UNITED STATES SECURITIES
AND
EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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. 001-11625
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 Road B2 West, Suite 400,
Saint Paul, Minnesota 55113-3105
(Address of principal executive offices) (Zip Code)
(612) 636-7920
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
1) Common Stock, Par Value $.16 2/3 per share
2) Rights
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
None
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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by
nonaffiliates of the Registrant on February 24, 1997
was $1.06 billion. For purposes of this calculation, all
shares held by officers and directors of the Registrant
and by the trustees of employee stock ownership plans
(ESOPs) and pension plans of the Registrant and
subsidiaries were deemed to be shares held by affiliates.
The number of shares outstanding of Registrant's only
class of common stock on February 24, 1997 was
37,863,963.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following portions of the Annual Report to
Shareholders for the year ended December 31, 1996 and
Proxy Statement for the 1997 Annual Meeting of
Shareholders are incorporated by reference as the Item of
this Form 10-K indicated.
Part of Form 10-K Portion of Annual Report
Part I, Item 1.
Business - Financial Pages 30 and 53:
information about Business Segment
industry segments, Information; Page 43:
foreign operations, Research and Develop-
research and ment; Page 35: Environ-
development and mental Matters and Page
environmental matters. 46: Committments and
Contingencies (Note 9)
and Page 55: Disclosure
of Risks and Uncertain-
ties (Note 19).
Part II, Item 5.
Market for Registrant's Page 57: Pentair Stock
Common Equity and Data, Price Range and
Related Stockholder Dividends of Common
Matters. Stock.
Part II, Item 6.
Selected Financial Data. Page 56: Selected
Financial Data - 10 Year
Summary.
Part II, Item 7.
Management's Discussion Pages 28-35:
and Analysis of Financial Management's
Condition and Results of Discussion and Analysis.
Operations.
Part II, Item 8.
Financial Statements Pages 36-56:
and Supplementary Data. Consolidated Statement
of Income, Balance
Sheet and Statement of
Cash Flows, related
Notes, Report of
Independent Auditors
and Quarterly Financial
Data.
Portion of Proxy Statement
Part III, Item 10.
Directors and Executive Pages 2-5: Security
Officers of the Registrant. Ownership of
Management and
Beneficial Ownership;
Pages 5-8: Directors
Standing for Election.
Part III, Item 11.
Executive Compensation. Pages 11-20: Executive
Compensation.
Part III, Item 12.
Security Ownership of Pages 2-5: Security
Certain Beneficial Owners Ownership of
and Management. Management and
Certain Beneficial
Ownership.
<PAGE>
PART I
Item 1. Business
(a) General Development of the Business.
The Registrant was incorporated in 1966 under the laws
of Minnesota. In the past year, the Registrant has
not changed its form of organization or mode of
conducting business. The Registrant grows through
internal development and acquisitions. As in the past,
periodic dispositions of assets or business units are
possible when they no longer fit with the long-term
strategies of the Registrant.
Effective January 1, 1994, the Registrant acquired the net
assets and the subsidiaries of Schroff GmbH
(Schroff) from Fried. Krupp AG Hoesch-Krupp for a cash
purchase price of approximately $140 million net
of cash acquired. Schroff manufactures and sells
enclosures, cases, subracks and accessories for
commercial electronic and instrumentation applications.
In September 1994, Pentair announced that it was
exploring strategic alternatives for its paper businesses,
including their possible sale. In the second quarter of
1995, all of the Pentair paper businesses were sold.
On April 1, 1995 the company sold its Cross Pointe Paper
Corporation subsidiary for $203.3 million to
Noranda Forest, Inc. On June 30, 1995 the company sold
its Niagara of Wisconsin Paper Corporations, its
50% share of Lake Superior paper Industries (LSPI) joint
venture and its 12% share of Superior Recycled
Fiber Industries (SRFI) for $115.6 million cash to
Consolidated Papers, Inc.
The sale transactions have permitted Pentair to focus its
commitments and resources on the industrial
products sector, building upon the strong growth and
leading market positions these businesses have
achieved.
Effective November 1, 1995, the Company acquired Fleck
Controls, Inc., a manufacturer of control valves
which are major components in residential water
softeners, and commercial and industrial water
conditioning systems for $133.9 million. Pentair considers
Fleck to be its first major step in entering the
water treatment business. This will be continued as
Pentair pursues other product offerings and new
channels within the water products market.
During 1996, the Company completed four strategic
acquisitions that strengthened market positions
throughout the world. In January, Myers acquired Aplex
to broaden its industrial pump line. In June, Porter-Cable
acquired FLEX, a German power tool company. In
November, the Company acquired Century Manufacturing
a manufacturer which serves the vehicle service
equipment markets, complementing its Lincoln Automotive
subsidiary. In December, Fleck Controls purchased
SIATA, an Italian manufacturer of water conditioning
control equipment.
(b) Financial Information about Industry Segments.
The Registrant's business is conducted in two industry
segments. The Specialty Products segment
manufactures woodworking machinery; portable power
tools; valves for water conditioning equipment; and
pumps and pumping systems. The General Industrial
Equipment segment manufactures electrical and
electronic enclosures and wireways; industrial lubricating
systems and material dispensing equipment;
vehicle service equipment; and sporting ammunition.
Business segment financial information is found on
page 30 and page 53 (Note 17) of the 1996 Annual
Report to Shareholders.
Narrative Description of Business.
Description of the Specialty Products Segment:
Products and marketing.
The following table sets forth, for each of the last three
years, the Specialty Products segment product
class net sales in excess of 10 percent of the Registrant's
consolidated net sales .
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Stationary and
Portable Power Tools 30% 28% 28%
Pumps and Water
Treatment Systems 13 9 9
Total Segment 43% 37% 37%
</TABLE>
Woodworking Machinery. The Registrant, through its
subsidiary Delta International Machinery Corp.
(Delta), manufactures, markets, and services a line of
general-purpose woodworking machinery including
table saws, band saws, planers, jointers, grinders, drill
presses, shapers, lathes, and other tools and
accessories. Delta sells its products in the United States,
Canada, and other foreign countries under its
"Delta" and "Biesemeyer" brand names through a network
of independent and mail order distributors,
hardware stores and home centers. Markets include
do-it-yourself/homeshop craftsmen; commercial,
residential, and industrial construction; remodeling; and
cabinet manufacturers, case goods, and furniture
makers.
Portable Electric Tools. The Registrant, through its
subsidiary Porter-Cable Corporation (Porter-Cable),
manufactures and markets a variety of portable electric
tools and air-powered nailing products including
circular saws, reciprocating saws, band saws, sanders,
grinders, cordless tools, drills, pneumatic fastening
products and routers. Porter-Cable markets its products
under the brand names "Porter-Cable" and
"FLEX" through a network of independent, specialty tool,
and mail order distributors, hardware stores and
home centers. Markets include woodworking; residential
and industrial construction; industrial fabrication
and maintenance; and home craftsmen.
Pumps and Pumping Systems. The Registrant, through
its F.E. Myers Co. Division of McNeil (Ohio)
Corporation (Myers), manufactures and markets a wide
variety of pumps for residential and municipal
wells; sump pumps for residential service; submersible
non-clog and grinder pumps and systems for
residential, commercial, and municipal service; and
reciprocating and centrifugal pumps for commercial
and industrial services. Markets include wholesale, retail,
and national catalog distribution to residential,
commercial, and industrial users; pump specialty
distribution for municipal, government, and OEM
products. Myers markets its products under the brand
names " Myers" and "Aplex". In addition, Myers
distributes products to the do-it-yourself market for retail
sale through home centers and hardware stores
under the names "Water Ace" and "Shur Dri".
Water Conditioning Control Valves. The Registrant,
through its subsidiary Fleck Controls, Inc. (Fleck),
manufactures, designs and markets a broad range of
control valves used in the manufacture of water
softeners, filtration, deionization, and desalination
systems. Products are sold directly by Fleck's internal
sales organization. Fleck markets its products under the
brand names "Fleck" and "SIATA". Markets
include residential, commercial, industrial, and municipal
water treatment; and manufacturers who supply
residential and commercial markets with standard and
custom designed products.
Competitive conditions.
Delta participates in the middle range of the overall market
for general purpose woodworking machinery.
The addressed market is focused on high quality, feature
oriented products and value added services for
the home shop, contractor, and small shop markets.
Delta markets the industry's broadest line of products
for its addressed market. Delta's numerous competitors
do have individual products which compete with
certain of Delta's products. Competition in this market
focuses on quality, features, service and price.
Porter-Cable competes in the professional portable
tool market which is highly competitive.
Porter-Cable faces several major competitors across its
addressed market. Product innovation, features,
performance, quality, service, delivery and price are all
competitive factors.
Myers addresses the water pump and system market.
Myers faces many competitors across its product
lines. Price, delivery, and quality are competitive factors.
Fleck addresses the water treatment market. Fleck is one
of the four primary manufacturers of control
valves in the United States and Europe. Broad product
offerings, product development and customer
support and service are competitive factors. Fleck has a
significant market share in the residential valve
market and a leading market share in the commercial
valve market. Fleck sells to both OEMs and
independent distributors for inclusion in water control
systems which are sold directly to the end user.
Description of the General Industrial Equipment
Segment:
Products and marketing.
The following table sets forth, for each of the last three
years, the General Industrial Equipment segment
product class net sales in excess of 10 percent of
consolidated net sales.
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Electrical and Electronic
Enclosures 35% 39% 36%
Sporting Ammunition 8 10 12
Total Segment 57% 63% 63%
</TABLE>
Electrical and Electronic Enclosures. Through the
Hoffman Engineering Company division of
Federal-Hoffman, Inc. (Hoffman) and through Schroff
GmbH and its international subsidiaries (Schroff), the
Registrant manufactures metallic and composite
enclosures and cabinets that house electrical and
electronic controls, instruments, and components; and
cabinets, cases, subracks, microcomputer
packaging systems, and a full line of accessories
including backplanes, power supplies, and technical
workstations. Hoffman markets its products primarily
through independent manufacturer's representatives
and electrical and electronic equipment distributors.
Hoffman markets its products under the brand name
"Hoffman". Markets include automotive, petroleum and
petrochemical, food, machine tool, and other
industrial manufacturing customers along with original
equipment manufacturers; plant maintenance and
repair; and construction. Schroff markets its products
under the brand name "Schroff".
Schroff serves the worldwide industrial electronics
industry including key segments such as computers, test
& measurement, private LANs/data communication,
industrial control and factory automation, medical and
telecommunications.
Sporting Ammunition. Through the Federal Cartridge
Company division of Federal-Hoffman, Inc. (Federal),
the Registrant manufactures and markets shotshell,
centerfire, and rimfire cartridges, ammunition
components, and clay targets. These products are
distributed throughout the United States through a
network of distributors, directly to large retail chains, and
directly to the U.S. government and law
enforcement agencies. Federal markets its products
under the brand names of "Premium", "Gold Medal",
"Classic", BallistiClean", and "Tactical". Federal markets
include hunters; trap, skeet, sporting clay, and
target shooters; the U.S. government; and law
enforcement.
Vehicle Service Equipment. The Registrant, through its
Lincoln Automotive division of McNeil (Ohio)
Corporation (Lincoln Automotive) and its subsidiary
Century Manufacturing (Century), manufactures and
markets lubrication, repair, and service equipment for a
broad range of vehicles. Products include lubricating
tools and equipment, battery charging and testing
equipment, welding equipment and supplies,
and a complete line of lifting equipment including
hydraulic jacks and specialty tools; portable power
supplies, automotive refrigerant and coolant recyclers, arc
and MIG welders, plasma cutters, and welding
accessories. Products are marketed under the brand
names of "Lincoln", "Blackhawk Automotive",
"Marquette", "Porto-Power", "Banner", "Winner", "Pro-Arc",
"Century", "Solar", and "Booster Pac". Products
are marketed to national retailers and through a distributor
network to professional mechanics and general
maintenance facilities. Certain lubricating equipment,
tools, and jacks and lifting equipment are sold under
private label programs. Markets include automotive
aftermarket and retail channels for professional and
do-it-yourself automotive and body repair; wholesale,
retail, and commercial distribution for industrial
maintenance, farm, and home metalworking.
Industrial Lubricating Systems and Material Dispensing
Equipment. The Registrant, through its Lincoln
Industrial division of McNeil (Ohio) Corporation (Lincoln
Industrial), manufactures components and designs
automated and manual lubrication systems and
equipment; pumps and pumping stations for thick fluid
transfer applications. Lubricating and materials
dispensing systems are marketed in the United States by
approximately 100 specially qualified systems distributors
with design, installation, and service capability.
Basic lubricating equipment and accessories are
marketed through industrial supply and specialty
distributors. A special direct sales group markets a wide
variety of Lincoln Industrial products to original
equipment manufacturers in a variety of industries.
Lincoln Industrial markets its products under the brand
names "Air Brake", "BearingSaver", "Centro-Matic",
"Cobra", "Dispense Pak", "Ecolub", "Helios", "Lincoln",
"Magna-Ram", "Modular Lube", "Multi-Luber",
"PowerMaster", "PileDriver", "PL2000", "Quicklink",
"Quicklub", "System Sentry", and "Zerk-lock". Markets
include heavy industry (steel mills, cement plants,
pulp and paper, power plants), automobile manufacturers,
commercial vehicles, agriculture, construction
equipment, food and beverage, mining, printing, and
general lubrication markets.
Competitive conditions.
Hoffman is the largest North American manufacturer of
electrical enclosures and wireways, having a
market share estimated to be about 25% of our addressed
market. It is currently the only manufacturer
with national distribution and its competitors are generally
smaller, regional manufacturers. Hoffman also
participates in the North American electronic enclosures
market, facing competition from a large number of
firms, with three or four established firms leading the
market. In both markets, the most significant
competitive factors are price, product innovation, service,
quality, breadth of product line, and delivery.
Schroff is a significant manufacturer in Europe's electronic
enclosure market and a technological leader.
Schroff, like Hoffman, has a comprehensive product
range. Schroff faces competition from a large number
of firms, some of whom manufacture a broad
range of enclosures and some who focus on
smaller niche markets. Significant competitive factors are
product innovation and quality.
Federal and its two primary competitors, Winchester and
Remington, have a combined market share of
approximately 90% in the U.S. sporting ammunition
market, with the balance coming from smaller domestic
competitors and foreign ammunition manufacturers.
Quality, delivery, price and terms are significant
competitive factors.
Lincoln Industrial , Lincoln Automotive and Century face
three to five major competitors and several
smaller competitors across their product lines.
Competition involving industrial lubricating systems and
material dispensing equipment tends to center around
quality, systems capability, and application
knowledge. Price becomes a more significant competitive
factor for vehicle servicing equipment.
Information Regarding Both Segments:
Working capital items.
Federal's working capital builds from January through
September as inventories are increased to meet third
quarter shipping schedules. Management continues to
focus on reducing working capital requirements
through management of receivable and inventory levels.
Status of new products.
The industries in which the segments participate are
essentially mature and do not experience the
introduction of many products that materially change the
nature of the industry. Individual manufacturers
generally make improvements or apply new technologies
to existing products.
Raw materials.
The raw materials used in the manufacturing process
include steel (bar and sheet) various metals including
brass and lead, gunpowder and plastic. Selected motors,
castings, plastic parts and components are also
purchased. The supply of all raw materials and
components is currently adequate.
Delta and Porter-Cable import selected tools in their
product offerings. Design and engineering of these
products is performed primarily by Delta. The
manufacturing process is controlled and monitored for
most
of these products in factories dedicated to Delta
production. Supply of these products is currently
adequate
and timely.
Patents, trademarks, licenses, franchises and
concessions.
The businesses own a number of U.S. and foreign
patents and trademarks. They were acquired over
many years and relate to many products and
improvements. No one patent or trademark is of material
importance to either segment.
Seasonal aspects.
For either segment, there is no strong seasonal aspect.
Backlog.
The segments normally do not experience backlogs for
substantial periods of time. The nature of the
businesses emphasizes maintaining inventories sufficient
to satisfy customer needs on a timely basis, and
production and sourcing is geared towards providing
adequate inventories in order to minimize customer
back orders. Accordingly, backlogs are not material to
understanding the sales trends or manufacturing
fluctuations of the segments.
Dependence on limited number of customers.
The Registrant as a whole is not dependent on a single
customer or on a few customers. The loss of a
limited number of customers would not have a material
adverse impact on the Registrant.
Government contracts.
The Registrant has no material portion of sales under
government contracts that may be subject to
renegotiation of profits or termination of contracts at the
election of the government.
Employees.
As of December 31, 1996, the Registrant and its
subsidiaries employed approximately 9,770 persons, of
which 2,050 were represented by unions having collective
bargaining agreements.
Labor contracts negotiated in 1996 were: International
Union of Electrical Workers - Jonesboro, Arkansas
(extended to April 4, 1999 ) 215 employees.
Contracts expiring in 1997: Molders and Allied Workers
Local 45 - Ashland, Ohio (expires 5/1/97) 49
employees; United Auto Workers - St. Louis, Missouri
(expires 6/6/97) 144 employees; Molders and Allied
Workers Local 19 - Guelph, Ontario, Canada (expires
7/1/97) 7 employees; and Patternworkers League -
Ashland, Ohio (expires 9/1/97) 1 employee.
The Registrant considers its employee relations to be
good and feels future contracts will be able to be
negotiated for the benefit of the business and the
employees.
(d) Financial Information about Foreign Operations.
The Registrant operates primarily in North America and
Europe. See discussion of foreign operations
incorporated by reference.
Item 2. Properties
The Registrant's corporate offices, located at 1500 County
Road B2 West, St. Paul, Minnesota 55113-3105,
are leased and consist of approximately 22,000 square
feet; the lease expires in November 1998, with an option
to renew for a term of five years. Information
about the Registrant's principal manufacturing facilities
and other properties is presented below by industry
segment. These facilities are adequate and suitable for
the purposes they serve. Unless noted all facilities are
owned.
Specialty Products Segment
SUBSIDIARY/ APPROXIMATE
DIVISION LOCATION PRIMARY USE SQUARE FEET
Porter-Cable Jackson, Manufacturing, 485,000
Tennessee(1) Distribution,
and Office
Steinheim, Manufacturing, 90,000
Germany Distribution,
and Office
Delta Pittsburgh, Office and 41,000
Pennsylvania Product Development
Tupelo, Manufacturing 333,000
Mississippi and Office
Memphis, Distribution 400,000
Tennessee(2) and Office
Guelph, Distribution 57,000
Ontario(3) and Office
Mesa, Manufacturing 50,000
Arizona(4) and Office
Taichung, Office and 1,000
Taiwan Product Development
F.E. Myers Ashland, Manufacturing, 412,000
Ohio Distribution,
and Office
Kitchener, Distribution 26,000
Ontario and Office
Midland, Manufacturing, 21,000
Texas and Office
Fleck Controls, Brookfield, Manufacturing, 77,000
Inc. Wisconsin Distribution,
and Office
Buc, Manufacturing, 24,000
France(5) Distribution,
and Office
Montespertoly, Manufacturing, 24,000
Italy Distribution,
and Office
Maurapas, Manufacturing, 20,000
France(6) Distribution,
and Office
Singapore(7) Manufacturing, 4,000
Distribution,
and Office
NOTES:
(1) Lease term expires in 1998.
(2) Lease term expires in 1999.
(3) Lease term expires in 1999.
(4) Lease term expires in 2000.
(5) Lease term expires in 1998.
(6) Lease term expires in 1999.
(7) Leased under a short-term lease.
General Industrial Equipment Segment
SUBSIDIARY/ APPROXIMATE
DIVISION LOCATION PRIMARY USE SQUARE FEET
Hoffman Anoka, Manufacturing 814,000
Engineering Minnesota and Office
Brooklyn Center, Manufacturing 128,000
Minnesota(1) and Office
Reynosa, Mexico Manufacturing 90,000
Plymouth, Office and 20,000
Minnesota (12) Training Center
Federal Anoka, Manufacturing 875,000
Cartridge Minnesota and Office
Richmond, Manufacturing 41,000
Indiana and Office
Lincoln St. Louis, Manufacturing 565,000
Industrial Missouri and Office
Walldorf, Manufacturing 117,000
Germany and Office
Chodov, Manufacturing 18,000
Czech Republic (2) and Office
Lincoln Jonesboro, Manufacturing 378,000
Automotive Arkansas and Office
Nogales, Sonora Manufacturing 35,000
Mexico(3)
Mississauga, Distribution 30,000
Ontario and Office
Schroff GmbH Straubenhardt, Manufacturing 523,000
Germany(4)
Schroff S.A. Betschdorf, Manufacturing 210,000
France(5) and Warehouse
Schroff U.K. Hemel Hempstead, Manufacturing 37,000
England(6)
Schroff U.K. Hemel Hempstead, Manufacturing 22,000
England(6)(7)
Schroff, Inc. Warwick, Manufacturing 80,000
Rhode Island and Office
Warwick, Office and 18,000
Rhode Island(8) Assembly
Warwick, Distribution 15,000
Rhode Island(11)
Schroff K.K. Meiwa-Cho, Manufacturing 23,500
Japan
Century Bloomington, Manufacturing, 216,000
Manufacturing Minnesota(9) Distribution,
and Office
Pierre, Manufacturing 70,000
South Dakota(10) and Office
St.-Jean-sur-
Richelieu, Manufacturing 13,000
Quebec(11) and Office
NOTES:
(1) Lease term expires in 2006. The lease has an option to renew for an
additional ten-year term.
(2) Lease term expires in 1998, with an option to renew for one-year.
(3) Lease term expires in 1999.
(4) A small portion of this facility is leased until 2011.
(5) Leased under two lease agreements expiring in 2002 and 2005.
Both leases include a purchase option.
(6) Facilities are shared by Schroff U.K. & Hoffman U.K.
Total area is 59,000 square feet.
(7) Lease term expires in 2011.
(8) Lease term expires in 2000. This lease includes a purchase option.
(9) Lease term expires in 2020.
(10) Lease term expires in 1999 with a bargain purchase option of $1.
(11) Lease term expires in 2001.
(12) Lease term expires in 2000.
Item 3. Legal Proceedings.
The Registrant or its subsidiaries have been made
parties to actions filed, or have been given notice of
potential claims, relating to the conduct of its
business, including those pertaining to product liability,
environmental and employment matters. Major
matters which may have an impact on the Registrant
are discussed below. The Registrant believes that it is
remote that the outcome of such matters will have a
material adverse effect on the Registrant's financial
position or future results of operations, based on
current circumstances known to the Registrant.
Federal-Hoffman, Inc. Federal Cartridge, a division of
Federal-Hoffman, has been named by the EPA as a
Potentially Responsible Party (PRP) in connection
with a waste disposal site in Greer, South Carolina.
The EPA issued an administrative order effective April
29, 1992 to Federal-Hoffman and 96 other entities to
compel the cleanup of the Aqua-Tech Environmental,
Inc. site. Federal-Hoffman is working with a group of
other PRPs to negotiate with the EPA regarding the
cleanup of the site. A surface cleanup of the site is
complete. Federal Cartridge paid $442,000 toward
the cost of the surface cleanup.
On March 16, 1995, the EPA notified Federal Cartridge
that it is a PRP related to the subsurface of the
Aqua-Tech site. Pending EPA approval, the PRP
group anticipates beginning in 1997 a study of the soil
and groundwater to determine the extent of
subsurface contamination. The cost of such study,
any necessary remediation and the size of allocation,
if any, to Federal-Hoffman is unknown to the
Registrant at this time. Federal-Hoffman however,
anticipates its allocation in the subsurface action to be
positively impacted by the nature of its waste and the
fact that virtually all of its waste was accounted for
and removed during the surface remediation.
In October 1992, Hoffman Engineering, a division of
Federal-Hoffman, was also named as a PRP in
connection with the Aqua-Tech site. Hoffman has
settled out of both the surface and subsurface
remediation as a de minimis party.
Delta International Machinery. In January 1993,
Beaver-Delta Machinery Corp. (Beaver-Delta), a
former subsidiary of Delta International Machinery
Corp., and three other parties were sued by a
commercial developer and current owner of real
estate in Guelph, Ontario that Rockwell International
(Rockwell) previously owned and that was acquired by
Beaver-Delta in 1984. Trichlorethylene (TCE) and
other contamination of soil
and groundwater was alleged. Preliminary investigation
indicated that Beaver-Delta did not use TCE during
the short period that it owned the property at issue.
Beaver-Delta served notice on Rockwell of its intent to
seek indemnification from Rockwell for all costs
related to that matter. The lawsuit was dismissed with
prejudice in August 1995 after two years of inactivity.
In July 1996, the Registrant received notice of a
potential claim from Rockwell regarding the alleged
contamination of the same property. In June 1996,
the Ontario Ministry of Environment and Energy
(MOEE) requested Rockwell to investigate the site
and develop a cleanup program. The extent and cost
of such a cleanup program is unknown at this time.
The Registrant continues to believe that the Asset
Purchase Agreement with Rockwell calls for Rockwell
to be responsible for this matter. The Registrant
believes that this matter is unlikely to result in material
liability.
Porter-Cable Corporation. In November 1993, the
Tennessee Department of Environment and
Conservation (TDEC) issued to Porter-Cable
Corporation (Porter-Cable) and Rockwell International
Corporation (Rockwell) an administrative order
requiring them to investigate, and if necessary, clean
up alleged groundwater contamination at a
manufacturing facility located in Madison County,
Tennessee. The facility was acquired by Porter-Cable
from Rockwell in 1981. Porter-Cable reached an
agreement with Rockwell regarding sharing costs and
expenses related to investigation of the site. The
Registrant believes that this matter is unlikely to result
in material liability or material changes in operations.
No estimate of the projected response cost liability
can be made based on information currently known to
the Company.
Discontinued Paper Operations. Responsibility for
certain environmental obligations and potential liability
of the Registrant's former Cross Pointe Paper
Corporation subsidiary were retained by the
Registrant as a part of the sale of Cross Pointe. At the
time of the sale, the Registrant established accruals
for potential liabilities relating to environmental
conditions existing on or before April 1995, based on
extensive studies of the sites involved. Cost for
certain of these environmental conditions are borne
entirely by the Registrant; for other conditions, the
Registrant bears only a portion of the costs which
may be incurred in connection therewith. In 1996,
the Registrant paid approximately $445,000 in costs
covered by those accruals. The Registrant is closely
monitoring the status of all open environmental
conditions and has established procedures with the
buyer dealing with activities at the affected sites. Few
of the retained liabilities involve conditions or sites that
are active at this time.
Responsibility for environmental obligations of the
Registrant's former Niagara of Wisconsin Paper
Corporation subsidiary and its two joint ventures, Lake
Superior Paper Industries and Superior Recycled Fiber
Industries, was not retained as part of the sale of
these entities. Customary warranties were given
regarding unknown environmental conditions at these
sites, but the Registrant does not anticipate any
significant liability therefor.
Product Liability Claims. As of March 1, 1997, the
Registrant or its subsidiaries are defendants in
approximately 143 product liability lawsuits and have
been notified of approximately 160 additional claims.
The Registrant has had and currently has in place
insurance coverage it deems adequate for its needs.
A substantial number of these lawsuits and claims are
insured by Penwald, a regulated insurance company
wholly owned by the Registrant. See discussion in
Item 7 (MD&A - Insurance Subsidiary) and Item 8
(Note 1 to the Financial
Statements). Accounting accruals covering the
deductible portion of liability claims not covered by
Penwald have been established and are reviewed on
a regular basis. The Registrant has not experienced
unfavorable trends in either the severity or frequency
of product liability claims.
Item 4. Submission of Matters to a Vote of Security
Holders.
During the fourth quarter, no matter was submitted to a
vote of security holders.
PART II
Item 5. Market for Registrant's Common Equity and
Related Shareholder Matters.
Item 6. Selected Financial Data.
Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operation.
Item 8. Financial Statements and Supplementary Data.
For information required under Items 5 through 8, see the
Registrant's Annual Report to Shareholders for the
year ended December 31, 1996, as referenced on page 2
of this report.
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure.
No changes in accountants or disagreements between the
Registrant and its accountants regarding accounting
principles or financial statement disclosures have
occurred within the 24 months prior to the date of the
Registrant's most recent financial statements.
PART III
Item 10. Directors and Executive Officers of the
Registrant.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the executive officers of the Registrant.
Their term of office extends until the next annual meeting
of the Board of Directors, scheduled for April 23, 1997, or
until their successors are elected and have qualified.
Winslow H. Buxton 57
Chairman since January 15, 1993;
President and Chief Executive Officer
since August 1992; Chief Operating
Officer, August 1990 - August 1992.
Richard J. Cathcart 52
Executive Vice President since February
1996; Executive Vice President,
Corporate Development March 1995 -
February 1996; Vice President, Business
Development of Honeywell, Inc. 1994 -
March 1995; Vice President and General
Manager of Honeywell's Worldwide
Building Control Division 1992 - 1994.
Joseph R. Collins 55
Executive Vice President since March
1995; Acting Chief Financial Officer,
June 1993 - March 1994; Senior Vice
President - Specialty Products August
1991 - February 1995.
James H. Frank 57
Senior Vice President, Enclosures since
March 1996; Co-President of Schroff
(subsidiary of Registrant) March 1994 -
February 1996; President of Hoffman
Engineering (division of Registrant)
December 1989 - March 1994.
Richard W. Ingman 52
Executive Vice President and Chief
Financial Officer since August 1996;
President of Hoffman Engineering
(division of Registrant) March 1994 - July
1996; Vice President of Corporate
Development August 1989 - February
1994.
Gerald C. Kitch 59
Executive Vice President, President
International Business Development
since February 1996; Executive Vice
President March 1995 - February 1996;
Senior Vice President - General
Industrial Equipment August 1991 -
February 1995.
Debby S. Knutson 42
Vice President, Human Resources since
September 1994; Assistant Vice
President, Human Resources , August
1993 - September 1994; Vice President,
Human Resources of Hoffman
Engineering (division of Registrant) July
1990 - August 1993.
Roy T. Rueb 56
Vice President, Treasurer since October 1986
and Secretary since June 1994.
There is no family relationship between any of the
executive officers or directors.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
For information required under Items 11 and 12, see the
Registrant's Proxy Statement for the 1997 Annual
Meeting of Shareholders referenced on page 2 of this
report.
Item 13. Certain Relationships and Related Transactions.
No relationships or transactions existed that require
disclosure under Item 13.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Financial Statements and Exhibits.
1. The following consolidated financial
statements of Pentair, Inc. and subsidiaries, together with
the Report of Independent Certified Public Accountants,
found on pages 28 to 57 of the Registrant's Annual
Report to Shareholders for the year ended December 31,
1996, are hereby incorporated by reference in
this Form 10-K.
(Page of Annual Report)
Report of Independent Certified Public Accountants (36)
Consolidated Statements of Income
for Years Ended December 31, 1996,
1995 and 1994 (37)
Consolidated Balance Sheets as of
December 31, 1996 and 1995 (38 - 39)
Consolidated Statements of Cash Flows
for Years Ended December 31, 1996,
1995 and 1994 (41)
Notes to Consolidated Financial
Statements (42 - 55)
2. The additional financial data listed below is
included as exhibits to this Form 10-K Report and
should be read in conjunction with the consolidated
financial statements presented in the 1996 Annual
Report to Shareholders.
Independent Auditors Report
Schedule for the years ended December 31, 1996,1995 and 1994:
II- Valuation and Qualifying Accounts
3. The following exhibits are included with this
Report on Form 10-K (or incorporated by
reference) as required by Item 601 of Regulation S-K.
Exhibit
Number Description
(3.1) Restated Articles of Incorporation as amended
through April 19, 1995.
(3.2) Resolution Establishing and Designating $7.50
Callable Cumulative Convertible Preferred Stock, Series
1988, as a series of Preferred Stock of Pentair, Inc.
(3.3) Resolution Establishing and Designating 8%
Callable Cumulative Voting Convertible Preferred Stock,
Series 1990, as a series of Preferred Stock of Pentair, Inc.
(3.4) Second Amended and Superseding By-Laws as
amended through July 21, 1995.
(4.1) Restated Articles of Incorporation, as amended, and
Second Amended and Superseding By-Laws, as
amended (see Exhibits 3.1 - 3.4 above).
(4.2) Rights Agreement as of July 21, 1995 between
Norwest Bank N.A. and Pentair, Inc.
(4.3) Multi-Facility Credit Agreement among Pentair, Inc.,
for itself as Borrower as agent for all Borrowers and as
Guarantor, EuroPentair GmbH, Pentair Canada, Inc.,
Borrowers and Bank of America National Trust and
Savings Association, for itself and as U.S. Dollar
Administrative Agent, First Bank National Association for
itself and as Overnight Administrative Agent, Morgan
Guaranty Trust Company of New York, for itself and as
G-7 Currency Administrative Agent, NBD Bank, Dresdner
Bank AG, ABN Amro Bank N.V. and the Bank of Tokyo -
Mitsubishi, Ltd., Banks and various affiliates of the Banks
which are parties to the Canadian Facility, Dated as of
November 15, 1996.
(4.4) Credit Agreement Dated as of November 15, 1996
Between Pentair, Inc. and First Bank National Association.
(4.5) $25,000,000 Note Purchase Agreement dated
December 13, 1991 between Pentair, Inc. and Principal
Mutual Life Insurance Company.
(4.6) $15,000,000 Note Purchase Agreement dated
November 1, 1992 between Pentair, Inc. and Nationwide
Life Insurance Company.
(4.7) $15,000,000 Note Purchase Agreement dated
January 15, 1993 between Pentair, Inc. and Principal
Mutual Life Insurance Company.
(4.8) $70,000,000 Senior Notes Purchase Agreement
dated as of April 30, 1993 between Pentair, Inc. and
United of Omaha Life Insurance Company, Companion
Life Insurance Company, Principal Mutual Life Insurance
Company, Nippon Life Insurance Company of America,
Lutheran Brotherhood, American United Life Insurance
Company, Modern Woodmen of America, The Franklin
Life Insurance Company and Ameritas Life Insurance
Corp.
(4.9) Pentair, Inc. Note Purchase Agreement Dated as of
January 24, 1997 6.99% Senior Notes, Series A, Due
2007, 6.79% Senior Notes, Series B, Due 2004 and
6.74% Senior Notes, Series C, Due 2004.
(10.1) Agreements dated February 8, 1978 and February
9, 1982 between the Company and D. Eugene Nugent.
(10.2) Agreement dated February 8, 1984 (Amending
Exhibit 10.1).
(10.3) Agreement dated December 17, 1985 (Amending
Exhibit 10.1).
(10.4) Agreement dated May 7, 1990 (Amending Exhibit
10.1).
(10.5) Company's Supplemental Employee Retirement
Plan effective June 16, 1988.
(10.6) Company's 1986 Nonqualified Stock Option Plan.
(10.7) Company's Omnibus Stock Incentive Plan as
Amended and Restated.
(10.8) Company's Management Incentive Plan as
amended to January 12, 1990.
(10.9) Employee Stock Purchase and Bonus Plan as
amended and restated effective January 1,1992.
(10.10) Company's Flexible Perquisite Program as
amended to January 1, 1989.
(10.11) Form of 1986 Management Assurance
Agreement (Revised 1990) between the Company and
certain key employees.
(10.12) Fourth Amended and Restated Compensation
Plan for Non-Employee Directors.
(10.13) Company's Outside Directors Nonqualified
Stock Option Plan dated January 22, 1988.
(10.14) First Amendment to Outside Directors
Nonqualified Stock Option Plan (Amending Exhibit
10.13).
(10.15) Second Amendment to Outside Directors
Nonqualified Stock Option Plan (Amending Exhibit 10.13).
(10.16) Pentair, Inc. Deferred Compensation Plan
effective January 1, 1993.
(10.17) Pentair, Inc. Non-Qualified Deferred
Compensation Plan effective January 1, 1996.
(10.18) Trust Agreement for Pentair, Inc. Non-Qualified
Deferred Compensation Plan between Pentair, Inc. And
State Street Bank and Trust Company.
(10.19) Cash Deficiency Agreement dated December
31, 1987 among Pentair Duluth Corp., as Joint Venturer,
Associated Southern Investment Company, as Owner
Participant, The Connecticut Bank and Trust Company,
National Association, as Indenture Trustee, and First
National Bank of Minneapolis, as Owner Trustee. Cash
Deficiency Agreements also were entered into with
respect to each of the other four Owner Participants:
Dana Lease Finance Corporation, NYNEX Credit
Company, Public Service Resources Corporation, and
Southern Indiana Properties, Inc.
(10.20) Keepwell Agreement and Assignment dated
December 31, 1987 among Pentair, Inc., as Sponsor,
Pentair Duluth Corp., as Joint Venturer, and First National
Bank of Minneapolis, as Owner Trustee; although First
Minneapolis executed this filed document as Owner
Trustee for Associated Southern Investment Company,
additional Keepwell Agreements and Assignments were
entered into by First Minneapolis as Owner Trustee for the
other four Owner Participants listed in the description of
Exhibit 10.19 above.
(10.21) Definition of Terms for Financing Agreement
dated December 31, 1987 and the Transaction
Documents Referred to Therein: Sale and Leaseback of
Undivided Interest in Lake Superior Paper Industries'
Supercalendered Paper Mill; although this filed document
supplies the definitions applicable to the agreements filed
as Exhibits 10.19 and 10.20 above, there were four
additional sets of definitions that supply the definitions for
the other sets of agreements referred to in the
descriptions of those Exhibits with respect to the various
Owner Participants.
(10.22) Loan and Stock Purchase Agreement dated
March 7, 1990 between the Company and the Pentair,
Inc. Employee Stock Ownership Plan Trust, acting
through State Street Bank and Trust Company, as
Trustee.
(10.23) $56,499,982 Promissory Note dated March 7,
1990 of the Pentair, Inc. Employee Stock Ownership Plan
Trust, acting through State Street Bank and Trust
Company, as Trustee, to the Company.
(10.24) Agreement for Sale and Purchase of Stock of
Cross Pointe Paper Corporation between Pentair, Inc. and
Noranda Forest, Inc. dated February 21, 1995 (including
Exhibits and only Schedule 13).
(11) Statement regarding computation of earnings per
share.
(13) Annual Report to Shareholders for each of the three
years in the period ended December 31, 1996.
(21) Subsidiaries of Registrant.
(23) Consent of Deloitte & Touche, LLP.
(27) Financial Data Schedule.
EXHIBIT INDEX
Exhibit
Number Description
(3.1) Restated Articles of Incorporation as amended
through April 19, 1995 (Incorporated by reference to
Exhibit 3.1 to the Company's Form 10-Q for the quarter
ended June 30, 1995).
(3.2) Resolution Establishing and Designating $7.50
Callable Cumulative Convertible Preferred Stock, Series
1988, as a series of Preferred Stock of Pentair, Inc.
(Incorporated by reference to Exhibit 4.1 to Amendment
No. 1 to the Company's Current Report on Form 8-K filed
December 30, 1988).
(3.3) Resolution Establishing and Designating 8%
Callable Cumulative Voting Convertible Preferred Stock,
Series 1990, as a series of Preferred Stock of Pentair, Inc.
(Incorporated by reference to Exhibit 4 to the Company's
Current Report on Form 8-K filed March 21,1990).
(3.4) Second Amended and Superseding By-Laws as
amended through July 21, 1995 (Incorporated by
reference to Exhibit 3.2 to the Company's Form 10-Q for
the quarter ended June 30, 1995).
(4.1) Restated Articles of Incorporation, as amended, and
Second Amended and Superseding By-Laws, as
amended (see Exhibits 3.1 - 3.4 above).
(4.2) Rights Agreement dated as of July 21, 1995
between Norwest Bank N.A. and Pentair, Inc.
(Incorporated by reference to Exhibit 4.1 to the
Company's Form 10-Q for the quarter ended June 30,
1995).
(4.3) Multi-Facility Credit Agreement among Pentair, Inc.,
for itself as Borrower as agent for all Borrowers and as
Guarantor, EuroPentair GmbH, Pentair Canada, Inc.,
Borrowers and Bank of America National Trust and
Savings Association, for itself and as U.S. Dollar
Administrative Agent, First Bank National Association for
itself and as Overnight Administrative Agent, Morgan
Guaranty Trust Company of New York, for itself and as
G-7 Currency Administrative Agent, NBD Bank, Dresdner
Bank AG, ABN Amro Bank N.V. and the Bank of Tokyo -
Mitsubishi, Ltd., Banks and various affiliates of the Banks
which are parties to the Canadian Facility, Dated as of
November 15, 1996.
(4.4) Credit Agreement Dated as of November 15, 1996
Between Pentair, Inc. and First Bank National Association.
(4.5) $25,000,000 Note Purchase Agreement dated
December 13, 1991 between Pentair, Inc. and Principal
Mutual Life Insurance Company. (Incorporated by
reference to Exhibit 4.15 to the Company's Registration
Statement on Form S-8 filed January 13, 1992).
(4.6) $15,000,000 Note Purchase Agreement dated
November 1, 1992 between Pentair, Inc. and Nationwide
Life Insurance Company (Incorporated by reference to
Exhibit 4.16 to the Company's Form 10-K for the year
ended December 31, 1992).
(4.7) $15,000,000 Note Purchase Agreement dated
January 15, 1993 between Pentair, Inc. and Principal
Mutual Life Insurance Company (Incorporated by
reference to Exhibit 4.17 to the Company's Form 10-K for
the year ended December 31, 1992).
(4.8) $70,000,000 Senior Notes Purchase Agreement
dated as of April 30, 1993 between Pentair, Inc. and
United of Omaha Life Insurance Company, Companion
Life Insurance Company, Principal Mutual Life Insurance
Company, Nippon Life Insurance Company of America,
Lutheran Brotherhood, American United Life Insurance
Company, Modern Woodmen of America, The Franklin
Life Insurance Company and Ameritas Life Insurance
Corp (Incorporated by reference to Exhibit 4.17 to the
Company's Form 10-K for the year ended December 31,
1993).
(4.9) Pentair, Inc. Note Purchase Agreement Dated as of
January 24, 1997 6.99% Senior Notes, Series A, Due
2007, 6.79% Senior Notes, Series B, Due 2004 and
6.74% Senior Notes, Series C, Due 2004.
(10.1) Agreements dated February 8, 1978 and February
9, 1982 between the Company and D.Eugene Nugent
(Incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement on Form S-2 filed June
24, 1983).
(10.2) Agreement dated February 8, 1984 (Amending
Exhibit 10.1) (Incorporated by reference to Exhibit 10.4 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1983).
(10.3) Agreement dated December 17, 1985 (Amending
Exhibit 10.1) (Incorporated by reference to Exhibit 10.6 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1985).
(10.4) Agreement dated May 7, 1990 (Amending Exhibit
10.1). (Incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10K for the year
ended December 31, 1990).
(10.5) Company's Supplemental Employee Retirement
Plan effective June 16, 1988 (Incorporated by reference
to Exhibit 10.10 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989).
(10.6) Company's 1986 Nonqualified Stock Option Plan
(Incorporated by reference to Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the year
ended December 31,1986).
(10.7) Company's Omnibus Stock Incentive Plan as
Amended and Restated. (Incorporated by reference to
Exhibit 10.1 to the Company's Form 10-Q for the quarter
ended March 31, 1996).
(10.8) Company's Management Incentive Plan as
amended to January 12, 1990 (Incorporated by reference
to Exhibit 10.17 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989).
(10.9) Employee Stock Purchase and Bonus Plan as
amended and restated effective January 1, 1992
(Incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on Form10-K for the year
ended December 31, 1991).
(10.10) Company's Flexible Perquisite Program as
amended to January 1, 1989 (Incorporated by reference
to Exhibit 10.20 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989).
(10.11) Form of 1986 Management Assurance
Agreement (Revised 1990) between the Company and
certain executive officers (Incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989).
(10.12) Fourth Amended and Restated Compensation
Plan for Non-Employee Directors.
(10.13) Company's Outside Directors Nonqualified
Stock Option Plan dated January 22, 1988 (Incorporated
by reference to Exhibit 10.20 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1987).
(10.14) First Amendment to Outside Directors
Nonqualified Stock Option Plan (Amending Exhibit 10.13)
(Incorporated by reference to Exhibit 10.22 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1991).
(10.15) Second Amendment to Outside Directors
Nonqualified Stock Option Plan (Amending Exhibit 10.13)
(Incorporated by reference to Exhibit 10.23 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1991).
(10.16) Pentair, Inc. Deferred Compensation Plan
effective January 1, 1993 (Incorporated by reference to
Exhibit 10.21 to the Company's Form 10-K for the year
ended December 31,1992).
(10.17) Pentair, Inc. Non-Qualified Deferred
Compensation Plan effective January 1, 1996
(Incorporated by reference to Exhibit 10.17 to the
Company's Form 10-K for the year ended December 31,
1995).
(10.18) Trust Agreement for Pentair, Inc. Non-Qualified
Deferred Compensation Plan between Pentair, Inc. And
State Street Bank and Trust Company (Incorporated by
reference to Exhibit 10.18 to the Company's Form 10-K
for the year ended December 31, 1995).
(10.19) Cash Deficiency Agreement dated December
31, 1987 among Pentair Duluth Corp., as Joint Venturer,
Associated Southern Investment Company, as Owner
Participant, The Connecticut Bank and Trust Company,
National Association, as Indenture Trustee, and First
National Bank of Minneapolis, as Owner Trustee. Cash
Deficiency Agreements also were entered into with
respect to each of the other four Owner Participants:
Dana Lease Finance Corporation, NYNEX Credit
Company, Public Service Resources Corporation, and
Southern Indiana Properties, Inc. (Incorporated by
reference to Exhibit 10.1 to Amendment No. 1 to the
Company's Current Report on Form 8-K filed April 26,
1988).
(10.20) Keepwell Agreement and Assignment dated
December 31, 1987 among Pentair, Inc., as Sponsor,
Pentair Duluth Corp., as Joint Venturer, and First National
Bank of Minneapolis, as Owner Trustee; although First
Minneapolis executed this filed document as Owner
Trustee for Associated Southern Investment Company,
additional Keepwell Agreements and Assignments were
entered into by First Minneapolis as Owner Trustee for the
other four Owner Participants listed in the description of
Exhibit 10.19 above (Incorporated by reference to Exhibit
10.2 to Amendment No. 1 to the Company's Current
Report on Form 8-K filed April 26, 1988).
(10.21) Definition of Terms for Financing Agreement
dated December 31, 1987 and theTransaction Documents
Referred to Therein: Sale and Leaseback of Undivided
Interest in Lake Superior Paper Industries'
Supercalendered Paper Mill; although this filed document
supplies the definitions applicable to the agreements filed
as Exhibits 10.19 and 10.20 above, there were four
additional sets of definitions that supply the definitions for
the other sets of agreements referred to in the
descriptions of those Exhibits with respect to the various
Owner Participants (Incorporated by reference to Exhibit
10.3 to Amendment No. 1 to the Company's Current
Report on Form 8-K filed April 26, 1988).
(10.22) Loan and Stock Purchase Agreement dated
March 7, 1990 between the Company and the Pentair,
Inc. Employee Stock Ownership Plan Trust, acting
through State Street Bank and Trust Company, as
Trustee (Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K filed March 21,
1990).
(10.23) $56,499,982 Promissory Note dated March 7,
1990 of the Pentair, Inc. Employee Stock Ownership Plan
Trust, acting through State Street Bank and Trust
Company, as Trustee, to the Company (Incorporated by
reference to Exhibit 10.2 to the Company's Current Report
on Form 8-K filed March 21, 1990).
(10.24) Agreement for Sale and Purchase of Stock of
Cross Pointe Paper Corporation between Pentair, Inc. and
Noranda Forest, Inc. dated February 21, 1995 (including
Exhibits and only Schedule 13)(Incorporated by reference
to Exhibit 2.1 to the Company's Current Report on Form
8-K filed April 17, 1995).
(11) Statement regarding computation of earnings per
share.
(13) Annual Report to Shareholders for each of the three
years in the period ended December 31, 1996.
(21) Subsidiaries of Registrant.
(23) Consent of Deloitte & Touche,LLP.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
PENTAIR, INC.
By /s/ Richard W. Ingman
Richard W. Ingman
Executive Vice President and
Chief Financial Officer
Dated: March 27, 1997
<PAGE>
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has also been signed by
the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
By /s/ Winslow H. Buxton Dated: March 27, 1997
Winslow H. Buxton,
Chairman, President and
Chief Executive Officer, Director
By /s/ George N. Butzow Dated: March 27,1997
George N. Butzow,
Director
By /s/ William J. Cadogan Dated: March 27, 1997
William J. Cadogan
Director
By /s/ Barbara B. Grogan Dated: March 27, 1997
Barbara B. Grogan
Director
By /s/ Charles A. Haggerty Dated: March 27, 1997
Charles A. Haggerty,
Director
By /s/ Harold V. Haverty Dated: March 27, 1997
Harold V. Haverty,
Director
By /s/ Quentin J. Hietpas Dated: March 27,1997
Quentin J. Hietpas,
Director
By /s/ Walter Kissling Dated: March 27,1997
Walter Kissling,
Director
By /s/ D. Eugene Nugent Dated: March 27,1997
D. Eugene Nugent,
Director
By /s/ Richard M. Schulze Dated: March 27,1997
Richard M. Schulze,
Director
By /s/ Karen E. Welke Dated: March 27,1997
Karen E. Welke,
Director
<PAGE>
INDEPENDENT AUDITORS REPORT
Pentair, Inc.:
We have audited the consolidated financial statements of
Pentair, Inc. and subsidiaries as of December 31,
1996 and 1995, and for each of the three years in the
period ended December 31, 1996, and have issued
our report thereon dated February 7, 1997; such financial
statements and report are included in your 1996
Annual Report to Shareholders and are incorporated
herein by reference. Our audits also included the
financial statement schedule of Pentair, Inc. and
subsidiaries listed in Item 14. This financial statement
schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion
based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents
fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE, LLP
Minneapolis, Minnesota
February 7, 1997
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
PENTAIR, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS -
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND DEDUCTIONS- AT END OF
($ THOUSANDS) OF PERIOD EXPENSES WRITE-OFFS PERIOD
Allowance for
doubtful
accounts and
notes receivables
<S> <C> <C> <C> <C>
1994 $5,452 2,634 (897) $7,189
1995 7,189 782 (131) 7,840
1996 7,840 498 (990) 7,348
</TABLE>
MULTI-FACILITY
CREDIT AGREEMENT
among
PENTAIR, INC.,
for itself as Borrower,
as agent for all Borrowers
and as Guarantor,
EuroPentair GmbH,
Pentair Canada, Inc.,
Borrowers
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
for itself and as U.S. Dollar
Administrative Agent,
FIRST BANK NATIONAL
ASSOCIATION,
for itself and as Overnight
Administrative Agent,
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
for itself and as G-7 Currency
Administrative Agent,
NBD BANK,
DRESDNER BANK AG,
ABN AMRO BANK N.V.
and
THE BANK OF TOKYO - MITSUBISHI,
LTD.
Banks
and various affiliates of the
Banks
which are parties to the
Canadian Facility
Dated as of November 15, 1996
MULTI-FACILITY
CREDIT AGREEMENT
This Agreement dated as of
November 15, 1996 is among
PENTAIR, INC., EUROPENTAIR GMBH
and PENTAIR CANADA, INC., and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Bank and as U.S. Dollar
Administrative Agent, FIRST BANK
NATIONAL ASSOCIATION, as a Bank
and as Overnight Administrative
Agent, MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as a Bank
and as a G-7 Currency
Administrative Agent, and NBD
BANK, DRESDNER BANK AG, ABN AMRO
BANK N.V. and THE BANK OF
TOKYO-MITSUBISHI, LTD, as Banks,
and various affiliates of the
Banks which are parties to the
Canadian Facility described
herein.
The parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
The following terms, as used
herein, have the following
meanings:
"Absolute Rate means a rate
of interest per annum, rounded
to the nearest one-hundredth of
one percent, for a particular
Bid Loan amount and a particular
Interest Period.
"Absolute Rate Bid means the
Absolute Rate specified with
respect to a particular Bid Loan
amount and a particular Interest
Period in a Bid submitted in
response to a Bid Loan Request.
"Absolute Rate Bid Loan
means an amount loaned to any of
the Borrowers under this
Agreement that bears interest by
reference to an Absolute Rate
determined pursuant to
Article VII.
"Absolute Rate Bid Request
means a Bid Loan Request
requesting an Absolute Rate Bid.
"Adjusted CD Rate applicable
to any Interest Period means a
rate per annum determined
pursuant to the following
formula:
ACDR = [CDBR]* plus AR
[1.0 - RP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
RP = CD Reserve Percentage
AR = Assessment Rate
* The amount in brackets being
rounded upwards, if necessary,
to the next higher 1/100 of 1%.
"Adjusted Debt to Total
Capital Ratio means the ratio
obtained by dividing (i)
Consolidated Debt, excluding any
Debt arising pursuant to a Sale
of Receivables, by (ii) an
amount equal to the sum of
Consolidated Debt, excluding any
Debt arising pursuant to a Sale
of Receivables, and Consolidated
Shareholders' Equity.
"Agent means any of BofA,
First Bank, Morgan or BA Canada
in its capacity as an agent for
the Banks (or, in the case of BA
Canada, for the Canadian Banks)
hereunder, and any successor
thereto pursuant to Section
14.9; "Agents means all such
institutions.
"Agent-Related Persons"
means any Agent and any
successor thereto in such
capacity hereunder, together
with their respective affiliates
and the officers, directors,
employees, agents and
attorneys-in-fact of such
Persons and affiliates.
"Agreement means this
Multi-Facility Credit Agreement
dated as of November 15, 1996,
as amended or otherwise modified
from time to time.
"Assessment Rate means, for
any day of any Interest Period
for a CD Loan, the rate (rounded
upwards, if necessary, to the
next higher 1/100 of 1%)
determined by the U.S. Dollar
Administrative Agent as equal to
the annual assessment rate in
effect on such day payable to
the Federal Deposit Insurance
Corporation (the "FDIC") by a
member of the Bank Insurance
Fund that is classified as
adequately capitalized and
within supervisory subgroup "A"
(or a comparable successor
assessment risk classification
within the meaning of 12 C.F.R.
section 327.3) for insuring time
deposits at offices of such
member in the United States; or,
if the FDIC shall at any time
cease to assess time deposits
based upon such classifications
or successor classifications,
equal to the maximum annual
assessment rate in effect on
such day that is payable to the
FDIC by commercial banks
(whether or not applicable to
any particular Bank) for
insuring time deposits at
offices of such banks in the
United States.
"BA Canada means Bank of
America Canada, a bank chartered
under the laws of Canada.
"BA Loan means an amount
loaned to Pentair Canada under
this Agreement bearing interest
at the Fixed BA Rate for the
applicable Interest Period
pursuant to the applicable
Notice of Borrowing. Borrowings
of BA Loans shall be in an
aggregate principal amount of
Cdn.$2,000,000 or any larger
integral multiple of
Cdn.$100,000.
"BA Rate means, for any
Interest Period for a BA Loan,
the rate of interest per annum
(rounded upwards, if necessary,
to the next higher 1/100 of 1%)
equal to the market bid rate
determined by the Canadian
Administrative Agent for
banker's acceptances (with a
tenor comparable to such
Interest Period and in an amount
comparable to the BA Loan of BA
Canada for such Interest Period)
accepted by BA Canada on the
first day of such Interest
Period.
"Banks means the financial
institutions listed on the
signature pages hereof as
"Banks" and their respective
successors and assigns. The
term Bank shall, whenever
appropriate, include any branch
or affiliate of a Bank which is
acting as a Canadian Bank
hereunder.
"Bid means one or more
offers by any Bank to make one
or more Bid Loans submitted in
the manner provided in Section
7.3 (in the case of Domestic Bid
Loans) or 8.3 (in the case of
G-7 Currency Bid Loans).
"Bid Loan means a Domestic
Bid Loan or a G-7 Currency Bid
Loan.
"Bid Loan Request means a
request by a Borrower for Bids
submitted in the manner provided
in Section 7.1 (in the case of
Bids for Domestic Bid Loans) or
8.1 (in the case of Bids for G-7
Currency Bid Loans).
"BofA" means Bank of America
National Trust and Savings
Association.
"Borrower or "Borrowers
means any one or more of
Pentair, Inc., a Minnesota
corporation, EuroPentair GmbH, a
German limited liability
company, and Pentair Canada, and
their respective successors and
permitted assigns.
"Borrowing means a borrowing
of funds under Section 2.1,
consisting of one or more Loans
of the same type made at the
same time. Borrowings hereunder
shall be in the form of U.S.
Dollar Loans (pursuant to
Article III hereof), G-7
Currency Loans (pursuant to
Article IV hereof), Overnight
Loans (pursuant to Article V
hereof), Canadian Loans
(pursuant to Article VI hereof),
Domestic Bid Loans (pursuant to
Article VII hereof) or G-7
Currency Bid Loans (pursuant to
Article VIII hereof).
"Business Day means
(i) with respect
to an Overnight
Loan, any day
except a Saturday,
Sunday or other day
on which commercial
banks in
Minneapolis,
Minnesota are
required or
authorized by law
to close; and
(ii) for any other
purpose, any day
except a Saturday,
Sunday or other day
on which commercial
banks in New York
City, Chicago,
Illinois,
Minneapolis,
Minnesota and San
Francisco,
California (and, in
the case of
disbursements and
payments in
Canadian Dollars,
in Toronto,
Ontario) are
required or
authorized by law
to close and (a) in
the case of a
Eurodollar Loan,
G-7 Currency Loan
or G-7 Currency Bid
Loan, a day on
which commercial
banks are open for
foreign exchange
business in London,
England, and (b) in
the case of a G-7
Currency Loan or
G-7 Currency Bid
Loan, a day on
which dealings in
the relevant G-7
Currency are
carried on in the
applicable offshore
foreign exchange
interbank market in
which disbursement
or payment in such
G-7 Currency will
be made or received
hereunder.
"Canadian Administrative
Agent means BA Canada in its
capacity as agent for the Banks
hereunder in respect of Canadian
Loans, and any successor thereto
pursuant to Section 14.9.
"Canadian Bank means BofA
and Morgan and any other Bank
which, with the consent of the
Borrowers and the Agents, agrees
to become a Canadian Bank
hereunder; provided that each
such Bank shall designate a
Canadian branch or affiliate of
such Bank which will have all
rights, and perform all
obligations, of such Bank
hereunder in respect of Canadian
Loans, such designation to be
made either (i) by causing such
branch or affiliate to execute a
signature page hereof or (ii) by
written notice to Pentair and
the Agents (including any notice
changing the designation of such
Bank's branch or affiliate which
will act as a Canadian Bank
hereunder); provided that no
affiliate of a Bank may be so
designated pursuant to clause
(ii) unless such affiliate has
executed an agreement
satisfactory to Pentair and the
Agents agreeing to become a
party hereto.
"Canadian Commitment means
Cdn. $40,000,000, as such amount
may be revised from time to time
pursuant to Section 2.8. The
Canadian Commitment is a subset
of the Total Commitment and does
not increase the total amount
available for borrowing
hereunder.
"Canadian Dollars and the
sign "Cdn.$ mean lawful money of
Canada.
"Canadian Loan" means any
Prime Loan, BA Loan or
Eurodollar Loan made to Pentair
Canada under Articles II and VI
of this Agreement. All Canadian
Loans shall be made in Canadian
Dollars.
"Canadian Percentage means,
for any Bank, the percentage
which such Bank's Commitment is
of the aggregate amount of the
Commitments of all Canadian
Banks. The Canadian Percentage
for each Canadian Bank as of the
date of this Agreement is set
forth under the heading
"Canadian Percentage on Schedule
1 opposite such Bank's name.
"CD Base Rate applicable to
any Interest Period means the
average rate per annum (rounded
upwards, if necessary, to the
next higher 1/100 of 1%) bid at
10:00 A.M. (Chicago time) (or as
soon thereafter as practicable)
on the first day of such
Interest Period offered by two
or more New York or Chicago
certificate of deposit dealers
of recognized standing for the
purchase at face value from the
U.S. Dollar Administrative Agent
of its certificates of deposit
in an amount comparable to such
Agent's portion of the principal
amount of the CD Borrowing to
which such Interest Period
applies and having a maturity
comparable to such Interest
Period.
"CD Loan means an amount
loaned to a Borrower under this
Agreement bearing interest at
the Fixed CD Rate for the
applicable Interest Period
pursuant to the applicable
Notice of Borrowing. Borrowings
of CD Loans shall be in an
aggregate principal amount of
U.S.$1,000,000 or any larger
integral multiple of
U.S.$100,000.
"CD Margin means a
percentage determined in
accordance with the table below:
Adjusted
Debt to Total CD
Capital Ratio Margin:
.40 or less .325 of 1%
over .40 but
not over .55 .400 of 1%
over .55 .525 of 1%
"CD Reserve Percentage means
for any day the maximum reserve
percentage (expressed as a
decimal, rounded upwards, if
necessary, to the next higher
1/100th of 1%), as determined by
the U.S. Dollar Administrative
Agent, in effect on such day
(including any ordinary,
marginal, emergency,
supplemental, special and other
reserve percentages), as
prescribed by the Federal
Reserve Board (or any successor)
for determining the maximum
reserves to be maintained by
member banks of the Federal
Reserve System with deposits
exceeding $1,000,000,000 for new
non-personal time deposits for a
period comparable to the
applicable Interest Period and
in an amount of U.S. $100,000 or
more. The Fixed CD Rate shall
be adjusted automatically on and
as of the effective date of any
change in the CD Reserve
Percentage.
"Code means the Internal
Revenue Code of 1986, as
amended.
"Commitment means, with
respect to any Bank, the amount
set forth under the heading
"Commitment" on Schedule 1
opposite such Bank's name, as
such amount may be revised from
time to time pursuant to Section
2.3(c), 2.8 or 15.6.
"Commitment Percentage
means, for any Bank, the
percentage which such Bank's
Commitment is of the Total
Commitment. The Commitment
Percentage for each Bank as of
the date of this Agreement is
set forth under the heading
"Commitment Percentage" on
Schedule 1 opposite such Bank's
name.
"Computation Date means each
date on which an Agent
determines the Equivalent Amount
of any Loan or Letter of Credit
Obligation pursuant to Section
2.15.
"Consolidated Cumulative Net
Income means the sum of the net
income of Pentair and its
Consolidated Subsidiaries for
(i) the period from July 1, 1996
through December 31, 1996; and
(ii) each fiscal year of Pentair
thereafter; provided that (x)
net income for any period shall
be added to Consolidated
Cumulative Net Income only when
such period is completed and (y)
if net income for any period is
not positive, such period shall
be excluded in calculating
Consolidated Cumulative Net
Income.
"Consolidated Debt means, at
any date, the Debt of Pentair
and its Consolidated
Subsidiaries, determined on a
consolidated basis as of such
date.
"Consolidated Shareholders'
Equity means, at any date, the
consolidated shareholders'
equity of Pentair and its
Consolidated Subsidiaries.
"Consolidated Subsidiary
means, at any date, any
Subsidiary or other entity the
accounts of which would be
consolidated with those of
Pentair in its consolidated
financial statements as of such
date.
"Controlled Group means all
members of a controlled group of
corporations and all trades or
businesses (whether or not
incorporated) under common
control which, together with
Pentair, are treated as a single
employer under Sections 414(b)
or 414(c) of the Code.
"Daily Pricing Loan means an
amount loaned to Pentair under
this Agreement bearing interest
at the applicable Daily Pricing
Rate for the applicable Interest
Period pursuant to the
applicable Notice of Borrowing.
Daily Pricing Loans shall be in
a principal amount of the lesser
of either (ii) U.S.$1,000,000 or
any larger integral multiple of
U.S.$100,000 or (ii) the amount
of any unused Overnight
Commitment.
"Daily Pricing Rate means
for any day a rate per annum
(rounded upward, if necessary,
to the nearest 1/16 of 1%)
determined pursuant to the
following formula, which rate
shall continue in effect until
the next succeeding Business
Day:
Daily Pricing Rate =
LIBO Rate
1.00 - Eurocurrency
Reserve Percentage
plus 0.50%
"Debt of any Person means at
any date, without duplication,
(i) all obligations of such
Person for borrowed money, (ii)
all obligations of such Person
evidenced by bonds, debentures,
notes or other similar
instruments, (iii) all
obligations of such Person to
pay the deferred purchase price
of property or services, except
trade accounts payable arising
in the ordinary course of
business, (iv) all obligations
of such Person as lessee under
capital leases, (v) all Debt of
others secured by a Lien on any
asset of such Person, whether or
not such Debt is assumed by such
Person, (vi) the amount of any
proceeds of a Sale of
Receivables less amounts
collected on the receivables
sold in such Sale of
Receivables, (vii) all
non-contingent reimbursement
obligations of such Person under
letters of credit, and (viii)
all Debt (as defined above) of
others Guaranteed by such
Person.
"Debt to Total Capital Ratio
means the ratio obtained by
dividing (i) Consolidated Debt
by (ii) an amount equal to the
sum of Consolidated Debt and
Consolidated Shareholders'
Equity.
"Default means any condition
or event which constitutes an
Event of Default or which with
the giving of notice or lapse of
time or both would, unless cured
or waived, become an Event of
Default.
"Domestic Bid Loan means a
Domestic Margin Rate Bid Loan or
an Absolute Rate Bid Loan.
"Domestic Margin Bid means
the Margin specified in basis
points with respect to a
particular Interest Period in a
Bid submitted in response to a
Bid Loan Request for a Domestic
Margin Rate Bid Loan.
"Domestic Margin Bid Request
means a Bid Loan Request
requesting a Domestic Margin
Bid.
"Domestic Margin Rate Bid
Loan means an amount loaned to
any of the Borrowers under this
Agreement that bears interest by
reference to a Margin Rate
determined pursuant to
Article VII.
"Domestic Submission
Deadline has the meaning set
forth in Section 7.3.
"Environmental Claims means
all claims, however asserted, by
any governmental authority or
other Person alleging potential
liability or responsibility for
violation of any Environmental
Law, or for release or injury to
the environment.
"Environmental Laws means
all federal, state and local
laws, statutes, common law
duties, rules, regulations,
ordinances and codes, together
with all administrative orders,
directed duties, requests,
licenses, authorizations and
permits of, and agreements with,
any judicial, regulating or
other governmental authority, in
each case relating to
environmental, health, safety
and land use matters.
"Equivalent Amount means, on
any date, (a) in the case of any
amount denominated in U.S.
Dollars, such amount, (b) in the
case of any amount denominated
in Canadian Dollars which
relates to Canadian Loans, the
amount of U.S. Dollars into
which such amount could be
converted at the Canadian
Administrative Agent's spot
selling rate through its FX
trading office at approximately
10:00 a.m. (Chicago time) on
such date, and (c) in the case
of any amount denominated in a
G-7 Currency (excluding any
amount referred to in clause (b)
above), the amount of U.S.
Dollars into which such amount
could be converted at the G-7
Currency Administrative Agent's
spot buying rate (based on the
London interbank market rate
then prevailing) as of
approximately 11:00 a.m. (London
time) three Business Days before
such date.
"ERISA means the Employee
Retirement Income Security Act
of 1974, as amended, or any
successor statute.
"Eurocurrency Margin means a
percentage determined in
accordance with the table below:
Adjusted
Debt to Total Eurocurrency
Capital Ratio Margin:
.40 or less .200 of 1%
over .40 but
not over .55 .275 of 1%
over .55 .400 of 1%
"Eurocurrency Reserve
Percentage means, for any day
for any Eurodollar Loan or G-7
Currency Loan (or for any
overdue G-7 Currency Bid Loan),
the percentage (expressed as a
decimal and rounded upward, if
necessary, to an integral
multiple of 1/100 of 1%) in
effect on such day, as
prescribed by the Board of
Governors of the Federal Reserve
System (or any successor), for
determining the aggregate
maximum reserve requirements
(including, without limitation,
any emergency, supplemental,
marginal and other reserve
requirements and taking into
account any transitional
adjustments or other scheduled
changes in reserve requirements)
for the applicable Agent in
respect of new deposits in the
applicable currency having a
maturity comparable to the
Interest Period for such Loan
and in an Equivalent Amount of
U.S.$100,000 or more.
"Eurodollar Loan means an
amount loaned to any of the
Borrowers under this Agreement
bearing interest at the Fixed
Eurodollar Rate for the
applicable Interest Period
pursuant to the applicable
Notice of Borrowing. Borrowings
of Eurodollar Loans shall be in
an aggregate principal amount of
U.S.$2,000,000 or any larger
integral multiple of
U.S.$100,000.
"Event of Default has the
meaning set forth in Section
13.1.
"Expense Ratio has the
meaning set forth in Section
12.4.
"Facility Fee has the
meaning set forth in Section
2.6.
"Federal Funds Effective
Rate means, for any day, an
interest rate per annum equal to
the weighted average of the
rates on overnight Federal funds
transactions with members of the
Federal Reserve System arranged
by Federal funds brokers, as
published for such day by the
Federal Reserve Bank of New
York, or, if such rate is not so
published for any day which is a
Business Day, the average of the
quotations for such day on such
transactions received by BofA
from three Federal funds brokers
of recognized standing selected
by it. In the case of a day
which is not a Business Day, the
Federal Funds Effective Rate for
such day shall be the Federal
Funds Effective Rate for the
next preceding Business Day.
"First Bank means First Bank
National Association.
"Fixed BA Rate means, for
any BA Loan, a rate per annum
equal to the sum of the BA Rate
for such Loan plus the
Eurocurrency Margin.
"Fixed CD Rate means, for
any CD Loan, a rate per annum
equal to the sum of the
applicable Adjusted CD Rate plus
the CD Margin. The Adjusted CD
Rate and, therefore, the Fixed
CD Rate shall be adjusted
automatically on and as of the
effective date of any change in
the CD Reserve Percentage or the
CD Margin.
The following example will
illustrate the calculation of a
Fixed CD Rate. Assuming a CD
Base Rate for a 30-day Interest
Period of 5.27%, a CD Reserve
Percentage of 0%, an Assessment
Rate of 0%, and a CD Margin of
.325 of 1%, the Fixed CD Rate
would equal:
.0527
----------- + 0 + .00325 =
1.00 - 0
.05595 = 5.60%
"Fixed Eurodollar Rate
means, for any Eurodollar Loan,
a rate per annum equal to the
sum of (a) the quotient obtained
(rounded upwards, if necessary,
to the next higher 1/100 of 1%)
by dividing (i) the applicable
Interbank Offered Rate by
(ii) 1.00 minus the Eurocurrency
Reserve Percentage, plus (b) the
Eurocurrency Margin. The Fixed
Eurodollar Rate shall be
adjusted automatically on and as
of the effective date of any
change in the Eurocurrency
Reserve Percentage or the
Eurocurrency Margin.
The following example will
illustrate the calculation of a
Fixed Eurodollar Rate. Assuming
an Interbank Offered Rate for a
one month Interest Period of
5.375%, a Eurocurrency Reserve
Percentage of 0%, and a
Eurocurrency Margin of .200 of
1%, the Fixed Eurodollar Rate
would equal:
.05375
----------- + .00200 = .05575
1.00 - 0
= 5.58%
"Fixed G-7 Rate means, for
any G-7 Currency Loan, a rate
per annum equal to the sum of
(a) the quotient obtained
(rounded upwards, if necessary,
to the next higher 1/100 of 1%)
by dividing (i) the applicable
Interbank Offered Rate by (ii)
1.00 minus the Eurocurrency
Reserve Percentage plus (b) the
Eurocurrency Margin. The Fixed
G-7 Rate shall be adjusted
automatically on and as of the
effective date of any change in
the Eurocurrency Reserve
Percentage or the Eurocurrency
Margin.
The following example will
illustrate the calculation of a
Fixed G-7 Rate. Assuming an
Interbank Offered Rate for a one
month Interest Period of 3%, a
Eurocurrency Reserve Percentage
of 0%, and a Eurocurrency Margin
of .200 of 1%, the Fixed G-7
Rate would equal:
.03
----------- + .00200 = .03200 =
1.00 - 0
3.2%
"Fixed Rate Loans means CD
Loans, Eurodollar Loans, G-7
Currency Loans and BA Loans.
"Funding Date means any day
designated by a Borrower as the
Business Day on which a Bid Loan
shall, subject to the terms and
conditions hereof, be made by
any Bank.
"G-7 Currency means any of
German Deutschmarks, French
Francs, British Pounds Sterling,
Japanese Yen, Canadian Dollars
or Italian Lira.
"G-7 Currency Administrative
Agent means Morgan in its
capacity as agent for the Banks
hereunder with respect to
Borrowings denominated in G-7
Currencies, and any successor
thereto pursuant to Section
14.9.
"G-7 Currency Bid" means the
Margin specified in basis points
with respect to a particular
Interest Period in a Bid
submitted in response to a Bid
Loan Request for a G-7 Currency
Bid Loan.
"G-7 Currency Bid Loan means
an amount loaned to any of the
Borrowers in a G-7 Currency
under this Agreement that bears
interest at a rate determined
pursuant to Article VIII.
"G-7 Currency Letters of
Credit has the meaning set
forth in Section 9.1.
"G-7 Currency Loan means an
amount loaned to any of the
Borrowers under this Agreement
bearing interest at the Fixed
G-7 Rate for the applicable
Interest Period pursuant to the
applicable Notice of Borrowing;
provided that Canadian Loans
shall not be G-7 Currency Loans.
Borrowings of G-7 Currency Loans
shall be in an aggregate
Equivalent Amount of at least
U.S. $2,000,000 and an integral
multiple of 100,000 units of the
applicable G-7 Currency.
"G-7 Currency Submission
Deadline has the meaning set
forth in Section 8.3.
"Guarantee by any Person
means any obligation, contingent
or otherwise, of such Person
directly or indirectly
guaranteeing any Debt of any
other Person or in any manner
providing for the payment of any
Debt of any other Person or
otherwise protecting the holder
of such Debt against loss
(whether by agreement to
keep-well, to purchase assets,
goods, securities, services, or
to take-or-pay or otherwise);
provided that the term Guarantee
shall not include endorsements
for collection or deposit in the
ordinary course of business or
amounts due contingently or
otherwise with respect to
obligations of Lake Superior
Paper Industries, a former joint
venture of Pentair, or Flambeau
Paper Corp., a former subsidiary
of Pentair. The term
"Guarantee" used as a verb has a
correlative meaning.
"Guarantor means Pentair, in
its capacity as guarantor of
Loans and Letter of Credit
Obligations of any other
Borrower pursuant to Article XVI
hereof.
"Interbank Offered Rate
means, with respect to each
Interest Period:
(i) in the case of a
Loan denominated in U.S.
Dollars or a Canadian
Loan, the average rate per
annum (rounded upwards, if
necessary, to the next
higher 1/100 of 1%)
determined by the
applicable Agent at which
deposits in U.S. Dollars
or Canadian Dollars, as
applicable, are offered to
BofA or BA Canada, as
applicable, by major banks
in the interbank
eurocurrency market at
approximately 10:00 a.m.
(Chicago time), or as soon
thereafter as practicable,
two Business Days before
the first day of such
Interest Period in an
amount approximately equal
to BofA's or BA Canada's
portion of the principal
amount of the Borrowing to
which such Interest Period
is to apply (or, in the
case of a Domestic Margin
Rate Bid Loan, in an
amount equal to the
largest Domestic Margin
Rate Bid Loan to be made
by any Bank as part of
such Borrowing) and for a
period of time comparable
to such Interest Period;
and
(ii) in the case of a
Loan denominated in a G-7
Currency, (x) the per
annum rate for deposits in
the relevant G-7 Currency
for a period of time
comparable to such
Interest Period which
appears on Telerate Page
3740 or 3750, whichever is
applicable, at
approximately 11:00 a.m.
(London time) two Business
Days before the first day
of such Interest Period or
(y) if such rate does not
appear on Telerate Page
3740 or 3750 on such day,
the average rate per annum
(rounded upwards, if
necessary, to the next
higher 1/100 of 1%)
determined by the G-7
Currency Administrative
Agent at which deposits in
such G-7 Currency are
offered to the G-7
Currency Administrative
Agent by major banks in
the London interbank
market at approximately
11:00 a.m. (London time)
two Business Days before
the first day of such
Interest Period in an
amount approximately equal
to the G-7 Currency
Administrative Agent's
portion of the principal
amount of the Borrowing to
which such Interest Period
is to apply (or, in the
case of a G-7 Currency Bid
Loan, in an amount equal
to the largest G-7
Currency Bid Loan to be
made by any Bank as part
of such Borrowing) and for
a period of time
comparable to such
Interest Period.
The references to Telerate
Page 3740 or 3750 in this
definition shall be construed to
be a reference to the relevant
page on the Telerate service or
any other service that may be
designated by the British
Bankers' Association as the
information vendor for the
purpose of displaying British
Bankers' Association Interest
Settlement Rates for the
relevant G-7 Currency.
"Interest Expense means, for
any period, the sum, without
duplication, of the consolidated
interest expense of Pentair and
its Consolidated Subsidiaries
for such period.
"Interest Period means:
(i) with respect to
each Reference Loan or
Prime Loan: a period
commencing on the date of
such Loan and ending on
the Termination Date,
provided that any Interest
Period which would
otherwise end on a day
which is not a Business
Day shall be extended to
the next succeeding
Business Day.
(ii) with respect to
each CD or BA Loan: the
period commencing on the
date of such Loan and
ending 30, 60, 90 or 180
days thereafter, as the
applicable Borrower may
elect in the applicable
Notice of Borrowing,
provided that any Interest
Period which would
otherwise end on a day
which is not a Business
Day shall be extended to
the next succeeding
Business Day.
(iii) with respect to
each Eurodollar Loan, G-7
Currency Loan, Domestic
Margin Rate Bid Loan or
G-7 Currency Bid Loan:
the period commencing on
the date of such Loan and
ending one, two, three or
six months thereafter, as
the applicable Borrower
may elect in the
applicable Notice of
Borrowing, provided that:
(A) any
Interest Period
which would
otherwise end on a
day which is not a
Business Day shall
be extended to the
next succeeding
Business Day unless
such Business Day
falls in another
calendar month, in
which case such
Interest Period
shall end on the
next preceding
Business Day; and
(B) any
Interest Period
which begins on the
last Business Day
of a calendar month
(or on a day for
which there is no
numerically
corresponding day
in the calendar
month at the end of
such Interest
Period) shall end
on the last
Business Day of a
calendar month.
(iv) with respect to
each Absolute Rate Bid
Loan: the period
commencing on the date of
such Loan and ending not
less than 7 or more than
180 days thereafter, as
the applicable Borrower
may elect in the
applicable Notice of
Borrowing, provided that
any Interest Period which
would otherwise end on a
day which is not a
Business Day shall be
extended to the next
succeeding Business Day.
(v) with respect to
each Daily Pricing Loan: a
period commencing on the
date of such Loan and
ending five (5) Business
Days thereafter.
"Issuing Bank shall mean any
of the Banks in its capacity as
issuer of one or more Letters of
Credit. If any letter of credit
shall be issued by any other
issuer, but confirmed by any
Bank, such Bank shall be deemed
to be the Issuing Bank with
respect to such letter of
credit.
"Lending Office means, as to
each Bank, any office, branch or
affiliate of such Bank which
shall be making or maintaining
any Loan.
"Letters of Credit shall
have the meaning set forth in
Section 9.1, and shall include
specifically any standby letter
of credit issued by another
issuer but which is confirmed by
an Issuing Bank.
"Letter of Credit
Agreements shall have the
meaning set forth in
Section 9.6.
"Letter of Credit
Obligations shall mean the
aggregate amount of all possible
drawings under all Letters of
Credit plus all amounts drawn
under any Letter of Credit and
not reimbursed by the Borrower
under the applicable Letter of
Credit Agreement.
"LIBO Rate means the offered
rate for deposits in U.S.
Dollars (rounded upwards, if
necessary, to the nearest 1/16
of 1%), for delivery of such
deposits on such day, for an
interest period of one month,
which appears on the Reuters
Screen LIBO Page as of the time
selected by the Overnight Bank
on such day. If at least two
rates appear on the Reuters
Screen LIBO Page, the rate shall
be the arithmetic mean of such
rates (rounded as provided
above). If fewer than two rates
appear, the rate may be
determined by the Overnight Bank
based on other services selected
for such purpose by the
Overnight Bank or based on rates
offered to the Overnight Bank
for U.S. Dollar deposits in the
interbank Eurodollar market.
"Reuters Screen LIBO Page for
the purpose of this definition
means the display designated as
page "LIBO on the Reuters
Monitor Money Rates Service (or
such other page as may replace
the LIBO Page on that service
for the purpose of displaying
London interbank offered rates
of major banks for U.S. Dollar
deposits).
"Lien means, with respect to
any asset, any mortgage, lien,
pledge, charge, security
interest or encumbrance of any
kind in respect of such asset.
For the purposes of this
Agreement, a Borrower or any
Subsidiary thereof shall be
deemed to own subject to a Lien
any asset which it has acquired
or holds subject to the interest
of a vendor or lessor under any
conditional sale agreement,
capital lease or other title
retention agreement relating to
such asset.
"Loan or "Loans means one or
more Loans to be made by a Bank
pursuant to Article II,
consisting of U.S. Dollar Loans
(which may be Reference Loans,
CD Loans, or Eurodollar Loans),
G-7 Currency Loans, Overnight
Loans (which may be Reference
Loans or Daily Pricing Loans),
Canadian Loans (which may be
Prime Loans, BA Loans or
Eurodollar Loans) or Bid Loans.
Because each Bank's
participation interest in each
Letter of Credit represents an
extension of credit hereunder,
whether or not drawings have
occurred under any such Letter
of Credit, the term "Loan shall
also include, for purposes of
utilization of the Commitments,
reduction of the Commitments
under Section 2.8 and all other
purposes hereunder, the
participation interest of each
Bank in each Letter of Credit.
"Majority Canadian Banks
means any group of two or more
Canadian Banks having total
Canadian Percentages of more
than 50%.
"Margin means the margin,
rounded to the nearest 1/100 of
1%, above or, if a negative
number, below the applicable
Interbank Offered Rate for a
particular Interest Period and
for a particular Domestic Margin
Rate Bid Loan amount or G-7
Currency Bid Loan amount, as the
case may be.
"Margin Rate for a Domestic
Margin Rate Bid Loan or a G-7
Currency Bid Loan means the rate
of interest per annum determined
for such Bid Loan pursuant to
Section 7.8(b) or 8.8, as
applicable.
"Material Subsidiary means
(a) each Borrower other than
Pentair and (b) each other
Subsidiary of Pentair that at
the time of determination
constitutes a "significant
subsidiary" (as such term is
defined in Regulation S-X of the
Securities and Exchange
Commission as in effect on the
date of this Agreement).
"Maximum Offer means the
maximum aggregate amount of Bid
Loans for all Interest Periods
which are offered by a Bank
pursuant to a particular Bid.
"Maximum Request means the
maximum aggregate amount of Bid
Loans requested by a Borrower
for all Interest Periods in a
single Bid Loan Request pursuant
to Section 7.1 or 8.1 (which
amount shall not be greater than
the amount permitted by Section
7.2 or 8.2, as the case may be).
"Morgan" means Morgan
Guaranty Trust Company of New
York.
"Non-Canadian Bank has the
meaning set forth in Section
6.5(a).
"Notes means the promissory
notes of the Borrowers in the
form of Exhibit A, evidencing
Loans hereunder. Because each
Bank's participation interest in
each Letter of Credit represents
an extension of credit
hereunder, whether or not
drawings have occurred under any
such Letter of Credit, each
Bank's participation interest
therein shall be deemed the
holding of a Note hereunder for
purposes of this Agreement
(including without limitation
Section 2.13), whether or not a
Loan is deemed to be made to
fund drawings thereunder as
contemplated by Section 9.4.
"Notice of Borrowing means a
notice complying with the
requirements of Section 3.1 with
respect to a U.S. Dollar Loan,
Section 4.1 with respect to a
G-7 Currency Loan, Section 5.1
with respect to an Overnight
Loan, Section 6.1 with respect
to Canadian Loans or a notice
accepting one or more Bids
pursuant to Section 7.4 or 8.4.
"Overnight Administrative
Agent means First Bank in its
capacity as agent with respect
to Overnight Loans, and any
successor thereto pursuant to
Section 14.9.
"Overnight Bank means First
Bank in its capacity as lender
under the Overnight Commitment.
"Overnight Commitment means
U.S.$25,000,000, as such amount
may be revised from time to time
pursuant to Section 2.8. The
Overnight Commitment is a subset
of the Total Commitment and does
not increase the total amount
available for borrowing
hereunder.
"Overnight Loan means any
Reference Loan or Daily Pricing
Loan made under Articles II and
V of this Agreement.
"Participant has the meaning
set forth in Section 15.6(d).
"Payment Office means, in
the case of each of the U.S.
Dollar Administrative Agent, the
G-7 Currency Administrative
Agent, the Overnight Bank and
the Canadian Administrative
Agent, the office or account of
such entity through which
payments are to be made and
received hereunder, as notified
to the Borrowers and the Banks
from time to time (it being
understood that an Agent may
designate different offices for
different types of Loans and/or
different currencies).
"Payment Sharing Notice
means a written notice from any
Bank to the Agents and Pentair
(i) advising them that an Event
of Default has occurred and is
continuing and (ii) directing
the Agents to allocate all
payments and other recoveries
received from or on behalf of
the Borrowers in accordance with
Section 2.18(b).
"PBGC means the Pension
Benefit Guaranty Corporation or
any entity succeeding to any or
all of its functions under
ERISA.
"Pentair means Pentair,
Inc., acting as a separate
Borrower (or as Guarantor)
hereunder, and, as the context
demands, acting as the agent for
any other Borrowers for
administrative purposes as
provided for in Section 15.9
hereof.
"Pentair Canada means
Pentair Canada, Inc., an
Ontario, Canada corporation.
"Person means an individual,
a corporation, a partnership, an
association, a trust or any
other entity or organization,
including a government or
political subdivision or an
agency or instrumentality
thereof.
"Plan means at any time an
employee pension benefit plan
which is covered by Title IV of
ERISA or subject to the minimum
funding standards under Section
412 of the Code and is either
(i) maintained by any Borrower
or any member of the Controlled
Group for employees of such
Borrower or any member of the
Controlled Group or (ii)
maintained pursuant to a
collective bargaining agreement
or any other arrangement under
which more than one employer
makes contributions and to which
any Borrower or any member of
the Controlled Group is then
making or accruing an obligation
to make contributions or has
within the preceding five plan
years made contributions.
"Prime Loan means an amount
loaned to Pentair Canada under
this Agreement bearing interest
at the Prime Rate. Borrowings
of Prime Loans shall be in an
aggregate principal amount of
Cdn.$1,000,000 or any larger
integral multiple of
Cdn.$100,000.
"Prime Rate means, for any
Prime Loan, for any day, the per
annum rate of interest in effect
for such day as publicly
announced from time to time by
BA Canada in Toronto, Ontario as
its "prime rate.
"Prior Agreements has the
meaning set forth in Section
10.3.
"Reference Loan means an
amount loaned to any of the
Borrowers under this Agreement
bearing interest at the
applicable Reference Rate.
Borrowings of Reference Loans
shall be in an aggregate
principal amount of the lesser
of (ii) U.S.$1,000,000 or any
larger integral multiple of
U.S.$100,000 or (ii) the unused
amount of the Total Commitment
or the Overnight Commitment, as
the case may be.
"Reference Rate means, for
any Reference Loan made by the
Overnight Bank as an Overnight
Loan, the rate publicly
announced from time to time by
such bank as its reference rate,
which rate may be at, above or
below the rate or rates at which
such bank lends to other
Persons. "Reference Rate means,
for any other Reference Loan or
for any other purpose herein,
for any day, a fluctuating rate
per annum equal to the greater
of (1) the rate of interest then
most recently announced by BofA
at San Francisco, California, as
its reference rate, or (2) a
rate per annum (rounded upward
to the next highest 1/8 of 1% if
not already an integral multiple
of 1/8 of 1%) equal to the
Federal Funds Effective Rate in
effect on such day plus 1/2% of
1%. If for any reason BofA
shall have determined (which
determination shall be
conclusive in the absence of
manifest error) that it is
unable to ascertain the Federal
Funds Effective Rate for any
reason (including, without
limitation, the inability or
failure of BofA to obtain
sufficient bids or publications
in accordance with the terms
hereof), the Reference Rate
shall be the rate referred to in
clause (1) until the
circumstances giving rise to
such inability no longer exist.
For purposes of this
Agreement and the Notes, each
change in the Reference Rate due
to a change in the Federal Funds
Effective Rate shall take effect
on the effective date of such
change in the Federal Funds
Effective Rate.
"Refinancing Loan means a
U.S. Dollar Loan, a G-7 Currency
Loan, an Overnight Loan or a
Canadian Loan made by a Bank
with respect to which, after
giving effect to such Loan and
the application of the proceeds
thereof, no increase results in
the aggregate outstanding
principal amount of all U.S.
Dollar Loans, G-7 Currency
Loans, Overnight Loans or
Canadian Loans, as the case may
be, made by such Bank.
"Regulatory Change means,
after the date hereof, the
adoption of any applicable law,
rule or regulation, or any
change therein, or any change in
the interpretation or
administration thereof by any
governmental authority, central
bank or comparable agency
charged with the interpretation
or administration thereof or
compliance by any Bank with any
request or directive (whether or
not having the force of law) of
any such authority, central bank
or comparable agency.
"Required Banks means at any
time Banks having at least
66-2/3% of the aggregate amount
of the Commitments or, if the
Commitments shall have been
terminated, holding at least
66-2/3% of the aggregate
Equivalent Amount of all Loans
outstanding.
"Sale of Receivables means a
sale by Pentair or a
Consolidated Subsidiary, with or
without recourse or discount, of
an interest in trade receivables
of Pentair or a Consolidated
Subsidiary pursuant to a
receivables purchase program or
a loan secured by such
receivables.
"Subsidiary means any
corporation or other entity of
which securities or other
ownership interests having
ordinary voting power to elect a
majority of the board of
directors or other persons
performing similar functions are
at the time directly or
indirectly owned by Pentair.
"Taxes has the meaning set
forth in Section 2.16.
"Termination Date means June
30, 2001 (or if such date is not
a Business Day, the next
succeeding day which is a
Business Day), as the same may
be extended pursuant to Section
2.3, or such earlier date on
which the Commitments are
terminated pursuant to Section
13.1.
"Total Commitment shall mean
the aggregate amount of the
Commitments of the Banks.
"Unfunded Vested Liabilities
means, with respect to any Plan
at any time, the amount (if any)
by which (i) the present value
of all vested nonforfeitable
benefits under such Plan exceeds
(ii) the fair market value of
all Plan assets allocable to
such benefits, all determined as
of the then most recent
valuation date for such Plan,
but only to the extent that such
excess represents a potential
liability of Pentair or any
member of the Controlled Group
to the PBGC or the Plan under
Title IV of ERISA.
"U.S. Dollar Administrative
Agent means BofA in its
capacity as agent for the Banks
hereunder with respect to U.S.
Dollar Loans, and any successor
thereto pursuant to Section
14.9.
"U.S. Dollar Letters of
Credit has the meaning set
forth in Section 9.1.
"U.S. Dollar Loans means any
Reference Loan, CD Loan or
Eurodollar Loan made under
Articles II and III of this
Agreement.
"U.S. Dollars and the sign
"U.S.$ mean lawful money of the
United States of America.
SECTION 1.2 Accounting
Terms and Determinations.
Unless otherwise specified
herein, all accounting terms
used herein shall be
interpreted, all accounting
determinations hereunder shall
be made, and all financial
statements required to be
delivered hereunder shall be
prepared in accordance with
generally accepted accounting
principles as in effect for U.S.
domiciled companies from time to
time, applied on a basis
consistent (except for changes
approved by Pentair's
independent public accountants)
with the most recent audited
consolidated financial
statements of Pentair and its
Consolidated Subsidiaries
delivered to the Banks; provided
that if Pentair notifies the
U.S. Dollar Administrative Agent
that Pentair desires to amend
any covenant in Article XII (or
any related definition) to
eliminate the effect of any
change in generally accepted
accounting principles on the
operation of such covenant (or
such definition), or the U.S.
Dollar Administrative Agent
notifies Pentair that the
Required Banks wish to amend any
such covenant (or any such
definition) for such purpose,
then Pentair's compliance with
such covenant shall be
determined (or such definition
shall be interpreted) on the
basis of generally accepted
accounting principles in effect
immediately before such change
became effective, until either
such notice is withdrawn or such
covenant (or such definition) is
amended in a manner satisfactory
to Pentair and the Required
Banks. For Borrowers who are
domiciled outside the United
States, financial statements
provided hereunder pursuant to
Section 12.1(k) shall have been
prepared in accordance with
generally accepted accounting
principles as in effect from
time to time for the
jurisdictions in which they are
domiciled, which financial
statements may, however, be
conformed to the accounting
treatment specified in the
preceding sentence.
ARTICLE II
LOANS AND ADMINISTRATION
SECTION 2.1 Application of
Articles II through IX. The
provisions of this Article II
shall apply to all Loans made by
the Banks hereunder. In
addition, the provisions of
Article III shall apply to U.S.
Dollar Loans; the provisions of
Article IV shall apply to G-7
Currency Loans; the provisions
of Article V shall apply to
Overnight Loans; the provisions
of Article VI shall apply to
Canadian Loans; the provisions
of Article VII shall apply to
Domestic Bid Loans; the
provisions of Article VIII shall
apply to G-7 Currency Bid Loans;
and the provisions of Article IX
shall apply to Letters of
Credit. The Borrowers shall
have the sole discretion,
exercisable without limitation,
to determine whether and which
kinds or types of Loans to
obtain under this Agreement,
without regard to which Banks or
which Agents may be requested to
participate as a result of the
exercise of that discretion.
SECTION 2.2 Commitments to
Lend.
(a) During the term
hereof until the
Termination Date, each
Bank severally agrees, on
the terms and conditions
set forth in this
Agreement, to make Loans
to the Borrowers, or to
permit an Issuing Bank to
issue Letters of Credit
for or on behalf of the
Borrowers, from time to
time in Equivalent Amounts
not to exceed in the
aggregate at any one time
outstanding (excluding, in
the case of the Overnight
Bank, the Overnight Loans)
the amount of its
Commitment (and, as more
fully set forth in Section
6.5 and 6.6, each
Non-Canadian Bank agrees
to purchase participations
in Canadian Loans).
(b) During the term
hereof until the
Termination Date, (i) the
Overnight Bank severally
agrees, on the terms and
conditions set forth in
this Agreement, to make
Overnight Loans to
Pentair, from time to time
in amounts not to exceed
in the aggregate at any
one time outstanding the
amount of the Overnight
Commitment and (ii) each
other Bank agrees to fund
its pro rata share of, or
purchase a participation
in, each Overnight Loan
under the circumstances,
and as more fully set
forth in, Sections 5.5,
5.6 and 5.7. Only Pentair
may be the Borrower of an
Overnight Loan.
(c) Each Borrowing
or Letter of Credit
Obligation denominated in
a G-7 Currency shall be
deemed a utilization of
the Commitments in an
amount equal to the
Equivalent Amount thereof
as determined from time to
time pursuant to Section
2.15(a).
(d) With the
exception of Overnight
Loans described in Article
V hereof and Bid Loans
described in Articles VII
and VIII hereof, each
Borrowing shall be made
from the several Banks
ratably in proportion to
their respective
Commitment Percentages;
provided that Borrowings
of Canadian Loans shall be
made from the several
Canadian Banks ratably in
accordance with their
Canadian Percentages.
(e) At no time shall
the sum of the principal
Equivalent Amount of all
Loans and Letter of Credit
Obligations exceed the
Total Commitment; at no
time shall the principal
Equivalent Amount of all
Canadian Loans exceed the
Canadian Commitment; and
at no time shall the
principal amount of all
Overnight Loans exceed the
Overnight Commitment.
(f) At no time shall
the sum of the principal
amount of all U.S. Dollar
Loans plus the principal
amount of all Domestic Bid
Loans plus the amount of
all Letter of Credit
Obligations with respect
to U.S. Dollar Letters of
Credit plus the principal
Equivalent Amount of all
Canadian Loans (determined
as of the most recent
applicable Computation
Date) plus the principal
amount of all Overnight
Loans exceed the North
American Sublimit (and
each of the U.S. Dollar
Administrative Agent, the
Overnight Administrative
Agent and the Canadian
Administrative Agent
agrees that it will,
promptly upon the request
of any other Agent,
provide such other Agent
with a calculation of the
outstanding Equivalent
Amount of all Loans and
Letter of Credit
Obligations administered
by such Agent). At no
time shall the sum of the
principal Equivalent
Amount of all G-7 Currency
Loans plus the principal
Equivalent Amount of all
G-7 Currency Bid Loans
plus the Equivalent Amount
of all Letter of Credit
Obligations with respect
to G-7 Currency Letters of
Credit, in each case
determined as of the most
recent applicable
Computation Date, exceed
the G-7 Currency Sublimit.
For purposes of the
foregoing, (i) the North
American Sublimit shall
initially be
U.S.$150,000,000, (ii) the
G-7 Currency Sublimit
shall initially be
U.S.$125,000,000 and
(iii) subject to the first
two sentences of this
clause (f), Pentair may
from time to time change
the amount of each such
Sublimit by giving notice
of such change to the
Agents (which notice shall
specify the effective date
of such change); provided
that (x) any such change
shall become effective
only upon receipt by all
of the Agents of such
notice; (y) each such
Sublimit shall at all
times be an integral
multiple of
U.S.$1,000,000; and (z)
the total of such
Sublimits shall at all
times be equal to the
Total Commitment.
Within the foregoing limits, the
Borrowers may borrow under this
Section 2.2, repay Loans under
Section 2.4, and reborrow at any
time during the term hereof.
SECTION 2.3 Extension of
Termination Date. On or not
more than 30 days before May 1,
1998, and on or not more than 30
days before May 1 of every
second year thereafter, Pentair
may, by written notice to each
Bank (with copies to the
Agents), request that the
Termination Date be extended for
an additional two years,
effective as of the following
June 30; provided, however, that
no such request will be
considered if the Termination
Date was not extended upon any
previous request. The Banks
will indicate their acceptance
or rejection of any requested
extension as follows:
(a) If all Banks
notify Pentair (with
copies to the Agents) in
writing within 30 days
after receipt of notice of
a requested extension of
their acceptance of the
requested extension, the
extension shall be deemed
to have been granted.
(b) If Banks which
hold in the aggregate less
than one-third of the
outstanding Commitments of
all of the Banks notify
Pentair (with copies to
the Agents) in writing
within 30 days after
receipt of notice of a
requested extension that
they consent to the
requested extension, the
extension shall be deemed
to have been rejected.
(c) If Banks which
hold in the aggregate
one-third or more but less
than all of the
outstanding Commitments of
all of the Banks notify
Pentair (with copies to
the Agents) in writing
within 30 days after
receipt of notice of a
requested extension that
they consent to the
requested extension, the
extension shall be deemed
to have been rejected
unless the Banks which
consented to the requested
extension, or any
combination of the
consenting Banks, agree,
within 15 days after
receipt from Pentair of
written notice that one or
more Banks have consented
to the extension, to
increase their
Commitment(s) by the
amount of the aggregate
Commitments of the
non-consenting Banks. If
the consenting Banks, or
any combination of them,
agree to increase their
Commitments by the
aggregate amount of the
Commitments of the
non-consenting Banks, the
requested extension shall
be deemed to have been
granted and the
Commitments of the Banks
altered as follows:
(1) If only
one Bank agrees to
increase its
Commitment, the
Commitment of such
Bank shall be
increased as of the
effective date of
the extension by
the amount of the
Commitments of the
non-consenting
Banks. If more
than one Bank
agrees to increase
their Commitments,
the Commitments of
the non-consenting
Banks shall be
allocated among the
Banks desiring
increased
Commitments in such
proportion or
proportions as
Pentair in its sole
discretion elects;
provided, however,
that no Bank shall
be required to
accept an increase
in its Commitment
which is larger
than the increase
to which it has
previously agreed.
(2) On the
effective date of
the extension of
the Termination
Date, the Banks
which have elected
to increase their
Commitments shall
make Loans to the
Borrowers, subject
to the terms of
Section 10.1, in
the amounts and in
the currencies of
the aggregate
principal balance
of the Notes
payable to the
non-consenting
Banks. Each
consenting Bank
shall share in such
Loans in the same
proportion as the
amount by which its
Commitment is
increased bears to
the aggregate
increases in the
Commitments of all
of the consenting
Banks. The
proceeds of all
Loans made pursuant
to this Section
2.3(c) shall be
paid by the Banks
making the same to
the applicable
Agent which shall
promptly remit the
proceeds of such
Loans to the
non-consenting
Banks in repayment
of the Notes
payable to such
Banks (and the
applicable
Borrowers shall
concurrently pay to
the non-consenting
Banks any amount
payable pursuant to
Section 2.9 as if
such Borrowers had
prepaid the Loans
of such
non-consenting
Banks on such
date). Effective
as of the effective
date of the
extension of the
Termination Date,
the Commitment(s)
of the
non-consenting
Bank(s) shall
terminate.
SECTION 2.4 Maturity. Each
Loan shall be paid in full by
the applicable Borrower on the
earlier of (i) the last day of
the Interest Period applicable
thereto or (ii) the Termination
Date.
SECTION 2.5 Notes.
(a) The Loans of
each Bank shall be
evidenced by Notes
executed by the Borrowers
and payable to the order
of such Bank for the
account of its Lending
Office. If requested by
any Bank, Pentair Canada
will execute a separate
Note payable to the branch
or affiliate of such Bank
which is acting as a
Canadian Lender hereunder.
(b) Each Bank may
record, and prior to any
transfer of its Notes may
endorse, on the schedules
forming a part of its Note
appropriate notations to
evidence the date and
amount of each Loan made
by it and the date and
amount of each payment of
principal made by the
Borrowers with respect
thereto and, in the case
of Loans denominated in a
G-7 Currency, the currency
of such Loans. Each Bank
is hereby irrevocably
authorized by the
Borrowers so to record and
endorse and to attach to
and make a part of its
Note a continuation of any
such schedule as and when
required, but failure to
so record or endorse any
notation shall not affect
the Borrowers' obligations
hereunder or under the
Notes.
SECTION 2.6 Facility Fees.
(a) During the term
of this Agreement, the
Borrowers shall pay to the
U.S. Dollar Administrative
Agent for the account of
each Bank a Facility Fee
on such Bank's Commitment
in U.S. Dollars at a rate
per annum determined as
follows:
Adjusted
Debt to Facility
Total Capital Fee
.40 or less .100 of 1%
.40 but
not over .55 .125 of 1%
over .55 .150 of 1%
(b) The Borrowers
shall make each payment of
Facility Fees hereunder
not later than 11:00 a.m.
(Chicago time) on the date
when due, in federal or
other funds immediately
available to the U.S.
Dollar Administrative
Agent, at its Payment
Office. Such Facility
Fees shall accrue from and
including the date of the
first Borrowing under this
Agreement to but excluding
the Termination Date and
shall be payable quarterly
in arrears on the last day
of each calendar quarter
during the term hereof.
Facility Fees shall be
computed on the basis of a
year of 365 days (or 366
days in a leap year) and
paid for the actual number
of days elapsed, including
the first day but
excluding the last day.
SECTION 2.7 Duration of
Interest Periods. The duration
of each Interest Period shall be
as specified in the applicable
Notice of Borrowing.
SECTION 2.8 Termination or
Reduction of Commitments.
(a) Pentair may,
upon at least three
Business Days' notice to
the Agents, terminate
entirely at any time, or
proportionately reduce
from time to time by an
aggregate amount of
U.S.$5,000,000 or any
larger multiple of
U.S.$1,000,000, the
aggregate amount of the
Commitments in excess of
the sum of (i) the
principal Equivalent
Amount of all outstanding
Loans and (ii) the
Equivalent Amount of all
Letter of Credit
Obligations then
outstanding.
(b) If, after giving
effect to any reduction of
the Commitments pursuant
to clause (a) above, the
Overnight Commitment would
exceed the Total
Commitment, the Overnight
Commitment shall be
immediately and
automatically reduced to
the amount of the Total
Commitment.
(c) If, after giving
effect to any reduction of
the Commitments pursuant
to clause (a) above, the
Canadian Commitment would
exceed the Total
Commitment, the Canadian
Commitment shall be
automatically and
immediately reduced to the
amount of the Total
Commitment.
(d) If the
Commitments are terminated
in their entirety, all
accrued Facility Fees
shall be payable on the
effective date of such
termination. After a
Commitment has been
reduced or terminated, it
may not be reinstated,
except as provided in
Section 2.3(c).
SECTION 2.9 Funding Losses.
If a Borrower makes any payment
of principal with respect to any
CD, Eurodollar, G-7 Currency, BA
or Bid Loan, as the case may be,
for any reason on any day other
than the last day of an Interest
Period applicable thereto, or if
a Borrower fails to borrow any
CD, Eurodollar, G-7 Currency, BA
or Bid Loan after a Notice of
Borrowing has been given to any
Bank in accordance with Section
3.1, 4.1, 5.1, 6.1, 7.4 or 8.4,
such Borrower shall reimburse
each applicable Bank on demand
for any resulting loss or
expense incurred by it,
including without limitation any
loss incurred in obtaining,
liquidating or employing
deposits from third parties, but
excluding loss of margin for the
period after any such payment;
provided that such Bank shall
have delivered to Pentair a
certificate as to the amount of
such loss or expense, which
certificate shall be conclusive
in the absence of manifest
error.
SECTION 2.10 Computation of
Interest. Interest on
Reference, Prime and BA Loans
shall be computed on the basis
of a year of 365 days (or 366
days in a leap year) and paid
for the actual number of days
elapsed and including the first
day but excluding the last day
thereof. Interest on CD, Daily
Pricing, Eurodollar, G-7
Currency and Bid Loans shall be
computed on the basis of a year
of 360 days and paid for the
actual number of days elapsed,
calculated as to each Interest
Period from and including the
first day thereof to but
excluding the last day thereof.
For purposes of the Interest Act
(Canada), where in this
Agreement a rate of interest on
a Loan to Pentair Canada is to
be calculated on a year of 360
days, the yearly rate of
interest to which such rate is
equivalent is such rate
multiplied by the number of days
in the year for which such
calculation is made and divided
by 360.
SECTION 2.11 Lending
Unlawful. In the event that any
Regulatory Change shall make it
unlawful or impossible for any
Bank to make, maintain or fund
any Loan as a Eurodollar Loan, a
G-7 Currency Loan, a Domestic
Margin Rate Bid Loan, a G-7
Currency Bid Loan or a BA Loan,
the obligation of such Bank
under Section 2.2 to make or
maintain any Loan as a
Eurodollar Loan, a G-7 Currency
Loan, a Domestic Margin Rate Bid
Loan, a G-7 Currency Bid Loan or
a BA Loan shall, upon the
happening of such Regulatory
Change, forthwith terminate and
such Bank shall, by telephonic
notice confirmed in writing to
the applicable Borrower and the
Agents, declare that such
obligation has so terminated.
Upon receipt of such notice, the
applicable Borrower shall
immediately prepay in full the
then outstanding principal
amount of each such Eurodollar
Loan, G-7 Currency Loan,
Domestic Margin Rate Bid Loan,
G-7 Currency Bid Loan or BA Loan
together with accrued interest.
Concurrently with prepaying any
such Eurodollar Loan, G-7
Currency Loan or BA Loan, such
Borrower shall borrow (a) in the
case of prepayment of a
Eurodollar Loan, a Reference
Loan (or, if such Loan is to
Pentair Canada, a Prime Loan) in
an equal principal amount, (b)
in the case of prepayment of a
G-7 Currency Loan, a replacement
Loan in the applicable G-7
Currency bearing interest at a
rate equal to the sum of the
Eurocurrency Margin plus such
Bank's cost of funds for
obtaining such G-7 Currency to
make such Loan for the
applicable Interest Period, as
determined by such Bank in its
discretion, and (c) in the case
of prepayment of a BA Loan, a
Prime Loan in an equal principal
amount. In addition, so long as
such circumstances shall
continue, concurrently with any
Borrowing of Eurodollar Loans,
G-7 Currency Loans or BA Loans,
as the case may be, such Bank
shall (a) in the case of a
Borrowing of Eurodollar Loans,
make a Reference Loan (or if
such Loan is to Pentair Canada,
a Prime Loan) in an amount equal
to its pro rata share of such
Borrowing, (b) in the case of a
Borrowing of G-7 Currency Loans,
make a replacement Loan in the
applicable G-7 Currency at a
rate per annum equal to the sum
of the Eurocurrency Margin plus
such Bank's cost of funds for
obtaining such G-7 Currency to
make such Loan for the
applicable Interest Period, as
determined by such Bank in its
discretion, and (c) in the case
of a Borrowing of BA Loans, make
a Prime Loan in an amount equal
to its pro rata share of such
Borrowing. If circumstances
subsequently change so that such
Bank shall no longer be so
affected, it shall so notify
Pentair and the other Banks,
whereupon the obligation of such
Bank under Section 2.2 to make
or maintain Eurodollar Loans,
G-7 Currency Loans or BA Loans
shall be reinstated.
SECTION 2.12 Funds
Unavailable. Notwithstanding
any other provision of this
Agreement, if, prior to the
first day of the Interest Period
for a CD, Eurodollar, G-7
Currency or BA Loan, any Bank
(or, in the case of clause (b)
below, the applicable Agent)
shall determine for any reason
whatsoever (which determination
shall be conclusive and binding
on the applicable Borrower),
that:
(a) deposits in the
applicable currency in the
relevant amount and for
the relevant Interest
Period are not available
to such Bank in the
relevant market, or
(b) by reason of
circumstances affecting
the relevant market,
adequate means do not
exist for ascertaining the
interest rate applicable
hereunder to such CD,
Eurodollar, G-7 Currency
or BA Loan,
then such Bank shall promptly
give notice to the applicable
Borrower and the other Banks of
such determination, and the
obligation of such Bank (or, in
the case of clause (b) above, of
all Banks) under Section 2.2 to
make or maintain any Loan as a
CD, Eurodollar, G-7 Currency or
BA Loan, as the case may be,
shall, upon such notification,
forthwith terminate. So long as
the circumstances described in
clause (a) above shall continue,
concurrently with any Borrowing
of CD, Eurodollar or G-7
Currency Loans, as the case may
be, the affected Bank shall (a)
in the case of a Borrowing of CD
or Eurodollar Loans, make a
Reference Loan (or, if such Loan
is to Pentair Canada, a Prime
Loan) in an amount equal to its
pro rata share of such
Borrowing, (b) in the case of a
Borrowing of G-7 Currency Loans,
make a replacement Loan in the
applicable G-7 Currency at a
rate per annum equal to the sum
of the Eurocurrency Margin plus
such Bank's cost of funds for
obtaining such G-7 Currency to
make such Loan for the
applicable Interest Period, as
determined by such Bank in its
discretion, and (c) in the case
of a Borrowing of BA Loans, make
a Prime Loan in an amount equal
to its pro rata share of such
Borrowing. If circumstances
subsequently change so that such
Bank shall no longer be so
affected, such Bank shall so
notify Pentair and the other
Banks, whereupon the obligation
of such Bank under Section 2.2
to make or maintain CD,
Eurodollar or G-7 Currency Loans
(whichever was so terminated and
is then available) shall be
reinstated.
SECTION 2.13 Increased
Costs and Reduced Returns.
(a) If, after the
date hereof, the adoption
of any applicable law,
rule or regulation, or any
change therein, or any
change in the
interpretation or
administration thereof by
any governmental
authority, central bank or
comparable agency charged
with the interpretation or
administration thereof or
compliance by the Banks
(or their Lending Offices)
with any request or
directive (whether or not
having the force of law)
of any such authority,
central bank or comparable
agency:
(i) shall subject
any Bank to any
tax, duty or other
charge with respect
to (1) its
obligation to make
Fixed Rate Loans,
(2) such Loans, or
(3) its Notes, or
shall change the
basis of taxation
of payments to such
Bank of the
principal of or
interest on its
Fixed Rate Loans or
in respect of any
other amount due
under this
Agreement in
respect of such
Loans or its
obligation to make
Fixed Rate Loans
(except for changes
in the taxation of
the overall net
income of such
Bank); or
(ii) shall impose,
modify or deem
applicable any
reserve (including,
without limitation,
any imposed by the
Board of Governors
of the Federal
Reserve System, but
excluding any
included in the
Eurocurrency
Reserve
Percentage),
special deposit or
similar requirement
against assets of,
or deposits with or
for the account of,
or credit extended
by, such Bank or
shall impose on
such Bank or the
interbank
eurocurrency market
any other condition
affecting (1) its
obligation to make
Fixed Rate Loans,
(2) its Loans or
(3) its Notes; or
(iii) shall impose,
modify or deem
applicable any tax,
reserve, special
deposit or similar
requirement against
or with respect to
or measured by
reference to
Letters of Credit
issued or to be
issued hereunder or
participations in
such Letters of
Credit;
and the result of any of
the foregoing is to
increase the cost to such
Bank of making or
maintaining any such Loan
or issuing, maintaining or
participating in any
Letter of Credit, or to
reduce the amount of any
sum received or receivable
by such Bank under this
Agreement or under its
Notes with respect any
such Loan or any Letter of
Credit, by an amount
deemed by such Bank to be
material, then, within 15
days after demand by such
Bank, the Borrowers agree
to pay to such Bank such
additional amount or
amounts as will compensate
it for such increased cost
or reduction.
(b) If, after the
date hereof, any Bank
shall have determined that
the adoption of any
applicable law, rule or
regulation regarding
capital adequacy, or any
change therein, or any
change in the
interpretation or
administration thereof by
any governmental
authority, central bank or
comparable agency charged
with the interpretation or
administration thereof, or
compliance by such Bank
(or any corporation
controlling such Bank)
with any request or
directive regarding
capital adequacy (whether
or not having the force of
law) of any such
authority, central bank or
comparable agency, has or
would have the effect of
reducing the rate of
return on such Bank's (or
such controlling
corporation's) capital as
a consequence of its
obligations hereunder to a
level below that which
such Bank (or such
controlling corporation)
could have achieved but
for such adoption, change
or compliance (taking into
consideration such Bank's
(or such controlling
corporation's) policies
with respect to capital
adequacy) by an amount
deemed by such Bank to be
material, then from time
to time, within 15 days
after demand by such Bank,
the Borrowers shall pay to
such Bank such additional
amount or amounts as will
compensate for such
reduction.
(c) Each Bank will
promptly notify Pentair of
any event of which it has
knowledge, occurring after
the date hereof, which
will entitle such Bank to
compensation pursuant to
this Section 2.13 and will
designate a different
Lending Office (with
notice of such designation
provided to the Agents) if
such designation will
avoid the need for, or
reduce the amount of, such
compensation and will not,
in the sole judgment of
such Bank, be otherwise
disadvantageous to such
Bank. A certificate of
each Bank claiming
compensation under this
Section 2.13 and setting
forth the additional
amount or amounts to be
paid to it hereunder shall
be conclusive in the
absence of manifest error.
In determining such
amount, each Bank may use
any reasonable averaging
and attribution methods.
SECTION 2.14 Adjustments to
Margins and Facility Fees. The
CD Margin, the Eurocurrency
Margin and the percentage
applicable for calculating
Facility Fees shall (i)
initially be based upon the
Adjusted Debt to Total Capital
Ratio as of June 30, 1996 and
(ii) thereafter be adjusted, to
the extent applicable, 50 days
(or, in the case of the last
fiscal quarter of any fiscal
year, 95 days) after the end of
each fiscal quarter of Pentair
based on the Adjusted Debt to
Total Capital Ratio as of the
last day of such fiscal quarter;
provided that if Pentair fails
to deliver the financial
statements and compliance
statement required by Section
12.1(a) or (b) and Section
12.1(c) by the 50th (or, if
applicable, the 95th) day after
any fiscal quarter, the Adjusted
Debt to Total Capital Ratio
shall be deemed to be greater
than 0.55 until such statements
and certificate are delivered.
SECTION 2.15 Currency
Exchange Fluctuations.
(a) The G-7 Currency
Administrative Agent will
determine the Equivalent
Amount of (i) any
Borrowing of G-7 Currency
Loans and G-7 Currency Bid
Loans as of the requested
Borrowing Date, (ii) any
G-7 Letter of Credit as of
the requested date of
issuance thereof and (iii)
each outstanding Borrowing
of G-7 Currency Loans and
G-7 Currency Bid Loans and
all Letter of Credit
Obligations in respect of
G-7 Currency Letters of
Credit as of the last
Business Day of each
month.
(b) The U.S. Dollar
Administrative Agent will
determine the Equivalent
Amount of (i) any
borrowing of Canadian
Loans as of the requested
Borrowing Date and
(ii) each outstanding
Borrowing of Canadian
Loans as of the last
Business Day of each
month.
(c) On the last
Business Day of each
month, each Agent will
notify the U.S. Dollar
Administrative Agent of
the aggregate Equivalent
Amount of all Loans and
Letters of Credit
outstanding under the
facilities administered by
such Agent.
(d) If on any
Computation Date the
aggregate Equivalent
Amount of all outstanding
Loans plus the aggregate
Equivalent Amount of all
Letter of Credit
Obligations exceeds the
Total Commitment, one or
more of the Borrowers
shall immediately prepay
one or more Loans in an
amount sufficient to
eliminate such excess.
SECTION 2.16 Taxes.
(a) All payments
made by any Borrower or
the Guarantor, as the case
may be, of principal of
and interest on any Loans
or of fees or other
amounts payable hereunder
are payable without
deduction for or on
account of any present or
future taxes, duties or
other charges (except for
franchise taxes and taxes
based on income levied by
the jurisdiction in which
the applicable Lending
Office of a Bank is
located or under whose law
such Bank is incorporated)
levied or imposed by the
government of any
jurisdiction or by any
political subdivision or
taxing authority thereof
or therein through
withholding or deduction
with respect to any such
taxes, duties or other
charges (hereinafter
called, with such
exceptions, "Taxes"). If
any Taxes are so levied or
imposed, the applicable
Borrower or the Guarantor,
as the case may be, will
pay additional interest or
will make additional
payments in such amounts
so that every net payment
of principal of and
interest on such Loans and
of other amounts payable
hereunder, after
withholding or deduction
for or on account of any
Taxes (including Taxes on
any additional amounts
payable hereunder), will
not be less than the
amount otherwise payable
but for such withholding
or deduction. The
applicable Borrower or the
Guarantor, as the case may
be, shall furnish to each
Bank certified copies of
official receipts
evidencing the payment by
such Borrower or the
Guarantor, as the case may
be, of all Taxes so levied
or imposed within 45 days
after the date any such
payment is due pursuant to
applicable law. In
addition, each Borrower
and the Guarantor, as the
case may be, will
indemnify and hold
harmless each Bank against
and reimburse each Bank
upon demand for the amount
of any Taxes so levied or
imposed on and paid by
such Bank. The agreements
of the Borrowers and the
Guarantor under this
subsection (a) shall
survive the repayment and
cancellation of all Loans
and the termination of
this Agreement.
(b) Each Canadian
Bank agrees that it will,
no later than the date of
the first payment of
interest by Pentair Canada
hereunder (or, in the case
of a Canadian Bank which
becomes a party hereto
after such date, the date
upon which such Bank
becomes a party hereto),
deliver to the Canadian
Administrative Agent and
to Pentair Canada an
instrument in writing
certifying one of the
following:
(i) that such
Canadian Bank is
not a non-resident
of Canada for the
purposes of Part
XIII of the Income
Tax Act (Canada)
and that it is the
sole beneficial
owner of payments
of principal of and
interest on its
Canadian Loans
under this
Agreement;
(ii) its
jurisdiction of
incorporation and
residence for tax
purposes, that it
is the sole
beneficial owner of
payments of
principal of and
interest on its
Canadian Loans
under this
Agreement and the
rate of withholding
tax applicable to
any payment of
interest to it
pursuant to any
applicable tax
conventions between
Canada, on the one
hand, and its
jurisdiction of
residence for tax
purposes, on the
other hand; or
(iii) its
jurisdiction of
incorporation and
residence for tax
purposes, the names
of the beneficial
owners of payments
of principal of and
interest on its
Canadian Loans
under this
Agreement, the
residence for tax
purposes of each of
such beneficial
owners and the rate
of withholding tax
applicable to any
payment of interest
in respect of each
beneficial owner
pursuant to any
applicable tax
convention between
Canada, on the one
hand, and the
jurisdiction of
residence for tax
purposes of each
beneficial owner,
on the other hand;
and undertaking to advise
Pentair Canada and the
Canadian Administrative
Agent of any changes in
respect of (i), (ii) or
(iii), as the case may be
(provided that no Canadian
Bank shall be required to
notify Pentair Canada or
the Canadian
Administrative Agent of
any change resulting
solely from the purchase
of participations in
Canadian Loans pursuant to
Section 6.5). In
addition, each Canadian
Bank shall, promptly upon
Pentair Canada's or the
Canadian Administrative
Agent's reasonable request
to that effect, deliver to
Pentair Canada or the
Canadian Administrative
Agent (as the case may be)
such other instruments in
writing, forms or similar
documentation as may be
required from time to time
by any applicable law,
treaty, rule or regulation
or the official
interpretation of any such
law, treaty, rule or
regulation by any
governmental authority
charged with the
interpretation or
administration thereof
(whether or not having the
force of law) in order to
establish such Canadian
Bank's tax status for
withholding purposes. If
the Canadian
Administrative Agent
receives a request from
Revenue Canada Customs,
Excise and Taxation or
another taxing authority
to provide additional
information concerning the
withholding tax status of
any Canadian Bank, such
Canadian Bank shall (upon
notice of such request
from the Canadian
Administrative Agent) use
reasonable efforts to
obtain and deliver such
information to such taxing
authority and the Canadian
Administrative Agent.
SECTION 2.17 Substitution
of Banks. Upon the receipt by
any Borrower from any Bank of a
claim for compensation under
Section 2.13, 2.16(a) or 4.6 or
a notice of the type described
in Section 2.11 or 2.12, Pentair
may: (i) designate a
replacement bank or financial
institution (a "Replacement
Bank") to acquire and assume all
or a ratable part of all of such
affected Bank's Loans and
Commitment; and/or (ii) request
one or more of the other Banks
to acquire and assume all or
part of such affected Bank's
Loans and Commitment. Any
designation of a Replacement
Bank under clause (i) shall be
subject to the prior written
consent of each Agent and each
Issuing Bank which has any
Letter of Credit outstanding
(which consents shall not be
unreasonably withheld).
SECTION 2.18 Order and
Proration of Payments.
(a) Whenever any
payment received by any
Agent by or on behalf of
any Borrower to be
distributed to the Banks
(or any of them) is
insufficient to pay in
full the amounts then due
and payable to the Banks,
and such Agent has not
received a Payment Sharing
Notice, such payment shall
be distributed to the
Banks (and for purposes of
this Agreement shall be
deemed to have been
applied by the Banks,
notwithstanding the fact
that any Bank may have
made a different
application in its books
and records) in the
following order: first,
to the payment of the
principal amount of the
Loans made to such
Borrower which are then
due and payable and to the
reimbursement obligations
of such Borrower then due
in respect of any Letter
of Credit, ratably among
the Banks in accordance
with the aggregate
principal amount of such
Loans and reimbursement
obligations owed to each
Bank; second, to the
payment of interest then
due and payable on the
Loans made to such
Borrower and on the
reimbursement obligations
of such Borrower in
respect of Letters of
Credit, ratably among the
Banks in accordance with
the aggregate amount of
interest owed by such
Borrower to each Bank;
third, to the payment of
the fees payable by such
Borrower under Section
2.6, ratably among the
Banks in accordance with
the aggregate amount of
such fees owed to each
Bank; and fourth, to the
payment of any other
amounts payable by such
Borrower under this
Agreement, ratably among
the Banks in accordance
with the aggregate amount
of such payments owed to
each Bank.
(b) After any Agent
has received a Payment
Sharing Notice, all
payments received by such
Agent by or on behalf of
any Borrower to be
distributed to the Banks
shall be distributed to
the Banks (and for
purposes of this Agreement
shall be deemed to have
been applied by the Banks,
notwithstanding the fact
that any Bank may have
made a different
application in its books
and records) in the
following order: first,
to the payment of amounts
payable by such Borrower
under Section 15.3,
ratably among the Agents
and the Banks in
accordance with the
aggregate amount of such
payments owed to each
Agent and each Bank;
second, to the payment of
fees payable by such
Borrower under Section
2.6, ratably among the
Banks in accordance with
the aggregate amount of
such fees owed to each
Bank; third, to the
payment of the principal
amount of and interest
accrued on the Loans to
such Borrower, the
reimbursement obligations
of such Borrower in
respect of Letters of
Credit (including
contingent obligations in
respect of undrawn Letters
of Credit) and, in the
case of Pentair, its
obligations as Guarantor
pursuant to Article XVI
hereof, regardless of
whether any such amount is
then due and payable,
ratably among the Banks in
accordance with the
aggregate amount of Loans,
reimbursement obligations
and accrued interest owed
by such Borrower
(including, in the case of
Pentair, its obligations
as Guarantor) to each
Bank; and fourth, to the
payment of any other
amount payable by such
Borrower under this
Agreement, ratably among
the Banks in accordance
with the amount owed by
such Borrower to each
Bank. Any amount to be
distributed pursuant to
clause third of the first
sentence of this
subsection (b) for
application to contingent
obligations in respect of
undrawn Letters of Credit
shall be held by the U.S.
Dollar Administrative
Agent (in the case of U.S.
Dollar Letters of Credit)
or the G-7 Currency
Administrative Agent (in
the case of G-7 Currency
Letters of Credit) as cash
collateral hereunder. If
any Letter of Credit is
thereafter drawn upon, the
applicable Agent shall
distribute to the Issuing
Bank an amount equal to
the lesser of the
Equivalent Amount of such
draw and the amount of the
cash collateral held by
such Agent pursuant to the
preceding sentence. If
any Letter of Credit
expires or terminates or
the amount available for
drawing thereunder is
reduced and, after giving
effect to such expiration,
termination or reduction,
the amount of cash
collateral held by the
applicable Agent pursuant
to the second preceding
sentence exceeds the
aggregate undrawn
Equivalent Amount of all
then-outstanding Letters
of Credit, such excess
shall promptly be applied
by the applicable Agent in
the manner and priority
set forth in clauses
first, second, third and
fourth of the first
sentence of this
subsection (b).
(c) If, other than
as expressly provided
elsewhere herein, any Bank
shall obtain any payment
or other recovery (whether
voluntary, involuntary, by
application of offset,
enforcement of security or
otherwise) on account of
principal of or interest
on any Loan or any
participation therein, any
participation in any
Letter of Credit or any
fees in excess of the
share of payments and
other recoveries
(exclusive of payments or
recoveries under Section
2.13, 2.16(a) or 4.6) such
Bank would have received
if such payment or
recovery had been
distributed pursuant to
the provisions of
subsection 2.18(a) or (b)
(whichever is applicable
at the time of such
payment or other
recovery), such Bank shall
purchase from the other
Banks, in a manner to be
reasonably specified by
the Agents, such
participations in the
Loans held by them (and,
if applicable, such
sub-participations in the
Letters of Credit) as
shall be necessary to
cause such purchasing Bank
to share the excess
payment or other recovery
ratably with each of them
in accordance with the
order of payments set
forth in
subsection 2.18(a) or (b),
as applicable; provided,
however, that if all or
any portion of the excess
payment or other recovery
is thereafter recovered
from such purchasing Bank,
the purchase shall be
rescinded and the purchase
price restored to the
extent of such recovery,
but without interest.
(d) The Equivalent
Amount of the principal of
and accrued and unpaid
interest on each G-7
Currency Loan and each
Canadian Loan, any
obligation in respect of a
G-7 Currency Letter of
Credit and any other
amount payable by any
Borrower in a G-7 Currency
shall be determined by the
G-7 Currency
Administrative Agent (or,
in the case of a Canadian
Loan, the U.S. Dollar
Administrative Agent) as
of (i) in the case of any
distribution pursuant to
subsection 2.18(a) or (b),
the date of such
distribution, and (ii) in
the case of receipt by any
Bank of any payment or
other recovery which may
be subject to subsection
2.18(c) (or any
disgorgement by any Bank
pursuant to the proviso to
such subsection), as of
the date of such receipt
(or such disgorgement).
SECTION 2.19 Judgment
Currency. If for the purposes
of obtaining judgment in any
court it is necessary to convert
a sum due from a Borrower
hereunder or under any of the
Notes in the currency expressed
to be payable herein or under
such Note (the "specified
currency") into another
currency, the parties hereto
agree, to the fullest extent
that they may effectively do so,
that the rate of exchange used
shall be that at which in
accordance with normal banking
procedures the G-7 Currency
Agent (or, in the case of any
amount relating to a Canadian
Loan, the U.S. Dollar
Administrative Agent) could
purchase the specified currency
with such other currency at the
G-7 Currency Agent's London
office (or, in the case of any
amount relating to a Canadian
Loan, the U.S. Dollar
Administrative Agent's FX
Trading Office) on the Business
Day preceding that on which
final judgment is given. The
obligations of any Borrower in
respect of any sum due to any
Bank or the applicable Agent
hereunder or under any Note
shall, notwithstanding any
judgment in a currency other
than the specified currency, be
discharged only to the extent
that on the Business Day
following receipt by such Bank
or the applicable Agent, as the
case may be, of any sum adjudged
to be so due in such other
currency such Bank or the
applicable Agent, as the case
may be, may in accordance with
normal banking procedures
purchase the specified currency
with such other currency. If
the amount of the specified
currency so purchased is less
than the sum originally due to
such Bank or the applicable
Agent, as the case may be, in
the specified currency, the
applicable Borrower shall, to
the fullest extent that it may
effectively do so, as a separate
obligation and notwithstanding
any such judgment, indemnify
such Bank or the applicable
Agent, as the case may be,
against such loss, and if the
amount of the specified currency
so purchased exceeds (a) the sum
originally due to any Bank or
the applicable Agent, as the
case may be, in the specified
currency and (b) any amounts
shared with other Banks as a
result of allocations of such
excess as a disproportionate
payment to such Bank under
Section 2.18, such Bank or the
applicable Agent, as the case
may be, agrees to remit such
excess to the applicable
Borrower.
SECTION 2.20 Payments.
(a) Unless the
applicable Agent receives
notice from the applicable
Borrower prior to the date
on which any payment is
due to any Bank that such
Borrower will not make
such payment in full as
and when required, such
Agent may assume that such
Borrower has made such
payment in full to such
Agent on such date in
immediately available
funds and such Agent may
(but shall not be so
required), in reliance
upon such assumption,
distribute to such Bank on
such due date an amount
equal to the amount then
due such Bank. If and to
the extent the applicable
Borrower has not made such
payment in full to such
Agent, such Bank shall
repay to such Agent on
demand such amount
distributed to such Bank,
together with interest
thereon at (a) in the case
of a payment in U.S.
Dollars, (i) for the first
three Business Days after
demand, the Federal Funds
Effective Rate, and (ii)
thereafter, the Reference
Rate, and (b) in the case
of a payment in a G-7
Currency, (i) for the
first three Business Days
after demand, the rate
specified by such Agent as
its cost for overnight
funds in the applicable
currency, and (ii)
thereafter, the rate
specified in clause (b)
(i) plus 1%.
(b) Unless the
applicable Agent receives
notice from a Bank at
least one Business Day
prior to the date of any
Borrowing that such Bank
will not make available as
and when required
hereunder to such Agent
for the account of the
applicable Borrower the
amount of such Bank's
ratable share of such
Borrowing, such Agent may
assume that such Bank has
made such amount available
to such Agent in
immediately available
funds on the date of such
Borrowing and such Agent
may (but shall not be so
required), in reliance
upon such assumption, make
available to the
applicable Borrower on
such date a corresponding
amount. If and to the
extent any Bank shall not
have made its full amount
available to the
applicable Agent in
immediately available
funds and such Agent has
made available to the
applicable Borrower such
amount, such Bank shall on
the Business Day following
the date of such Borrowing
make such amount available
to such Agent, together
with interest at (a) in
the case of a Borrowing in
U.S. Dollars, the Federal
Funds Effective Rate, and
(b) in the case of a
Borrowing in a G-7
Currency, the rate
specified by such Agent as
its cost for overnight
funds in the applicable
currency. A notice by the
applicable Agent submitted
to any Bank with respect
to amounts owing under
this clause (b) shall be
conclusive, absent
manifest error. If such
amount is so made
available, such payment to
such Agent shall
constitute such Bank's
Loan on the date of
Borrowing for all purposes
of this Agreement. If
such amount is not made
available to the Agent on
the Business Day following
the date of Borrowing, the
applicable Agent will
notify the applicable
Borrower of such failure
to fund and, upon demand
by such Agent, such
Borrower shall pay such
amount to such Agent for
such Agent's account,
together with interest
thereon for each day
elapsed since the date of
such Borrowing, at a rate
per annum equal to the
interest rate applicable
at the time to the Loans
comprising such Borrowing.
ARTICLE III
U.S. DOLLAR LOANS
SECTION 3.1 Method of
Borrowing.
(a) The Borrowers
shall give the U.S. Dollar
Administrative Agent a
Notice of Borrowing (which
may be given orally, but
if so, shall be promptly
confirmed by facsimile) no
later than 12:00 noon
(Chicago time) on the day
of each Reference
Borrowing, at least one
Business Day before each
CD Borrowing and at least
three Business Days before
each Eurodollar Borrowing
specifying:
(i) the date
of such Borrowing,
which shall be a
Business Day,
(ii) the
aggregate amount of
such Borrowing,
(iii) whether
the Loans
comprising such
Borrowing are to be
CD Loans, Reference
Loans or Eurodollar
Loans, and
(iv) if a CD
Borrowing or
Eurodollar
Borrowing, the
duration of the
Interest Period
applicable to such
Borrowing.
In the event that a
Borrower does not request
a new borrowing prior to
the last day of any
Interest Period and does
not otherwise provide
funds to pay Loans
maturing on such day, the
Borrower shall be deemed
to have given the U.S.
Dollar Administrative
Agent a Notice of
Borrowing requesting
Reference Loans on such
day in the principal
amount of the Loans coming
due on such day.
(b) Upon receipt of
a Notice of Borrowing, the
U.S. Dollar Administrative
Agent shall promptly
notify each Bank of the
contents thereof and of
such Bank's ratable share
of such Borrowing and such
Notice of Borrowing shall
not thereafter be
revocable by the
applicable Borrower.
(c) Not later than
1:00 p.m. (Chicago time)
on the date of each
Borrowing of a Reference,
CD or Eurodollar Loan,
each Bank shall make
available its ratable
share of such Borrowing,
in federal or other funds
immediately available to
the U.S. Dollar
Administrative Agent at
the U.S. Dollar
Administrative Agent's
Payment Office. Unless
the U.S. Dollar
Administrative Agent
receives notice or
otherwise determines that
any applicable condition
specified in Article X has
not been satisfied, the
U.S. Dollar Administrative
Agent will make the funds
so received from the Banks
available to the Borrower
at the U.S. Dollar
Administrative Agent's
Payment Office.
Notwithstanding the
foregoing provisions of
this Section, to the
extent that a U.S. Dollar
Loan made by a Bank
matures on the date of a
requested U.S. Dollar
Loan, such Bank shall
apply the proceeds of the
Loan it is then making to
the repayment of the
maturing Loan.
SECTION 3.2 Rate and
Payment of Interest.
(a) Reference Loans.
Each Reference Loan shall
bear interest on the
outstanding principal
amount thereof for each
day from the date such
Loan is made until it
becomes due at a rate per
annum equal to the
Reference Rate for such
day. Such interest shall
be payable on the last day
of each calendar quarter
and on the Termination
Date. Any overdue
principal of and, to the
extent permitted by law,
overdue interest on any
Reference Loan shall bear
interest, payable on
demand, for each day until
paid at a rate per annum
equal to the sum of 1%
plus the Reference Rate
for such day.
(b) CD Loans. Each
CD Loan shall bear
interest on the
outstanding principal
amount thereof at a rate
per annum equal to the
applicable Fixed CD Rate.
Such interest shall be
payable on the last day of
the Interest Period
therefor and, if such
Interest Period is longer
than 90 days, at intervals
of 90 days after the first
day thereof. Any overdue
principal of and, to the
extent permitted by law,
overdue interest on any CD
Loan shall bear interest,
payable on demand, for
each day until paid at a
rate per annum equal to
the sum of 1% plus the
higher of (i) the Fixed CD
Rate for such CD Loan and
(ii) the rate applicable
to Reference Loans for
such day.
(c) Eurodollar
Loans. Each Eurodollar
Loan shall bear interest
on the outstanding
principal amount thereof
at a rate per annum equal
to the applicable Fixed
Eurodollar Rate. Such
interest shall be payable
on the last day of the
Interest Period therefor
and, if such Interest
Period is longer than
three months, at intervals
of three months after the
first day thereof. Any
overdue principal of and,
to the extent permitted by
law, overdue interest on
any Eurodollar Loan shall
bear interest, payable on
demand, for each day from
and including the date
payment thereof was due to
but excluding the date of
actual payment, at a rate
per annum equal to the sum
of 1% plus the
Eurocurrency Margin plus
the quotient obtained
(rounded upward, if
necessary, to the next
higher 1/100 of 1%) by
dividing (i) the interest
rate per annum at which
one day (or, if such
amount due remains unpaid
more than three Business
Days, then for such other
period of time not longer
than six months as the
U.S. Dollar Administrative
Agent may elect) deposits
in U.S. Dollars, in an
amount approximately equal
to the U.S. Dollar
Administrative Agent's
overdue Eurodollar Loan
which is part of the
applicable Borrowing, are
offered to the U.S. Dollar
Administrative Agent in
the London interbank
market for the applicable
period determined as
provided above, by
(ii) 1.00 minus the
Eurocurrency Reserve
Percentage.
(d) The U.S. Dollar
Administrative Agent shall
determine each interest
rate applicable to the
U.S. Dollar Loans
hereunder and shall give
prompt notice to Pentair
and the other Banks by
telex, facsimile or cable
of each rate of interest
so determined, and its
determination thereof
shall be conclusive in the
absence of manifest error.
SECTION 3.3 Prepayment.
(a) The Borrowers
may, upon notice to the
U.S. Dollar Administrative
Agent not later than one
Business Day prior to the
date of prepayment in the
case of Reference Loans
and CD Loans and three
Business Days prior to the
date of prepayment in the
case of Eurodollar Loans,
prepay any Borrowing of
U.S. Dollar Loans in whole
at any time, or from time
to time in part in amounts
aggregating U.S.$1,000,000
or any larger multiple of
U.S.$100,000 (provided
that after any such
prepayment the aggregate
outstanding Reference
Loans are in an aggregate
amount of at least
U.S.$1,000,000, each
Borrowing of CD Loans is
in an aggregate amount of
at least U.S.$1,000,000
and each Borrowing of
Eurodollar Loans is in an
aggregate amount of at
least U.S.$2,000,000), by
paying the principal
amount to be prepaid
together with accrued
interest thereon to the
date of prepayment. Each
such optional prepayment
shall be applied ratably
to prepay the applicable
Loans of the several Banks
in proportion to their
Commitment Percentages.
(b) Any prepayment
of a CD Loan or Eurodollar
Loan prior to the last day
of the Interest Period
therefor shall be subject
to Section 2.9.
(c) Upon receipt of
a notice of prepayment
pursuant to this Section
(which may be given
orally, but if so, shall
be promptly confirmed by
facsimile), the U.S.
Dollar Administrative
Agent shall promptly
notify each Bank of the
contents thereof and of
such Bank's ratable share
of such prepayment, and
such notice shall not
thereafter be revocable by
the Borrowers.
SECTION 3.4 General
Provisions as to Payments. The
Borrowers shall make each
payment of principal of, and
interest on, U.S. Dollar Loans
hereunder not later than 11:00
a.m. (Chicago time) on the date
when due, in federal or other
funds immediately available to
the U.S. Dollar Administrative
Agent at its Payment Office.
The U.S. Dollar Administrative
Agent will promptly distribute
to each Bank its ratable share
of each such payment received by
the U.S. Dollar Administrative
Agent for the account of the
Banks. Whenever any payment of
Facility Fees or principal of,
or interest on, any Reference
Loans or CD Loans shall be due
on a day which is not a Business
Day, the date for payment
thereof shall be extended to the
next succeeding Business Day.
Whenever any payment of
principal of, or interest on,
any Eurodollar Loans shall be
due on a day which is not a
Business Day, the date for
payment thereof shall be
extended to the next succeeding
Business Day unless as a result
thereof it would fall in the
next calendar month, in which
case it shall be advanced to the
next preceding Business Day. If
the date for any payment of
principal is extended by
operation of law or otherwise,
interest thereon shall be
payable for such extended time.
ARTICLE IV
G-7 CURRENCY LOANS
SECTION 4.1 Method of
Borrowing.
(a) The applicable
Borrower shall give the
G-7 Currency
Administrative Agent a
Notice of Borrowing by
9:00 a.m. (London time) at
least three Business Days
before each G-7 Currency
Borrowing specifying:
(i) the date
of such Borrowing,
which shall be a
Business Day,
(ii) the G-7
Currency in which
the Loan is to be
made,
(iii) the
aggregate amount
(in such G-7
Currency) of such
Borrowing, and
(iv) the
duration of the
Interest Period
applicable to such
Borrowing.
(b) Upon receipt of
a Notice of Borrowing, the
G-7 Currency
Administrative Agent shall
promptly notify each Bank
of the contents thereof
and of such Bank's ratable
share of such Borrowing
and such Notice of
Borrowing shall not
thereafter be revocable by
the applicable Borrower.
(c) Not later than
12:00 noon (London time)
on the date of each G-7
Currency Borrowing, each
Bank shall make available
its ratable share of such
Borrowing, in the
applicable currency,
immediately available to
the G-7 Currency
Administrative Agent at
its Payment Office.
Unless the G-7 Currency
Administrative Agent
receives notice or
otherwise determines that
any applicable condition
specified in Article X has
not been satisfied, the
G-7 Currency
Administrative Agent will
make the funds so received
from the Banks available
to the applicable Borrower
at the G-7 Currency
Administrative Agent's
Payment Office.
Notwithstanding the
foregoing provisions of
this Section, to the
extent that a G-7 Currency
Loan made by a Bank
matures on the date of a
requested G-7 Currency
Loan in the same currency,
such Bank shall apply the
proceeds of the Loan it is
then making to the
repayment of the maturing
Loan.
SECTION 4.2 Rate and
Payment of Interest.
(a) G-7 Currency
Loans. Each G-7 Currency
Loan shall bear interest
on the outstanding
principal amount thereof
at a rate per annum equal
to the applicable Fixed
G-7 Rate. Such interest
shall be payable on the
last day of the Interest
Period therefor and, if
such Interest Period is
longer than three months,
at intervals of three
months after the first day
thereof. Any overdue
principal of and, to the
extent permitted by law,
overdue interest on any
G-7 Currency Loan shall
bear interest, payable on
demand, for each day from
and including the date
payment thereof was due to
but excluding the date of
actual payment, at a rate
per annum equal to the sum
of 1% plus the
Eurocurrency Margin plus
the quotient obtained
(rounded upward, if
necessary, to the next
higher 1/100 of 1%) by
dividing (i) the interest
rate per annum at which
one day (or, if such
amount due remains unpaid
more than three Business
Days, then for such other
period of time not longer
than six months as the G-7
Currency Administrative
Agent may elect) deposits
in the applicable G-7
Currency in an amount
approximately equal to the
G-7 Currency
Administrative Agent's
overdue G-7 Currency Loan
which is a part of the
applicable Borrowing, are
offered to the G-7
Currency Administrative
Agent in the London
interbank market for the
applicable period
determined as provided
above by (ii) 1.00 minus
the Eurocurrency Reserve
Percentage.
(b) The G-7
Administrative Agent shall
determine the interest
rate applicable to the G-7
Currency Loans hereunder
and shall give prompt
notice to Pentair and the
other Banks by telex,
facsimile or cable of each
rate of interest so
determined, and its
determination thereof
shall be conclusive in the
absence of manifest error.
SECTION 4.3 Prepayment.
(a) The Borrowers
may, upon not less than
four Business Days' prior
notice to the G-7 Currency
Administrative Agent,
prepay any Borrowing of
G-7 Currency Loans in
whole at any time, or from
time to time in part in an
aggregate Equivalent
Amount of at least
U.S.$1,000,000 and an
integral multiple of
100,000 units of the
applicable G-7 Currency
(provided that after any
such prepayment, each
Borrowing of G-7 Currency
Loans is in an aggregate
Equivalent Amount of at
least U.S.$2,000,000), by
paying the principal
amount to be prepaid
together with accrued
interest thereon to the
date of prepayment. Each
such optional prepayment
shall be applied ratably
to the several Banks in
proportion to their
Commitment Percentages.
(b) Any prepayment
of a G-7 Currency Loan
prior to the last day of
the Interest Period
therefor shall be subject
to Section 2.9.
(c) Upon receipt of
a notice pursuant to this
Section (which may be
given orally, but if so,
shall be promptly
confirmed by facsimile),
the G-7 Currency
Administrative Agent shall
promptly notify each Bank
of the contents thereof
and of such Bank's ratable
share of such prepayment,
and such notice shall not
thereafter be revocable by
the Borrowers.
SECTION 4.4 General
Provisions as to Payments. The
Borrowers shall make each
payment to be made in a G-7
Currency of principal of, and
interest on, the G-7 Currency
Loans hereunder not later than
12:00 noon (London time) on the
date when due, in the applicable
G-7 Currency funds as may then
be customary for settlement of
international transactions in
such G-7 Currency immediately
available to the G-7 Currency
Administrative Agent at its
Payment Office. The G-7
Currency Administrative Agent
will promptly distribute to each
Bank its ratable share of each
such payment received by the G-7
Currency Administrative Agent
for the account of the Banks in
like funds. Whenever any
payment of principal of, or
interest on, any G-7 Currency
Loans shall be due on a day
which is not a Business Day, the
date for payment thereof shall
be extended to the next
succeeding Business Day unless
as a result thereof it would
fall in the next calendar month,
in which case it shall be
advanced to the next preceding
Business Day. If the date for
any payment of principal is
extended by operation of law or
otherwise, interest thereon
shall be payable for such
extended time.
SECTION 4.5
Impracticability of Funding.
Notwithstanding the satisfaction
of all conditions referred to in
this Agreement with respect to
any Borrowing to be denominated
in a G-7 Currency, if there
shall occur on or prior to the
date of such borrowing any
change in national or
international financial,
political or economic conditions
or currency exchange rates or
exchange controls which would in
the opinion of the G-7 Currency
Administrative Agent make it
impracticable for the Loans
comprising such borrowing to be
denominated in such G-7
Currency, then the G-7 Currency
Administrative Agent shall
forthwith give notice thereof to
Pentair and the Banks, and such
Loans shall not be made.
SECTION 4.6 Costs.
(a) If the cost to
any Bank of making or
maintaining any G-7
Currency Loan is
increased, or the amount
of any sum received or
receivable by any Bank (or
its Lending Office) in
respect of any such Loan
is reduced, by an amount
deemed by such Bank to be
material, by reason of the
fact that a Borrower is
incorporated in, or
conducts business in, a
jurisdiction outside the
United States, such
Borrower shall indemnify
such Bank for the
increased cost or
reduction within 15 days
of demand by such Bank
(with a copy to the G-7
Currency Administrative
Agent). A certificate of
any Bank claiming
compensation under this
Section 4.6 and setting
forth the additional
amount or amounts to be
paid to it hereunder shall
be conclusive in the
absence of manifest error.
(b) Each Bank will
promptly notify Pentair of
any event of which it has
knowledge, occurring after
the date hereof, which
will entitle such Bank to
compensation or the
payment of additional
amounts pursuant to this
Section 4.6 and will
designate a different
Lending Office if such
designation will avoid the
need for, or reduce the
amount of, such
compensation or additional
amounts and will not, in
the sole judgment of such
Bank, be otherwise
disadvantageous to such
Bank.
ARTICLE V
OVERNIGHT LOANS
SECTION 5.1 Method of
Borrowing.
(a) Pentair shall
give the Overnight Bank a
Notice of Borrowing (which
may be given orally, but
if so, shall be promptly
confirmed by facsimile) no
later than 12:00 noon
(Minneapolis time) on the
day of each Borrowing of
Reference and Daily
Pricing Loans, specifying:
(i) the date
of such Borrowing,
which shall be a
Business Day,
(ii) the amount
of such Borrowing,
and
(iii) whether
the Loans
comprising such
Borrowing are to be
Reference Loans or
Daily Pricing
Loans.
In the event that Pentair
does not request a new
borrowing prior to the
last day of any Interest
Period and does not
otherwise provide funds to
pay Overnight Loans
maturing on such day,
(x) if the
Loans maturing on
such day are
Reference Loans,
Pentair shall be
deemed to have
given the Overnight
Bank a Notice of
Borrowing
requesting
Reference Loans on
such day in the
principal amount of
the Loans coming
due on such day;
and
(y) if the
Loans maturing on
such day are Daily
Pricing Loans,
Pentair shall be
deemed to have
given the Overnight
Bank a Notice of
Borrowing
requesting Daily
Pricing Loans on
such day in the
principal amount of
the Loans coming
due on such day.
(b) Not later than
2:00 p.m. (Minneapolis
time) on the date of each
Borrowing of Overnight
Loans, the Overnight Bank
shall deposit the amount
of such Borrowing, in
federal or other funds
immediately available, in
Pentair's deposit account
maintained with the
Overnight Bank unless the
Overnight Bank receives
notice or otherwise
determines that any
applicable condition
specified in Article X has
not been satisfied.
Notwithstanding the
foregoing provisions of
this Section, to the
extent that an Overnight
Loan matures on the date
of a requested Overnight
Loan, the Overnight Bank
shall apply the proceeds
of the Overnight Loan it
is then making to the
repayment of the maturing
Overnight Loan.
SECTION 5.2 Rate and
Payment of Interest.
(a) Reference Loans.
Each Reference Loan shall
bear interest on the
outstanding principal
amount thereof for each
day from the date such
Loan is made until it
becomes due at a rate per
annum equal to the
Reference Rate for such
day. Such interest shall
be payable on the last day
of each calendar quarter
and on the Termination
Date. Any overdue
principal of and, to the
extent permitted by law,
overdue interest on any
Reference Loan shall bear
interest, payable on
demand, for each day until
paid at a rate per annum
equal to the sum of 1%
plus the Reference Rate
for such day.
(b) Daily Pricing
Loans. Each Daily Pricing
Loan shall bear interest
on the outstanding
principal amount thereof
for each day from the date
such Loan is made until it
becomes due at a rate per
annum equal to the Daily
Pricing Rate for such day.
Such interest shall be
payable on the last day of
the Interest Period
therefor and on the day of
any prepayment thereof.
Any overdue principal of
and, to the extent
permitted by law, overdue
interest on any Daily
Pricing Loan shall bear
interest, payable on
demand, for each day until
paid at a rate per annum
equal to the sum of 1%
plus the otherwise
applicable Daily Pricing
Rate for such day.
(c) Rate of
Interest. The Overnight
Administrative Agent shall
determine each interest
rate applicable to the
Overnight Loans hereunder
and shall give prompt
notice to Pentair by
telex, facsimile or cable
of each rate of interest
so determined, and its
determination thereof
shall be conclusive in the
absence of manifest error.
SECTION 5.3 Prepayment.
(a) Pentair may, by
notice to the Overnight
Bank not later than 4:00
p.m. on any Business Day,
prepay Overnight Loans in
whole at any time, or from
time to time in part in
the amount of
U.S.$1,000,000 or any
larger multiple of
U.S.$100,000 (provided
that after such prepayment
the outstanding Overnight
Reference Loans are in an
aggregate amount of at
least U.S.$1,000,000 and
each Daily Pricing Loan is
in an amount permitted by
the definition thereof),
by paying the principal
amount to be prepaid
together with accrued
interest thereon to the
date of prepayment.
(b) Upon receipt of
a notice of prepayment
pursuant to this Section
(which may be given
orally, but if so, shall
be promptly confirmed by
facsimile), such notice
shall not thereafter be
revocable by Pentair.
SECTION 5.4 General
Provisions as to Payments.
Pentair shall make each payment
of principal of, and interest
on, Overnight Loans not later
than 12:00 noon (Minneapolis
time) on the date when due, in
federal or other funds
immediately available to the
Overnight Bank at its Payment
Office. Whenever any payment of
facility fees or principal of,
or interest on, any Overnight
Loans shall be due on a day
which is not a Business Day, the
date for payment thereof shall
be extended to the next
succeeding Business Day. If the
date for any payment of
principal is extended by
operation of law or otherwise,
interest thereon shall be
payable for such extended time.
SECTION 5.5 Refunding of
Overnight Loans. The Overnight
Bank may, in its sole and
absolute discretion at any time
that a Default exists, on behalf
of Pentair (which hereby
irrevocably directs the
Overnight Bank to act on its
behalf), request each Bank to
make a U.S. Dollar Loan in an
amount equal to such Bank's
Commitment Percentage of the
principal amount of the
Overnight Loans outstanding on
the date such notice is given.
Unless any of the events
described in paragraph (f) or
(g) of Section 13.1 shall have
occurred (in which event the
procedures of Section 5.6 shall
apply), and regardless of
whether the conditions precedent
set forth in this Agreement to
the making of a Loan are then
satisfied or the aggregate
amount of such Loans is not in
the minimum or integral amount
otherwise required hereunder for
U.S. Dollar Loans, each Bank
shall make the proceeds of its
Loan available to the U.S.
Dollar Administrative Agent for
the account of the Overnight
Bank at the office of BofA in
San Francisco prior to 11:00
a.m. (Chicago time) in
immediately available funds on
the Business Day next succeeding
the date such notice is given.
The proceeds of such Loans shall
be immediately applied to repay
the outstanding Overnight Loans.
All Loans made pursuant to this
Section 5.5 shall be Reference
Loans.
SECTION 5.6 Participations
in Overnight Loans.
(a) If an event
described in paragraph (f)
or (g) of Section 13.1
exists (or for any reason
the Banks may not make
U.S. Dollar Loans pursuant
to Section 5.5), each Bank
will, upon notice from the
Overnight Bank, purchase
from the Overnight Bank
(and the Overnight Bank
will sell to each other
Bank) an undivided
participation interest in
all outstanding Overnight
Loans in an amount equal
to its Commitment
Percentage of the
outstanding principal
amount of the Overnight
Loans (and each Bank will
immediately transfer to
the Overnight Bank, in
immediately available
funds, the amount of its
participation).
(b) Whenever, at any
time after the Overnight
Bank has received payment
for any other Bank's
participation interest in
Overnight Loans pursuant
to clause (a), the
Overnight Bank receives
any payment on account
thereof, the Overnight
Bank will distribute to
such Bank its
participation interest in
such amount (appropriately
adjusted, in the case of
interest payments, to
reflect the period of time
during which such Bank's
participation interest was
outstanding and funded) in
like funds as received;
provided, however, that in
the event that such
payment received by the
Overnight Bank is required
to be returned, such other
Bank will return to the
Overnight Bank any portion
thereof previously
distributed by the
Overnight Bank to it in
like funds as such payment
is required to be returned
by the Overnight Bank.
SECTION 5.7 Overnight
Participation Obligations
Unconditional.
(a) Each Bank's
obligation to make Loans
pursuant to Section 5.5
and/or to purchase
participation interests in
Overnight Loans pursuant
to Section 5.6 shall be
absolute and unconditional
and shall not be affected
by any circumstance
whatsoever, including (a)
any set-off, counterclaim,
recoupment, defense or
other right which such
Bank may have against the
Overnight Bank, any
Borrower or any other
Person for any reason
whatsoever; (b) the
occurrence or continuance
of a Default; (c) any
adverse change in the
condition (financial or
otherwise) of any Borrower
or any other Person; (d)
any breach of this
Agreement by any Borrower
or any other Bank; (e) any
inability of Pentair to
satisfy the conditions
precedent to borrowing set
forth in this Agreement on
the date upon which any
Overnight Loan is to be
refunded or any
participation interest
therein is to be
purchased; or (f) any
other circumstance,
happening or event
whatsoever, whether or not
similar to any of the
foregoing.
(b) Notwithstanding
the provisions of
clause (a) above, no Bank
shall be required to make
any Loan to Pentair to
refund an Overnight Loan
pursuant to Section 5.5 or
to purchase a
participation interest in
an Overnight Loan pursuant
to Section 5.6 if, prior
to the making by the
Overnight Bank of such
Overnight Loan, the
Overnight Bank received
written notice from any
Agent or any Bank
specifying that such Agent
or such Bank believed in
good faith that one or
more of the conditions
precedent to the making of
such Overnight Loan were
not satisfied and, in
fact, such conditions
precedent were not
satisfied at the time of
the making of such
Overnight Loan.
ARTICLE VI
CANADIAN LOANS
SECTION 6.1 Method of
Borrowing.
(a) Pentair (on behalf of
Pentair Canada) shall give the
Canadian Administrative Agent a
Notice of Borrowing (which may
be given orally, but if so,
shall be promptly confirmed by
facsimile) no later than 9:00
a.m. (Chicago time) on the day
of each Prime Borrowing, at
least two Business Days before
each BA Borrowing and at least
three Business Days before each
Eurodollar Borrowing specifying:
(i) the date
of such Borrowing,
which shall be a
Business Day,
(ii) the
aggregate amount of
such Borrowing,
(iii) whether
the Loans
comprising such
Borrowing are to be
Prime Loans, BA
Loans or Eurodollar
Loans, and
(iv) if a BA
Borrowing or
Eurodollar
Borrowing, the
duration of the
Interest Period
applicable to such
Borrowing.
In the event that Pentair
(on behalf of Pentair
Canada) does not request a
new borrowing prior to the
last day of any Interest
Period and Pentair Canada
does not otherwise provide
funds to pay Canadian
Loans maturing on such
day, Pentair Canada shall
be deemed to have given
the Canadian
Administrative Agent a
Notice of Borrowing
requesting Prime Loans on
such day in the principal
amount of the Canadian
Loans coming due on such
day.
(b) Upon receipt of
a Notice of Borrowing, the
Canadian Administrative
Agent shall promptly
notify each Canadian Bank
of the contents thereof
and of such Canadian
Bank's ratable share of
such Borrowing and such
Notice of Borrowing shall
not thereafter be
revocable by Pentair
Canada.
(c) Not later than
11:00 a.m. (Chicago time)
on the date of each
Borrowing of a Prime, BA
or Eurodollar Loan, each
Canadian Bank shall make
available its ratable
share of such Borrowing,
in immediately available
funds, to the Canadian
Administrative Agent at
the Canadian
Administrative Agent's
Payment Office. Unless
the Canadian
Administrative Agent
receives notice or
otherwise determines that
any applicable condition
specified in Article X has
not been satisfied, the
Canadian Administrative
Agent will make the funds
so received from the
Canadian Banks available
to Pentair Canada at the
Canadian Administrative
Agent's Payment Office.
Notwithstanding the
foregoing provisions of
this Section, to the
extent that a Canadian
Loan made by a Canadian
Bank matures on the date
of a requested Canadian
Loan, such Canadian Bank
shall apply the proceeds
of the Loan it is then
making to the repayment of
the maturing Canadian
Loan.
SECTION 6.2 Rate and
Payment of Interest.
(a) Prime Loans.
Each Prime Loan shall bear
interest on the
outstanding principal
amount thereof for each
day from the date such
Loan is made until it
becomes due at a rate per
annum equal to the Prime
Rate for such day. Such
interest shall be payable
on the last day of each
calendar quarter and on
the Termination Date. Any
overdue principal of and,
to the extent permitted by
law, overdue interest on
any Prime Loan shall bear
interest, payable on
demand, for each day until
paid at a rate per annum
equal to the sum of 1%
plus the Prime Rate for
such day.
(b) BA Loans. Each
BA Loan shall bear
interest on the
outstanding principal
amount thereof at a rate
per annum equal to the
applicable Fixed BA Rate.
Such interest shall be
payable on the last day of
the Interest Period
therefor and, if such
Interest Period is longer
than 90 days, at intervals
of 90 days after the first
day thereof. Any overdue
principal of and, to the
extent permitted by law,
overdue interest on any BA
Loan shall bear interest,
payable on demand, for
each day until paid at a
rate per annum equal to
the sum of 1% plus the
higher of (i) the Fixed BA
Rate for such BA Loan and
(ii) the rate applicable
to Prime Loans for such
day.
(c) Eurodollar
Loans. Each Eurodollar
Loan shall bear interest
on the outstanding
principal amount thereof
at a rate per annum equal
to the applicable Fixed
Eurodollar Rate. Such
interest shall be payable
on the last day of the
Interest Period therefor
and, if such Interest
Period is longer than
three months, at intervals
of three months after the
first day thereof. Any
overdue principal of and,
to the extent permitted by
law, overdue interest on
any Eurodollar Loan shall
bear interest, payable on
demand, for each day from
and including the date
payment thereof was due to
but excluding the date of
actual payment, at a rate
per annum equal to the sum
of 1% plus the
Eurocurrency Margin plus
the quotient obtained
(rounded upward, if
necessary, to the next
higher 1/100 of 1%) by
dividing (i) the interest
rate per annum at which
one day (or, if such
amount due remains unpaid
more than three Business
Days, then for such other
period of time not longer
than six months as the
Canadian Administrative
Agent may elect) deposits
in dollars, in an amount
approximately equal to the
Canadian Administrative
Agent's overdue Eurodollar
Loan which is part of the
applicable Borrowing, are
offered to the Canadian
Administrative Agent in
the London interbank
market for the applicable
period determined as
provided above, by
(ii) 1.00 minus the
Eurocurrency Reserve
Percentage.
(d) The Canadian
Administrative Agent shall
determine each interest
rate applicable to the
Canadian Loans hereunder
and shall give prompt
notice to Pentair and the
other Canadian Banks by
telex, facsimile or cable
of each rate of interest
so determined, and its
determination thereof
shall be conclusive in the
absence of manifest error.
SECTION 6.3 Prepayment.
(a) Pentair Canada
may, upon notice to the
Canadian Administrative
Agent (which may be given
by Pentair) not later than
one Business Day prior to
the date of prepayment in
the case of Prime Loans,
not later than two
Business Days prior to the
date of prepayment in the
case of BA Loans and not
later than three Business
Days prior to the date of
prepayment in the case of
Eurodollar Loans, prepay
any Borrowing of Canadian
Loans in whole at any
time, or from time to time
in part in amounts
aggregating Cdn.
$1,000,000 or any larger
multiple of Cdn. $100,000
(provided that after any
such prepayment the
aggregate outstanding
Prime Loans are in an
aggregate amount of at
least Cdn. $1,000,000,
each Borrowing of BA Loans
is in an aggregate amount
of at least Cdn.
$1,000,000 and each
Borrowing of Eurodollar
Loans is in an aggregate
amount of at least Cdn.
$2,000,000), by paying the
principal amount to be
prepaid together with
accrued interest thereon
to the date of prepayment.
Each such optional
prepayment shall be
applied ratably to prepay
the applicable Loans of
the several Canadian Banks
in proportion to their
Canadian Percentages.
(b) Any prepayment
of a BA Loan or Eurodollar
Loan prior to the last day
of the Interest Period
therefor shall be subject
to Section 2.9.
(c) Upon receipt of
a notice of prepayment
pursuant to this Section
(which may be given
orally, but if so, shall
be promptly confirmed by
facsimile), the Canadian
Administrative Agent shall
promptly notify each
Canadian Bank of the
contents thereof and of
such Canadian Bank's
ratable share of such
prepayment, and such
notice shall not
thereafter be revocable by
the Pentair Canada.
SECTION 6.4 General
Provisions as to Payments.
Pentair Canada shall make each
payment of principal of, and
interest on, Canadian Loans
hereunder not later than 11:00
a.m. (Chicago time) on the date
when due, in funds immediately
available to the Canadian
Administrative Agent at its
Payment Office. The Canadian
Administrative Agent will
promptly distribute to each
Canadian Bank its ratable share
of each such payment received by
the Canadian Administrative
Agent for the account of the
Canadian Banks. Whenever any
payment of principal of, or
interest on, any Prime Loans or
BA Loans shall be due on a day
which is not a Business Day, the
date for payment thereof shall
be extended to the next
succeeding Business Day.
Whenever any payment of
principal of, or interest on,
any Eurodollar Loans shall be
due on a day which is not a
Business Day, the date for
payment thereof shall be
extended to the next succeeding
Business Day unless as a result
thereof it would fall in the
next calendar month, in which
case it shall be advanced to the
next preceding Business Day. If
the date for any payment of
principal is extended by
operation of law or otherwise,
interest thereon shall be
payable for such extended time.
SECTION 6.5 Participations
in Canadian Loans.
(a) The Majority
Canadian Banks may, in
their sole and complete
discretion at any time a
Default exists, require
each Bank which is not,
and has not designated a
branch or affiliate as, a
Canadian Bank (a
"Non-Canadian Bank") to,
and each Non-Canadian Bank
agrees that promptly upon
notice from the Majority
Canadian Banks it will,
purchase from each
Canadian Bank (and each
Canadian Bank will sell to
each Non-Canadian Bank) an
undivided participation
interest in all
outstanding Canadian Loans
in an amount so that,
after giving effect to all
such purchases and sales,
each Bank will have a
direct or participation
interest in all
outstanding Canadian Loans
in an amount equal to its
Commitment Percentage of
such Loans. In
furtherance of the
foregoing, each Bank
agrees that promptly upon
receipt of such notice it
will transfer to the
Canadian Administrative
Agent, in immediately
available funds, an amount
equal to its Commitment
Percentage of all
outstanding Canadian
Loans, and promptly upon
receipt of such funds the
Canadian Administrative
Agent will transfer to
each Canadian Bank its pro
rata share thereof.
(b) Whenever, at any
time after the Canadian
Administrative Agent has
received funds from a
Non-Canadian Bank in
payment of its
participation interest in
the Canadian Loans
pursuant to clause (a),
the Canadian
Administrative Agent
receives any payment on
account of any Canadian
Loans, the Canadian
Administrative Agent will
distribute such funds in a
manner which gives effect
to the purchase of such
participation interests
(appropriately adjusted,
in the case of interest
payments, to reflect the
period of time during
which such Non-Canadian
Bank's participation
interest was outstanding
and funded and to reflect
any amounts withheld on
account of withholding
taxes attributable to any
particular Bank) in like
funds as received (and if
any Canadian Bank receives
any payment directly on
account of any Canadian
Loan, such Canadian Bank
shall promptly deliver the
proceeds thereof to the
Canadian Administrative
Agent for distribution as
provided above); provided,
however, that in the event
any such payment is
required to be returned by
the Canadian
Administrative Agent or
any Canadian Bank, such
Non-Canadian Bank will
return to the Canadian
Administrative Agent or
such Canadian Bank any
portion thereof previously
distributed by the
Canadian Administrative
Agent to it in like funds
as is required to be
returned by the Canadian
Administrative Agent or
such Canadian Bank.
SECTION 6.6 Canadian
Participation Obligations
Unconditional.
(a) Each
Non-Canadian Bank's
obligation to purchase
participation interests in
Canadian Loans pursuant to
Section 6.5 shall be
absolute and unconditional
and shall not be affected
by any circumstance
whatsoever, including (a)
any set-off, counterclaim,
recoupment, defense or
other right which such
Non-Canadian Bank may have
against the Canadian
Administrative Agent, any
Canadian Bank, any
Borrower or any other
Person for any reason
whatsoever; (b) the
occurrence or continuance
of a Default; (c) any
adverse change in the
condition (financial or
otherwise) of any Borrower
or any other Person; (d)
any breach of this
Agreement by any Borrower
or any other Bank; (e) any
inability of Pentair
Canada to satisfy the
conditions precedent to
borrowing set forth in
this Agreement on the date
upon which any
participation interest in
any Canadian Loan is to be
purchased; or (f) any
other circumstance,
happening or event
whatsoever, whether or not
similar to any of the
foregoing.
(b) Notwithstanding
the provisions of
clause (a) above, no
Non-Canadian Bank shall be
required to purchase a
participation interest in
a Canadian Loan pursuant
to Section 6.5 if, prior
to the making by the
Canadian Banks of such
Canadian Loan, the
Canadian Banks received
written notice from any
Agent or any Bank
specifying that such Agent
or such Bank believed in
good faith that one or
more of the conditions
precedent to the making of
such Canadian Loan were
not satisfied and, in
fact, such conditions
precedent were not
satisfied at the time of
the making of such
Canadian Loan.
ARTICLE VII
DOMESTIC BID LOANS
SECTION 7.1 Domestic Bid
Loan Request. Any Borrower,
acting (in the case of a
Borrower other than Pentair)
through Pentair as its agent,
may submit a Bid Loan Request to
the U.S. Dollar Administrative
Agent for Domestic Bid Loans
corresponding to up to three
different Interest Periods.
Such submission shall be made
not later than 10:00 a.m.
(Chicago time) by telephone,
(a) in the case of a
Domestic Margin Bid
Request, four Business
Days prior to the Funding
Date, and
(b) in the case of
an Absolute Rate Bid
Request, one Business Day
prior to the Funding Date,
promptly followed by written
confirmation, substantially in
the form of Exhibit B-1,
personally delivered, or
transmitted by telex or
facsimile, to the U.S. Dollar
Administrative Agent.
Each Bid Loan Request under
this Article VII shall designate
the following:
(i) the name of the
Borrower;
(ii) the Maximum
Request;
(iii) a single type of
interest rate for all Bid
Loans requested, i.e., an
Absolute Rate or a Margin
Rate;
(iv) the number of
Bid Loans requested, up to
three, and the Interest
Period applicable to each
thereof; and
(v) a single
Funding Date for all Bid
Loans requested.
The U.S. Dollar
Administrative Agent shall
promptly inform each Bank of its
receipt of such Bid Loan Request
and the substance thereof. The
Borrowers may not make more than
four Bid Loan Requests under
this Article VII in any calendar
month, and there shall be at
least five Business Days between
each Funding Date requested by
the Borrowers under this
Article VII.
SECTION 7.2 Amount and
Increments of Loans. Each Bid
Loan Request under this
Article VII shall request Bid
Loans in a minimum amount, in
the aggregate for all Interest
Periods, of U.S.$5,000,000 or an
integral multiple of
U.S.$1,000,000 over such amount,
not to exceed, however, the
amount by which
(a) the Total
Commitment
exceeds
(b) the sum of the
aggregate outstanding
principal amount of all
outstanding Loans plus all
Letter of Credit
Obligations,
calculated by the U.S. Dollar
Administrative Agent as of the
relevant Funding Date, assuming
that the Borrowers will pay,
when due, all Loans maturing
prior to or on such Funding
Date, and that all Loans for
which Notices of Borrowing have
been given and not yet funded
will be made prior to such
Funding Date.
SECTION 7.3 Bidding
Procedure. Each Bank shall have
the right, but not the
obligation, to offer to make all
or any part of any Domestic Bid
Loan or Loans described on any
Bid Loan Request under this
Article VII at an interest rate
of the type specified therein in
a minimum amount of
U.S.$1,000,000, or an integral
multiple thereof, in the
aggregate for all Interest
Periods and for all interest
rates corresponding to each
thereof. Any Bank desiring to
make such an offer shall submit
to the U.S. Dollar
Administrative Agent by
telephone its Bid:
(a) with respect to
a Domestic Margin Bid
Request, not later than
10:00 a.m. (Chicago time)
three Business Days prior
to the Funding Date
specified in such Request,
and
(b) with respect to
an Absolute Rate Bid
Request, by 8:45 a.m.
(Chicago time) on the
Funding Date specified in
such Request
(such 10:00 a.m. or 8:45 a.m.
time, as applicable, herein
called the "Domestic Submission
Deadline ) promptly followed by
written confirmation,
substantially in the form of
Exhibit C-1, personally
delivered, or transmitted by
facsimile, to the U.S. Dollar
Administrative Agent; provided
that any Bid submitted by the
U.S. Dollar Administrative Agent
(or any Affiliate thereof) in
its capacity as a Bank shall be
submitted not later than 15
minutes prior to the Domestic
Submission Deadline. Each Bank
may offer to make all or any
part of any Domestic Bid Loan or
Loans for a single Interest
Period at more than one interest
rate so long as:
(i) such offers are
made in accordance with
the procedures described
herein;
(ii) each interest
rate applies to a portion
of a Bid Loan in a minimum
amount of U.S.$1,000,000
or an integral multiple
thereof;
(iii) such Bank does
not offer to make Bid
Loans with more than four
interest rates for any
single Interest Period,
and
(iv) all such
interest rates are of the
single type designated in
such Bid Loan Request.
The aggregate amount of Bid
Loans (whether for a single
Interest Period or for all
Interest Periods) offered in a
Bid may exceed the Maximum
Request of the corresponding Bid
Loan Request. However, each Bid
shall set forth the Maximum
Offer which the applicable
Borrower may accept pursuant to
such Bid, and such Maximum Offer
shall not exceed the Maximum
Request.
If any Bid omits information
required by the form provided as
Exhibit C-1, the U.S. Dollar
Administrative Agent will
promptly attempt to notify the
Bank submitting such Bid and
such Bank may resubmit such Bid
if it is able to do so prior to
the Domestic Submission Deadline
but without modifying any
Absolute Rate Bid or Domestic
Margin Bid originally set forth
therein.
SECTION 7.4 Acceptance of
Bids.
(a) Domestic Margin
Bids. At or prior to
10:30 a.m. (Chicago time)
on the day of the Domestic
Submission Deadline, the
U.S. Dollar Administrative
Agent will give telephonic
notice (promptly confirmed
in writing) to Pentair of
all Domestic Margin Bids
received and the substance
thereof. The applicable
Borrower, acting (in the
case of a Borrower other
than Pentair) through
Pentair as its agent,
shall, in its sole
discretion but subject to
the provisions of Section
7.4(c), irrevocably accept
or reject any Domestic
Margin Bid (or portion of
the principal amount of
any Bid Loan offered with
such Domestic Margin Bid)
by telephonic notice
(promptly confirmed in
writing) to the U.S.
Dollar Administrative
Agent, to be given at or
prior to 10:45 a.m.
(Chicago time) on such
day. The U.S. Dollar
Administrative Agent will
promptly notify each Bank
that has submitted a
Domestic Margin Bid by
telephone, at or prior to
11:15 a.m. (Chicago time)
on such day (promptly
confirmed in writing), to
what extent such Bank's
Domestic Margin Bid has
been accepted and the
details of such
acceptance, together with
instructions regarding the
funding of the Bid Loans
contemplated thereby. In
the event Pentair fails to
provide such telephonic
notice to the U.S. Dollar
Administrative Agent at or
prior to 10:45 a.m.
(Chicago time) on such
day, the U.S. Dollar
Administrative Agent may
presume conclusively that
the applicable Borrower
has totally rejected all
such Domestic Margin Bids
and the U.S. Dollar
Administrative Agent will
notify each Bank that has
submitted a Domestic
Margin Bid of such
rejection by telephone on
such day (promptly
confirmed in writing). At
or prior to 11:00 a.m.
(Chicago time) two
Business Days prior to the
proposed Funding Date for
any Domestic Margin Rate
Bid Loans, the U.S. Dollar
Administrative Agent shall
notify Pentair and each
Bank with respect to which
any portion of such Bank's
Domestic Margin Bid has
been accepted of the
Interbank Offered Rate
applicable to such Bid
Loans as determined
pursuant to the definition
of "Interbank Offered
Rate.
(b) Absolute Rate
Bids. At or prior to 9:00
a.m. (Chicago time) on the
Funding Date proposed in
an Absolute Rate Bid
Request, the U.S. Dollar
Administrative Agent will
give telephonic notice
(promptly confirmed in
writing) to Pentair of all
Absolute Rate Bids
received and the substance
thereof. The applicable
Borrower, acting (in the
case of a Borrower other
than Pentair) through
Pentair as its agent,
shall, in its sole
discretion but subject to
the provisions of Section
7.4(c), irrevocably accept
or reject any Absolute
Rate Bid (or portion of
the principal amount of
any Bid Loan offered with
such Absolute Rate Bid) by
telephonic notice
(promptly confirmed in
writing) to the U.S.
Dollar Administrative
Agent to be given at or
prior to 9:15 a.m.
(Chicago time) on such
day. The U.S. Dollar
Administrative Agent will
notify each Bank that has
submitted an Absolute Rate
Bid by telephone, at or
prior to 9:30 a.m.
(Chicago time) on such day
(promptly confirmed in
writing), to what extent
such Bank's Absolute Rate
Bid has been accepted and
the details of such
acceptance, together with
instructions regarding the
funding of the Bid Loans
contemplated thereby. In
the event Pentair fails to
provide such telephonic
notice to the U.S. Dollar
Administrative Agent at or
prior to 9:15 a.m.
(Chicago time) on the same
day as the Domestic
Submission Deadline, the
U.S. Dollar Administrative
Agent may presume
conclusively that the
applicable Borrower has
totally rejected all such
Absolute Rate Bids and the
U.S. Dollar Administrative
Agent will notify each
Bank that has submitted an
Absolute Rate Bid of such
rejection by telephone on
such day (promptly
confirmed in writing).
(c) Acceptance
Guidelines.
(i) Portion
Size. When a
Borrower accepts a
portion, but not
all, of the
principal amount of
any Domestic Bid
Loan offered for
any single Interest
Period at a single
interest rate in
any Bank's Bid,
such Borrower shall
accept such portion
in an amount of not
less than
U.S.$1,000,000 or
an integral
multiple of
U.S.$100,000 over
such amount for any
such Bank.
(ii) Aggregate
Amount. The amount
of all Domestic Bid
Loans accepted by
the Borrowers, in
the aggregate for
all Interest
Periods and
interest rates:
(i) from all Banks,
pursuant to a
single Bid Loan
Request shall not
exceed the Maximum
Request and (ii)
from each Bank,
pursuant to a
single Bid Loan
Request shall not
exceed the Maximum
Offer of the
corresponding Bid
from such Bank.
(iii) Allocation
among Banks. If a
Borrower accepts
any Bid (or any
portion thereof
referred to in
paragraph (i) above
in this Section
7.4(c)), it must
accept offers based
exclusively upon
pricing (from
lowest to highest)
of interest rate
and no other
criteria. If two
or more Banks
submit offers for
identical Interest
Periods at
identical pricing
and a Borrower
accepts any such
offer (or any such
portion), the
principal amount of
Bid Loans in
respect of which
such offers are
accepted shall be
allocated among
such Banks as
nearly as possible
(in such multiples,
not greater than
U.S.$100,000, as
such Borrower may
deem appropriate),
in proportion to
the principal
amounts offered by
such Banks at such
pricing. The Bid
Loans resulting
from such
allocation need not
be in integral
multiples of
U.S.$1,000,000.
SECTION 7.5 No Prepayment.
Domestic Bid Loans may not be
prepaid prior to the last day of
their respective Interest
Periods (except pursuant to
Section 2.11).
SECTION 7.6 General
Provisions as to Payments. The
Borrowers shall make each
payment of principal of, and
interest on, the Domestic Bid
Loans hereunder not later than
12:00 noon (Chicago time) on the
date when due, in federal or
other funds immediately
available in Chicago to the U.S.
Dollar Administrative Agent at
its Payment Office. The U.S.
Dollar Administrative Agent will
promptly distribute to any Bank
each such payment made with
respect to a Domestic Bid Loan
made by such Bank. Whenever any
payment of principal of, or
interest on, any Absolute Rate
Bid Loan shall be due on a day
which is not a Business Day, the
date for payment thereof shall
be extended to the next
succeeding Business Day.
Whenever any payment of
principal of, or interest on,
any Domestic Margin Rate Bid
Loan shall be due on a day which
is not a Business Day, the date
for payment thereof shall be
extended to the next succeeding
Business Day unless as a result
thereof it would fall in the
next calendar month, in which
case it shall be advanced to the
next preceding Business Day. If
the date for any payment of
principal is extended by
operation of law or otherwise,
interest thereon shall be
payable for such extended time.
SECTION 7.7 Funding of
Domestic Bid Loans. Not later
than 12:00 noon (Chicago time)
on the Funding Date of one or
more Domestic Bid Loans, each
Bank with respect to which any
portion of a Bid has been
accepted shall make available
funds covering such Bank's Bid
Loan or Loans in federal or
other funds immediately
available in Chicago to the U.S.
Dollar Administrative Agent at
its Payment Office. Unless the
U.S. Dollar Administrative Agent
receives notice or otherwise
determines that any applicable
condition specified in Article X
has not been satisfied, the U.S.
Dollar Administrative Agent will
make the funds so received from
the Banks available to the
applicable Borrower at the U.S.
Dollar Administrative Agent's
Payment Office. Notwithstanding
the foregoing provisions of this
Section, to the extent that a
Domestic Bid Loan made by a Bank
matures on the Funding Date for
another Domestic Bid Loan to be
made by such Bank, such Bank
shall apply the proceeds of the
Domestic Bid Loan it is then
making to the repayment of the
maturing Domestic Bid Loan.
SECTION 7.8 Rate and
Payment of Interest.
(a) Absolute Rate Bid
Loans. Each Absolute Rate Bid
Loan shall bear interest on the
outstanding principal amount
thereof for each day from the
date such Bid Loan is made until
it becomes due at a rate per
annum equal to the Absolute Rate
Bid offered by the Bank making
such Bid Loan and accepted by
the applicable Borrower as the
rate applicable to such Absolute
Rate Bid Loan, pursuant to
Section 7.4(b). Such interest
shall be payable for each
Interest Period on the last day
thereof. Any overdue principal
of and, to the extent permitted
by law, overdue interest on any
Absolute Rate Bid Loan shall
bear interest, payable on
demand, for each day until paid
at a rate per annum equal to the
sum of 1% plus the higher of (i)
the Absolute Rate for such Loan
and (ii) the rate applicable to
Reference Loans for such day.
(b) Domestic Margin Rate
Bid Loans. Each Domestic Margin
Rate Bid Loan shall bear
interest on the outstanding
principal amount thereof, for
the Interest Period applicable
thereto, at a rate per annum
equal to the sum of the
Interbank Offered Rate for such
Interest Period plus (or minus)
the Domestic Margin Bid offered
by the Bank making such Bid Loan
and accepted by the Borrower as
the Margin Rate applicable to
such Domestic Margin Rate Bid
Loan pursuant to Section 7.4(a).
Such interest shall be payable
for each Interest Period on the
last day thereof. Any overdue
principal of and, to the extent
permitted by law, overdue
interest on, any Domestic Margin
Rate Bid Loan shall bear
interest, payable on demand, for
each day until paid at a rate
per annum equal to the sum of 1%
plus the higher of (i) the rate
otherwise applicable pursuant to
the first sentence of this
clause (b) and (ii) the rate
applicable to Reference Loans
for such day.
ARTICLE VIII
G-7 CURRENCY BID LOANS
SECTION 8.1 G-7 Currency
Bid Loan Request. Any Borrower,
acting (in the case of a
Borrower other than Pentair)
through Pentair as its agent,
may submit a Bid Loan Request to
the G-7 Currency Administrative
Agent for G-7 Currency Bid Loans
corresponding to up to three
different Interest Periods.
Such submission shall be made
not later than 3:00 p.m. (London
time) by telephone, five
Business Days prior to the
Funding Date, promptly followed
by written confirmation,
substantially in the form of
Exhibit B-2, personally
delivered, or transmitted by
telex or facsimile, to the G-7
Currency Administrative Agent.
Each Bid Loan Request under
this Article VIII shall
designate the following:
(i) the name of the
Borrower;
(ii) the G-7 Currency of
the requested Bid Loans;
(iii) the Maximum Request;
(iv) the number of Bid
Loans requested, up to three,
and the Interest Period
applicable to each thereof; and
(v) a single Funding Date
for all Bid Loans requested.
The G-7 Currency
Administrative Agent shall
promptly inform each Bank of its
receipt of such Bid Loan Request
and the substance thereof. The
Borrowers may not make more than
four Bid Loan Requests under
this Article VIII in any
calendar month, and there shall
be at least five Business Days
between each Funding Date
requested by the Borrowers under
this Article VIII.
SECTION 8.2 Amount and
Increments of Loans. Each Bid
Loan Request under this Article
VIII shall request Bid Loans in
a minimum Equivalent Amount, in
the aggregate for all Interest
Periods, of U.S.$5,000,000 and
an integral multiple of
1,000,000 units of the
applicable G-7 Currency, not to
exceed, however, the amount by
which
(a) the Total
Commitment
exceeds
(b) the sum of the
aggregate outstanding
principal amount of all
outstanding Loans plus all
Letter of Credit
Obligations,
calculated by the G-7 Currency
Administrative Agent as of the
relevant Funding Date, assuming
that the Borrowers will pay,
when due, all Loans maturing
prior to or on such Funding
Date, and that all Loans for
which Notices of Borrowing have
been given and not yet funded
will be made prior to such
Funding Date.
SECTION 8.3 Bidding
Procedure. Each Bank shall have
the right, but not the
obligation, to offer to make all
or any part of any G-7 Currency
Bid Loan or Loans described on
any Bid Loan Request under this
Article VIII in a minimum
Equivalent Amount of
U.S.$1,000,000 and an integral
multiple of 100,000 units of the
applicable G-7 Currency. Any
Bank desiring to make such an
offer shall submit to the G-7
Currency Administrative Agent by
telephone its Bid not later than
10:00 a.m. (London time) four
Business Days prior to the
Funding Date specified in such
Request (such 10:00 a.m. time
herein called the "G-7 Currency
Submission Deadline ) promptly
followed by written
confirmation, substantially in
the form of Exhibit C-2,
personally delivered, or
transmitted by facsimile, to the
G-7 Currency Administrative
Agent; provided that any Bid
submitted by the G-7 Currency
Administrative Agent (or any
Affiliate thereof) in its
capacity as a Bank shall be
submitted not later than 15
minutes prior to the G-7
Currency Submission Deadline.
Each Bank may offer to make all
or any part of any G-7 Currency
Bid Loan or Loans for a single
Interest Period at more than one
interest rate so long as:
(i) such offers are
made in accordance with
the procedures described
herein;
(ii) each interest
rate applies to a portion
of a Bid Loan in a minimum
Equivalent Amount of
U.S.$1,000,000 and an
integral multiple of
100,000 units of the
applicable G-7 Currency;
and
(iii) such Bank does
not offer to make Bid
Loans with more than four
interest rates for any
single Interest Period.
The aggregate amount of Bid
Loans (whether for a single
Interest Period or for all
Interest Periods) offered in a
Bid may exceed the Maximum
Request of the corresponding Bid
Loan Request. However, each Bid
shall set forth the Maximum
Offer which the applicable
Borrower may accept pursuant to
such Bid, and such Maximum Offer
shall not exceed the Maximum
Request.
If any Bid omits information
required by the form provided as
Exhibit C-2, the G-7 Currency
Administrative Agent will
promptly attempt to notify the
Bank submitting such Bid and
such Bank may resubmit such Bid
if it is able to do so prior to
the G-7 Currency Submission
Deadline but without modifying
any G-7 Currency Bid originally
set forth therein.
SECTION 8.4 Acceptance of
Bids.
(a) At or prior to
1:30 p.m. (London time) on
the day of the G-7
Currency Submission
Deadline, the G-7 Currency
Administrative Agent will
give telephonic notice
(promptly confirmed in
writing) to Pentair of all
G-7 Currency Bids received
and the substance thereof.
The applicable Borrower,
acting (in the case of a
Borrower other than
Pentair) through Pentair
as its agent, shall, in
its sole discretion but
subject to the provisions
of Section 8.4(b),
irrevocably accept or
reject any G-7 Currency
Bid (or portion of the
principal amount of any
Bid Loan offered with such
G-7 Currency Bid) by
telephonic notice
(promptly confirmed in
writing) to the G-7
Currency Administrative
Agent, to be given at or
prior to 3:00 p.m. (London
time) on such day. The
G-7 Currency
Administrative Agent will
promptly notify each Bank
that has submitted a G-7
Currency Bid by telephone,
at or prior to 5:00 p.m.
(London time) on such day
(promptly confirmed in
writing), to what extent
such Bank's G-7 Currency
Bid has been accepted and
the details of such
acceptance, together with
instructions regarding the
funding of the G-7
Currency Bid Loans
contemplated thereby. In
the event Pentair fails to
provide such telephonic
notice to the G-7 Currency
Administrative Agent at or
prior to 5:00 p.m. (London
time) on such day, the G-7
Currency Administrative
Agent may presume
conclusively that the
applicable Borrower has
totally rejected all such
G-7 Currency Bids and the
G-7 Currency
Administrative Agent will
notify each Bank that has
submitted a G-7 Currency
Bid of such rejection by
telephone on such day
(promptly confirmed in
writing). At or prior to
noon (London time) two
Business Days prior to the
proposed Funding Date for
any G-7 Currency Bid
Loans, the G-7 Currency
Administrative Agent shall
notify Pentair and each
Bank with respect to which
any portion of such Bank's
G-7 Currency Bid has been
accepted of the Interbank
Offered Rate applicable to
such G-7 Currency Bid
Loans as determined
pursuant to the definition
of "Interbank Offered
Rate.
(b) Acceptance
Guidelines.
(i) Portion Size.
When a Borrower accepts a
portion, but not all, of
the principal amount of
any G-7 Currency Bid Loan
offered for any single
Interest Period at a
single interest rate in
any Bank's Bid, such
Borrower shall accept such
portion in an Equivalent
Amount of not less than
U.S.$1,000,000 and an
integral multiple of
100,000 units of the
applicable G-7 Currency.
(ii) Aggregate
Amount. The amount of all
G-7 Currency Bid Loans
accepted by the Borrowers,
in the aggregate for all
Interest Periods and
interest rates: (i) from
all Banks, pursuant to a
single Bid Loan Request
shall not exceed the
Maximum Request and (ii)
from each Bank, pursuant
to a single Bid Loan
Request shall not exceed
the Maximum Offer of the
corresponding Bid from
such Bank.
(iii) Allocation among
Banks. If a Borrower
accepts any Bid (or any
portion thereof referred
to in paragraph (i) above
in this Section 8.4(b)),
it must accept offers
based exclusively upon
pricing (from lowest to
highest) of interest rate
and no other criteria. If
two or more Banks submit
offers for identical
Interest Periods at
identical pricing and a
Borrower accepts any such
offer (or any such
portion), the principal
amount of Bid Loans in
respect of which such
offers are accepted shall
be allocated among such
Banks as nearly as
possible (in such
multiples, not greater
than 100,000 units of the
applicable G-7 Currency,
as such Borrower may deem
appropriate), in
proportion to the
principal amounts offered
by such Banks at such
pricing.
SECTION 8.5 No Prepayment.
G-7 Currency Bid Loans may not
be prepaid prior to the last day
of their respective Interest
Periods.
SECTION 8.6 General
Provisions as to Payments. The
Borrowers shall make each
payment of principal of, and
interest on, the G-7 Currency
Bid Loans hereunder not later
than 12:00 noon (London time) on
the date when due, in funds
immediately available in London
to the G-7 Currency
Administrative Agent at its
Payment Office. The G-7
Currency Administrative Agent
will promptly distribute to any
Bank each such payment made with
respect to a G-7 Currency Bid
Loan made by such Bank.
Whenever any payment of
principal of, or interest on,
any G-7 Currency Bid Loan shall
be due on a day which is not a
Business Day, the date for
payment thereof shall be
extended to the next succeeding
Business Day unless as a result
thereof it would fall in the
next calendar month, in which
case it shall be advanced to the
next preceding Business Day. If
the date for any payment of
principal is extended by
operation of law or otherwise,
interest thereon shall be
payable for such extended time.
SECTION 8.7 Funding of G-7
Currency Bid Loans. Not later
than 10:00 a.m. (London time) on
the Funding Date of one or more
G-7 Currency Bid Loans, each
Bank with respect to which any
portion of a Bid has been
accepted shall make available
funds covering such Bank's Bid
Loan or Loans in funds
immediately available in London
to the G-7 Currency
Administrative Agent at its
Payment Office. Unless the G-7
Currency Administrative Agent
receives notice or otherwise
determines that any applicable
condition specified in Article X
has not been satisfied, the G-7
Currency Administrative Agent
will make the funds so received
from the Banks available to the
applicable Borrower at the G-7
Currency Administrative Agent's
Payment Office. Notwithstanding
the foregoing provisions of this
Section, to the extent that a
G-7 Currency Bid Loan made by a
Bank matures on the Funding Date
for another G-7 Currency Bid
Loan to be made by such Bank in
the same G-7 Currency, such Bank
shall apply the proceeds of the
G-7 Currency Bid Loan it is then
making to the repayment of the
maturing G-7 Currency Bid Loan.
SECTION 8.8 Rate and
Payment of Interest. Each G-7
Currency Bid Loan shall bear
interest on the outstanding
principal amount thereof, for
the Interest Period applicable
thereto, at a rate per annum
equal to the sum of the
Interbank Offered Rate for such
Interest Period plus (or minus)
the G-7 Currency Bid offered by
the Bank making such Bid Loan
and accepted by the Borrower as
the Margin Rate applicable to
such G-7 Currency Bid Loan
pursuant to Section 8.4(a).
Such interest shall be payable
for each Interest Period on the
last day thereof. Any overdue
principal of and, to the extent
permitted by law, overdue
interest on, any G-7 Currency
Bid Loan shall bear interest,
payable on demand, for each day
from and including the date
payment thereof was due to but
excluding the date of actual
payment, at a rate per annum
equal to the sum of 1% plus the
Eurocurrency Margin plus the
quotient obtained (rounded
upward, if necessary, to the
next higher 1/100 of 1%) by
dividing (i) the interest rate
per annum at which one day (or,
if such amount due remains
unpaid more than three Business
Days, then for such other period
of time not longer than six
months as the G-7 Currency
Administrative Agent may elect)
deposits in the applicable G-7
Currency in an amount
approximately equal to the G-7
Currency Administrative Agent's
such overdue G-7 Currency Bid
Loan, are offered to the G-7
Currency Administrative Agent in
the London interbank market for
the applicable period determined
as provided about by (ii) 1.00
minus the Eurocurrency Reserve
Percentage.
ARTICLE IX
LETTERS OF CREDIT
SECTION 9.1 Letters of
Credit.
(a) Subject to the
terms and conditions of
this Agreement, and on the
condition that the sum of
the aggregate Equivalent
Amount of all Letter of
Credit Obligations and all
Loans outstanding at any
one time shall never
exceed the Total
Commitment, the Borrowers
may, in addition to Loans
provided for in Section
2.2 hereof, request upon
not less than two Business
Days' (or such lesser
period of time as the
applicable Agent and the
applicable Issuing Bank
shall agree) notice from
Pentair to the applicable
Agent and the applicable
Issuing Bank that any
Issuing Bank issue standby
letters of credit for the
account of the Borrowers,
by making such request as
provided in Section 9.6
hereof (such standby
letters of credit, as
amended, supplemented or
extended from time to
time, being herein
collectively called the
"Letters of Credit ).
Each Letter of Credit
shall be in form and
substance, and shall name
a beneficiary,
satisfactory to the
applicable Issuing Bank.
Letters of Credit may be
denominated in any
currency in which Loans
may be made and shall be
in a minimum Equivalent
Amount (at the time of
issuance thereof) of
U.S.$1,000,000. Letters
of Credit denominated in
U.S. Dollars ("U.S. Dollar
Letters of Credit ) shall
be administered by the
U.S. Dollar Administrative
Agent, and Letters of
Credit denominated in any
G-7 Currency ("G-7
Currency Letters of
Credit ) shall be
administered by the G-7
Currency Administrative
Agent. No Letter of
Credit issued pursuant to
this Agreement shall have
an expiration date later
than one year from date of
issuance or later than 25
days before the
Termination Date. No
Letter of Credit shall be
issued if the conditions
to borrowing set forth in
Section 10.1 shall have
not been met.
Notwithstanding any other
provision of this
Agreement, the aggregate
amount of all Letter of
Credit Obligations shall
not at any time exceed an
Equivalent Amount of
U.S.$100,000,000.
(b) The Borrowers
may from time to time,
upon not less than two
Business Days' (or such
lesser period of time as
the applicable Agent and
the applicable Issuing
Bank shall agree) notice
from Pentair to the
applicable Agent and the
applicable Issuing Bank,
request that such Issuing
Bank amend or otherwise
modify any Letter of
Credit. Any Issuing Bank
may agree to so amend or
otherwise modify any
Letter of Credit issued by
such Issuing Bank;
provided that (i) such
Issuing Bank shall give
prompt notice to the
applicable Agent (which
shall notify each other
Bank) of the details of
such amendment or other
modification and (ii) any
amendment or other
modification which would
increase the amount of, or
extend the term of, any
Letter of Credit shall be
deemed to constitute, and
shall be subject to the
terms and conditions
applicable to, the
issuance of a new Letter
of Credit hereunder.
SECTION 9.2 Effect upon
Commitment. Upon the date of
the issuance of a Letter of
Credit, (a) the Issuing Bank
shall notify the applicable
Agent of the issuance thereof,
(b) such Agent shall notify each
other Bank of such issuance and
of such Bank's Commitment
Percentage of the amount of such
Letter of Credit and (c) the
Issuing Bank shall be deemed,
without further action by any
party hereto, to have sold to
each Bank, and each Bank shall
be deemed, without further
action by any party hereto, to
have purchased from the Issuing
Bank, a participation, in a
percentage equal to its
Commitment Percentage, in such
Letter of Credit and the related
Letter of Credit Obligations.
The Commitment of each Bank
shall be deemed to be utilized
for all purposes hereof in an
Equivalent Amount equal to such
Bank's Commitment Percentage of
Letter of Credit Obligations.
SECTION 9.3 Payment under
Letters of Credit. Upon receipt
from the beneficiary of any
Letter of Credit of any demand
for payment thereunder, the
Issuing Bank shall promptly
notify Pentair and each Bank
(with a copy to the applicable
Agent) as to the amount to be
paid as a result of such demand
and the payment date. The
applicable Borrower shall
promptly reimburse the
applicable Issuing Bank for any
payment under a Letter of
Credit. If at any time an
Issuing Bank shall have made a
payment under a Letter of Credit
and the applicable Borrower
shall not have reimbursed the
Issuing Bank, each Bank will pay
to such Issuing Bank,
immediately upon demand by such
Issuing Bank, an amount equal to
such Bank's Commitment
Percentage of such payment,
together with interest on such
amount for each day from the
date of demand for such payment
(or, if such demand is made
after 1:00 p.m. Chicago time on
such date, from the next
succeeding Business Day) to the
date of payment by such Bank of
such amount at a rate of
interest per annum equal to (a)
in the case of a U.S. Dollar
Letter of Credit, (i) for the
first three Business Days after
demand, the Federal Funds
Effective Rate, and (ii)
thereafter, the Reference Rate,
and (b) in the case of a G-7
Currency Letter of Credit, (i)
for the first three Business
Days after demand, the rate
specified by the Issuing Bank as
its cost for overnight funds in
the applicable currency, and
(ii) thereafter, the rate
specified in clause (b)(i) plus
1%.
SECTION 9.4 Reimbursement
of Payments. The applicable
Borrower shall be irrevocably
and unconditionally obligated
forthwith to reimburse the
Issuing Bank for any amount paid
by the Issuing Bank upon any
drawing under any Letter of
Credit, without presentment,
demand, protest or other
formalities of any kind, all of
which are hereby waived. Such
reimbursement may, subject to
satisfaction of the conditions
in Article X hereof and to the
extent of the available
Commitments (after adjustment in
the same to reflect the
elimination of the corresponding
Letter of Credit Obligation), be
made by the borrowing of Loans.
The Issuing Bank will pay
through the applicable Agent to
each Bank such Bank's Commitment
Percentage of all amounts
received from the applicable
Borrower for application in
payment, in whole or in part, of
a Letter of Credit Obligation,
but only to the extent such Bank
has made payment to the Issuing
Bank in respect of such Letter
of Credit pursuant to Section
9.3 above.
SECTION 9.5 Letter of
Credit Fee. The Borrowers will
pay to the applicable Agent for
the account of the Banks
(ratably according to their
Commitment Percentages) a Letter
of Credit fee with respect to
each Letter of Credit,
calculated on the basis of the
amount available for drawing
under such Letter of Credit for
the period from and including
the date of issuance of such
Letter of Credit to and
including the date of expiration
or termination thereof, at a per
annum rate equal to the
Eurocurrency Margin applicable
from time to time, such fee to
be due and payable quarterly in
arrears on the last day of each
calendar quarter and on the
Termination Date (and
thereafter, if applicable, on
demand). All Letter of Credit
fees shall be computed on the
basis of a year of 360 days and
paid for the actual number of
days elapsed until expiration of
such Letter of Credit.
SECTION 9.6 Letter of
Credit Agreements. The issuance
by an Issuing Bank of a Letter
of Credit shall, in addition to
the discretionary nature of this
Facility, be subject to the
conditions precedent that the
Borrowers shall have executed
and delivered such applications
and other instruments and
agreements relating to such
Letter of Credit as the Issuing
Bank shall have reasonably
requested and are not
inconsistent with the terms of
this Agreement (the "Letter of
Credit Agreements'). In the
event of a conflict between the
terms of this Agreement and the
terms of any Letter of Credit
Agreement, the terms hereof
shall control (it being
understood that any Letter of
Credit Agreement may provide for
a fronting fee and other
customary fees and charges to be
paid in connection with any
Letter of Credit issued
thereunder).
SECTION 9.7
Indemnification; Release. Each
Borrower hereby indemnifies and
holds harmless each Agent, each
Issuing Bank and each Bank from
and against any and all claims,
damages, losses, liabilities,
costs or expenses which such
Agent, such Issuing Bank or such
Bank may incur (or which may be
claimed against such Agent, such
Issuing Bank or such Bank by any
Person whatsoever), REGARDLESS
OF WHETHER CAUSED IN WHOLE OR IN
PART BY THE NEGLIGENCE OF ANY OF
THE INDEMNIFIED PARTIES, in
connection with, and releases
each Agent, each Issuing Bank
and each Bank from any claim
relating to, the execution and
delivery of any Letter of Credit
or transfer of or payment or
failure to pay under such Letter
of Credit; provided that the
Borrowers shall not be required
to indemnify any party seeking
indemnification for any claims,
damages, losses, liabilities,
costs or expenses to the extent,
but only to the extent, caused
by (ii) the willful misconduct
or gross negligence of the party
seeking indemnification, or (ii)
the failure by the party seeking
indemnification to pay under any
Letter of Credit after the
presentation to it of a request
required to be paid under
applicable law.
ARTICLE X
CONDITIONS TO BORROWINGS
The obligation of each Bank
to make a Loan on the occasion
of any Borrowing pursuant
hereto, and the right of any
Borrower to request the issuance
of any Letter of Credit
hereunder, is subject to the
satisfaction of the following
conditions:
SECTION 10.1 All Borrowings
and Issuances of Letters of
Credit. In the case of each
Borrowing or issuance of a
Letter of Credit:
(a) receipt (i) by
the applicable Agent of a
Notice of Borrowing as
required by Section 3.1,
4.1, 5.1, 6.1, 7.4 or 8.4,
as the case may be, or
(ii) of a request to issue
a Letter of Credit as
required by Section 9.1;
(b) the fact that,
as of the time of and
immediately after such
Borrowing or the issuance
of such Letter of Credit,
no Default (or, in the
case of a Borrowing of
Refinancing Loans, no
Event of Default) shall
have occurred and be
continuing;
(c) the fact that
the representations and
warranties of the
Borrowers and the
Guarantor contained in
this Agreement (excluding,
in the case of a
Refinancing Borrowing, the
representations and
warranties set forth in
Sections 11.4(c) and 11.5)
shall be true on and as of
the date of such Borrowing
or the issuance of such
Letter of Credit; and
(d) the fact that,
as of the time immediately
after such Borrowing or
the issuance of such
Letter of Credit, the
aggregate principal
Equivalent Amount of all
Loans and all Letter of
Credit Obligations
outstanding shall not
exceed the Total
Commitment, the aggregate
principal Equivalent
Amount of all Canadian
Loans will not exceed the
Canadian Commitment and
the aggregate principal
amount of all Overnight
Loans outstanding shall
not exceed the Overnight
Commitment.
Each Notice of Borrowing and
Borrowing hereunder and the
request for issuance of, and the
issuance of, each Letter of
Credit shall be deemed to be a
representation and warranty by
the Borrowers on such date as to
the facts specified in clauses
(b), (c) and (d) of this
Section.
SECTION 10.2 First
Borrowing. On or before the
date of the first Borrowing (or
the issuance of any Letter of
Credit):
(a) receipt by each
Bank for the account of
such Bank of duly executed
Notes, dated on or before
the date of such Borrowing
or the issuance of such
Letter of Credit,
complying with the
provisions of Section 2.5.
(b) receipt by each
Bank of opinions of Henson
& Efron, counsel for the
Borrowers, and Gowling,
Strathy & Henderson,
Canadian counsel for
Pentair Canada,
substantially in the form
of Exhibits D-1 and D-2
hereto, respectively;
(c) receipt by each
Bank of a certificate
signed by an officer of
each of the Borrowers, to
the effect set forth in
clauses (b), (c) and (d)
of Section 10.1, and
containing the resolutions
of the Borrowers
authorizing the execution,
delivery and performance
of this Agreement and the
Notes; and
(d) receipt by each
Bank of an incumbency
certificate which shall
identify by name and title
and bear the signatures of
the officers of the
Borrowers authorized to
sign this Agreement and
the Notes, upon which
certificate the Banks
shall be entitled to rely
until informed in writing
by Pentair of any change.
The certificate and opinions
referred to in clauses (b), (c)
and (d) above shall be dated no
more than ten Business Days
before the date of the first
Borrowing or the issuance of the
first Letter of Credit,
whichever is earlier.
SECTION 10.3 Use of
Proceeds of First Borrowing and
Transition. Pentair and, in one
instance, EuroPentair GmbH, are
parties to the following
agreements (the "Prior
Agreements ):
(a) Facility
Agreements dated as of
February 11, 1994, as
amended as of November 1,
1994, and October 31,
1995, among (i) Pentair,
Bank of America Illinois
and Morgan, for themselves
and as Agents, and NBD
Bank, (ii) Pentair and
First Bank, for itself and
as Agent, and Norwest Bank
Minnesota, N.A., and
(iii) EuroPentair GmbH and
Pentair, and Morgan and
Bank of America Illinois,
for themselves and as
Agents, NBD Bank - First
Chicago, and Dresdner Bank
AG;
(b) Restatement of
Credit Agreement dated as
of July 11, 1989, as
amended as of September 1,
1991, January 19, 1993,
and December 31, 1994,
between Pentair and First
Bank; and
(c) Bid Loan
Agreement dated as of
December 14, 1988, as
amended as of January 1,
1991 and February 11,
1994, among Pentair, Bank
of America Illinois, for
itself and as Agent,
Morgan, J.P. Morgan
Delaware, First Bank
National Association,
Norwest Bank Minnesota,
N.A., and NBD Bank -
First Chicago.
All or a portion of the first
Borrowing shall be used to pay
in full all outstanding
obligations, if any, of the
Borrowers under the Prior
Agreements; provided, however,
that each "Bid Loan" which is
outstanding under the Bid Loan
Agreement referred to in clause
(c) above shall, concurrently
with the first Borrowing
hereunder (and without any other
action by any Person), be deemed
to be a Domestic Bid Loan
hereunder and to be subject to
the terms and provisions hereof.
Upon satisfaction in full of all
obligations, if any, of each
Borrower under the Prior
Agreements (excluding
obligations in respect of
existing "Bid Loans" which are
deemed to have become Domestic
Bid Loans hereunder), each Bank
which is the holder of any note
issued by the Borrowers under
the Prior Agreements shall
deliver each such note, marked
paid, to the applicable
Borrower, and the Prior
Agreements shall terminate.
From and after the execution of
this Agreement, the Borrowers
shall have no further right to
borrow funds under the Prior
Agreements.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
The Borrowers represent and
warrant that:
SECTION 11.1 Corporate
Existence and Power.
(a) Pentair is a
corporation duly
incorporated, validly
existing and in good
standing under the laws of
Minnesota and has all
corporate powers and all
material governmental
licenses, authorizations,
consents and approvals
required to carry on its
business as now conducted.
(b) EuroPentair GmbH
is a limited liability
company duly incorporated
and validly existing under
the laws of Germany, with
its seat in Straubenhardt,
Germany and registered in
the Handelsregister in the
Amtsgericht Pforzheim
under file number
HRB-3548, and has all
corporate powers and all
material governmental
licenses, authorizations,
consents and approvals
required to carry on its
business as now conducted.
(c) Pentair Canada
is a corporation duly
incorporated, validly
existing and in good
standing under the laws of
Ontario, Canada and has
all corporate powers and
all material governmental
licenses, authorizations,
consents and approvals
required to carry on its
business as now conducted.
SECTION 11.2 Corporate and
Governmental Authorization;
Contravention. The execution,
delivery and performance by the
Borrowers of this Agreement and
the Notes are within their
respective corporate powers,
have been duly authorized by all
necessary corporate action,
require no action by or in
respect of, or filing with, any
governmental body, agency or
official and do not contravene,
or constitute a default under,
any provision of applicable law
or regulation or of the
certificate of incorporation or
by-laws or other organizational
documents of any Borrower or of
any agreement, judgment,
injunction, order, decree or
other instrument binding upon
any Borrower or result in the
creation or imposition of any
Lien on any asset of any
Borrower or any of Pentair's
Subsidiaries.
SECTION 11.3 Binding
Effect. This Agreement
constitutes a valid and binding
agreement of each of the
Borrowers, and the Notes, when
executed and delivered in
accordance with this Agreement,
will constitute valid and
binding obligations of the
respective Borrowers.
SECTION 11.4 Financial
Information.
(a) The consolidated
balance sheet of Pentair
and its Consolidated
Subsidiaries at December
31, 1995 and the related
consolidated statements of
income and cash flows for
the fiscal year then
ended, reported on by
Deloitte & Touche LLP and
set forth in Pentair's
annual report for the year
ended December 31, 1995 as
filed with the Securities
and Exchange Commission on
Form 10-K, a copy of which
has been delivered to each
Bank, fairly present, in
conformity with generally
accepted accounting
principles, the
consolidated financial
position of Pentair and
its Consolidated
Subsidiaries at such date
and their consolidated
results of operations and
cash flows for such fiscal
year.
(b) The unaudited
consolidated balance sheet
of Pentair and its
Consolidated Subsidiaries
at June 30, 1996 and the
related unaudited
consolidated statements of
income and cash flows for
the three months then
ended, set forth in
Pentair's quarterly report
for the fiscal quarter
ended June 30, 1996 as
filed with the Securities
and Exchange Commission on
Form 10-Q, a copy of which
has been delivered to each
Bank, fairly present, in
conformity with generally
accepted accounting
principles applied on a
basis consistent with the
financial statements
referred to in paragraph
(a) of this Section, the
consolidated financial
position of Pentair and
its Consolidated
Subsidiaries at such date
and their consolidated
results of operations and
cash flows for such
three-month period
(subject to normal
year-end adjustments).
(c) Since December
31, 1995 there has been no
material adverse change in
the business, financial
position, results of
operations or prospects of
Pentair and its
Consolidated Subsidiaries,
considered as a whole.
SECTION 11.5 Litigation.
There is no action, suit or
proceeding pending, or to the
knowledge of any of the
Borrowers threatened, against or
affecting any of the Borrowers
or any of their respective
Subsidiaries before any court or
arbitrator or any governmental
body, agency or official in
which there is a reasonable
possibility of an adverse
decision which could materially
adversely affect the business,
consolidated financial position
or consolidated results of
operations of Pentair and its
Consolidated Subsidiaries, taken
as a whole, or which in any
manner questions the validity of
this Agreement or the Notes.
SECTION 11.6 Compliance
with ERISA. Pentair and each
member of the Controlled Group
have fulfilled their obligations
under the minimum funding
standards of ERISA and the Code
with respect to each Plan and
are in compliance in all
material respects with the
presently applicable provisions
of ERISA and the Code, and have
not incurred any liability to
the PBGC or a Plan under Title
IV of ERISA.
SECTION 11.7 Taxes. The
Borrowers and their respective
Subsidiaries have filed all
foreign, United States federal,
state and local income, excise
and other tax returns which are
required to be filed by them and
have paid or made provision for
the payment of all taxes which
have become due pursuant to such
returns or pursuant to any
assessment in respect thereof
received by any Borrower or any
of its Subsidiaries, except such
taxes, if any, as are being
contested in good faith and for
which adequate reserves have
been provided. The federal
income tax liability, if any, of
the Borrowers and their
respective Subsidiaries has been
determined by the Internal
Revenue Service and paid for all
years prior to and including the
fiscal year ended December 31,
1984.
SECTION 11.8 Subsidiaries.
Each of the Borrowers'
respective Subsidiaries is a
corporation duly incorporated,
validly existing and in good
standing under the laws of its
jurisdiction of incorporation
and has all corporate powers and
all material governmental
licenses, authorizations,
consents and approvals required
to carry on its business as now
conducted.
SECTION 11.9 Not an
Investment Company. None of the
Borrowers is an "investment
company" within the meaning of
the Investment Company Act of
1940, as amended.
SECTION 11.10 Environmental
Matters. Pentair conducts in
the ordinary course of business
a review of the effect of
existing Environmental Laws and
existing Environmental Claims on
business, operations and
properties of Pentair and its
Subsidiaries, and as a result
thereof Pentair has reasonably
concluded that such
Environmental Laws and
Environmental Claims could not,
individually or in the
aggregate, reasonably be
expected to have a material
adverse effect on the business,
consolidated financial position
or consolidated results of
operations of Pentair and its
Subsidiaries taken as a whole.
ARTICLE XII
COVENANTS
The Borrowers agree that so
long as any Bank has any
Commitment hereunder or any
amount payable under any Note
remains unpaid:
SECTION 12.1 Information.
Pentair will deliver to each of
the Banks:
(a) as soon as
available and in any event
within 90 days after the
end of each fiscal year of
Pentair, a consolidated
balance sheet of Pentair
and its Consolidated
Subsidiaries at the end of
such fiscal year and the
related consolidated
statements of income and
cash flows for such fiscal
year, setting forth in
each case in comparative
form the figures for the
previous fiscal year, all
reported on in accordance
with the rules and
regulations of the
Securities and Exchange
Commission and audited by
Deloitte & Touche LLP or
other independent public
accountants of nationally
recognized standing;
(b) as soon as
available and in any event
within 45 days after the
end of each of the first
three quarters of each
fiscal year of Pentair, a
consolidated balance sheet
of Pentair and its
Consolidated Subsidiaries
at the end of such quarter
and the related
consolidated statements of
income and cash flows for
such quarter and for the
portion of Pentair's
fiscal year ended at the
end of such quarter,
setting forth in each case
in comparative form the
figures for the
corresponding quarter and
the corresponding portion
of Pentair's previous
fiscal year, all certified
(subject to normal
year-end adjustments) as
to fairness of
presentation, generally
accepted accounting
principles and consistency
by the chief financial
officer, the chief
accounting officer or the
vice president - treasurer
of Pentair;
(c) simultaneously
with the delivery of each
set of financial
statements referred to in
clauses (a) and (b) above,
a certificate of the chief
financial officer or the
chief accounting officer
of Pentair (i) setting
forth in reasonable detail
the calculations required
to establish whether
Pentair was in compliance
with the requirements of
Sections 12.2 to 12.7,
inclusive, on the date of
such financial statements
and (ii) stating whether
there exists on the date
of such certificate any
Default and, if any
Default then exists,
setting forth the details
thereof and the action
which Pentair is taking or
proposes to take with
respect thereto;
(d) simultaneously
with the delivery of each
set of financial
statements referred to in
clause (a) above, a
statement of the firm of
independent public
accountants which reported
on such statements (i)
whether anything has come
to their attention to
cause them to believe that
there existed on the date
of such statements any
Default and (ii)
confirming the
calculations set forth in
the officer's certificate
delivered simultaneously
therewith pursuant to
clause (c) above;
(e) forthwith upon
the occurrence of any
Default, a certificate of
the chief financial
officer or the chief
accounting officer of
Pentair setting forth the
details thereof and the
action which Pentair is
taking or proposes to take
with respect thereto;
(f) promptly upon
the mailing thereof to the
shareholders of Pentair
generally, copies of all
financial statements,
reports and proxy
statements so mailed;
(g) promptly upon
the filing thereof, copies
of all registration
statements (other than the
exhibits thereto and any
registration statements on
Form S-8 or its
equivalent) and annual,
quarterly or monthly
reports which Pentair
shall have filed with the
Securities and Exchange
Commission;
(h) if and when
Pentair or any member of
the Controlled Group gives
or is required to give
notice to the PBGC of any
"reportable event" (as
defined in Section 4043 of
ERISA) with respect to any
Plan which might
constitute grounds for a
termination of such Plan
under Title IV of ERISA,
or knows that the plan
administrator of any Plan
has given or is required
to give notice of any such
reportable event, a copy
of the notice of such
reportable event given or
required to be given to
the PBGC;
(i) from time to
time such additional
information regarding the
financial position or
business of the Borrowers
as an Agent, at the
request of any Bank, may
reasonably request;
(j) as soon as
available and in any event
(i) within 90 days after
the end of each fiscal
year of Pentair and (ii)
within 45 days of the end
of each of the first three
quarters of each fiscal
year of Pentair, a
consolidating balance
sheet and the related
consolidating statement of
income, with respect only
to Pentair's operating
businesses, for the
relevant fiscal period
(and, for interim fiscal
quarters, for the portion
of the year ended at the
end of such quarter),
certified as to fairness
of presentation, generally
accepted accounting
principles and consistency
by the chief financial
officer, the chief
accounting officer or the
vice president - treasurer
of Pentair;
(k) as soon as
available and in any event
within 360 days after the
end of each fiscal year of
each Borrower other than
Pentair, a balance sheet
of such Borrower at the
end of such fiscal year
and the related statement
of income for such fiscal
year, setting forth in
each case in comparative
form the figures for the
previous fiscal year,
certified as to fairness
of presentation, generally
accepted accounting
principles applicable in
such Borrower's country of
domicile and consistency
in accordance with
applicable local law; and
(l) simultaneously
with the delivery of the
financial statements
referred to in clause (k)
above, a certificate of an
officer of each such
Borrower stating whether
there exists on the date
of such certificate any
Default and, if any
Default then exists,
setting forth the details
thereof and the action
which such Borrower is
taking or proposes to take
with respect thereto.
SECTION 12.2 Debt to Total
Capital Ratio. The Debt to
Total Capital Ratio will at no
time exceed .60.
SECTION 12.3 Minimum
Consolidated Shareholders'
Equity. Consolidated
Shareholders' Equity will at no
time be less than the sum of (a)
U.S.$425,000,000 plus (b) 50% of
Consolidated Cumulative Net
Income plus (c) 50% of the
proceeds of all classes of
equity securities issued by
Pentair after June 30, 1996.
SECTION 12.4 Expense Ratio.
At any time when the Debt to
Total Capital Ratio exceeds .50,
as of the end of each quarter of
each of Pentair's fiscal years,
the ratio of
(a) consolidated net
income before taxes plus
(to the extent deducted in
calculating net income
before taxes) Interest
Expense and rent expense
to
(b) Interest Expense
and rent expense,
(the "Expense Ratio ) calculated
on a cumulative basis for the
four most recent fiscal quarters
(excluding in each case interest
and rent expense of any joint
venture or other entity in which
Pentair or a Consolidated
Subsidiary has an ownership
interest but which is not a
Subsidiary), will not be less
than 1.5:1.0.
SECTION 12.5 Negative
Pledge. Neither the Borrowers
nor any Consolidated Subsidiary
will create, assume or suffer to
exist any Lien securing Debt on
any asset now owned or hereafter
acquired by any of them, except:
(a) Liens existing
on the date of this
Agreement (it being
understood that each such
Lien which secures Debt in
an aggregate principal
amount of more than
U.S.$1,000,000 is
disclosed in the financial
information referred to in
Section 11.4);
(b) any Lien
existing on any asset of
any corporation at the
time such corporation
becomes a Consolidated
Subsidiary and not created
in contemplation of such
event;
(c) any Lien on any
asset securing Debt
incurred or assumed for
the purpose of financing
all or any part of the
cost of acquiring such
asset, provided that such
Lien attaches to such
asset concurrently with or
within 90 days after the
acquisition thereof;
(d) any Lien on any
asset of any corporation
existing at the time such
corporation is merged into
or consolidated with a
Borrower or a Consolidated
Subsidiary and not created
in contemplation of such
event;
(e) any Lien
existing on any asset
prior to the acquisition
thereof by a Borrower or a
Consolidated Subsidiary
and not created in
contemplation of such
acquisition;
(f) any Lien arising
out of the refinancing,
extension, renewal or
refunding of any Debt
secured by any Lien
permitted by any of the
foregoing clauses of this
Section, provided that
such Debt is not increased
and is not secured by any
additional assets;
(g) any Lien arising
pursuant to any order of
attachment, distraint or
similar legal process
arising in connection with
court proceedings so long
as the execution or other
enforcement thereof is
effectively stayed and the
claims secured thereby are
being contested in good
faith by appropriate
proceedings;
(h) any Lien on
trade receivables arising
out of a Sale of
Receivables; and
(i) Liens not
otherwise permitted by the
foregoing clauses of this
Section securing Debt in
an aggregate principal
amount at any time
outstanding not exceeding
12.5% of Consolidated
Shareholders' Equity.
SECTION 12.6
Consolidations, Mergers and
Sales of Assets. No Borrower
will merge or consolidate with
any other non-affiliated Person
or sell, lease, transfer or
otherwise dispose of
substantially all of its assets
as an entirety to any other
Person unless:
(a) the Person
surviving the merger or
consolidation is the
applicable Borrower; and
(b) immediately
after giving effect to any
such action, no Default
shall have occurred and be
continuing.
SECTION 12.7 Subsidiary
Debt. Pentair will not at any
time permit the aggregate amount
of all outstanding Debt of its
Subsidiaries, excluding:
(a) obligations
assumed in connection with
acquisitions;
(b) Debt under this
Agreement; and
(c) Debt incurred in
respect of any Sale of
Receivables;
to exceed twenty percent (20%)
of Consolidated Shareholders'
Equity.
SECTION 12.8 Use of
Proceeds. The proceeds of the
Loans made and the issued under
this Agreement will be used by
the Borrowers to refinance the
promissory notes executed and
delivered by the Borrowers under
the Prior Agreements and
otherwise for general corporate
purposes. None of such proceeds
will be used, directly or
indirectly, for the purpose,
whether immediate, incidental or
ultimate, of purchasing or
carrying any "margin stock"
within the meaning of Regulation
U of the Board of Governors of
the Federal Reserve System.
None of the Borrowers will
engage principally, or as one of
its important activities, in the
business of extending credit for
the purpose of purchasing or
carrying any such margin stock
within the meaning of such
Regulation U.
SECTION 12.9 Environmental
Laws. Pentair shall, and shall
cause each of its Subsidiaries
to, conduct its operations in
compliance with all
Environmental Laws, except for
such noncompliance which
individually or in the aggregate
would not be reasonably expected
to result in material liability
to Pentair and its Subsidiaries
taken as a whole.
SECTION 12.10 Sales of
Receivables. Pentair shall not,
and shall not permit any
Subsidiary to, engage in any
Sale of Receivables if the
outstanding principal Equivalent
Amount of loans secured in
connection with all Sales of
Receivables plus (without
duplication) the outstanding
investment all receivables sold
pursuant to Sales of Receivables
would at any time exceed an
Equivalent Amount of
U.S.$50,000,000.
ARTICLE XIII
DEFAULTS
SECTION 13.1 Events of
Default. If one or more of the
following events ("Events of
Default") shall have occurred
and be continuing:
(a) any of the
Borrowers shall fail to
pay within three days of
the date due any principal
of any Loan; or any of the
Borrowers shall fail to
pay within five (5) days
of the date due any
interest on any Loan, any
fee or any other amount
payable hereunder;
(b) any of the
Borrowers shall fail to
observe or perform any
covenant contained in
Sections 12.2 to 12.9,
inclusive;
(c) any of the
Borrowers shall fail to
observe or perform any
other covenant or
agreement contained in
this Agreement for 30 days
after written notice
thereof has been given to
Pentair by the U.S. Dollar
Administrative Agent at
the request of any Bank;
(d) any
representation, warranty,
certification or statement
made by any of the
Borrowers in this
Agreement or in any
certificate, financial
statement or other
document delivered
pursuant to this Agreement
shall prove to have been
incorrect in any material
respect when made;
(e) any event or
condition shall occur
which results in the
acceleration of the
maturity of any Debt
(other than the Notes) of
any of the Borrowers or
any of their respective
Subsidiaries equal to or
exceeding an Equivalent
Amount of U.S.$20,000,000
in the aggregate for all
such Debt or enables (or,
with the giving of notice
or lapse of time or both,
would enable) the holder
of any such Debt or any
Person acting on such
holder's behalf to
accelerate the maturity
thereof or any of the
Borrowers or any of their
respective Subsidiaries
shall fail to pay when due
(subject to any applicable
grace period) Debt which
in the aggregate exceeds
such Equivalent Amount;
provided, however, that at
any time Pentair has Debt
outstanding, obtained
through one or more public
or private placements
thereof to institutional
investors, with a
principal amount of an
Equivalent Amount of
U.S.$25,000,000 or more
outstanding, which has a
threshold for
cross-default similar to
this subparagraph 12.1(e)
lower than an Equivalent
Amount of U.S.$20,000,000,
the threshold for the
purposes of this
subparagraph 12.1 (e)
shall be the lowest
threshold amount under any
such financing;
(f) Pentair or any
of its Material
Subsidiaries shall
commence a voluntary case
or other proceeding
seeking liquidation,
reorganization or other
relief with respect to
itself or its debts under
any bankruptcy, insolvency
or other similar law now
or hereafter in effect or
seeking the appointment of
a trustee, receiver,
liquidator, custodian or
other similar official of
it or any substantial part
of its property or shall
consent to any such relief
or to the appointment of
or taking possession by
any such official in an
involuntary case or other
proceeding commenced
against it or shall make a
general assignment for the
benefit of creditors or
shall commence or consent
to a proceeding for
approval of a plan of
arrangement with respect
to its debts or shall fail
generally to pay its debts
as they become due or
shall take any corporate
action to authorize any of
the foregoing;
(g) an involuntary
case or other proceeding
shall be commenced against
Pentair or any of its
Material Subsidiaries
seeking liquidation,
reorganization or other
relief with respect to it
or its debts under any
bankruptcy, insolvency or
other similar law now or
hereafter in effect or
seeking the appointment of
a trustee, receiver,
liquidator, custodian or
other similar official of
it or any substantial part
of its property and such
involuntary case or other
proceeding shall remain
undismissed and unstayed
for a period of 60 days;
or an order for relief
shall be entered against
Pentair or any of its
Material Subsidiaries
under the federal
bankruptcy laws or similar
bankruptcy or insolvency
laws of any other
applicable jurisdiction as
now or hereafter in
effect;
(h) Pentair or any
member of the Controlled
Group shall fail to pay
when due an amount or
amounts aggregating in
excess of U.S.$10,000,000
which it shall have become
liable to pay to the PBGC
or to a Plan under Title
IV of ERISA; or Pentair or
any member of the
Controlled Group shall
file a distress
termination notice with
the PBGC and the amount of
the Unfunded Vested
Liabilities under that
filing exceeds
U.S.$5,000,000; or the
PBGC shall institute
proceedings under Title IV
of ERISA to terminate or
to cause a trustee to be
appointed to administer
any such Plan or Plans or
a proceeding shall be
instituted by a fiduciary
of any such Plan or Plans
to enforce Section 515 of
ERISA and such proceeding
shall not have been
dismissed within 30 days
thereafter; or a condition
shall exist by reason of
which the PBGC would be
entitled to obtain a
decree adjudicating that
any such Plan or Plans
must be terminated;
(i) a judgment or
order for the payment of
money in excess of an
Equivalent Amount of
U.S.$10,000,000 shall be
rendered against any
Borrower or any of its
respective Subsidiaries
and such judgment or order
shall continue unsatisfied
and unstayed for a period
of 60 days;
(j) any Person or
two or more Persons acting
in concert shall have
acquired beneficial
ownership (within the
meaning of Rule 13d-3 of
the Securities and
Exchange Commission under
the Securities Exchange
Act of 1934) of 50% or
more of the outstanding
shares of voting stock of
Pentair; or
(k) within a period
of twelve consecutive
months, three-fourths of
the directors of the board
of directors of Pentair
shall have changed;
then, and in every such event,
(1) in the case of
any of the Events of
Default specified in
paragraphs (a) through
(e), or (h) through (k)
above, the Agents or any
one or more of them shall
(i) if requested by Banks
having 50% or more in
aggregate amount of the
Commitments, by notice to
the Borrowers (with a copy
to all Banks and all
Agents), terminate the
Commitments and they shall
thereupon terminate,
and/or (ii) if requested
by Banks holding Notes
evidencing 50% or more in
aggregate principal amount
of the Loans, by notice to
the Borrowers (with a copy
to all Banks and all
Agents) declare the Notes
(together with accrued
interest thereon) to be,
and the Notes shall
thereupon become,
immediately due and
payable without
presentment, demand,
protest or other notice of
any kind, all of which are
hereby waived by the
Borrowers; and
(2) in the case of
any of the Events of
Default specified in
paragraph (f) or (g)
above, without any notice
to the Borrowers or any
other act by any Agent or
the Banks, the Commitments
shall thereupon terminate
and the Notes (together
with accrued interest
thereon) shall become
immediately due and
payable without
presentment, demand,
protest or other notice of
any kind, all of which are
hereby waived by the
Borrowers.
SECTION 13.2 Notice of
Default. The U.S. Dollar
Administrative Agent shall give
notice to the Borrowers under
Section 13.1(c) promptly upon
being requested to do so by any
Bank and shall thereupon notify
all the Banks thereof.
SECTION 13.3 Letters of
Credit. In addition to the
foregoing remedies, if any Event
of Default described in Section
13.1 (f) or (g) shall have
occurred, or if any other Event
of Default described in Section
13.1 shall have occurred and the
Agents or any one or more of
them shall have demanded that
the Borrowers provide cash
collateral for the Letters of
Credit, each Borrower shall pay
to the applicable Agent, as
agent and bailee for the benefit
of the Banks, in respect of each
Letter of Credit issued for the
account of such Borrower an
amount equal to all of the then
outstanding Letter of Credit
Obligations of such Borrower.
Such payment shall be in
immediately available funds or
in similar cash collateral
acceptable to the applicable
Agent. Such amount shall be
held by such Agent in a cash
collateral account until the
outstanding Letters of Credit
are terminated without payment
or are paid. In the event the
applicable Borrower defaults in
the payment of any Letter of
Credit Obligations, the proceeds
of the cash collateral account
shall be applied to the payment
thereof. The Borrowers
acknowledge and agree that the
Banks would not have an adequate
remedy at law for failure by a
Borrower to pay immediately to
the applicable Agent the amount
provided under this Section, and
that such Agent and the Banks
shall have the right to require
such Borrower to perform
specifically such undertaking
whether or not any of the Letter
of Credit Obligations are due
and payable. Upon the failure
of any Borrower to make any
payment required under this
Section, the Agents, on behalf
of the Banks, may proceed to use
all remedies available at law or
in equity to enforce the
obligation of such Borrower to
pay or reimburse such Agent,
including without limitation any
right the Agent, any Issuing
Bank or any Bank may have to
enforce any security interest in
any collateral for such
obligations. The balance of any
payment due under this Section
13.3 shall bear interest payable
on demand until paid in full at
a per annum rate equal to the
Reference Rate plus 2% (or, in
the case of a G-7 Currency
Letter of Credit, the rate that
would be applicable to overdue
principal of a Loan as
determined by the G-7 Currency
Administrative Agent in
accordance with the second
sentence of Section 4.2(a).
ARTICLE XIV
THE AGENTS
SECTION 14.1 Appointment
and Authorization. Each Bank
hereby irrevocably (subject to
Section 14.9) appoints,
designates and authorizes each
Agent to take such action on its
behalf under the provisions of
this Agreement and the Notes and
to exercise such powers and
perform such duties as are
expressly delegated to it by the
terms of this Agreement or the
Notes, together with such powers
as are reasonably incidental
thereto. Notwithstanding any
provision to the contrary
contained elsewhere in this
Agreement or in any Note, no
Agent shall have any duties or
responsibilities, except those
expressly set forth herein, nor
shall any Agent have or be
deemed to have any fiduciary
relationship with any Bank, and
no implied covenants, functions,
responsibilities, duties,
obligations or liabilities shall
be read into this Agreement or
any Note or otherwise exist
against any Agent.
SECTION 14.2 Delegation of
Duties. Each Agent may execute
any of its duties under this
Agreement or any Note by or
through agents, employees or
attorneys-in-fact and shall be
entitled to advice of counsel
concerning all matters
pertaining to such duties.
Without limiting the foregoing,
the Canadian Administrative
Agent may delegate certain of
its duties hereunder to the U.S.
Dollar Administrative Agent. No
Agent shall be responsible for
the negligence or misconduct of
any agent or attorney-in-fact
that it selects with reasonable
care.
SECTION 14.3 Liability of
Agents. None of the
Agent-Related Persons shall (i)
be liable for any action taken
or omitted to be taken by any of
them under or in connection with
this Agreement or any Note or
the transactions contemplated
hereby (except for its own gross
negligence or willful
misconduct), or (ii) be
responsible in any manner to any
of the Banks for any recital,
statement, representation or
warranty made by any Borrower,
or any officer thereof,
contained in this Agreement or
in any certificate, report,
statement or other document
referred to or provided for in,
or received by any Agent under
or in connection with, this
Agreement or any Note, or the
validity, effectiveness,
genuineness, enforceability or
sufficiency of this Agreement or
any Note, or for any failure of
Pentair or any other Borrower to
perform any of its obligations
hereunder. No Agent-Related
Person shall be under any
obligation to any Bank to
ascertain or to inquire as to
the observance or performance of
any of the agreements contained
in, or conditions of, this
Agreement or any Note, or to
inspect the properties, books or
records of any Borrower or any
Subsidiaries or affiliates of
any Borrower.
SECTION 14.4 Reliance by
Agents. Each Agent shall be
entitled to rely, and shall be
fully protected in relying, upon
any writing, resolution, notice,
consent, certificate, affidavit,
letter, telegram, facsimile,
telex or telephone message,
statement or other document or
conversation believed by it to
be genuine and correct and to
have been signed, sent or made
by the proper Person or Persons,
and upon advice and statements
of legal counsel (including
counsel to any Borrower),
independent accountants and
other experts selected by any
Agent. Each Agent shall be
fully justified in failing or
refusing to take any action
under this Agreement or any Note
unless it shall first receive
such advice or concurrence of
the Required Banks as it deems
appropriate and, if it so
requests, it shall first be
indemnified to its satisfaction
by the Banks against any and all
liability and expense which may
be incurred by it by reason of
taking or continuing to take any
such action. Each Agent shall
in all cases be fully protected
in acting, or in refraining from
acting, under this Agreement or
any Note in accordance with a
request or consent of the
Required Banks, and such request
and any action taken or failure
to act pursuant thereto shall be
binding upon all of the Banks.
SECTION 14.5 Notice of
Default. No Agent shall be
deemed to have knowledge or
notice of the occurrence of any
Default or Event of Default,
except with respect to defaults
in the payment of principal,
interest and fees required to be
paid to such Agent for the
account of the Banks, unless
such Agent shall have received
written notice from a Bank or a
Borrower referring to this
Agreement, describing such
Default or Event of Default and
stating that such notice is a
"notice of default". If any
Agent receives such a notice,
such Agent will notify the other
Agents and the Banks of its
receipt thereof. Each Agent
shall take such action with
respect to such Default or Event
of Default as may be requested
by the Required Banks in
accordance with Article XIII;
provided, however, that unless
and until such Agent has
received any such request, such
Agent may (but shall not be
obligated to) take such action,
or refrain from taking such
action, with respect to such
Default or Event of Default as
it shall deem advisable or in
the best interest of the Banks.
SECTION 14.6 Credit
Decision. Each Bank
acknowledges that none of the
Agent-Related Persons has made
any representation or warranty
to it, and that no act by any
Agent hereinafter taken,
including any review of the
affairs of the Borrowers, shall
be deemed to constitute any
representation or warranty by
any Agent-Related Person to any
Bank. Each Bank represents to
each Agent that it has,
independently and without
reliance upon any Agent-Related
Person and based on such
documents and information as it
has deemed appropriate, made its
own appraisal of and
investigation into the business,
prospects, operations, property,
financial and other condition
and creditworthiness of Pentair
and its Subsidiaries, and all
applicable bank regulatory laws
relating to the transactions
contemplated hereby, and made
its own decision to enter into
this Agreement and to extend
credit to the Borrowers
hereunder. Each Bank also
represents that it will,
independently and without
reliance upon any Agent-Related
Person and based on such
documents and information as it
shall deem appropriate at the
time, continue to make its own
credit analysis, appraisals and
decisions in taking or not
taking action under this
Agreement, and to make such
investigations as it deems
necessary to inform itself as to
the business, prospects,
operations, property, financial
and other condition and
creditworthiness of the
Borrowers. Except for notices,
reports and other documents
expressly herein required to be
furnished to the Banks by an
Agent, no Agent shall have any
duty or responsibility to
provide any Bank with any credit
or other information concerning
the business, prospects,
operations, property, financial
and other condition or
creditworthiness of the
Borrowers which may come into
the possession of any of the
Agent-Related Persons.
SECTION 14.7
Indemnification of Agents.
Whether or not the transactions
contemplated hereby are
consummated, the Banks shall
indemnify upon demand each
Agent-Related Persons (to the
extent not reimbursed by or on
behalf of the Borrowers and
without limiting the obligation
of the Borrowers to do so), pro
rata (determined on the same
basis used in determining
Required Banks), from and
against any cost, expense
(including reasonable attorney's
fees and charges) claim, demand,
action, loss or liability that
such Agent-Related Person may
suffer or incur in connection
with this Agreement or any
action taken or omitted by such
Agent hereunder; provided,
however, that no Bank shall be
liable for the payment to any
Agent-Related Person of any
portion of the foregoing
resulting solely from such
Person's gross negligence or
willful misconduct. The
undertaking in this Section
shall survive the resignation or
replacement of any Agent and any
termination of this Agreement.
SECTION 14.8 Agents in
Individual Capacity. Each of
BofA and its affiliates
(including BA Canada), Morgan
and its affiliates and First
Bank and its affiliates may make
loans to, issue letters of
credit for the account of,
accept deposits from, acquire
equity interests in and
generally engage in any kind of
banking, trust, financial
advisory, underwriting or other
business with Pentair and its
Subsidiaries and affiliates as
though, in the case of BofA,
BofA were not the U.S. Dollar
Administrative Agent and BA
Canada were not the Canadian
Administrative Agent, in the
case of Morgan, Morgan were not
the G-7 Currency Administrative
Agent, and, in the case of First
Bank, First Bank were not the
Overnight Administrative Agent,
in each case without notice to
or consent of the Banks. The
Banks acknowledge that, pursuant
to such activities, BofA or its
affiliates (including BA Canada)
or Morgan or its affiliates or
First Bank or its affiliates may
receive information regarding
Pentair or its affiliates
(including information that may
be subject to confidentiality
obligations in favor of Pentair
or such affiliate) and
acknowledge that none of BofA,
Morgan, First Bank or any of
their respective affiliates
shall have any obligation to
provide such information to
them. With respect to its
Loans, each of BofA, BA Canada,
Morgan and First Bank (and any
of their respective affiliates
which may become a Bank) shall
have the same rights and powers
under this Agreement as any
other Bank and may exercise the
same as though it were not an
Agent.
SECTION 14.9 Successor
Agents. Any Agent may, and at
the request of the Required
Banks shall, resign as an Agent
upon 30 days' notice to the
Borrowers and the Banks. Upon
any such resignation or removal,
provided no Default exists, the
Borrowers shall have the right
to appoint another Bank as
successor Agent subject to the
consent of the Required Banks,
which consent shall not be
unreasonably withheld. If such
consent is not obtained within
30 days, or if a Default exists,
then the Required Banks shall
have the right to appoint, on
behalf of the Borrowers and the
Banks, a successor Agent. Upon
the acceptance of any
appointment as an Agent
hereunder by a successor Agent,
such successor Agent shall
thereupon succeed to and become
vested with all the rights,
powers, privileges and duties of
the retiring Agent, and the
retiring Agent shall be
discharged from its duties and
obligations hereunder. After
any retiring Agent's resignation
hereunder as Agent, the
provisions of this Article XIV
shall continue in effect for its
benefit in respect of any
actions taken or omitted to be
taken by it while it was acting
as an Agent hereunder. If no
successor Agent has accepted
appointment as the applicable
successor Agent by the date
which is 30 days following a
retiring Agent's notice of
resignation, such retiring
Agent's resignation shall
nevertheless thereupon become
effective and the Banks shall
perform all of the duties of
such Agent hereunder until such
time, if any, as the Required
Banks appoint a successor Agent
as provided above.
SECTION 14.10 Withholding
Tax.
(a) If any Bank
(other than a Canadian
Bank) is a "foreign
corporation, partnership
or trust" within the
meaning of the Code and
such Bank claims exemption
from, or a reduction of,
U.S. withholding tax under
Section 1441 or 1442 of
the Code, such Bank agrees
with and in favor of each
of the U.S. Dollar
Administrative Agent and
the G-7 Currency
Administrative Agent to
deliver to such Agent:
(i) if such Bank
claims an exemption
from, or a
reduction of,
withholding tax
under a United
States tax treaty,
two properly
completed and
executed copies of
IRS Form 1001
before the payment
of any interest in
the first calendar
year and before the
payment of any
interest in each
third succeeding
calendar year
during which
interest may be
paid under this
Agreement;
(ii) if such
Bank claims that
interest paid under
this Agreement is
exempt from United
States withholding
tax because it is
effectively
connected with a
United States trade
or business of such
Bank, two properly
completed and
executed copies of
IRS Form 4224
before the payment
of any interest is
due in the first
taxable year of
such Bank and in
each succeeding
taxable year of
such Bank during
which interest may
be paid under this
Agreement; and
(iii) such other
form or forms as
may be required
under the Code or
other laws of the
United States as a
condition to
exemption from, or
reduction of,
United States
withholding tax.
Such Bank agrees to
promptly notify each of
the U.S. Dollar
Administrative Agent and
the G-7 Currency
Administrative Agent of
any change in
circumstances which would
modify or render invalid
any claimed exemption or
reduction.
(b) If any Bank
claims exemption from, or
reduction of, withholding
tax under a United States
tax treaty by providing
IRS Form 1001 and such
Bank sells, assigns,
grants a participation in
or otherwise transfers all
or part of the obligations
of any Borrower to such
Bank, such Bank agrees to
notify each of the U.S.
Dollar Administrative
Agent and the G-7 Currency
Administrative Agent of
the percentage amount in
which it is no longer the
beneficial owner of such
obligations. To the
extent of such percentage
amount, the U.S. Dollar
Administrative Agent and
the G-7 Currency
Administrative Agent will
treat such Bank's IRS Form
1001 as no longer valid.
(c) If any Bank
claims exemption from
United States withholding
tax by providing IRS Form
4224 and such Bank sells,
assigns, grants a
participation in or
otherwise transfers all or
part of the obligations of
any Borrower to such Bank,
such Bank agrees to
undertake sole
responsibility for
complying with the
withholding tax
requirements imposed by
Sections 1441 and 1442 of
the Code.
(d) If any Bank is
entitled to a reduction in
any applicable withholding
tax, the applicable Agent
may withhold from any
interest payment to such
Bank an amount equivalent
to the applicable
withholding tax after
taking into account such
reduction. However, if
any form or other
documentation with respect
to any applicable
withholding tax required
by this Agreement or any
applicable law is not
delivered by any Bank to
any Agent, then such Agent
may withhold from any
interest payment to such
Bank from any applicable
Borrower an amount
equivalent to the
applicable withholding
tax, without reduction.
(e) If the Internal
Revenue Service or Revenue
Canada or any other
governmental authority of
the United States, Canada
or any other jurisdiction
asserts a claim that any
Agent did not properly
withhold tax from amounts
paid to or for the account
of any Bank (because an
appropriate form was not
delivered to such Agent or
was not properly executed,
or because such Bank
failed to notify such
Agent of a change in
circumstances which
rendered the exemption
from, or reduction of,
withholding tax
ineffective, or for any
other reason), such Bank
shall indemnify such Agent
fully for all amounts
paid, directly or
indirectly, by such Agent
as tax or otherwise,
including penalties and
interest, and including
any taxes imposed by any
jurisdiction on amounts
payable to such Agent
under this Section,
together with all costs
and expenses (including
reasonable attorneys'
fees). The obligation of
the Banks under this
subsection shall survive
the repayment of all
Loans, the resignation of
any Agent and the
termination of this
Agreement.
SECTION 14.11 Agents' Fees.
The Borrowers shall pay to each
Agent such fees as are agreed to
from time to time by the
Borrowers and such Agent.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices. All
notices, requests and other
communications to any party
hereunder shall be in writing
(including bank wire, telex,
facsimile or similar writing),
except where specifically
permitted to be given orally,
and shall be given to such party
at its address or facsimile
number set forth on the
signature pages hereof or such
other address or telex number as
such party may hereafter specify
for the purpose by notice to the
applicable Agents and the
Borrowers. Each such notice,
request or other communication
shall be effective (i) if given
by facsimile, when such
facsimile is transmitted to the
facsimile number specified in
this Section and the appropriate
confirmation is received, (ii)
if given by mail, 72 hours after
such communication is deposited
in the mails with first class
postage prepaid, addressed as
aforesaid or (iii) if given by
any other means, when delivered
at the address specified in this
Section; provided that notices
to any Agent under Articles II
through IX shall not be
effective until received. Any
agreement of the Agents and the
Banks herein to receive certain
notices by telephone or
facsimile is solely for the
convenience and at the request
of the Borrowers. The Agents
and the Banks shall be entitled
to rely on the authority of any
Person purporting to be a Person
authorized by the applicable
Borrower to give such notice,
and the Agents and the Banks
shall not have any liability to
such Borrower or any other
Person on account of any action
taken or not taken by any Agent
or any Banks in reliance upon
such telephonic or facsimile
notice. The obligation of the
Borrowers to repay the Loans and
Letter of Credit Obligations
shall not be affected in any way
or to any extent by any failure
by any Agent or any Banks to
receive written confirmation of
any telephonic or facsimile
notice or the receipt by any
Agent or any Banks of a
confirmation which is at
variance with the terms
understood by such Agent or such
Banks to be contained in the
telephonic or facsimile notice.
SECTION 15.2 No Waiver. No
failure or delay by any Agent or
any Bank in exercising any
respective right, power or
privilege hereunder or under any
Note shall operate as a waiver
thereof, nor shall any single or
partial exercise thereof
preclude any other or further
exercise thereof or the exercise
of any other right, power or
privilege. The rights and
remedies herein provided shall
be cumulative and not exclusive
of any rights or remedies
provided by law.
SECTION 15.3 Expenses;
Documentary Taxes. The
Borrowers shall pay upon demand
(i) all reasonable expenses of
each Agent, including fees and
disbursements of a single joint
counsel for the Agents and the
Banks, in connection with the
review of this Agreement, any
waiver or consent hereunder or
any amendment hereof or any
Default or alleged Default by
any of the Borrowers hereunder
and (ii) if an Event of Default
occurs, all reasonable
out-of-pocket expenses incurred
by each Agent and each Bank,
including fees and disbursements
of attorneys for each Agent and
each Bank (who may be employees
of such Agent or such Bank), in
connection with such Event of
Default and collection and other
enforcement proceedings
resulting therefrom. The
respective Borrowers shall
indemnify each Bank against any
transfer taxes, documentary
taxes, assessments or charges
made by any governmental
authority by reason of the
execution and delivery of this
Agreement or the Notes.
SECTION 15.4 Amendments and
Waivers. Any provision of this
Agreement or the Notes may be
amended or waived if, but only
if, such amendment or waiver is
in writing and is signed by the
Borrowers' Agent and the
Required Banks (and, if the
rights or duties of any Agent
are affected thereby, by such
Agent), and acknowledged by the
Agents; provided that no such
amendment or waiver shall,
unless signed by all the Banks
and delivered to the Agents:
(a) increase the
Commitment of any Bank
(except pursuant to
Section 2.3 (c)) or
subject any Bank to any
additional obligations;
(b) reduce the
principal of or rate of
interest on any Loan or
any fee (other than fees
provided for in Section
14.11) hereunder;
(c) postpone the
date fixed for any payment
of principal of or
interest on any Loan or
any fees (other than fees
provided for in Section
14.11) hereunder;
(d) change the
percentage of the
Commitments or of the
aggregate unpaid principal
amount of the Notes, or
the number of Banks, which
shall be required for the
Banks or any of them to
take any action under this
Agreement;
(e) amend Section
2.18 or this Section 15.4.
SECTION 15.5 Collateral.
Each of the Banks represents
that it in good faith is not
relying upon any "margin stock"
(as defined in Regulation U of
the Board of Governors of the
Federal Reserve System) as
collateral in the extension or
maintenance of the credit
provided for in this Agreement.
SECTION 15.6 Successors and
Assigns.
(a) The provisions
of this Agreement shall be
binding upon and inure to
the benefit of the parties
hereto and their
respective successors and
assigns, except that the
Borrowers may not assign
or otherwise transfer any
of their respective rights
under this Agreement.
(b) Any Bank may,
with the written consent
of Pentair (which consent
shall not be unreasonably
withheld), the Agents and
each Issuing Bank which
has a Letter of Credit
outstanding (provided
that, so long as such
assignment will not result
in any increased costs to
the Borrowers, no written
consent of Pentair, any
Agent or any Issuing Bank
shall be required in
connection with any
assignment and delegation
by a Bank to an affiliate
of such Bank), at any time
assign and delegate to one
or more financial
institutions (each an
"Assignee") all or any
ratable part of its Loans,
its Commitment, and the
other rights and
obligations of such Bank
hereunder, in a minimum
Equivalent Amount of
U.S.$10,000,000 or, if
less, the entire amount of
its Loans, its Commitment
and the other rights and
obligations of such Bank
hereunder; provided,
however, that the
Borrowers and the Agents
may continue to deal
solely and directly with
such Bank in connection
with the interest so
assigned to an Assignee
until (x) written notice
of such assignment,
together with payment
instructions, addresses
and related information
with respect to such
Assignee, shall have been
given to the Borrowers and
the Agents by such Bank
and the Assignee; and (y)
such Bank or its Assignee
shall have paid to each of
the U.S. Dollar
Administrative Agent and
the G-7 Currency
Administrative Agent a
processing fee in the
amount of U.S.$1,000; and
provided, further, that no
Bank which is (or which
has designated a Canadian
branch or affiliate as) a
Canadian Bank may assign
all of its rights and
obligations hereunder
unless arrangements
reasonably satisfactory to
the Agents and the
Borrowers have been made
for one or more Banks to
act (or to cause their
respective Canadian
branches or affiliates to
act) as Canadian Banks
hereunder in the full
amount of the Canadian
Commitment.
(c) From and after
the date that the Agents
notify the assignor Bank
that they have consented
to, and received the
consents of Pentair and,
if applicable, the Issuing
Banks to a proposed
assignment and received
payment of the
above-referenced
processing fee, (i) the
applicable Assignee shall
be a party hereto and, to
the extent that rights
hereunder have been
assigned to it and
obligations hereunder have
been assumed by it, shall
have the rights and
obligations of a Bank
under this Agreement, and
(ii) the assignor Bank
shall, to the extent that
rights and obligations
hereunder have been
assigned by it, relinquish
its rights and be released
from its obligations under
this Agreement.
(d) Any Bank may at
any time sell to one or
more commercial banks or
other Persons not
affiliates of Pentair
(each a "Participant")
participating interests in
any Loan, the Commitment
of such Bank and the other
interests of such Bank
(the "originating Bank")
hereunder and under its
Note(s); provided,
however, that (i) the
originating Bank's
obligations under this
Agreement shall remain
unchanged, (ii) the
originating Bank shall
remain solely responsible
for the performance of
such obligations,
(iii) the Borrowers, the
Issuing Banks and the
Agents shall continue to
deal solely and directly
with the originating Bank
in connection with the
originating Bank's rights
and obligations under this
Agreement and the Notes
and (iv) no Bank shall
transfer or grant any
participating interest
under which the
Participant has rights to
approve any amendment to,
or any consent or waiver
with respect to, this
Agreement or any Note,
except to the extent such
amendment, consent or
waiver would require
unanimous consent of the
Banks as described in the
proviso to Section 15.4.
In the case of any such
participation, the
Participant shall be
entitled to the benefit of
Sections 2.9, 2.13,
2.16(a), 4.6 and 15.3 as
though it were also a Bank
hereunder (provided that
no Borrower shall be
obligated to pay any
amount under Section 2.9,
2.13, 2.16(a) or 4.6 to
any Participant which is
greater than such Borrower
would have been required
to pay to the originating
Bank if no such
participation had been
sold), and if amounts
outstanding under this
Agreement are due and
unpaid, or shall have been
declared or shall have
become due and payable
upon the occurrence of an
Event of Default, the
Participant shall be
deemed to have the right
of set-off in respect of
its participating interest
in amounts owing under
this Agreement to the same
extent as if the amount of
its participating interest
were owing directly to it
as a Bank under this
Agreement.
(e) Notwithstanding
any other provision in
this Agreement, any Bank
may at any time create a
security interest in, or
pledge, all or any portion
of its rights under and
interest in this Agreement
and any Note held by it in
favor of any Federal
Reserve Bank in accordance
with Regulation A of the
Board of Governors of the
Federal Reserve System or
U.S. Treasury Regulation
31 CFR section 203.14, and such
Federal Reserve Bank may
enforce such pledge or
security interest in any
manner permitted under
applicable law.
SECTION 15.7 Minnesota Law.
This Agreement and each Note
shall be construed in accordance
with and governed by the
substantive laws of the State of
Minnesota without regard to the
choice of law provisions
thereof.
SECTION 15.8 Counterparts;
Effectiveness. This Agreement
may be signed in any number of
counterparts, each of which
shall be an original, and all of
which taken together shall
constitute a single agreement,
with the same effect as if the
signatures thereto and hereto
were upon the same instrument.
This Agreement shall become
effective when each Agent shall
have received counterparts
hereof signed by all of the
parties hereto.
SECTION 15.9 Borrowers'
Agent. Each Borrower hereby
irrevocably appoints and
authorizes Pentair to take such
action and receive notices
hereunder as agent on its behalf
and to exercise such powers
under this Agreement as
delegated to it by the terms
hereof, together with all such
powers as are reasonably
incidental thereto. In
furtherance of and not in
limitation of the foregoing, for
administrative convenience of
the parties hereto, the Agents
and the Banks shall send all
notices and communications to be
sent to any Borrower solely to
Pentair and may rely solely upon
Pentair to receive all such
notices and other communications
for and on behalf of each
Borrower. Neither Pentair nor
any of its respective directors,
officers, agents or employees
shall be liable to any other
Borrower for any action taken or
not taken by it in connection
herewith (ii) with the consent
or at the request of such
Borrower or (ii) in the absence
of its own gross negligence or
willful misconduct. No Person
other than Pentair may act as
agent for the Borrowers
hereunder without the consent of
all of the Agents hereunder.
SECTION 15.10 Sharing of
Information. The Borrowers
authorize the Agents and the
Banks to share among each other
any information now or hereafter
possessed by any of them
regarding any Borrower.
ARTICLE XVI
GUARANTY
SECTION 16.1 Guaranty. The
Guarantor hereby unconditionally
and irrevocably guarantees the
full and punctual payment
(whether at stated maturity,
upon acceleration or otherwise)
of the principal of and interest
on each Note issued by each of
the other Borrowers pursuant to
this Agreement, and the full and
punctual payment of all other
amounts payable by each of the
other Borrowers under this
Agreement. Upon failure by any
such Borrower to pay punctually
any such amount, the Guarantor
shall forthwith on demand pay
the amount not so paid at the
place and in the manner
specified in this Agreement. In
addition (and without limiting
the foregoing), upon any Note of
any such Borrower being declared
or otherwise becoming
immediately due and payable
pursuant to Section 13.1, the
Guarantor shall forthwith on
demand pay all amounts payable
under such Note at the place and
in the manner specified in this
Agreement.
SECTION 16.2 Guaranty
Unconditional. The obligations
of the Guarantor hereunder shall
be unconditional and absolute
and, without limiting the
generality of the foregoing,
shall not be released,
discharged or otherwise affected
by:
(a) any extension,
renewal, settlement,
compromise, waiver or
release in respect of any
obligation of any Borrower
(other than the Guarantor)
under this Agreement or
any Note, by operation of
law or otherwise;
(b) any modification
or amendment of or
supplement to this
Agreement or any Note;
(c) any release,
impairment, non-perfection
or invalidity of any
direct or indirect
security for any
obligation of any Borrower
(other than the Guarantor)
under this Agreement or
any Note;
(d) any change in
the corporate existence,
structure or ownership of
any Borrower (other than
the Guarantor), or any
insolvency, bankruptcy,
reorganization or other
similar proceeding
affecting any Borrower
(other than the Guarantor)
or such Borrower's
respective assets or any
resulting release or
discharge of any
obligation of any Borrower
(other than the Guarantor)
contained in this
Agreement or any Note;
(e) the existence of
any claim, set-off or
other rights which the
Guarantor may have at any
time against any other
Borrower, any Agent, any
Bank or any other
corporation or person,
whether in connection
herewith or any unrelated
transaction, provided that
nothing herein shall
prevent the assertion of
any such claim by separate
suit or compulsory
counterclaim;
(f) any invalidity
or unenforceability
relating to or against any
Borrower (other than the
Guarantor) for any reason
of this Agreement or any
Note, or any provision of
applicable law or
regulation purporting to
prohibit the payment by
any Borrower (other than
the Guarantor) of the
principal of or interest
on any Note or any other
amount payable by any
Borrower (other than the
Guarantor) under this
Agreement; or
(g) any other act or
omission to act or delay
of any kind by any
Borrower, any Agent, any
Bank or any other
corporation or person or
any other circumstance
whatsoever which might,
but for the provisions of
this paragraph, constitute
a legal or equitable
discharge of the
Guarantor's obligations as
guarantor hereunder.
SECTION 16.3 Discharge only
upon Payment in Full;
Reinstatement in Certain
Circumstances. The Guarantor's
obligations as guarantor
hereunder shall remain in full
force and effect until the
Commitments shall have
terminated and the principal of
and interest on the Notes and
all other amounts payable by the
Borrowers under this Agreement
shall have been paid in full.
If at any time any payment of
the principal of or interest on
any Note or any other amount
payable by any Borrower (other
than the Guarantor) under this
Agreement is rescinded or must
be otherwise restored or
returned upon the insolvency,
bankruptcy or reorganization of
such Borrower or otherwise, the
Guarantor's obligations
hereunder with respect to such
payment shall be reinstated as
though such payment had been due
but not made at such time.
SECTION 16.4 Waiver by
Guarantor. The Guarantor
irrevocably waives
acceptance hereof, presentment,
demand, protest and any notice
not provided for herein, as well
as any requirement that at any
time any action be taken by any
corporation or person against
any Borrower or any other
corporation or person.
SECTION 16.5 Subrogation.
Notwithstanding any payment made
by or for the account of any
other Borrower pursuant to this
Article XVI, Pentair shall not
be subrogated to any right of
any Agent or any Bank until such
time as the Agents and the Banks
shall have received final
payment in cash of the full
amount of all principal of and
interest on the Loans, all fees,
all Letter of Credit Obligations
and all other amounts payable
hereunder.
SECTION 16.6 Stay of
Acceleration. If acceleration
of the time for payment of any
amount payable by any Borrower
(other than the Guarantor) under
this Agreement or the Notes is
stayed upon the insolvency,
bankruptcy or reorganization of
such Borrower, all such amounts
otherwise subject to
acceleration under the terms of
this Agreement shall nonetheless
be payable by the Guarantor
hereunder forthwith on demand by
the applicable Agent made at the
request of the requisite
proportion of the Banks
specified in Article XIII of
this Agreement.
IN WITNESS WHEREOF, the
parties hereto have caused this
Agreement to be duly executed by
their respective authorized
officers as of the day and year
first above written.
BORROWERS:
PENTAIR, INC., for itself, as
guarantor
PENTAIR CANADA, INC.
and as agent for the Borrowers
By____________________________
By______________________________
Title: Chief Financial Officer
Title__________________________
Waters Edge Plaza
1500 County Road B2 West
St. Paul, Minnesota 55113
Attention: Chief Financial
Officer
Telecopy: (612) 639-5209 Telephone: (612) 636-7920
EUROPENTAIR GmbH
By_____________________________
Title: Geschaftsfuhrer
Waters Edge Plaza
1500 County Road B2 West
St. Paul, Minnesota 55113
Attention: Chief Financial
Officer
Telecopy: (612) 639-5209
Telephone: (612) 636-7920
AGENTS:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as U.S. Dollar Administrative
Agent
By_____________________________
Title: Vice President
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attn: Gary Flieger
Telephone: (415) 436-3484
Telecopy: (415) 436-3425
FIRST BANK NATIONAL ASSOCIATION,
as Overnight Administrative
Agent
By_____________________________
Title__________________________
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota
55402-4302
Attn: Mark R. Olmon
Telephone: (612) 973-1085
Telecopy: (612) 973-0825
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as G-7 Currency
Administrative Agent
By_____________________________
Title: Vice President
60 Victoria Embankment
London EC4Y OJP
Attn: Global Credit Middle
Office
Telex number: 896631 MGT G
Telecopy: (071) 325-8190
Telephone: (071) 325-5245 or
5301
with a copy to:
60 Wall Street
New York, New York 10260
Attn: Loan Capital Markets
Telex number: 177615 MGT UT
Telecopy: (212) 648-5336
Telephone: (212) 648-6744
BANK OF AMERICA
CANADA, as Canadian
Administrative Agent
By_____________________________
Title__________________________
200 Front Street West
Suite 2700
Toronto, Ontario M5V 3L2
Attn: Derrek R. Wong
Telephone: (416) 349-4006
Telecopy: (416) 349-4282
BANKS:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By_________________________
Title__________________________
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Raju Patel
Telephone: (312) 828-7225
Telecopy: (312) 987-5833
BANK OF AMERICA
CANADA, as a Canadian Bank
(designated by Bank of America
National Trust and Savings
Association)
By______________________________
Title:_________________________
200 Front Street West
Suite 2700
Toronto, Ontario M5V 3L2
Attn: Derrek Wong
Telephone: (416) 349-4006
Telecopy: (416) 349-4282
FIRST BANK NATIONAL ASSOCIATION
By_____________________________
Title:__________________________
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota
55401-4302
Attn: Mark R. Olmon
Telephone: (612) 973-1085
Telecopy: (612) 973-0825
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By_____________________________
Title:__________________________
60 Wall Street
New York, New York 10260
Attn: Loan Capital Markets
Telephone: (212) 648-6744
Telecopy: (212) 648-5336
Telex Number: 177615 MGT UT
J.P. MORGAN CANADA, as a
Canadian Bank
(designated by Morgan Guaranty
Trust Company of New York)
By____________________________
Title:_________________________
Royal Bank Plaza
Suite 2200, South Tower
Toronto, Canada M5J 2J2
Attn: Gerda Grasshoff
Telephone: (416) 981-9178
Telecopy: (416) 981-9279
NBD BANK
By_____________________________
Title:__________________________
611 Woodward Avenue
Detroit, Michigan 48226
Attn: Marguerite C. Mullins
Telephone: (313) 225-2873
Telecopy: (313) 225-1671
DRESDNER BANK AG CHICAGO
AND GRAND CAYMAN BRANCHES
By:_____________________________
Title: Senior Vice President
By:____________________________
Title: Vice President
190 South LaSalle Street
Chicago, IL 60603
Attn: William J. Murray
Telephone: (312) 444-1318
Telecopy: (312) 444-1305
Operations Contact:
Ms. Feixiao Dai
Dresdner Bank AG
75 Wall Street
New York, NY 10005
Telephone: (212) 574-0269
Telecopy: (212) 574-0130
ABN AMRO BANK N.V., CHICAGO
BRANCH
By______________________________
Title:_________________________
By______________________________
Title:__________________________
135 South LaSalle Street
Chicago, Illinois 60674
Attn: Christine Holmes
Telephone: (312) 904-2662
Telecopy: (312) 606-8435
THE BANK OF TOKYO-MITSUBISHI,
LTD., CHICAGO BRANCH
By_____________________________
Title:_________________________
5100 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attn: Jeffrey R. Arnold
Telephone: (612) 333-0505
Telecopy: (612) 333-3735
Operations Contact:
Ms. Janice Hennig
The Bank of Tokyo-Mitsubishi,
Ltd., Chicago Branch
227 West Monroe Street
Chicago, IL 60606
Telephone: (312) 696-4710
Telecopy: (312) 696-4532
SCHEDULE 1
Bank
Commitment
Commitment Percentage
Canadian Percentage
Morgan Guaranty Trust Company of
New York U.S.
$55,000,000
20.000000000%
50%
Bank of America National Trust
and Savings Association
55,000,000
20.000000000
50%
First Bank National Association
30,000,000
10.909090909
N/A
NBD Bank
45,000,000
16.363636364
N/A
Dresdner Bank AG
30,000,000
10.909090909
N/A
ABN AMRO Bank N.V.
30,000,000
10.909090909
N/A
The Bank of Tokyo - Mitsubishi,
Ltd.
30,000,000
10.909090909
N/A
Totals
U.S.$275,000,000
100%
100%
EXHIBIT A
NOTE
Minneapolis, Minnesota
_______________, 199_
For value received,
_______________________________________________ (the "Borrower )
promises to pay to the order of
_________________________________________________________ (the
"Bank ) the aggregate unpaid
principal amount of all Loans
made by the Bank to the Borrower
pursuant to the Facility
Agreement referred to below,
together with interest on the
unpaid principal amounts thereof
at the rates and on the dates
set forth in the Facility
Agreement. The Borrower shall
pay each Loan in full on the
earlier of (i) the last day of
its Interest Period or (ii) the
Termination Date.
All payments of principal
and interest shall be made (i)
if in U.S. Dollars, in lawful
money of the United States in
federal or other immediately
available funds at the place
specified for payment thereof
pursuant to the Facility
Agreement, or (ii) if in a G-7
Currency, in such funds as may
then be customary for the
settlement of international
transactions in such G-7
Currency at the place specified
for payment thereof pursuant to
the Facility Agreement.
All Loans made by the Bank
to the Borrower pursuant to the
Facility Agreement and all
payments of the principal
thereof may be recorded by the
Bank and, prior to any transfer
hereof, endorsed by the Bank on
the schedule attached hereto, or
on a continuation of such
schedule attached to and made a
part hereof.
This Note is one of the
Notes referred to in the
Multi-Facility Credit Agreement
dated November 15, 1996 among
Pentair, Inc., EuroPentair GmbH,
Pentair Canada, Inc., the banks
party thereto and Morgan
Guaranty Trust Company of New
York, Bank of America National
Trust and Savings Association
and First Bank National
Association, as Agents (as
amended from time to time, the
"Facility Agreement ). Reference
is made to such Facility
Agreement for definitions of
capitalized terms contained
herein, provisions for the
prepayment hereof and the
acceleration of the maturity
hereof.
_______________________________________
By_______________________________________
Title:__________________________________
EXHIBIT B-1
FORM OF
DOMESTIC BID LOAN REQUEST
__________, ____
VIA FACSIMILE
Bank of America National Trust
and Savings Association,
as U.S. Dollar Administrative
Agent
1455 Market Street, 13th Floor
San Francisco, California 94103
Attn: George Slawek
Ladies and Gentlemen:
Reference is made to the
Multi-Facility Credit Agreement,
dated as of November 15, 1996
(as amended or otherwise
modified from time to time, the
"Agreement"), among Pentair,
Inc., EuroPentair GmbH and
Pentair Canada, Inc., as
Borrowers, Bank of America
National Trust and Savings
Association, as a Bank and as
U.S. Dollar Administrative
Agent, First Bank National
Association, as a Bank and as
Overnight Administrative Agent,
Morgan Guaranty Trust Company of
New York, as a Bank and as G-7
Currency Administrative Agent,
NBD Bank, Dresdner Bank AG, ABN
AMRO Bank N.V. and The Bank of
Tokyo - Mitsubishi, Ltd., as
Banks, and various affiliates of
the Banks which are parties to
the Canadian Facility described
therein. Capitalized terms used
herein have the meanings
specified in the Agreement.
This is a Bid Loan Request
for Domestic Bid Loans pursuant
to Section 7.1 of the Agreement
as follows:
1. The name of the
proposed Borrower is
.
2. The Maximum Request
is U.S.$
.
3. This is [an
Absolute Rate][a Domestic
Margin Rate] Bid Request.
4. The Borrower
requests [one][two][three]
Bid Loans and the Interest
Period[s] for the Bid
Loan[s] comprising the
Borrowing shall be
[,
and
].
5. The Funding Date of
the proposed Borrowing is
, .
The Borrower certifies that
the following statements are
true on the date hereof, and
will be true on the date of the
proposed Borrowing, before and
after giving effect thereto and
to the application of the
proceeds therefrom:
(a) the Bid Loans
requested hereby in
the aggregate equal
U.S.$5,000,000 or an
integral multiple of
U.S.$1,000,000 over
such amount and do
not exceed the limit
set forth in Section
7.2 of the Agreement;
(b) no Default shall
have occurred and be
continuing;
(c) the
representations and
warranties of the
Borrowers and the
Guarantor contained in the
Agreement shall be true;
(d) the aggregate
principal Equivalent
Amount of all Loans and
all Letter of Credit
Obligations shall not
exceed the Total
Commitment; and
(e) the principal
amount of all U.S. Dollar
Loans plus the principal
amount of all Domestic Bid
Loans plus the amount of
all Letter of Credit
Obligations with respect
to U.S. Dollar Letters of
Credit plus the principal
Equivalent Amount of all
Canadian Loans (determined
as of the most recent
applicable Computation
Date) plus the principal
amount of all Overnight
Loans will not exceed the
North American Sublimit
(as defined in Section
2.2(f) of the Agreement).
PENTAIR, INC. [on behalf
of]
[EUROPENTAIR GMBH]
[PENTAIR CANADA, INC.]
By:
Name:
Title:
EXHIBIT B-2
FORM OF
G-7 CURRENCY BID LOAN
REQUEST
__________, ____
VIA FACSIMILE
Morgan Guaranty Trust
Company of New York,
as G-7 Currency
Administrative Agent
60 Victoria Embankment
London, England
United Kingdom EC4Y OJP
Attn: Global Credit
Middle Office
Ladies and Gentlemen:
Reference is made to
the Multi-Facility Credit
Agreement, dated as of
November 15, 1996 (as
amended or otherwise
modified from time to
time, the "Agreement"),
among Pentair, Inc.,
EuroPentair GmbH and
Pentair Canada, Inc., as
Borrowers, Bank of America
National Trust and Savings
Association, as a Bank and
as U.S. Dollar
Administrative Agent,
First Bank National
Association, as a Bank and
as Overnight
Administrative Agent,
Morgan Guaranty Trust
Company of New York, as a
Bank and as G-7 Currency
Administrative Agent, NBD
Bank, Dresdner Bank AG,
ABN AMRO Bank N.V. and The
Bank of Tokyo -
Mitsubishi, Ltd., as
Banks, and various
affiliates of the Banks
which are parties to the
Canadian Facility
described therein.
Capitalized terms used
herein have the meanings
specified in the
Agreement.
This is a Bid Loan
Request for G-7 Currency
Bid Loans pursuant to
Section 8.1 of the
Agreement as follows:
1. The name of the
Borrower is
.
2. The G-7 Currency
for [each][the] Bid Loan
shall be [German
Deutschmarks][French
Francs][British Pounds
Sterling][Japanese
Yen][Canadian
Dollars][Italian Lira].
3. The Maximum Request
is
[Deutschmarks][Francs][Pounds][Yen][Canadian
Dollars][Lira].
4. The Borrower
requests [one][two][three]
Bid Loans and the Interest
Period[s] for the Bid
Loan[s] comprising the
Borrowing shall be
[,
and
].
5. The Funding Date of
the proposed Borrowing is
, .
The Borrower certifies that
the following statements are
true on the date hereof, and
will be true on the date of the
proposed Borrowing, before and
after giving effect thereto and
to the application of the
proceeds therefrom:
(a) the Equivalent
Amount of the Bid
Loans requested
hereby in the
aggregate (i) equals
or exceeds
U.S.$5,000,000, (ii)
is an integral
multiple of 1,000,000
units of the
applicable G-7
Currency and (iii)
does not exceed the
limit set forth in
Section 8.2 of the
Agreement;
(b) no Default shall
have occurred and be
continuing;
(c) the
representations and
warranties of the
Borrowers and the
Guarantor contained in the
Agreement shall be true;
and
(d) the aggregate
principal Equivalent
Amount of all Loans and
all Letter of Credit
Obligations shall not
exceed the Total
Commitment; and
(e) the principal
Equivalent Amount of all
G-7 Currency Loans plus
the principal Equivalent
Amount of all G-7 Currency
Bid Loans plus the
Equivalent Amount of all
Letter of Credit
Obligations with respect
to G-7 Currency Letters of
Credit, in each case
determined as of the most
recent applicable
Computation Date, will not
exceed the G-7 Currency
Sublimit (as defined in
Section 2.2(f) of the
Agreement).
PENTAIR, INC. [on behalf of]
[EUROPENTAIR GMBH]
[PENTAIR CANADA, INC.]
By:
Name:
Title:
EXHIBIT C-1
FORM OF DOMESTIC BID
__________, ____
VIA FACSIMILE
Bank of America National Trust
and Savings Association,
as U.S. Dollar Administrative
Agent
1455 Market Street, 13th Floor
San Francisco, California 94103
Attn: George Slawek
Ladies and Gentlemen:
Reference is made to the
Multi-Facility Credit Agreement,
dated as of November 15, 1996
(as amended or otherwise
modified from time to time, the
"Agreement"), among Pentair,
Inc., EuroPentair GmbH and
Pentair Canada, Inc., as
Borrowers, Bank of America
National Trust and Savings
Association, as a Bank and as
U.S. Dollar Administrative
Agent, First Bank National
Association, as a Bank and as
Overnight Administrative Agent,
Morgan Guaranty Trust Company of
New York, as a Bank and as G-7
Currency Administrative Agent,
NBD Bank, Dresdner Bank AG, ABN
AMRO Bank N.V. and The Bank of
Tokyo - Mitsubishi, Ltd., as
Banks, and various affiliates of
the Banks which are parties to
the Canadian Facility described
therein. Capitalized terms used
herein have the meanings
specified in the Agreement.
In response to the Domestic
Bid Loan Request of [PENTAIR,
INC.][EUROPENTAIR GMBH][PENTAIR
CANADA, INC.], dated
, , and in accordance with
Section 7.3 of the Agreement,
the undersigned Bank offers to
make [a] Domestic Bid Loan[s] in
the following principal
amount[s] at the following
interest rate[s] for the
following Interest Period[s]:
Funding Date: ,
Maximum Offer: $
Principal Principal Principal Principal
Amount $ Amount $ Amount $ Amount $
[Absolute [Absolute [Absolute [Absolute
Rate %] Rate %] Rate %] Rate %]
[Margin %] [Margin %] [Margin %] [Margin %]
Interest Interest Interest Interest
Period Period Period Period
[NAME OF BANK]
By:
Name:
Title:
EXHIBIT C-2
FORM OF G-7 CURRENCY BID
__________, ____
VIA FACSIMILE
Morgan Guaranty Trust Company of
New York,
as G-7 Currency Administrative
Agent
60 Victoria Embankment
London, England
United Kingdom EC4Y OJP
Attn: Global Credit Middle
Office
Ladies and Gentlemen:
Reference is made to the
Multi-Facility Credit Agreement,
dated as of November 15, 1996
(as amended or otherwise
modified from time to time, the
"Agreement"), among Pentair,
Inc., EuroPentair GmbH and
Pentair Canada, Inc., as
Borrowers, Bank of America
National Trust and Savings
Association, as a Bank and as
U.S. Dollar Administrative
Agent, First Bank National
Association, as a Bank and as
Overnight Administrative Agent,
Morgan Guaranty Trust Company of
New York, as a Bank and as G-7
Currency Administrative Agent,
NBD Bank, Dresdner Bank AG, ABN
AMRO Bank N.V. and The Bank of
Tokyo - Mitsubishi, Ltd., as
Banks, and various affiliates of
the Banks which are parties to
the Canadian Facility described
therein. Capitalized terms used
herein have the meanings
specified in the Agreement.
In response to the G-7
Currency Bid Loan Request of
[PENTAIR, INC.][EUROPENTAIR
GMBH][PENTAIR CANADA, INC.],
dated , , and
in accordance with Section 8.3
of the Agreement, the
undersigned Bank offers to make
[a] G-7 Currency Bid Loan[s]
thereunder in the following
principal amount[s] at the
following interest rate[s] for
the following Interest
Period[s]:
Funding Date: ,
G-7 Currency =
Maximum Offer: $
Principal Principal Principal Principal
Amount Amount Amount Amount
[currency units] [currency units] [currency units] [currency units]
Margin % Margin % Margin % Margin %
Interest Interest Interest Interest
Period Period Period Period
[NAME OF BANK]
By:
Name:
Title:
CREDIT AGREEMENT
Dated as of November 15, 1996
Between
PENTAIR, INC.
and
FIRST BANK NATIONAL ASSOCIATION
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of
November 15, 1996, is by and between PENTAIR,
INC., a Minnesota corporation (the "Borrower"),
and FIRST BANK NATIONAL ASSOCIATION, a
national banking association (the "Bank").
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following terms,
as used herein, have the following meanings:
"Adjusted CD Rate" applicable to any Interest
Period means a rate per annum determined
pursuant to the following formula:
ACDR = [CDBR* ] plus AR
[1.0 - RP]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
RP = CD Reserve Percentage
AR = Assessment Rate
* The amount in brackets being rounded
upwards, if necessary, to the next higher 1/100 of
1%.
"Adjusted Debt to Total Capital Ratio" means
the ratio obtained by dividing (i) Consolidated Debt,
excluding any Debt arising pursuant to a Sale of
Receivables, by (ii) an amount equal to the sum of
Consolidated Debt, excluding any Debt arising
pursuant to a Sale of Receivables, and Consolidated
Shareholders' Equity.
"Assessment Rate" means for any Interest
Period the net annual assessment rate (rounded
upwards, if necessary, to the next higher 1/100 of
1%) actually assessed to the Bank by the Federal
Deposit Insurance Corporation (or any successor)
for such Corporation's (or such successor's)
insuring time deposits at offices of the Bank during
the most recent period for which such rate has
been determined prior to the commencement of
such Interest Period.
"Assessment Rate" means, for any day of any
Interest Period for a CD Loan, the rate (rounded
upwards, if necessary, to the next higher 1/100 of
1%) determined by the Bank as equal to the annual
assessment rate in effect on such day payable to
the Federal Deposit Insurance Corporation (the
"FDIC") by a member of the Bank Insurance Fund
that is classified as adequately capitalized and
within supervisory subgroup "A" (or a comparable
successor assessment risk classification with the
meaning of 12 C.F.R. section 327.3) for insuring time
deposits at offices of such member in the United
States; or, if the FDIC shall at any time cease to
assess time deposits based upon such
classifications or successor classifications, equal to
the maximum annual assessment rate in effect on
such day that is payable to the FDIC by commercial
banks (whether or not applicable to the Bank) for
insuring time deposits at offices of such banks in
the United States.
"Agreement" means this Credit Agreement
dated as of November 15_, 1996, as amended or
otherwise modified from time to time.
"Borrowing" means a borrowing of funds under
Section 2.1, consisting of one or more Loans of the
same type made at the same time.
"Business Day": Any day (other than a
Saturday, Sunday or legal holiday in the State of
Minnesota) on which national banks are permitted
to be open in Minneapolis, Minnesota and, with
respect to Eurodollar Loans and Daily Pricing Loans,
a day on which dealings in Dollars may be carried
on by the Bank in the interbank eurodollar market.
"CD Base Rate" applicable to any Interest
Period means the rate of interest determined by the
Bank for the relevant Interest Period to be the average
(rounded upward, if necessary, to the nearest
1/100th of 1%) of the rates quoted to the Bank at
approximately 8:00 a.m., Minneapolis time (or as
soon thereafter as practicable), or at the option of the
Bank at approximately the time of the request for a
CD Loan if such request is made later than 8:00 a.m.,
Minneapolis time, in each case on the first day of the
applicable Interest Period by certificate of deposit
dealers selected by the Bank, in its sole discretion, for
the purchase from the Bank, at face value, of
certificates of deposit issued by the Bank in an
amount and maturity comparable to the amount and
maturity of the requested CD Loan, or at the option of
the Bank determined for such amount and maturity
based on published composite quotations of
certificate of deposit rates.
"CD Loan" means an amount loaned to the
Borrower under this Agreement bearing interest at
the Fixed CD Rate for the applicable Interest Period
pursuant to the applicable Notice of Borrowing.
Borrowings of CD Loans shall be in an aggregate
principal amount of $1,000,000 or any larger
integral multiple of $100,000.
"CD Margin" means a percentage determined in
accordance with the table below:
Adjusted
Debt to Total
Capital Ratio CD Margin:
.40 or less .325 of 1%
over .40 but not over .55 .400 of 1%
over .55 .525 of 1%
"CD Reserve Percentage" means for any day the
maximum reserve percentage (expressed as a
decimal, rounded upwards, if necessary, to the
next higher 1/100th of 1%), as determined by the
Bank, in effect on such day (including any ordinary,
marginal, emergency, supplemental, special and
other reserve percentages) as prescribed by the
Federal Reserve Board (or any successor) for
determining the maximum reserves to be
maintained by member banks of the Federal
Reserve System with deposits exceeding
$1,000,000,000 for new non-personal time
deposits for a period comparable to the applicable
Interest Period and in an amount of $100,000 or
more. The Fixed CD Rate shall be adjusted
automatically on and as of the effective date of any
change in the CD Reserve Percentage.
"Code" means the Internal Revenue Code of
1986, as amended.
"Commitment" means $25,000,000, as such
amount may be reduced from time to time pursuant
to Section 2.7.
"Consolidated Cumulative Net Income" means
the sum of the net income of the Borrower and its
Consolidated Subsidiaries for (i) the period from
July 1, 1996 through December 31, 1996; and (ii)
each fiscal year of the Borrower thereafter;
provided that (x) net income for any period shall be
added to Consolidated Cumulative Net Income only
when such period is completed and (y) if net
income for any period is not positive, such period
shall be excluded in calculating Consolidated
Cumulative Net Income.
"Consolidated Debt" means, at any date, the
Debt of the Borrower and its Consolidated
Subsidiaries, determined on a consolidated basis as
of such date.
"Consolidated Shareholder's Equity" means, at
any date, the consolidated shareholders' equity of
the Borrower and its Consolidated Subsidiaries.
"Consolidated Subsidiary" means, at any date,
any Subsidiary or other entity the accounts of
which would be consolidated with those of the
Borrower in its consolidated financial statements as
of such date.
"Controlled Group" means all members of a
controlled group of corporations and all trades or
business (whether or not incorporated) under
common control which, together with the
Borrower, are treated as a single employer under
Sections 414(b) or 414(c) of the Code.
"Daily Pricing Loan" means an amount loaned to
the Borrower under this Agreement bearing interest
at the applicable Daily Pricing Rate pursuant to the
applicable Notice of Borrowing.
"Daily Pricing Rate" means for any day a rate
per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) determined pursuant to the
following formula, which rate shall continue in
effect until the next succeeding Business Day:
Daily Pricing Rate = Eurodollar Interbank
Rateplus 0.50%
1.00 - Eurodollar
Reserve Percentage
"Debt" of any Person means at any date,
without duplication, (i) all obligations of such
Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes
or other similar instruments, (iii) all obligations of
such Person to pay the deferred purchase price of
property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all
obligations of such Person as lessee under capital
leases, (v) all Debt of others secured by a Lien on
any asset of such Person, whether or not such
Debt is assumed by such Person, (vi) the amount of
any proceeds of a Sale of Receivables less amounts
collected on the receivables sold in such Sale of
Receivables, (vii) all non-contingent reimbursement
obligations of such Person under letters of credit,
and (viii) all Debt (as defined above) of others
Guaranteed by such Person.
"Debt to Total Capital Ratio" means the ratio
obtained by dividing (i) Consolidated Debt by (ii) an
amount equal to the sum of Consolidated Debt and
Consolidated Shareholders' Equity.
"Default" means any condition or event which
constitutes an Event of Default or which with the
giving of notice or lapse of time or both would,
unless cured or waived, become an Event of
Default.
"Environmental Claims" means all claims,
however asserted, by any governmental authority
or other Person alleging potential liability or
responsibility for violation of any Environmental
Law, or for release or injury to the environment.
"Environmental Laws" means all federal, state
and local laws, statutes, common law duties, rules,
regulations, ordinances and codes, together with all
administrative orders, directed duties, requests,
licenses, authorizations and permits of, and
agreements with, any judicial, regulating or other
governmental authority, in each case relating to
environmental, health, safety and land use matters.
"ERISA" means the Employee Retirement
Income Security Act of 1974, as amended, or any
successor statute.
"Eurodollar Interbank Rate" means the
average offered rate for deposits in United States
Dollars (rounded upwards, if necessary, to the
nearest 1/16 of 1%):
(a) for each Eurodollar Loan, for delivery of
such deposits on the first day of an Interest
Period of a Eurodollar Loan, for the number
of days comprised therein, which appears
on the Reuters Screen LIBO Page as of
11:00 a.m., London time (or such other
time as of which such rate appears) on the
day that is two Business Days preceding the
first day of the Interest Period; or
(b) for each Daily Pricing Loan, for delivery
of such deposits on such day, for an
interest period of one month, which appears
on the Reuters Screen LIBO Page as of the
time selected by the Bank on such day;
or in either case, the rate for such deposits
determined by the Bank at such times and for such
interest periods based on such other published
service of general application as shall be selected
by the Bank for such purpose; provided, that in lieu
of determining the rate in the foregoing manner,
the Bank may determine the rate based on rates
offered to the Bank for deposits in United States
Dollars (rounded upwards, if necessary, to the
nearest 1/16 of 1%) in the interbank eurodollar
market at such time for delivery on the first day of
the Interest Period for the number of days
comprised therein. "Reuters Screen LIBO Page"
means the display designated as page "LIBO" on
the Reuter Monitor Money Rates Service (or such
other page as may replace the LIBO Page on that
service for the purpose of displaying London
interbank offered rates of major banks for United
States Dollar deposits).
"Eurodollar Margin" means a percentage
determined in accordance with the table below:
Adjusted
Debt to Total Eurodollar
Capital Ratio Margin
.40 or less .200 of 1%
over .40 but not over .55 .275 of 1%
over .55 .400 of 1%
"Eurodollar Reserve Percentage" means a
percentage equal to the daily average during the
relevant Interest Period (for Eurodollar Loans) or on
any Business Day (for Daily Pricing Loans) of the
aggregate maximum reserve requirements
(including all basic, supplemental, marginal and
other reserves), as specified under Regulation D of
the Federal Reserve Board, or any other applicable
regulation that prescribes reserve requirements
applicable to Eurocurrency liabilities (as presently
defined in Regulation D) or applicable to extensions
of credit by the Bank, the rate of interest on which
is determined with regard to rates applicable to
Eurocurrency liabilities. Without limiting the
generality of the foregoing, the Eurodollar Reserve
Requirement shall reflect any reserves required to
be maintained by the Bank against (i) any category
of liabilities that includes deposits by reference to
which the Eurodollar Interbank Rate is to be
determined, or (ii) any category of extensions of
credit or other assets that includes Eurodollar
Loans.
"Eurodollar Loan" means an amount loaned to
the Borrower under this Agreement bearing interest
at the Fixed Eurodollar Rate for the applicable
Interest Period pursuant to the applicable Notice of
Borrowing. Borrowings of Eurodollar Loans shall be
in an aggregate principal amount of $2,000,000 or
any larger integral multiple of $100,000.
"Event of Default" has the meaning set forth in
Section 7.1.
"Expense Ratio" has the meaning set forth in
Section 6.4.
"Facility Fee" has the meaning set forth in
Section 2.6.
"Fixed CD Rate" means, for any CD Loan, a rate
per annum equal to the sum of the applicable
Adjusted CD Rate plus the CD Margin. The
Adjusted CD Rate and, therefore, the Fixed CD Rate
shall be adjusted automatically on and as of the
effective date of any change in the CD Reserve
Percentage or the CD Margin.
The following example will illustrate the
calculation of a Fixed CD Rate. Assuming a CD
Base Rate for a 30-day Interest Period of 5.27%,
a CD Reserve Percentage of 0%, an Assessment
Rate of 0%, and a CD Margin of .325 of 1%, the
Fixed CD Rate would equal:
.0527
- ---------- + 0 + .00325 = .00595 = 5.60%
1.00 - 0
"Fixed Eurodollar Rate" means, for any
Eurodollar Loan, a rate per annum equal to the sum
of (a) the quotient obtained (rounded upwards, if
necessary, to the next higher 1/100 of 1%) by
dividing (i) the applicable Eurodollar Interbank Rate
by (ii) 1.00 minus the Eurodollar Reserve
Percentage, plus (b) the Eurodollar Margin. The
Fixed Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any
change in the Eurodollar Reserve Percentage or the
Eurodollar Margin.
The following example will illustrate the
calculation of a Fixed Eurodollar Rate. Assuming
an Interbank Offered Rate for a one month Interest
Period of 5.375%, a Eurodollar Reserve Percentage
of 0%, and a Eurodollar Margin of .200 of 1%, the
Fixed Eurodollar Rate would equal:
.05375
---------- + .00200 = .005575 = 5.58%
1.00 - 0
"Fixed Rate Loans" means CD Loans and
Eurodollar Loans.
"Guarantee" by any Person means any
obligation, contingent or otherwise, of such Person
directly or indirectly guaranteeing any Debt of any
other Person or in any manner providing for the
payment of any Debt of any other Person or
otherwise protecting the holder of such Debt
against loss (whether by agreement to keep-well,
to purchase assets, goods, securities, services, or
to take-or-pay or otherwise); provided that the term
Guarantee shall not include endorsements for
collection or deposit in the ordinary course of
business or amounts due contingently or otherwise
with respect to obligations of Lake Superior Paper
Industries, a former joint venture of the Company,
or Flambeau Paper Corp., a former subsidiary of the
Company. The term "Guarantee" used as a verb
has a correlative meaning.
"Interest Expense" means, for any period, the
sum, without duplication, of the consolidated
interest expense of the Borrower and its
Consolidated Subsidiaries for such period.
"Interest Period" means:
(i) with respect to each Reference Loan or
Daily Pricing Loan: a period commencing on the
date of such Loan and ending on the Termination
Date, provided that any Interest Period which
would otherwise end on a day which is not a
Business Day shall be extended to the next
succeeding Business Day.
(ii) with respect to each CD Loan: the
period commencing on the date of such Loan and
ending 30, 60, 90 or 180 days thereafter, as the
Borrower may elect in the applicable Notice of
Borrowing, provided that any Interest Period which
would otherwise end on a day which is not a
Business Day shall be extended to the next
succeeding Business Day.
(iii) with respect to each Eurodollar Loan:
the period commencing on the date of such Loan
and ending one, two, three or six months
thereafter, as the Borrower may elect in the
applicable Notice of Borrowing, provided that:
(A) any Interest Period which would
otherwise end on a day which is not a Business
Day shall be extended to the next succeeding
Business Day unless such Business Day falls in
another calendar month, in which case such
Interest Period shall end on the next preceding
Business Day; and
(B) any Interest Period which begins on the
last Business Day of a calendar month (or on a day
for which there is no numerically corresponding
day in the calendar month at the end of such
Interest Period) shall end on the last Business Day
of a calendar month.
"Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Borrower
or any Subsidiary thereof shall be deemed to own
subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease
or other title retention agreement relating to such
asset.
"Loan" or "Loans" means one or more Loans to
be made by the Bank pursuant to Article II (which
may be Reference Loans, CD Loans, Daily Pricing
Loans, or Eurodollar Loans).
"Material Subsidiary" means (a) each "Borrower"
under the Multi-Facility Credit Agreement other
than the Borrower hereunder, and (b) each other
Subsidiary of the Borrower that at the time of
determination constitutes a "significant subsidiary"
(as such term is defined in Regulation S-X of the
Securities and Exchange Commission as in effect
on the date of this Agreement).
"Multi-Facility Credit Agreement" means that
certain Multi-Facility Credit Agreement, dated as of
November 15, 1996, among the Borrower, certain
Subsidiaries of the Borrower, the Agents, and the
Banks (as defined therein), as the same shall
thereafter be amended, modified, renewed, or
replaced from time to time.
"Note" means the promissory Note of the
Borrower in the form of Exhibit A, evidencing Loans
hereunder.
"Notice of Borrowing" means a notice
complying with the requirements of Section 3.1.
"PBGC" means the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all
of its functions under ERISA.
"Person" means an individual, a corporation, a
partnership, an association, a trust or any other
entity or organization, including a government or
political subdivision or an agency or instrumentality
thereof.
"Plan" means at any time an employee pension
benefit plan which is covered by Title IV of ERISA
or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained
by the Borrower or any member of the Controlled
Group for employees of the Borrower or any
member of the Controlled Group or (ii) maintained
pursuant to a collective bargaining agreement or
any other arrangement under which more than one
employer makes contributions and to which the
Borrower or any member of the Controlled Group is
then making or accruing an obligation to make
contributions or has within the preceding five plan
years made contributions.
"Reference Loan" means an amount loaned to
the Borrower under this Agreement bearing interest
at the applicable Reference Rate. Borrowings of
Reference Loans shall be in an aggregate principal
amount of the lesser of (ii) $1,000,000 or any
larger integral multiple of $100,000 or (ii) the
unused amount of the Commitment.
"Reference Rate": The rate of interest from
time to time publicly announced by the Bank as its
"reference rate." The Bank may lend to its
customers at rates that are at, above or below the
Reference Rate. For purposes of determining any
interest rate which is based on the Reference Rate,
such interest rate shall change on the effective
date of any change in the Reference Rate.
"Refinancing Loan" means a Loan made by the
Bank with respect to which, after giving effect to
such Loan and the application of the proceeds
thereof, no increase results in the aggregate
outstanding principal amount of all Loans made by
the Bank.
"Regulatory Change" means, after the date
hereof, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in
the interpretation or administration thereof by any
governmental authority, central bank or comparable
agency charged with the interpretation or
administration thereof or compliance by the Bank
with any request or directive (whether or not
having the force of law) of any such authority,
central bank or comparable agency.
"Sale of Receivables" means a sale by the
Borrower or a Consolidated Subsidiary, with or
without recourse or discount, of an interest in trade
receivables of the Borrower or a Consolidated
Subsidiary pursuant to a receivables purchase
program or a loan secured by such receivables.
"Subsidiary" means any corporation or other
entity of which securities or other ownership
interests having ordinary voting power to elect a
majority of the board of directors or other persons
performing similar functions are at the time directly
or indirectly owned by the Borrower
"Taxes" has the meaning set forth in Section
2.16.
"Termination Date" means June 30, 2001 (or if
such date is not a Business Day, the next
succeeding day which is a Business Day), as the
same may be extended pursuant to Section 2.3, or
such earlier date on which the Commitments are
terminated pursuant to Section 7.2.
"Unfunded Vested Liabilities" means, with
respect to any Plan at any time, the amount (if any)
by which (i) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii)
the fair market value of all Plan assets allocable to
such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the
extent that such excess represents a potential
liability of the Borrower or any member of the
Controlled Group to the PBGC or the Plan under
Title IV of ERISA.
SECTION 1.2 Accounting Terms and
Determinations. Unless otherwise specified herein,
all accounting terms used herein shall be
interpreted, all accounting determinations
hereunder shall be made, and all financial
statements required to be delivered hereunder shall
be prepared in accordance with generally accepted
accounting principles as in effect for U.S. domiciled
companies from time to time, applied on a basis
consistent (except for changes approved by the
Borrower's independent public accountants) with
the most recent audited consolidated financial
statements of the Borrower and its Consolidated
Subsidiaries delivered to the Bank; provided that if
the Borrower notifies the Bank that the Borrower
desires to amend any covenant in Article VI (or any
related definition) to eliminate the effect of any
change in generally accepted accounting principles
on the operation of such covenant (or such
definition), or the Bank notifies the Borrower that
the Bank wishes to amend any such covenant (or
any such definition) for such purpose, then the
Borrower's compliance with such covenant shall be
determined (or such definition shall be interpreted)
on the basis of generally accepted accounting
principles in effect immediately before such change
became effective, until either such notice is
withdrawn or such covenant (or such definition) is
amended in a manner satisfactory to the Borrower
and the Bank.
ARTICLE II
LOANS AND ADMINISTRATION
SECTION 2.1 Commitment to Lend. During the
term hereof until the Termination Date, the Bank
agrees, on the terms and conditions set forth in
this Agreement, to make Loans to the Borrower
from time to time in amounts not to exceed in the
aggregate at any one time outstanding the amount
of its Commitment. Within the foregoing limits, the
Borrower may borrow under this Section 2.2, repay
Loans under Section 2.4, and reborrow at any time
during the term hereof.
SECTION 2.2 Extension of Termination Date.
On or not more than 30 days before May 1, 1998,
and on or not more than 30 days before May 1 of
every second year thereafter, the Borrower may, by
written notice to the Bank, request that the
Termination Date be extended for an additional two
years, effective as of the following June 30;
provided, however, that no such request will be
considered if the Termination Date was not
extended upon any previous request. The Bank will
indicate its acceptance or rejection of any
requested extension, which it may do at its sole
discretion. If the Bank notifies the Borrower in
writing within 30 days after receipt of notice of a
requested extension of its acceptance of the
requested extension, the extension shall be deemed
to have been granted.
SECTION 2.3 Maturity. Each Loan shall be
paid in full by the applicable Borrower on the earlier
of (i) the last day of the Interest Period applicable
thereto or (ii) the Termination Date.
SECTION 2.4 Note.
(a) The Loans of the Bank shall be evidenced by
a Note executed by the Borrower and payable to
the order of the Bank.
(b) The Bank may record, and prior to any
transfer of its Note may endorse, on the schedules
forming a part of its Note appropriate notations to
evidence the date and amount of each Loan made
by it and the date and amount of each payment of
principal made by the Borrower with respect
thereto and. The Bank is hereby irrevocably
authorized by the Borrower so to record and
endorse and to attach to and make a part of its
Note a continuation of any such schedule as and
when required, but failure to so record or endorse
any notation shall not affect the Borrower's
obligations hereunder or under the Note.
SECTION 2.5 Facility Fees.
(a) During the term of this Agreement, the
Borrower shall pay to the Bank a Facility Fee on the
Commitment at a rate per annum determined as
follows:
Adjusted
Debt to Total Capital Ratio
Over .40
.40 but not over Over
or less .55 .55
Facility Fee
.100 of 1% .125 of 1% .150 of 1%
(b) The Borrower shall make each payment of
Facility Fees hereunder not later than 11:00 a.m.
(Minneapolis time) on the date when due, in federal
or other funds immediately available to the Bank.
Such Facility Fees shall accrue from and including
the date of this Agreement to but excluding the
Termination Date and shall be payable quarterly in
arrears on the last day of each calendar quarter
during the term hereof. Facility Fees shall be
computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual
number of days elapsed, including the first day but
excluding the last day.
SECTION 2.6 Duration of Interest Periods. The
duration of each Interest Period shall be as
specified in the applicable Notice of Borrowing.
SECTION 2.7 Termination or Reduction of
Commitment.
(a) The Borrower may, upon at least three
Business Days' notice to the Bank, terminate
entirely at any time, or reduce from time to time by
an aggregate amount of $5,000,000 or any larger
multiple of $1,000,000, the amount of the
Commitment in excess of the sum of the principal
amount of all outstanding Loans.
(b) If the Commitment is terminated in its
entirety, all accrued Facility Fees shall be payable
on the effective date of such termination. After
the Commitment has been reduced or terminated,
it may not be reinstated.
SECTION 2.8 Funding Losses. If the Borrower
makes any payment of principal with respect to
any Loan, for any reason on any day other than the
last day of an Interest Period applicable thereto, or
if the Borrower fails to borrow any Fixed Rate
Loan, after a Notice of Borrowing has been given
to the Bank in accordance with Section 3.1, the
Borrower shall reimburse the Bank on demand for
any resulting loss or expense incurred by it,
including without limitation any loss incurred in
obtaining, liquidating or employing deposits from
third parties, but excluding loss of margin for the
period after any such payment; provided that the
Bank shall have delivered to the Borrower a
certificate as to the amount of such loss or
expense, which certificate shall be conclusive in
the absence of manifest error.
SECTION 2.9 Computation of Interest. Interest
on Reference Loans shall be computed on the basis
of a year of 365 days (or 366 days in a leap year)
and paid for the actual number of days elapsed and
including the first day but excluding the last day
thereof. Interest on Fixed Rate Loans and Daily
Pricing Loans shall be computed on the basis of a
year of 360 days and paid for the actual number of
days elapsed, calculated as to each Interest Period
from and including the first day thereof to but
excluding the last day thereof.
SECTION 2.10 Lending Unlawful. In the event
that any Regulatory Change shall make it unlawful
or impossible for the Bank to make, maintain or
fund any Loan as a Eurodollar Loan or Daily Pricing
Loan, the obligation of the Bank under Section 2.2
to make or maintain any Loan as a Eurodollar Loan
or Daily Pricing Loan, shall upon the happening of
such Regulatory Change, forthwith terminate and
the Bank shall, by telephonic notice confirmed in
writing to the applicable Borrower, declare that
such obligation has so terminated. Upon receipt of
such notice, the applicable Borrower shall
immediately prepay in full the then outstanding
principal amount of each such Eurodollar Loan or
Daily Pricing Loan, together with accrued interest.
The Bank shall in the case of a Borrowing of
Eurodollar Loans or Daily Pricing Loan, make a
Reference Loan in an amount equal to such
Borrowing. If circumstances subsequently change
so that the Bank shall no longer be so affected, it
shall so notify the Borrower, whereupon the
obligation of the Bank under Section 2.2 to make
or maintain Eurodollar Loans and Daily Pricing
Loans shall be reinstated.
SECTION 2.11 Funds Unavailable.
Notwithstanding any other provision of this
Agreement, if, prior to the first day of the Interest
Period for a Fixed Rate Loan or Daily Pricing Loan,
the Bank shall determine for any reason
whatsoever (which determination shall be
conclusive and binding on the applicable Borrower),
that:
(a) deposits in the relevant amount and for the
relevant Interest Period are not available to the
Bank in the relevant market, or
(b) by reason of circumstances affecting the
relevant market, adequate means do not exist for
ascertaining the interest rate applicable hereunder
to such Fixed Rate Loan or Daily Pricing Loan,
then the Bank shall promptly give notice to the
Borrower of such determination, and the obligation
of the Bank under Section 2.2 to make or maintain
any Loan as a Fixed Rate Loan or Daily Pricing Loan
shall, upon such notification, forthwith terminate.
So long as the circumstances described in clause
(a) above shall continue, concurrently with any
Borrowing of Fixed Rate Loans or Daily Pricing
Loans, the Bank shall make a Reference Loan in an
amount equal to such Borrowing. If circumstances
subsequently change so that the Bank shall no
longer be so affected, the Bank shall so notify the
Borrower, whereupon the obligation of the Bank
under Section 2.2 to make or maintain Fixed Rate
Loans or Daily Pricing Loans shall be reinstated.
SECTION 2.12 Increased Costs and Reduced
Returns.
(a) If, after the date hereof, the adoption of any
applicable law, rule or regulation, or any change
therein, or any change in the interpretation or
administration thereof by any governmental
authority, control bank or comparable agency
charged with the interpretation or administration
thereof or compliance by the Bank with any
request or directive (whether or not having the
force of law) of any such authority, central bank or
comparable agency:
(i) shall subject the Bank to any tax, duty
or other charge with respect to (1) its obligation to
make Fixed Rate Loans or Daily Pricing Loans, (2)
such Loans, or (3) the Note, or shall change the
basis of taxation of payments to the Bank of the
principal of or interest on the Fixed Rate Loans or
the Daily Pricing Loans or in respect of any other
amount due under this Agreement in respect of
such Loans or its obligation to make Fixed Rate
Loans or Daily Pricing Loans (except for changes in
the taxation of the overall net income of the Bank);
or
(ii) shall impose, modify or deem applicable
any reserve (including, without limitation, any
imposed by the Board of Governors of the Federal
Reserve System, but excluding any included in the
Eurodollar Reserve Percentage), special deposit or
similar requirement against assets of, or deposits
with or for the account of, or credit extended by,
the Bank or shall impose on the Bank or the
interbank eurodollar market any other condition
affecting (1) its obligation to make Fixed Rate
Loans or Daily Pricing Loans, (2) its Loans or (3) its
Note;
and the result of any of the foregoing is to increase
the cost to the Bank of making or maintaining any
such Loan, or to reduce the amount of any sum
received or receivable by the Bank under this
Agreement or under the Note with respect any
such Loan, by an amount deemed by the Bank to
be material, then, within 15 days after demand by
the Bank, the Borrower agrees to pay to the Bank
such additional amount or amounts as will
compensate it for such increased cost or reduction.
(b) If, after the date hereof, the Bank shall have
determined that the adoption of any applicable law,
rule or regulation regarding capital adequacy, or
any change therein, or any change in the
interpretation or administration thereof by an'
governmental authority, central bank or comparable
agency charged with the interpretation or
administration on thereof, or compliance by the
Bank (or any corporation controlling the Bank) with
any request or directive regarding capital adequacy
(whether or not having the force of law) of any
such authority, central bank or comparable agency,
has or would have the effect of reducing the rate
of return on the Bank's (or such controlling
corporation's) capital as a consequence of its
obligations hereunder to a level below that which
the Bank (or such controlling corporation) could
have achieved but for such adoption, change or
compliance (taking into consideration the Bank's
(or such controlling corporation's) policies with
respect to capital adequacy) by an amount deemed
by the Bank to be material, then from time to time,
within 15 days after demand by the Bank, the
Borrower shall pay to the Bank such additional
amount or amounts as will compensate for such
reduction.
(c) The Bank will promptly notify the Borrower
of any event of which it has knowledge, occurring
after the date hereof, which will entitle the Bank to
compensation pursuant to this Section 2.12 and
will designate a different Lending Office if such
designation will avoid the need for, or reduce the
amount of, such compensation and will not, in the
sole judgment of the Bank, be otherwise
disadvantageous to the Bank. A certificate of the
Bank claiming compensation under this Section
2.13 and setting forth the additional amount or
amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In
determining such amount, the Bank may use any
reasonable averaging and attribution methods.
SECTION 2.13 Adjustments to Margins and
Facility Fees. The CD Margin, the Eurodollar
Margin and the percentage applicable for
calculating Facility Fees shall (i) initially be based
upon the Adjusted Debt to Total Capital Ratio as of
June 30, 1996 and (ii) thereafter be adjusted, to
the extent applicable, 50 days (or, in the case of
the last fiscal quarter of any fiscal year, 95 days)
after the end of each fiscal quarter of the Borrower
based on the Adjusted Debt to Total Capital Ratio
as of the last day of such fiscal quarter; provided
that if the Borrower fails to deliver the financial
statements and compliance statement required by
Section 12.1(a) or (b) and Section 12.1(c) by the
50th (or, if applicable, the 95th) day after any
fiscal quarter, the Adjusted Debt to Total Capital
Ratio shall be deemed to be greater than 0.55 until
such statements and certificate are delivered.
ARTICLE III
PROCEDURES FOR BORROWING
SECTION 3.1 Method of Borrowing.
(a) The Borrower shall give the Bank a Notice of
Borrowing (which may be given orally, but if so,
shall be promptly confirmed by facsimile) no later
than 12:00 noon (Minneapolis time) on the day of
each Reference Borrowing and Daily Pricing Loan,
at least one Business Day before each CD
Borrowing and at least three Business Days before
each Eurodollar Borrowing specifying:
(i) the date of such Borrowing, which shall be a
Business Day,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such
Borrowing are to be Reference Loans, CD Loans,
Daily Pricing Loans or Eurodollar Loans, and
(iv) if a Eurodollar Borrowing or CD Borrowing,
the duration of the Interest Period applicable to
such Borrowing.
In the event that the Borrower does not request a
new borrowing prior to the last day of any Interest
Period and does not otherwise provide funds to pay
loans maturing on such day, the Borrower shall be
deemed to have given the Bank a Notice of
Borrowing requesting Reference Loans on such day
in the principal amount of the Loans coming due on
such day.
(b) Not later than 5:00 p.m. (Minneapolis time)
on the date of each Borrowing of a Loan, unless
the Bank determines that any applicable condition
specified in Article IV has not been satisfied, the
Bank will make the funds available to the Borrower.
Notwithstanding the foregoing provisions of this
Section, to the extent that a Loan matures on the
date of a requested Loan, the Bank shall apply the
proceeds of the Loan it is then making to the
repayment of the maturing Loan.
SECTION 3.2 Rate and Payment of Interest.
(a) Reference Loans. Each Reference Loan shall
bear interest on the outstanding principal amount
thereof for each day from the date such Loan is
made until it becomes due at a rate per annum
equal to the Reference Rate for such day. Such
interest shall be payable on the last day of each
calendar quarter and on the Termination Date
(b) Daily Pricing Loans. Each Daily Pricing Loan
shall bear interest on the outstanding principal
amount thereof for each day from the date such
Loan is made until it becomes due at a rate per
annum equal to the Daily Pricing Rate for such day.
Such interest shall be payable on the last day of
each calendar quarter and on the Termination Date.
(b) CD Loans. Each CD Loan shall bear interest
on the outstanding principal amount thereof at a
rate per annum equal to the applicable Fixed CD
Rate. Such interest shall be payable on the last
day of the Interest Period therefor and, if such
Interest Period is longer than 90 days, at intervals
of 90 days after the first day thereof.
(d) Eurodollar Loans. Each Eurodollar Loan shall
bear interest on the outstanding principal amount
thereof at a rate per annum equal to the applicable
Fixed Eurodollar Rate. Such interest shall be
payable on the last day of the Interest Period
therefor and, if such Interest Period is longer than
three months, at intervals of three months after the
first day thereof.
(e) Interest After Maturity. . Any overdue
principal of and, to the extent permitted by law,
overdue interest on any Loan shall bear interest,
payable on demand, for each day until paid at a
rate per annum equal to the greater of (i) 1.00% in
excess of the rate applicable to the unpaid principal
amount immediately before it became due, or (ii)
1.00% in excess of the Reference Rate in effect
from time to time.
SECTION 3.3 Prepayment.
(a) The Borrower may, upon notice to the Bank
not later than (i) 4:00 p.m., Minneapolis time, on
the date of prepayment in the instance of Daily
Pricing Loans, or (ii) one Business Day prior to the
date of prepayment, in the instance of Loans of
any other type, prepay any Loans in whole at any
time, or from time to time in part in amounts
aggregating $1,000,000 or any larger multiple of
$100,000, by paying the principal amount to be
prepaid together with accrued interest thereon to
the date of prepayment.
(b) Any prepayment of a Eurodollar Loan or a
CD Loan prior to the last day of the Interest Period
therefor shall be subject to Section 2.9.
SECTION 3.4 General Provisions as to
Payments. The Borrower shall make each payment
of principal of, and interest on, Loans hereunder
not later than 11:00 a.m. (Minneapolis time) on the
date when due, in federal or other funds
immediately available to the Bank at its main office
in Minneapolis, Minnesota. Whenever any payment
of Facility Fees or principal of, or interest on, any
Reference Loans, CD Loan or Daily Pricing Loans
shall be due on a day which is not a Business Day,
the date for payment thereof shall be extended to
the next succeeding Business Day. Whenever any
payment of principal of, or interest on, any
Eurodollar Loans shall be due on a day which is not
a Business Day, the date for payment thereof shall
be extended to the next succeeding Business Day
unless as a result thereof it would fall in the next
calendar month, in which case it shall be advanced
to the next preceding Business Day. If the date for
any payment of principal is extended by operation
of law or otherwise, interest thereon shall be
payable for such extended time.
ARTICLE IV
CONDITIONS TO BORROWINGS
The obligation of the Bank to make a Loan on
the occasion of any Borrowing pursuant hereto is
subject to the satisfaction of the following
conditions:
SECTION 4.1 All Borrowings. In the case of
each Borrowing:
(a) receipt by the Bank of a Notice of Borrowing
as required by Section 3.1;
(b) the fact that, as of the time of and
immediately after such Borrowing, no Default (or,
in the case of a Borrowing of Refinancing Loans, no
Event of Default) shall have occurred and be
continuing;
(c) the fact that the representations and
warranties of the Borrower contained in this
Agreement (excluding, in the case of a Refinancing
Borrowing, the representations and warranties set
forth in Sections 5.4(c) and 5.5) shall be true on
and as of the date of such Borrowing; and
(d) the fact that, as of the time immediately
after such Borrowing, the aggregate principal all
Loans outstanding shall not exceed the
Commitment.
Each Notice of Borrowing and Borrowing hereunder
shall be deemed to be a representation and
warranty by the Borrower on such date as to the
facts specified in clauses (b), (c) and (d) of this
Section.
SECTION 4.2 First Borrowing. On or before
the date of the first Borrowing:
(a) receipt by the Bank of the duly executed
Note, dated on or before the date of such
Borrowing, complying with the provisions of
Section 2.4.
(b) receipt by the Bank of an opinion of counsel
for the Borrower, substantially in the form of
Exhibit B hereto;
(c) receipt by the Bank of a certificate signed by
an officer of the Borrower, to the effect set forth in
clauses (b), (c) and (d) of Section 4.1, and
containing the resolutions of the Borrower
authorizing the execution, delivery and performance
of this Agreement and the Note; and
(d) receipt by the Bank of an incumbency
certificate which shall identify by name and title
and bear the signatures of the officers of the
Borrower authorized to sign this Agreement and the
Note, upon which certificate the Banks shall be
entitled to rely until informed in writing by the
Borrower of any change.
(e) the Multi-Facility Credit Agreement shall
have been executed and delivered by all parties
thereto, and the Borrower shall be entitled to
borrow funds thereunder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 5.1 Corporate Existence and Power.
The Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws
of Minnesota and has all corporate powers and all
material governmental licenses, authorizations,
consents and approvals required to carry on its
business as now conducted.
SECTION 5.2 Corporate and Governmental
Authorization: Contravention. The execution,
delivery and performance by the Borrower of this
Agreement and the Note are within its corporate
powers, have been duly authorized by all necessary
corporate action, require no action by or in respect
of, or filing with, any governmental body, agency
or official and do not contravene, or constitute a
default under, any provision of applicable law or
regulation or of the Articles of Incorporation or
by-laws or other organizational documents of the
Borrower or of any agreement, judgment,
injunction, order, decree or other instrument
binding upon the Borrower or result in the creation
or imposition of any Lien on any asset of the
Borrower or any of the Borrower's Subsidiaries.
SECTION 5.3 Binding Effect. This Agreement
constitutes a valid and binding agreement of the
Borrower, and the Note, when executed and
delivered in accordance with this Agreement, will
constitute a valid and binding obligation of the
Borrower.
SECTION 5.4 Financial Information.
(a) The consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries at
December 31, 1995 and the related consolidated
statements of income and cash flows for the fiscal
year then ended, reported on by Deloitte & Touche
LLP and set forth in the Borrower's annual report
for the year ended December 31, 1995 as filed
with the Securities and Exchange Commission on
Form 10-K, a copy of which has been delivered to
the Bank, fairly present, in conformity with
generally accepted accounting principles, the
consolidated financial position of the Borrower and
its Consolidated Subsidiaries at such date and their
consolidated results of operations and cash flows
for such fiscal year.
(b) The unaudited consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries at
September 30, 1996 and the related unaudited
consolidated statements of income and cash flows
for the three months then ended, set forth in the
Borrower's quarterly report for the fiscal quarter
ended September 30, 1996 as filed with the
Securities and Exchange Commission on Form
10-Q, a copy of which has been delivered to the
Bank, fairly present, in conformity with generally
accepted accounting principles applied on a basis
consistent with the financial statements referred to
in paragraph (a) of this Section, the consolidated
financial position of the Borrower and its
Consolidated Subsidiaries at such date and their
consolidated results of operations and cash flows
for such three-month period (subject to normal
year-end adjustments).
(c) Since December 31, 1995 there has been no
material adverse change in the business, financial
position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries,
considered as a whole.
SECTION 5.5 Litigation. There is no action,
suit or proceeding pending, or to the knowledge of
the Borrower threatened, against or affecting the
Borrower or any of its Subsidiaries before any court
or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of
an adverse decision which could materially
adversely affect the business, consolidated
financial position or consolidated results of
operations of the Borrower and its Consolidated
Subsidiaries, taken as a whole, or which in any
manner questions the validity of this Agreement or
the Note.
SECTION 5.6 Compliance with ERISA. The
Borrower and each member of the Controlled Group
have fulfilled their obligations under the minimum
funding standards of ERISA and the Code with
respect to each Plan and are in compliance in all
material respects with the presently applicable
provisions of ERISA and the Code, and have not
incurred any liability to the PBGC or a Plan under
Title IV of ERISA.
SECTION 5.7 Taxes. The Borrower and its
Subsidiaries have filed all foreign, United States
federal, state and local income, excise and other
tax returns which are required to be filed by them
and have paid or made provision for the payment of
all taxes which have become due pursuant to such
returns or pursuant to any assessment in respect
thereof received by the Borrower or any of its
Subsidiaries, except such taxes, if any, as are being
contested in good faith and for which adequate
reserves have been provided. The federal income
tax liability, if any, of the Borrower and its
Subsidiaries has been determined by the Internal
Revenue Service and paid for all years prior to and
including the fiscal year ended December 31, 1984.
SECTION 5.8 Subsidiaries. Each of the
Borrower's Subsidiaries is a corporation duly
incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation
and has all corporate powers and all material
governmental licenses, authorizations, consents
and approvals required to carry on its business as
now conducted.
SECTION 5.9 Not an Investment Company.
The Borrower is not an investment company within
the meaning of the Investment Company Act of
1940, as amended.
SECTION 5.10 Environmental Matters. The
Borrower conducts in the ordinary course of
business a review of the effect of existing
Environmental Laws and existing Environmental
Claims on business, operations and properties of
the Borrower and its Subsidiaries, and as a result
thereof the Borrower has reasonably concluded that
such Environmental Laws and Environmental Claims
could not, individually or in the aggregate,
reasonably be expected to have a material adverse
effect on the business, consolidated financial
position or consolidated results of operations of the
Borrower and its Subsidiaries taken as a whole.
ARTICLE VI
COVENANTS
The Borrower agrees that so long as the Bank
has any Commitment hereunder or any amount
payable under any Note remains unpaid:
SECTION 6.1 Information. The Borrower will
deliver to each of the Banks:
(a) as soon as available and in any event within
90 days after the end of each fiscal year of the
Borrower, a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries at the
end of such fiscal year and the related consolidated
statements of income and cash flows for such
fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal
year, all reported on in accordance with the rules
and regulations of the Securities and Exchange
Commission and audited by Deloitte & Touche LLP
or other independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within
45 days after the end of each of the first three
quarters of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries at the end of such
quarter and the related consolidated statements of
income and cash flows for such quarter and for the
portion of the Borrower's fiscal year ended at the
end of such quarter, setting forth in each case in
comparative form the figures for the corresponding
quarter and the corresponding portion of the
Borrower's previous fiscal year, all certified (subject
to normal year-end adjustments) as to fairness of
presentation, generally accepted accounting
principles and consistency by the chief financial
officer, the chief accounting officer or the vice
president - treasurer of the Borrower;
(c) simultaneously with the delivery of each set
of financial statements referred to in clauses (a)
and (b) above, a certificate of the chief financial
officer or the chief accounting officer of the
Borrower (i) setting forth in reasonable detail the
calculations required to establish whether the
Borrower was in compliance with the requirements
of Sections 6.2 to 6.7, inclusive, on the date of
such financial statements and (ii) stating whether
there exists on the date of such certificate any
Default and, if any Default then exists, setting forth
the details thereof and the action which the
Borrower is taking or proposes to take with respect
thereto;
(d) simultaneously with the delivery of each set
of financial statements referred to in clause (a)
above, a statement of the firm of independent
public accountants which reported on such
statements (i) whether anything has come to their
attention to cause them to believe that there
existed on the date of such statements any Default
and (ii) confirming the calculations set forth in the
officer's certificate delivered simultaneously
therewith pursuant to clause (c) above;
(e) forthwith upon the occurrence of any
Default, a certificate of the chief financial officer or
the chief accounting officer of the Borrower setting
forth the details thereof and the action which the
Borrower is taking or proposes to take with respect
thereto;
(f) promptly upon the mailing thereof to the
shareholders of the Borrower generally, copies of
all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of
all registration statements (other than the exhibits
thereto and any registration statements on Form S-8 or
its equivalent) and annual, quarterly or
monthly reports which the Borrower shall have filed
with the Securities and Exchange Commission;
(h) if and when the Borrower or any member of
the Controlled Group gives or is required to give
notice to the PBGC of any reportable event, (as
defined in Section 4043 of ERISA) with respect to
any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has
given or is required to give notice of any such
reportable event, a copy of the notice of such
reportable event given or required to be given to
the PBGC;
(i) from time to time such additional information
regarding the financial position or business of the
Borrower as the Bank may reasonably request;
(j) as soon as available and in any event (i)
within 90 days after the end of each fiscal year of
the Borrower and (ii) within 45 days of the end of
each of the first three quarters of each fiscal year
of the Borrower, a consolidating balance sheet and
the related consolidating statement of income, with
respect only to the Borrower's operating
businesses, for the relevant fiscal period (and, for
interim fiscal quarters, for the portion of the year
ended at the end of such quarter), certified as to
fairness of presentation, generally accepted
accounting principles and consistency by the chief
financial officer, the chief accounting officer or the
vice president - treasurer of the Borrower;
SECTION 6.2 Debt to Total Capital Ratio. The
Debt to Total Capital Ratio will at no time exceed
.60.
SECTION 6.3 Minimum Consolidated
Shareholders' Equity. Consolidated Shareholders'
Equity will at no time be less than the sum of (a)
$425,000,000 plus (b) 50% of Consolidated
Cumulative Net Income plus (c) 50% of the
proceeds of all classes of equity securities issued
by the Borrower after June 30, 1996.
SECTION 6.4 Expense Ratio. At any time
when the Debt to Total Capital Ratio exceeds .50,
as of the end of each quarter of each of the
Borrower's fiscal years, the ratio of
(a) consolidated net income before taxes plus
(to the extent deducted in calculating net income
before taxes) Interest Expense and rent expense to
(b) Interest Expense and rent expense,
(the "Expense Ratio") calculated on a cumulative
basis for the four most recent fiscal quarters
(excluding in each case interest and rent expense
of any joint venture or other entity in which the
Borrower or a Consolidated Subsidiary has an
ownership interest but which is not a Subsidiary),
will not be less than 1.5:1.0.
SECTION 6.5 Negative Pledge. Neither the
Borrower nor any Consolidated Subsidiary will
create, assume or suffer to exist any Lien securing
Debt on any asset now owned or hereafter
acquired by any of them, except:
(a) Liens existing on the date of this Agreement
(it being understood that each such Lien which
secures Debt in an aggregate principal amount of
more than $1,000,000 is disclosed in the financial
information referred to in Section 5.4);
(b) any Lien existing on any asset of any
corporation at the time such corporation becomes
a Consolidated Subsidiary and not created in
contemplation of such event;
(c) any Lien on any asset securing Debt incurred
or assumed for the purpose of financing all or any
put of the cost of acquiring such asset, provided
that such Lien attaches to such asset concurrently
with or within 90 days after the acquisition
thereof;
(d) any Lien on any asset of any corporation
existing at the time such corporation is merged into
or consolidated with the Borrower or a
Consolidated Subsidiary and not created in
contemplation of such event;
(e) any Lien existing on any asset prior to the
acquisition thereof by the Borrower or a
Consolidated Subsidiary and not created in
contemplation of such acquisition;
(f) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt
secured by any Lien permitted by any of the
foregoing clauses of this Section, provided that
such Debt is not increased and is not secured by
any additional assets;
(g) any Lien arising pursuant to any order of
attachment, distraint or similar legal process arising
in connection with court proceedings so long as the
execution or other enforcement thereof is
effectively stayed and the claims secured thereby
are being contested in good faith by appropriate
proceedings;
(h) any Lien on trade receivables arising out of
a Sale of Receivables; and
(i) Liens not otherwise permitted by the
foregoing clauses of this Section securing Debt in
an aggregate principal amount at any time
outstanding not exceeding 12.5% of Consolidated
Shareholders' Equity.
SECTION 6.6 Consolidations, Mergers and
Sales of Assets. The Borrower will not merge or
consolidate with any other non-affiliated Person or
sell, lease, transfer or otherwise dispose of
substantially all of its assets as an entirety to any
other Person unless:
(a) the Person surviving the merger or
consolidation is the Borrower; and
(b) immediately after giving effect to any such
action, no Default shall have occurred and be
continuing.
SECTION 6.7 Subsidiary Debt. The Borrower
will not at any time permit the aggregate amount of
all outstanding Debt of its Subsidiaries, excluding:
(a) obligations assumed in connection with
acquisitions;
(b) Debt under this Agreement; and
(c) Debt incurred in respect of any Sale of
Receivables;
to exceed twenty percent (20%) of Consolidated
Shareholders' Equity.
SECTION 6.8 Use of Proceeds. The proceeds
of the Loans made and the issued under this
Agreement will be used by the Borrower for general
corporate purposes. None of such proceeds will be
used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of
purchasing or carrying any "margin stock" within
the meaning of Regulation U of the Board of
Governors of the Federal Reserve System. The
Borrower will not engage principally, or as one of
its important activities, in the business of extending
credit for the purpose of purchasing or carrying any
such margin stock within the meaning of such
Regulation U.
SECTION 6.9 Environmental Laws. The
Borrower shall, and shall cause each of its
Subsidiaries to, conduct its operations in
compliance with all Environmental Laws, except for
such noncompliance which individually or in the
aggregate would not be reasonably expected to
result in material liability to the Borrower and its
Subsidiaries taken as a whole.
SECTION 6.10 Sales of Receivables. the
Borrower shall not, and shall not permit any
Subsidiary to, engage in any Sale of Receivables if
the outstanding principal of loans secured in
connection with all Sales of Receivables plus
(without duplication) the outstanding investment all
receivables sold pursuant to Sales of Receivables
would at any time exceed an amount of
$50,000,000.
ARTICLE VII
DEFAULTS
SECTION 7.1 Events of Default. If one or more
of the following events ("Events of Default") shall
have occurred and be continuing:
(a) the Borrower shall fail to pay within three
days of the date due any principal of any Loan; or
the Borrower shall fail to pay within five (5) days of
the date due any interest on any Loan, any fee or
any other amount payable hereunder;
(b) the Borrower shall fail to observe or perform
any covenant contained in Sections 6.2 to 6.9,
inclusive;
(c) the Borrower shall fail to observe or perform
any other covenant or agreement contained in this
Agreement for 30 days after written notice thereof
has been given to the Borrower by the Bank;
(d) any representation, warranty, certification or
statement made by the Borrower in this Agreement
or in any certificate, financial statement or other
document delivered pursuant to this Agreement
shall prove to have been incorrect in any material
respect when made;
(e) any event or condition shall occur which
results in the acceleration of the maturity of any
Debt (other than the Note) of the Borrower or any
of its Subsidiaries equal to or exceeding an amount
of $20,000,000 in the aggregate for all such Debt
or enables (or, with the giving of notice or lapse of
time or both, would enable) the holder of any such
Debt or any Person acting on such holder's behalf
to accelerate the maturity thereof; provided,
however, that at any time the Borrower has Debt
outstanding, obtained through one or more public
or private placements thereof to institutional
investors, with a principal amount of $25,000,000
or more outstanding, which has a threshold for
cross-default similar to this subparagraph 7.1(e)
lower than $20,000,000, the threshold for the
purposes of this subparagraph 7.1(e) shall be the
lowest threshold amount under any such financing;
(f) the Borrower or any of its Material
Subsidiaries shall commence a voluntary case or
other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any
substantial part of its property or shall consent to
any such relief or to the appointment of or taking
possession by any such official in an involuntary
case or other proceeding commenced against it or
shall make a general assignment for the benefit of
creditors or shall fail generally to pay its debts as
they become due or shall take any corporate action
to authorize any of the foregoing;
(g) an involuntary case or other proceeding shall
be commenced against the Borrower or any of its
Material Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any
substantial part of its property and such involuntary
case or other proceeding shall remain undismissed
and unstayed for a period of 60 days; or an order
for relief shall be entered against the Borrower or
any of its Material Subsidiaries under the federal
bankruptcy laws or similar bankruptcy or
insolvency laws of any other applicable jurisdiction
as now or hereafter in effect;
(h) The Borrower or any member of the
Controlled Group shall fail to pay when due an
amount or amounts aggregating in excess of
$10,000,000 which it shall have become liable to
pay to the PBGC or to a Plan under Title IV of
ERISA; or the Borrower or any member of the
Controlled Group shall file a distress termination
notice with the PBGC and the amount of the
Unfunded Vested Liabilities under that filing
exceeds $5,000,000; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or
to cause a trustee to be appointed to administer
any such Plan or Plans or a proceeding shall be
instituted by a fiduciary of any such Plan or Plans
to enforce Section 515 of ERISA and such
proceeding shall not have been dismissed within 30
days thereafter; or a condition shall exist by reason
of which the PBGC would be entitled to obtain a
decree adjudicating that any such Plan or Plans
must be terminated;
(i) a judgment or order for the payment of
money in excess of $10,000,000 shall be rendered
against the Borrower or any of its Subsidiaries and
such judgment or order shall continue unsatisfied
and unstayed for a period of 60 days;
(j) any Person or two or more Persons acting in
concert shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities
Exchange Act of 1934) of 50% or more of the
outstanding shares of voting stock of the Borrower;
(k) within a period of twelve consecutive
months, three-fourths of the directors of the board
of directors of the Borrower shall have changed; or
(l) any Event of Default shall occur under the
Multi-Facility Credit Agreement;
then, and in every such event,
(1) in the case of any of the Events of Default
specified in paragraphs (a) through (e), or (h)
through (l) above, the Bank may (i) by notice to the
Borrower, terminate the Commitment and they
shall thereupon terminate, and/or (ii) by notice to
the Borrower declare the Note (together with
accrued interest thereon) to be, and the Note shall
thereupon become, immediately due and payable
without presentment, demand, protest or other
notice of any kind, all of which are hereby waived
by the Borrower; and
(2) in the case of any of the Events of Default
specified in paragraph (f) or (g) above, without any
notice to the Borrower or any other act by the
Bank, the Commitment shall thereupon terminate
and the Note (together with accrued interest
thereon) shall become immediately due and payable
without presentment, demand, protest or other
notice of any kind, all of which are hereby waived
by the Borrower.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. All notices, requests
and other communications to any party hereunder
shall be in writing (including bank wire, telex,
facsimile or similar writing), except where
specifically permitted to be given orally, and shall
be given to such party at its address or facsimile
number set forth on the signature pages hereof or
such other address or telex number as such party
may hereafter specify for the purpose by notice to
the Bank and the Borrower. Each such notice,
request or other communication shall be effective
(i) if given by facsimile, when such facsimile is
transmitted to the facsimile number specified in
this Section and the appropriate confirmation is
received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or
(iii) if given by any other means, when delivered at
the address specified in this Section; provided that
notices to the Bank under Articles II and III shall not
be effective until received. Any agreement of the
Bank herein to receive certain notices by telephone
or facsimile is solely for the convenience of and at
the request of the Borrower. The Bank shall be
entitled to rely on the authority of any Person
purporting to be a Person authorized by the
applicable Borrower to give such notice, and the
Bank shall not have any liability to the Borrower or
any other Person on account of any action taken or
not taken by the Bank in reliance upon such
telephonic or facsimile notice. The obligation of
the Borrower to repay the Loans shall not be
affected in any way or to any extent by any failure
by the Bank to receive written confirmation of any
telephonic or facsimile notice or the receipt by the
Bank of a confirmation which is at variance with
the terms understood by the Bank to be contained
in the telephonic or facsimile notice.
SECTION 8.2 No Waiver. No failure or delay
by the Bank in exercising any right, power or
privilege hereunder or under the Note shall operate
as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further
exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
SECTION 8.3 Expenses; Documentary Taxes.
The Borrower shall pay upon demand (i) all
reasonable expenses of the Bank, including fees
and disbursements of counsel for the Bank, in
connection with the preparation of this Agreement,
any waiver or consent hereunder or any
amendment hereof or any Default or alleged Default
by the Borrower hereunder and (ii) if an Event of
Default occurs, all reasonable out-of-pocket
expenses incurred by the Bank, including fees and
disbursements of attorneys for the Bank (who may
be employees of the Bank), in connection with such
Event of Default and collection and other
enforcement proceedings resulting therefrom. The
Borrower shall indemnify the Bank against any
transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by
reason of the execution and delivery of this
Agreement or the Note.
SECTION 8.4 Amendments and Waivers. Any
provision of this Agreement or the Note may be
amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Bank.
SECTION 8.5 Collateral. The Bank represents
that it in good faith is not relying upon any "margin
stock" (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) as
collateral in the extension or maintenance of the
credit provided for in this Agreement.
SECTION 8.6 Successors and Assigns. The
provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and
their respective successors and assigns, except
that the Borrower may not assign or otherwise
transfer any of its rights under this Agreement.
SECTION 8.7 Participations and
Information. The Bank may sell participation
interests in any or all of the Loans and in all or any
portion of the Commitment to any Person. The
Bank may furnish any information concerning the
Borrower in the possession of the Bank from time
to time to participants and prospective participants
and may furnish information in response to credit
inquiries consistent with general banking practice.
SECTION 8.8 Minnesota Law. This Agreement
and each Note shall be construed in accordance
with and governed by the substantive laws of the
State of Minnesota without regard to the choice of
law provisions thereof.
SECTION 8.9 Counterparts: Effectiveness.
This Agreement may be signed in any number of
counterparts, each of which shall be an original,
and all of which taken together shall constitute a
single agreement, with the same effect as if the
signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective
when the Bank shall have received counterparts
hereof signed by all of the parties hereto.
SECTION 8.10 Consent to Jurisdiction. AT
THE OPTION OF THE BANK, THIS AGREEMENT
AND THE NOTE MAY BE ENFORCED IN ANY
FEDERAL COURT OR MINNESOTA STATE COURT
SITTING IN MINNEAPOLIS OR ST. PAUL,
MINNESOTA; AND THE BORROWER CONSENTS
TO THE JURISDICTION AND VENUE OF ANY SUCH
COURT AND WAIVES ANY ARGUMENT THAT
VENUE IN SUCH FORUMS IS NOT CONVENIENT.
IN THE EVENT THE BORROWER COMMENCES ANY
ACTION IN ANOTHER JURISDICTION OR VENUE
UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE
RELATIONSHIP CREATED BY THIS AGREEMENT,
THE BANK AT ITS OPTION SHALL BE ENTITLED TO
HAVE THE CASE TRANSFERRED TO ONE OF THE
JURISDICTIONS AND VENUES ABOVE-DESCRIBED,
OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO
HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
SECTION 8.11 Waiver of Jury Trial. THE
BORROWER WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS (a) UNDER
THIS AGREEMENT OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR (b)
ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREES THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed by their
respective authorized officers as of the day and
year first above written.
PENTAIR, INC.
By:___________________________________
Title:__________________________________
Waters Edge Plaza
1500 County Road B2 West
St. Paul, Minnesota 55113
Attention: Chief Financial Officer
Telecopy: (612) 639-5209
Telephone: (612) 636-7920
FIRST BANK NATIONAL ASSOCIATION
By:___________________________________
Title:__________________________________
601 2nd Ave. S.
Minneapolis, MN 55402-4302
Attention: Mark R. Olmon
Telephone: (612) 973-1085
Fax: (612) 973-0824
EXHIBITS
Exhibit Contents
A Form of Note
B Form of Legal Opinion
<PAGE>
EXHIBIT A
PROMISSORY NOTE
$25,000,000
Minneapolis, Minnesota: November 15, 1996
FOR VALUE RECEIVED, the undersigned
PENTAIR, INC., a Minnesota corporation (the
"Borrower"), promises to pay to the order of FIRST
BANK NATIONAL ASSOCIATION, a national
banking association (the "Bank"), on the due date
or dates determined under the Credit Agreement
hereinafter referred to, the principal sum of
TWENTY FIVE MILLION DOLLARS ($25,000,000),
or if less, the then aggregate unpaid principal
amount of the Loans (as such terms are defined in
the Credit Agreement) as may be borrowed by the
Borrower under the Credit Agreement. All Loans
and all payments of principal shall be recorded by
the holder in its records which records shall be
conclusive evidence of the subject matter thereof,
absent manifest error.
The Borrower further promises to pay to the
order of the Bank interest on the aggregate unpaid
principal amount hereof from time to time
outstanding from the date hereof until paid in full
at the rates per annum which shall be determined
in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on
the dates specified in the Credit Agreement.
All payments of principal and interest under
this Note shall be made in lawful money of the
United States of America in immediately available
funds at the Bank's office at 601 2nd Ave. S.,
Minneapolis, Minnesota 55402-4302, or at such
other place as may be designated by the Bank to
the Borrower in writing.
This Note is the Note referred to in, and
evidences indebtedness incurred under, a Credit
Agreement dated as of November 15, 1996
(herein, as it may be amended, modified or
supplemented from time to time, called the "Credit
Agreement") between the Borrower and the Bank,
to which Credit Agreement reference is made for a
statement of the terms and provisions thereof,
including those under which the Borrower is
permitted and required to make prepayments and
repayments of principal of such indebtedness and
under which such indebtedness may be declared to
be immediately due and payable.
All parties hereto, whether as makers,
endorsers or otherwise, severally waive
presentment, demand, protest and notice of
dishonor in connection with this Note.
This Note is made under and governed by
the internal laws of the State of Minnesota.
PENTAIR, INC.
By:____________________________________
Title:__________________________________
<PAGE>
EXHIBIT B
Opinion of Counsel
First Bank National Association
601 2nd Ave. S.
Minneapolis, MN 55402-4302
Attention:
Ladies/Gentlemen:
We have acted as counsel for PENTAIR,
INC., (the "Borrower"), and we are delivering to
you this opinion of counsel upon which you may
rely, in connection with a Credit Agreement, dated
as of November 15, 1996, entered into between
the Borrower and your Bank (the "Credit
Agreement"), and the transactions and other
documents, including the Note, described therein
(the "Loan Documents"). Unless otherwise defined
herein, capitalized terms used herein shall have the
respective meanings assigned to such terms in the
Credit Agreement.
In so acting, we, as counsel for the
Borrower, have made such factual inquiries, and
have examined or caused to be examined such
questions of law, as we have considered necessary
or appropriate for the purposes of this opinion and,
upon the basis of such inquiries and examinations,
advise you that, in our opinion:
(1) The Borrower and each of its
Subsidiaries are corporations duly organized, validly
existing and in good standing under the laws of the
state of their respective incorporation, and each is
duly qualified and in good standing as a foreign
corporation in all other jurisdictions in which its
respective present operations or properties require
such qualification.
(2) The Borrower has full corporate power
and authority to own and operate its properties and
assets, carry on its business as presently
conducted, and enter into and perform its
obligations under the Loan Documents to which it
is a party.
(3) The execution and delivery of the Loan
Documents to which the Borrower is a party, the
performance by the Borrower of its obligations
thereunder, and the borrowing by the Borrower
under the Credit Agreement, have been duly
authorized by all necessary corporate action, and all
of said Loan Documents have been duly executed
and delivered on behalf of the Borrower and
constitute valid and binding obligations of the
Borrower, enforceable in accordance with their
respective terms.
(4) There is no provision in the Borrower's
Articles of Incorporation or By-Laws, nor any
provision in any indenture, mortgage, contract or
agreement to which the Borrower is a party or by
which it or its properties may be bound, nor any
law, statute, rule or regulation, nor any writ, order
or decision of any court or governmental
instrumentality binding on the Borrower which
would be contravened by the execution and
delivery of the Loan Documents to which the
Borrower is a party, nor do any of the foregoing
prohibit the Borrower's performance of any term,
provision, condition, covenant or any other
obligation of the Borrower contained therein.
(5) There are no actions, suits or
proceedings pending or, to the best of our
knowledge after due inquiry, threatened against or
affecting the Borrower before any court or
arbitrator or by or before any administrative agency
or government authority in which there is a
reasonable possibility of an adverse decision which
would materially adversely affect the business,
consolidated financial position or consolidated
results of operations of the Borrower and its
Subsidiaries taken as a whole.
(6) Neither the making nor performance of
the Loan Documents, nor the borrowing(s) under
the Credit Agreement, requires the consent or
approval of any governmental instrumentality.
(7) The Borrower is not a "holding
company", a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company",
within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
(8) The Borrower is not an "investment
company" or a company "controlled" by an
"investment company", within the meaning of the
Investment Company Act of 1940, as amended.
(9) The Borrower is not engaged in the
business of extending credit for the purpose of
purchasing or carrying margin stock (within the
meaning of Regulation U of the Board of Governors
of the Federal Reserve System), and, to the best of
our knowledge after due inquiry, no part of the
proceeds of any loan under the Credit Agreement
will be used to purchase or carry any margin stock
or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
Very truly yours,
EXECUTION COPY
PENTAIR, INC.
NOTE PURCHASE AGREEMENT
Dated as of January 24, 1997
6.99% Senior Notes, Series A, Due
2007,
6.79% Senior Notes, Series B, Due
2004
and
6.74% Senior Notes, Series C, Due
2004
TABLE OF CONTENTS
(Not a part of the Agreement)
Section Heading Page
SECTION 1. Description of Notes
and Commitment. . . . . . . .1
1.1 Description of Notes . .1
1.2 Commitment; Date of Issue2
1.3 Use of Proceeds. . . . .3
SECTION 2. Prepayment and
Repayment of the Notes. . . .3
2.1 Repayment. . . . . . . .3
2.2 Optional Prepayments . .3
2.3 Notice of Prepayment . .3
2.4 Direct Payment . . . . .3
2.5 Surrender of Notes Upon
Prepayment or Repayment.4
SECTION 3. Representations and
Warranties
of the Company. . .4
3.1 Corporate Organization
and Authority. . . . . .4
3.2 Subsidiaries . . . . . .4
3.3 Financial Statements . .5
3.4 Disclosure . . . . . . .5
3.5 Pending Litigation . . .6
3.6 Sale is Legal and
Authorized . . . . . . .6
3.7 No Defaults. . . . . . .6
3.8 Governmental Consent . .7
3.9 Taxes. . . . . . . . . .7
3.10 Use of Proceeds. . . . .7
3.11 Private Offering . . . .7
3.12 Compliance with ERISA. .8
3.13 Investment Company Act .8
3.14 Compliance with Law. . .8
3.15 Broker's Fees. . . . . .8
SECTION 4. Representations and
Warranties
of the Purchasers .8
SECTION 5. Closing Conditions.9
5.1 Closing Certificate. . .9
5.2 Legal Opinions . . . . .9
5.3 Satisfactory Proceedings10
5.4 Waiver of Conditions . 11
SECTION 6. Company Covenants 11
6.1 Corporate Existence and
Status . . . . . . . . 11
6.2 Maintenance, Etc . . . 11
6.3 Insurance. . . . . . . 11
6.4 Reports and Rights of
Inspection . . . . . . 12
(a) Quarterly Statements12
(b) Annual Statements 12
(c) SEC Filings and
Reports to
Shareholders. . . 13
(d) Officer's
Certificates. . . 13
(e) Audit Reports . . 13
(f) Other Reports . . 13
(g) Requested
Information . . . 14
6.5 Notice of Default or
Event of Default . . . 14
6.6 Net Worth. . . . . . . 15
6.7 Investments. . . . . . 15
6.8 Limitation on Liens. . 16
6.9 Mergers, Consolidations
and Sales of Assets. . 18
6.10 Indebtedness . . . . . 19
6.11 Transactions with
Affiliates . . . . . . 19
6.12 Repurchase of Notes. . 20
6.13 Regulations U and X. . 20
6.14 Compliance with Laws . 20
6.15 Environmental Laws . . 20
6.16 ERISA Matters. . . . . 20
SECTION 7. Events of Default and
Remedies Therefor . . . . . 21
7.1 Events of Default. . . 21
7.2 Acceleration of
Maturities . . . . . . 22
SECTION 8. Interpretation of
Agreement; Definitions. . . 23
8.1 Accounting Principles. 23
8.2 Directly or Indirectly 23
8.3 Definitions. . . . . . 23
SECTION 9. Miscellaneous . . 30
9.1 Registered Notes; Several
Obligations
of Purchasers. . . . . 30
9.2 Transfer and Exchanges of
Notes. . . . . . . . . 30
9.3 Loss, Theft, Etc, of
Notes. . . . . . . . . 31
9.4 Expense; Stamp Tax
Indemnity. . . . . . . 31
9.5 Amendments, Waivers and
Consents . . . . . . . 32
9.6 Powers and Rights Not
Waived;
Remedies Cumulative. . 33
9.7 Notices. . . . . . . . 33
9.8 Successors and Assigns 33
9.9 Survival of Covenants and
Representations. . . . 33
9.10 Severability . . . . . 34
9.11 Governing Law. . . . . 34
9.12 Counterparts . . . . . 34
9.13 Captions . . . . . . . 34
Attachments to Note Purchase
Agreement:
Schedule I-Name of Purchasers
Schedule 3.2-Subsidiaries, etc.
Schedule 3.3-Financial Statement
Matters
Schedule 3.5-Pending Litigation
Exhibit A
- -Form of Senior Notes
Exhibit B
- -Form of Closing Certificate of
Pentair, Inc.
Exhibit C-1
- -Form of Opinion of Henson & Efron,
P.A., Counsel to Pentair, Inc.
Exhibit C-2
- -Form of Opinion of Winston &
Strawn, Special Counsel to the
Purchasers
Pentair, Inc.
1500 County Road B2 West
St. Paul, Minnesota 55113
NOTE PURCHASE AGREEMENT
6.99% Senior Notes, Series A, Due
2007
6.79% Senior Notes, Series B, Due
2004
6.74% Senior Notes, Series C, Due
2004
To the Purchasers named
in Schedule I which are
signatories to this Note
Purchase Agreement
Dated as of January 24, 1997
Ladies and Gentlemen:
The undersigned, Pentair, Inc., a
Minnesota corporation (the
"Company"), hereby agrees with the
Purchasers as follows:
SECTION 1. Description of Notes
and Commitment.
1.1 Description of Notes.
Pentair will authorize the issuance
and sale of (a) $35,000,000
aggregate principal amount of its
6.99% Senior Notes, Series A
(Private Placement No.: 709631 D*3)
(the "Series A Notes"), (b)
$5,000,000 aggregate principal
amount of its 6.79% Senior Notes,
Series B (Private Placement No.:
709631D@1) (the "Series B Notes")
and (c) $10,000,000 aggregate
principal amount of its 6.74% Senior
Notes, Series C (Private Placement
No.: 709631E*2) (the "Series C
Notes"), to be dated the date of
issue (the "Date of Issue"), May 1,
1997 in the case of each of the
Series A Notes and the Series B
Notes and February 5, 1997 in the
case of the Series C Notes, to bear
interest from such date at the rate
of 6.99% per annum in the case of
Series A Notes, 6.79% per annum in
the case of Series B Notes and 6.74%
per annum in the case of Series C
Notes, each payable semiannually in
arrears on the first day of each May
and November in each year commencing
May 1, 1997 in the case of the
Series C Notes, and commencing
November 1, 1997 in the case of each
of the Series A Notes and Series B
Notes and at maturity to and to bear
interest on overdue principal
(including any overdue optional
prepayment of principal) and
premium, if any, and (to the extent
legally enforceable) on any overdue
installment of interest at the rate
of 8.99% per annum in the case of
the Series A Notes, 8.79% per annum
in the case of the Series B Notes
and 8.74% per annum in the case of
the Series C Notes, in each case
after the maturity of such amount,
whether by acceleration or
otherwise, until paid, to be
expressed to mature on the date
which is ten years from the Date of
Issue with respect to the Series A
Notes (the "Series A Maturity Date")
and seven years from the Date of
Issue with respect to each of the
Series B Notes and the Series C
Notes (the "Series B Maturity Date"
and the "Series C Maturity Date")
and to be substantially in the form
of Exhibit A. Interest on the Notes
shall be computed on the basis of a
360-day year of twelve 30-day
months. The Notes are subject to
repayment as set forth in Section
2.1. The Notes are not subject to
prepayment or redemption at the
option of the Company prior to their
expressed Maturity Date except on
the terms and conditions and at the
prices set forth in Section 2.2.
Capitalized terms used in this Note
Purchase Agreement shall have the
meanings given to them in Section 8.
The term "Notes" as used herein
shall collectively mean all of the
Series A Notes, all of the Series B
Notes and all of the Series C Notes
and shall include Notes delivered in
replacement, substitution or
exchange therefor and the term
"Note" shall mean any of the Notes
individually. The term "Purchasers"
as used herein shall collectively
mean the holders of the Notes at any
time (whether by original purchase
from the Company or as a transferee
from a prior Purchaser). References
herein to an "Exhibit" are to one of
the exhibits attached to this
Agreement, references to a
"Schedule" are to one of the
schedules attached to this Agreement
and references to a "Section" are,
unless otherwise specified, to one
of the sections of this Agreement.
1.2 Commitment; Date of
Issue. (a) Subject to the terms and
conditions hereof and on the basis
of the representations and
warranties hereinafter set forth,
the Company agrees to issue and sell
to the Purchasers, and the
Purchasers agree to purchase from
the Company on the applicable Date
of Issue, the Notes of the Company
in the aggregate principal amount
set forth opposite their respective
names on Schedule I attached hereto
at a price of 100% of the principal
amount thereof.
(b) Delivery of the
Notes will be made at the offices of
Winston & Strawn, 35 West Wacker
Drive, Chicago, Illinois 60601,
against payment therefor in Federal
or other funds current and
immediately available for credit to
the Company's account at First Bank
National Association, Acct. No.
180120-790829 (ABA wire transfer
routing number 091000022), marked to
the attention of Karen Johnson, in
the amount of the purchase price at
10:00 a.m., Chicago time, on the
applicable Date of Issue. The Notes
delivered to each Purchaser on the
applicable Date of Issue will be
delivered to such Purchaser in the
form of a single Note for the
Series A Note, the Series B Note and
the Series C Note, in each case for
the full amount specified on
Schedule I attached hereto,
registered in such Purchaser's name
or in the name of such nominee as
such Purchaser may specify and in
substantially the form of Exhibit A
attached hereto.
1.3 Use of Proceeds. The
proceeds from the sale of the Notes
will be used to refinance existing
indebtedness of the Company and for
general corporate purposes.
SECTION 2. Prepayment and
Repayment of the Notes.
2.1 Repayment. The
Company shall repay the entire
aggregate principal amount of each
Note then outstanding on the
applicable Maturity Date for such
Note.
2.2 Optional Prepayments.
Upon compliance with Section 2.3,
the Company shall have the privilege
at any time and from time to time
after the applicable Date of Issue
of prepaying any Series of Notes,
pro rata to each Purchaser of the
then outstanding Notes in such
Series, either in whole or in part
(but if in part, then in an amount
of at least $100,000 and in integral
multiples of $10,000 in excess
thereof) by prepayment of the
principal amount of the Notes, or
portion thereof to be prepaid, and
accrued interest thereon to the date
of such prepayment, together with an
amount equal to the Make-Whole
Premium, determined not more than
five days prior to the date of such
prepayment; provided, however, that
after any amendment or waiver has
become effective pursuant to Section
9.5, all prepayments of the Notes
must be made on a pro rata basis for
either (a) all outstanding Notes or
(b) all outstanding Notes in each
Series of Notes held by any
Purchaser which did not consent to
such amendment or waiver.
2.3 Notice of Prepayment.
The Company shall give written
notice of any prepayment of the
Notes to the Purchasers not less
than 30 days nor more than 60 days
before the date fixed for such
optional prepayment specifying (a)
such date, (b) the principal amount
of the Notes to be prepaid on such
date, (c) the estimated Make-Whole
Premium, if any, and (d) accrued
interest applicable to the
prepayment. Notice of prepayment
having been so given, the aggregate
principal amount of the Note
specified in such notice, together
with the actual Make-Whole Premium,
if any, and accrued interest thereon
shall become due and payable on the
prepayment date.
2.4 Direct Payment.
Notwithstanding anything to the
contrary in this Agreement or the
Notes, the Company will pay when due
the principal on the Notes, the
Make-Whole Premium, if any, and
interest thereon, without any
presentment thereof directly to the
Purchaser thereof (or any nominee
specified by a Purchaser) or any
subsequent registered holder of any
Notes at the address of such
Purchaser set forth on Schedule I
attached hereto or at such other
address as such Purchaser or such
holder may from time to time
designate in writing to the Company
or, if a bank account is designated
for such Purchaser or such holder on
Schedule I attached hereto or in any
written notice to the Company from
such Purchaser or any such holder,
the Company will make such payments
in immediately available funds to
such bank account, marked for
attention as indicated, or in such
other manner or to such other
account of such Purchaser or such
holder in any bank in the United
States as the Purchaser or any such
holder may from time to time direct
in writing. Each Purchaser agrees
that in the event it shall sell or
transfer any such Notes (i) it will,
prior to the delivery of such Notes
(unless it has already done so),
make a notation thereon of all
principal, if any, prepaid on such
Notes and will also note thereon the
date to which interest has been paid
on such Notes, and (ii) it will
promptly notify the Company of the
name and address of the transferee
of any Notes so transferred.
2.5 Surrender of Notes
Upon Prepayment or Repayment. On
any partial prepayment of the Notes,
the Purchaser thereof shall, at the
option of such Purchaser, (a)
surrender such original Note or
Notes to the Company in exchange for
a new Note or Notes in a principal
amount equal to the principal amount
remaining unpaid on the surrendered
Note or Notes or (b) make a notation
on such original Note or Notes of
the portion of the principal so
prepaid. In case the entire
principal amount of the Note or
Notes is prepaid, or repaid at
maturity, together with all accrued
interest thereon, and any Make-Whole
Premium due with respect thereto,
the Note or Notes shall be
surrendered to the Company for
cancellation and shall not be
reissued.
SECTION 3. Representations and
Warranties of the Company.
The Company hereby
represents and warrants to each
Purchaser as follows:
3.1 Corporate
Organization and Authority. The
Company is duly organized, validly
existing and in good standing under
the laws of the State of Minnesota.
As of each respective date on which
these representations and warranties
are made by the Company, each
Subsidiary of the Company at the
time is a corporation duly
organized, validly existing and in
good standing under the laws of the
jurisdiction in which it is
incorporated. The Company and each
of its Subsidiaries has full
corporate power and authority to own
or hold under lease the properties
and assets it purports to own or
hold under lease and to carry on its
business as now being conducted. As
of each respective date on which
these representations and warranties
are made by the Company, the Company
and each of its Subsidiaries is at
the time duly qualified or licensed
as a foreign corporation and is in
good standing in each jurisdiction
wherein the nature of the business
transacted by it makes such
qualification or licensing
necessary, except where failure so
to qualify will not have a material
adverse effect on the properties,
business, operations or condition
(financial or otherwise) of the
Company and its Subsidiaries taken
as a whole.
3.2 Subsidiaries. As of
each respective date on which these
representations and warranties are
made by the Company, Schedule 3.2
attached hereto states (or will have
been amended by the Company to
state) (1) the name of each of the
Company's Subsidiaries at the time,
its jurisdiction of incorporation
and the percentage of its voting
capital stock owned by the Company
and/or its Subsidiaries and whether
such Subsidiary constitutes a
Restricted Subsidiary and (2) the
name of each of the Company's
corporate or joint venture
affiliates (other than Subsidiaries)
at the time, and the nature of the
affiliation. The Company and each
Subsidiary has good and marketable
title to all of the shares it
purports to own of the stock of each
Subsidiary, free and clear in each
case of any material lien. All such
shares have been duly issued and are
fully paid and non-assessable.
3.3 Financial Statements.
(a) The consolidated balance sheet
of the Company and its consolidated
subsidiaries as of December 31, 1995
and the related consolidated
statements of income and cash flows
for the fiscal year then ended,
reported on by Deloitte & Touche
(without qualification) and set
forth in the Company's annual report
for the year then ended as filed
with the Securities and Exchange
Commission ("SEC") on Form 10-K, a
copy of which has been provided to
each Purchaser, fairly presents, in
conformity with generally accepted
accounting principles, the
consolidated financial position of
the Company and its consolidated
Subsidiaries as of such date and the
consolidated results of their
operations and cash flows for such
period.
(b) Except as set
forth on Schedule 3.3 attached
hereto, since September 30, 1996
there has been no change in the
properties, business, operations or
condition (financial or otherwise)
of the Company and its Subsidiaries
taken as a whole as shown on the
consolidated balance sheet as of
such date except changes in the
ordinary course of business, none of
which individually or in the
aggregate has been materially
adverse to the properties, business,
operations or condition (financial
or otherwise) of the Company and its
Subsidiaries taken as a whole.
3.4 Disclosure. The
Company's (i) annual report for the
year ended December 31, 1995 as
filed on Form 10-K, including the
financial statements referred to in
Section 3.3(a), (ii) quarterly
reports as filed on Form 10-Q for
the quarters ending March 31, 1996,
June 30, 1996 and September 30,1996,
including the financial statements
referred to in Section 3.3(b), and
(iii) any current report filed on
Form 8-K since December 31, 1995
have been or shall be provided to
each Purchaser upon filing with the
SEC, have been or shall have been
prepared in accordance with the
rules and regulations of the SEC
and, as of the filing date thereof
and as of the initial Date of Issue,
neither any of such reports nor this
Agreement contains or will contain
any untrue statement of a material
fact or omit to state a material
fact necessary to make the
statements contained therein or
herein not misleading. There is no
fact peculiar to the Company or its
Subsidiaries which the Company has
not disclosed to the Purchasers in
writing which materially adversely
affects nor, so far as the Company
can now foresee, will materially
adversely affect, the properties,
business, operations or condition
(financial or otherwise) of the
Company and its Subsidiaries taken
as a whole.
3.5 Pending Litigation.
Except as set forth on Schedule 3.5
attached hereto and as otherwise
referred to in Section 3.16(c),
there are no proceedings pending or,
to the knowledge of the Company,
threatened against the Company or
any of its Subsidiaries before any
governmental authority or
arbitration board or tribunal which
would materially and adversely
affect the properties, business,
operations or condition (financial
or otherwise) of the Company and its
Subsidiaries taken as a whole. The
Responsible Officer of the Company
executing this Agreement and any
certificate with respect to this
Section 3.5 is not aware (after due
inquiry) of any default by the
Company or any of its Subsidiaries
with respect to any order of any
court or governmental authority or
arbitration board or tribunal.
3.6 Sale is Legal and
Authorized. (a) The sale of the
Notes and compliance by the Company
with all of the provisions of this
Agreement and the Notes:
(i) are within the
corporate powers of the Company
and have been duly authorized
by proper corporate action on
the part of the Company; and
(ii) will not violate
any provisions of any law or
any order of any court or
governmental authority or
agency and will not conflict
with or result in any breach of
any of the terms, conditions or
provisions of, or constitute a
default under, the articles of
incorporation or by-laws of the
Company or any indenture or
other agreement or instrument
to which the Company or any of
its Subsidiaries is a party or
by which any of them may be
bound or result in the
imposition of any liens or
encumbrances on any property of
the Company.
(b) The officers of
the Company executing and delivering
this Agreement and any Note issued
pursuant hereto on behalf of the
Company have been duly authorized to
do so, and this Agreement, any Note
and any other agreements delivered
pursuant hereto, when executed, are
and will be legal, valid and binding
obligations of the Company in every
respect, enforceable against the
Company in accordance with their
respective terms except as
enforceability may be limited by
bankruptcy, reorganization,
moratorium or other similar laws
affecting creditors' rights
generally and by general equitable
principles.
3.7 No Defaults. No
Default or Event of Default has
occurred and is continuing. Neither
the Company nor any of its
Subsidiaries is in default in the
payment of principal or interest on
indebtedness in excess of $5,000,000
in the aggregate and is not in
default under any instrument or
instruments or agreements under and
subject to which any such
indebtedness for or in respect of
borrowed money has been issued and
no waiver of any default under any
such instrument is in effect and no
event has occurred and is continuing
under the provisions of any such
instrument or agreement which with
the lapse of time or the giving of
notice, or both, would constitute an
event of default thereunder.
3.8 Governmental Consent.
Other than as previously obtained,
no registration with nor any
approval, consent or withholding of
objection on the part of any
regulatory body, state, federal or
local, is necessary in connection
with the execution and delivery by
the Company of this Agreement or the
Notes or compliance by the Company
with any of the provisions of this
Agreement or the Notes.
3.9 Taxes. All federal,
state and other tax returns of the
Company and its Subsidiaries
required by law to be filed have
been duly filed or appropriately
extended. All taxes shown on such
returns and assessments received by
the Company and its Subsidiaries
have been paid to the extent that
such taxes have become due, other
than taxes and assessments the
applicability, validity or amount of
which is being contested in good
faith by appropriate proceedings or
actions and as to which reserves
have been set up on the books of the
Company and its Subsidiaries to the
extent required by generally
accepted accounting principles. Any
tax obligations of the Company or
any of its Subsidiaries in excess of
the provisions and reserves on the
books of the Company and its
Subsidiaries in respect of federal,
state or other income taxes for the
years for which such returns have
not been closed (which reserves are,
in the judgment of the Company,
adequate) will not have a material
adverse effect on the properties,
business, operations or condition
(financial or otherwise) of the
Company and its Subsidiaries taken
as a whole.
3.10 Use of Proceeds.
None of the transactions
contemplated in this Agreement
(including, without limitation, the
use of proceeds from the issuance of
the Notes) will violate or result in
a violation of Section 7 of the
Securities Exchange Act of 1934, as
amended, or any regulation issued
pursuant thereto, including, without
limitation, Regulations G, T and X
of the Board of Governors of the
Federal Reserve System, 12 C.F.R.,
Chapter II. None of the proceeds
from the sale of the Notes will be
used to purchase, or to refinance
any borrowing the proceeds of which
were used to purchase, any "margin
stock" within the meaning of such
Regulation G.
3.11 Private Offering.
Neither the Company, directly or
indirectly, nor to the knowledge of
the Company any agent on its behalf,
has offered or will offer the Notes
or any similar Security or has
solicited an offer to acquire the
Notes or any similar security from
or has otherwise approached or
negotiated or will approach or
negotiate in respect of the Notes or
any similar security with any Person
other than the Purchasers and not
more than thirty-five Institutional
Investors. Neither the Company,
directly or indirectly, nor to the
knowledge of the Company any agent
on its behalf, has offered or will
offer the Notes or any similar
security or has solicited or will
solicit an offer to acquire the
Notes or any similar security from
any Person so as to bring the
issuance and sale of the Notes
within the provisions of Section 5
of the Securities Act of 1933, as
amended. As used herein, the term
"similar security" shall mean any
security containing terms and
conditions substantially equivalent
to those of the Notes, including,
without limitation, equivalent
maturities.
3.12 Compliance with
ERISA. The Company and each ERISA
Affiliate have fulfilled their
respective obligations under the
minimum funding standards of the
Employee Retirement Income Security
Act of 1974, as amended ("ERISA")
and the Code with respect to each
employee retirement benefit plan and
are in compliance in all material
respects with the presently
applicable provisions of ERISA and
the Code, and have not incurred any
liability under Title IV of ERISA to
the Pension Benefit Guaranty
Corporation other than premium
payments with respect to a plan.
3.13 Investment Company
Act. The Company is not and is not
directly or indirectly controlled
by, or acting on behalf of any
Person which is, an "investment
company" within the meaning of the
Investment Company Act of 1940, as
amended.
3.14 Compliance with Law.
Neither the Company nor any of its
Subsidiaries (a) is in violation of
any law, ordinance, franchise,
governmental rule or regulation to
which it is subject or (b) has
failed to obtain any license,
permit, franchise or other
governmental authorization necessary
to the ownership of its property or
to the conduct of its business,
which violation or failure to obtain
would materially adversely affect
the properties, business, operations
or condition (financial or
otherwise) of the Company and its
Subsidiaries taken as a whole, or
the ability of the Company to
perform its obligations contained in
this Agreement or the Notes.
3.15 Broker's Fees.
Except for First Chicago Capital
Markets, Inc., neither this
Agreement nor the sale of the Notes
or any other transaction
contemplated by this Agreement was
induced or procured through any
person, firm, corporation or other
entity acting on behalf of, or
representing the Company or any of
its Subsidiaries as broker, finder,
investment banker, financial advisor
or in any similar capacity.
SECTION 4. Representations and
Warranties of the Purchasers.
Each Purchaser represents,
and in entering into this Agreement
the Company understands, that (a)
such Purchaser is an Institutional
Investor and is acquiring the Notes
for the purpose of investment and
not with a view to the resale or
distribution thereof, and (b) such
Purchaser has no present intention
of selling, negotiating or otherwise
disposing of the Notes; provided
that the disposition of the Notes
shall at all times be and remain
within each Purchaser's control and
discretion and provided further that
each Purchaser agrees not to resell
or distribute the Notes except to an
Institutional Investor in a
transaction which is not in
violation of the Securities Act of
1933, as amended. Each Purchaser
further represents and warrants that
either: (i) no part of the funds to
be used by such Purchaser to
purchase the Notes to be purchased
by it hereunder will constitute
assets allocated to any separate
account maintained by it; (ii) no
part of the funds to be used by it
to purchase the Notes will
constitute assets allocated to any
separate account maintained by it
such that the application of such
funds will constitute a prohibited
transaction under Section 406 of
ERISA; or (iii) all or a part of
such funds will constitute assets of
one or more separate accounts
maintained by it and it has
disclosed to the Company the names
of such employee benefit plans whose
assets in such separate account or
accounts exceed 5% of the total
assets or are expected to exceed 5%
of the total assets of such account
or accounts as of the date of such
purchase and the Company has advised
such Purchaser in writing that the
Company is not a party-in-interest
nor are the Notes employer
securities with respect to the
particular employee benefit plans
disclosed to the Company by such
Purchaser as aforesaid (for the
purpose of this clause (iii), all
employee benefit plans maintained by
the same employer or employee
organization being deemed to be a
single plan). As used in this
Section, the terms "separate
account," "party-in-interest,"
"employer securities," and "employee
benefit plans" shall have the
respective meanings assigned to them
in ERISA. Each additional or
subsequent Purchaser of any of the
Notes shall be deemed by virtue of
such purchase to have made the
representations set forth in this
Section 4 as of the date of such
purchase.
SECTION 5. Closing Conditions.
Each Purchaser's
obligation to purchase the Notes on
the applicable Date of Issue shall
be subject to the performance by the
Company of its agreements hereunder
which by the terms hereof are to be
performed at or prior to the time of
delivery of the Notes and to the
following further conditions
precedent:
5.1 Closing Certificate.
Each Purchaser shall have received a
certificate dated the applicable
Date of Issue, signed by a
Responsible Officer of the Company
substantially in the form of Exhibit
B attached hereto, the truth and
accuracy of which shall be a
condition to such Purchaser's
obligation to purchase the Notes
proposed to be sold to such
Purchaser.
5.2 Legal Opinions.
Concurrently with the delivery of
the Notes to the Purchasers on the
applicable Date of Issue, each
Purchaser shall have received from
each of Henson & Efron, P.A.,
counsel to the Company, and Winston
& Strawn, special counsel to the
Purchasers, its opinion dated as of
each Date of Issue, in form and
substance satisfactory to the
Purchasers and covering the matters
set forth in Exhibit C-1 and Exhibit
C-2, respectively, attached hereto.
5.3 Satisfactory
Proceedings. All proceedings taken
in connection with the transactions
contemplated by this Agreement and
all documents necessary to the
consummation hereof, shall be
satisfactory in form and substance
to the Purchasers and their special
counsel, and each Purchaser shall
have received a copy (executed or
certificated as may be appropriate)
of all legal documents or
proceedings taken in accordance with
the consummation of said
transactions and of such other
documents as the Purchasers or their
special counsel shall have
reasonably requested, including,
without limitation, the following:
(a) The articles of
incorporation of the Company,
certified as of a date not
earlier than ten days prior to
the initial Date of Issue by
the Secretary of State of the
State of Minnesota;
(b) The by-laws of
the Company, certified as of
the initial Date of Issue by
the Secretary or an Assistant
Secretary of the Company;
(c) Certificate as
of a date not earlier than ten
days prior to the applicable
Date of Issue from the
Secretary of State of the State
of Minnesota as to the good
standing of the Company in such
jurisdiction;
(d) Incumbency
certificate with respect to the
officers of the Company
executing this Agreement, any
Note or any of the documents
referred to in this Agreement;
(e) Copies of a
resolution duly adopted by the
Board of Directors of the
Company approving the execution
and delivery of all documents
contemplated by this Agreement
(including, without limitation,
the Notes) to be executed and
delivered by the Company, and
certified by the Secretary or
an Assistant Secretary of the
Company as of the initial Date
of Issue;
(f) A fully executed
Note or Notes, as the case may
be, substantially in the form
of Exhibit A attached hereto,
in an appropriate amount as
specified in accordance with
this Agreement;
(g) Good standing
certificates dated as of recent
dates in the respective
jurisdictions of incorporation
of the Company's principal
operating Subsidiaries; and
(h) Such other
documents as may be reasonably
requested by the Purchasers or
their special counsel.
5.4 Waiver of Conditions.
If on the applicable Date of Issue
the Company fails to tender to the
Purchasers the Notes to be issued to
the Purchasers on such date or if
the conditions specified in this
Section 5 have not been fulfilled,
the Purchasers may thereupon elect
to be relieved of all further
obligations under this Agreement.
Without limiting the foregoing, if
the conditions specified in this
Section 5 have not been fulfilled,
the Purchasers may waive compliance
by the Company with any such
condition to such extent as the
Purchasers may in their sole
discretion determine. Nothing in
this Section 5.4 shall operate to
relieve the Company of any of its
obligations hereunder or to waive
any of the Purchasers' rights
against the Company.
SECTION 6. Company Covenants.
The Company agrees that
until the principal of and interest
on all Notes, and all other payments
due hereunder, shall have been paid
in full, the Company will perform
and observe and will cause the
Restricted Subsidiaries to perform
and observe, all of the following
provisions:
6.1 Corporate Existence
and Status. Except as permitted in
Section 6.9 hereof, the Company
will, and will cause each Restricted
Subsidiary to, maintain and preserve
(i) its corporate existence and (ii)
all rights, privileges, licenses and
other authority necessary for the
conduct of its businesses except
where the failure to maintain,
preserve and keep such rights,
privileges, licenses and other
authority would not have a material
adverse effect on the properties,
business, operations or condition
(financial or otherwise) of the
Company and its Subsidiaries taken
as a whole. The Company will, and
will cause each Restricted
Subsidiary to, continue to conduct
its business in an orderly manner
and without any material voluntary
interruption.
6.2 Maintenance, Etc. The
Company will maintain, preserve and
keep, and will cause each Restricted
Subsidiary to maintain, preserve and
keep, its properties which are used
or useful in the conduct of its
business (whether owned in fee or a
leasehold interest) in good repair
and working order.
6.3 Insurance. The
Company will, and will cause each
Restricted Subsidiary to, (a)
maintain insurance to such extent
and against such hazards and
liabilities as is commonly
maintained by companies engaged in
similar businesses and (b) promptly
upon any Purchaser's written
request, furnish to such Purchaser
such information about the insurance
of the Company and its Restricted
Subsidiaries that such Purchaser may
from time to time reasonably
request, which information shall be
prepared in form and detail
reasonably satisfactory to such
Purchaser and certified as true and
correct by an officer of the
Company.
6.4 Reports and Rights of
Inspection. The Company will keep,
and will cause each Restricted
Subsidiary to keep, proper books of
record and account in which full and
correct entries will be made of all
material dealings or transactions of
or in reliance on the business and
affairs of the Company or such
Restricted Subsidiary, in accordance
with generally accepted principles
of accounting consistently applied
(except where the changes have been
concurred in by the Company's
independent public accountants and
noted in the Company's financial
statements). The Company will
furnish to the Purchasers prior to
the initial Date of Issue and so
long thereafter as they are the
holders of any of the Notes:
(a) Quarterly
Statements. Within 60 days
after the end of each quarterly
fiscal period (except the last)
of each fiscal year, one copy
to each of the Purchasers of:
(1) the
unaudited consolidated
balance sheet of the
Company and its
Subsidiaries as of the
close of such quarter,
and
(2) unaudited
consolidated statements
of income and cash flows
of the Company and its
Subsidiaries for such
quarterly period (and in
the case of the second
and third quarter), for
the portion of the fiscal
year ending with such
quarter,
in each case setting forth in
comparative form the consolidated
figures from the corresponding
period or periods of the preceding
fiscal year, and certified as to
fairness of presentation in
conformity with generally accepted
accounting principles (except for
the absence of footnotes and subject
to normal year-end adjustments) by a
Senior Financial Officer of the
Company; provided, that delivery
within the time period specified in
this subsection (a) of copies of the
Company's quarterly report on Form
10-Q prepared in compliance with the
requirements therefor and filed with
the SEC shall be deemed to satisfy
the requirements of this Section
6.4(a).
(b) Annual
Statements. Within 105 days
after the close of each fiscal
year of the Company, duplicate
copies to each of the
Purchasers of:
(1) the
audited consolidated
balance sheet of the
Company and its
Subsidiaries as of the
close of such fiscal
year, and
(2) audited
consolidated statements
of income and cash flows
of the Company and its
Subsidiaries for such
fiscal year,
in each case setting forth in
comparative form the consolidated
figures for the preceding fiscal
year, all in accordance with the
rules and regulations of the SEC,
reported on by the Company's
independent public accountants, who
shall be of recognized national
standing, as to fairness of
presentation in conformity with
generally accepted accounting
principles; provided, that delivery
within the time period specified in
this subsection (b) of copies of the
Company's annual report on Form 10-K
for such fiscal year (together with
the Company's annual report to
shareholders, if any prepared
pursuant to Rule 14a-3 under the
Exchange Act) prepared in compliance
with the requirements therefor and
filed with the SEC shall be deemed
to satisfy the requirements of this
Section 6.4(b).
(c) SEC Filings and
Reports to Shareholders.
Promptly upon their becoming
available, the Company will
deliver to each Purchaser a
copy of (i) if deemed to be
material by the Company,
regular or periodic reports, if
any, which the Company or any
Subsidiary shall file with the
SEC or any national securities
exchange and (ii) all reports,
proxy statements and financial
statements delivered or sent by
the Company or any Subsidiary
to its shareholders (other than
the Company or another
Subsidiary).
(d) Officer's
Certificates. Within the
periods provided in paragraphs
(a) and (b) above, a
certificate of a Senior
Financial Officer of the
Company stating that such
officer has reviewed or caused
to have reviewed the provisions
of this Agreement and setting
forth in reasonable detail
whether there existed as of the
date of such financial
statements and whether there
exists on the date of the
certificate any Default or
Event of Default and, if any
such condition or event exists
on the date of the certificate,
specifying the nature and
period of existence thereof and
the action the Company and/or
its Restricted Subsidiaries is
taking and proposes to take
with respect thereto;
(e) Audit Reports.
If a Default or Event of
Default shall have occurred and
be continuing, promptly upon
receipt thereof, one copy of
each interim or special audit,
if any, made by independent
accountants of the books of the
Company or any Restricted
Subsidiary;
(f) Other Reports.
If at any time the Company
shall no longer be required to
file periodic reports with the
SEC, promptly upon their
becoming available, copies of
any material orders in any
proceedings to which the
Company or any of its
Restricted Subsidiaries is a
party, issued by any
governmental agency, Federal or
state, having jurisdiction over
the Company or any of its
Subsidiaries (an order being
deemed to be material for
purposes of this clause (f) if
a violation thereof or a
default thereunder would have a
material adverse effect on the
properties, business, profits
or condition (financial or
otherwise) of the Company and
its Restricted Subsidiaries
taken as a whole or would
materially adversely affect the
ability of the Company to
perform its obligations under
the Notes or this Agreement);
and
(g) Requested
Information. With reasonable
prompt-ness, such other
publicly available data and
information as any Purchaser
may reasonably request;
provided, however, that if at
any time the Company shall no
longer be required to file
periodic reports with the SEC,
with reasonable promptness,
such other data and information
as any Purchaser may reasonably
request.
The Company hereby
covenants and agrees that each
Purchaser, so long as it is the
holder of any of the Notes (or such
representatives as such Purchaser
may designate) may, upon reasonable
prior written notice to the Company,
(i) inspect
the public financial
statements of the Company
and discuss the affairs
of the business of the
Company and its
Subsidiaries with the
management of the
Company, and
(ii) if a
Default or Event of
Default shall have
occurred and be
continuing, the Company
will permit each
Purchaser, so long as it
is the holder of any of
the Notes (or such
Persons as such Purchaser
may designate), to visit
and inspect any of the
properties of the Company
or any Subsidiary to
examine all their books
of account, records,
reports and other papers,
to make copies and
extracts therefrom, and
to discuss their
respective affairs,
finances and accounts
with their respective
officers, employees, and
independent public
accountants (and by this
provision the Company
authorizes said
accountants to discuss
with each Purchaser the
finances and affairs of
the Company and its
Subsidiaries) all during
regular business hours
and as often as may be
reasonably requested.
The Company shall be
required to pay or
reimburse any Purchaser
for expenses which such
Purchaser may incur in
connection with any such
visitation or inspection
under this subparagraph
(ii).
6.5 Notice of Default or
Event of Default. Promptly after a
Senior Financial Officer of the
Company has become aware of the
existence of any condition or event
which constitutes a Default or an
Event of Default, but in no event
later than five days after such
officer has become aware of such
event or condition, the Company will
deliver to each Purchaser a written
notice specifying the nature and
period of existence thereof and what
action the Company is taking or
proposes to take with respect
thereto.
6.6 Net Worth. The
Company will not suffer nor will it
permit the Company and its
Restricted Subsidiaries consolidated
Net Worth at any time to fall below
Three Hundred Seventy-Five Million
Dollars ($375,000,000).
6.7 Investments. The
Company will not, and will not
permit any Restricted Subsidiary to,
make any investments in or loans,
advances or extensions of credit to,
any Person except:
(a) investments,
loans and advances by the
Company and its
Restricted Subsidiaries
in, to or for the benefit
of Restricted
Subsidiaries, including
any investment in a
business entity which,
after giving effect to
such investment, will
become a Restricted
Subsidiary;
(b) investments in
commercial paper maturing
in 270 days or less from
the date of issuance
which, at the time of
acquisition by the
Company or any Restricted
Subsidiary, is accorded a
rating of A2 by Standard
& Poor's Corporation, P2
by Moody's Investors
Services, Inc. or a
comparable rating by
another nationally
recognized credit rating
agency of similar
standing;
(c) investments in
direct obligations of the
United States of America,
or any agency thereof,
maturing in 12 months or
less from the date of
acquisition thereof;
(d) investments in
certificates of deposit
maturing within one year
from the date of origin,
issued by a bank or trust
company organized under
the laws of the United
States or any state
thereof, having capital,
surplus and undivided
profits aggregating at
least $100,000,000;
(e) investments in
obligations maturing in
12 months or less from
the date of acquisition
thereof which, at the
time of acquisition by
the Company or any
Restricted Subsidiary, is
accorded the highest
rating by Standard &
Poor's Corporation or
Moody's Investors
Services, Inc. or a
comparable rating by
another nationally
recognized credit rating
agency of similar
standing;
(f) loans or
advances in the usual and
ordinary course of
business to officers,
directors and employees
for expenses (including
moving expenses related
to a transfer) incidental
to carrying on the
business of the Company
or any Restricted
Subsidiary;
(g) current assets
arising in the ordinary
course of business of the
Company and its
Restricted Subsidiaries
(inclusive of all
franchisee and customer
receivables whether
classified as current or
long term on the balance
sheet);
(h) property to be
used in the ordinary
course of business of the
Company and its
Restricted Subsidiaries;
(i) investments
made pursuant to the
Company's unqualified
benefit plans;
(j) other
investments, provided
that the aggregate amount
of such investments at
any time outstanding does
not exceed 10% of the
Company and its
Restricted Subsidiaries
consolidated Net Worth;
(k) investment made
in the ordinary course of
business of the Company's
captive insurance company
(Penwald Inc.); and
(l) any other
investments, loans and
advances (in addition to
those permitted by the
foregoing provisions of
this Section 6.7) but
investments pursuant to
this subsection (l) shall
be deducted from the
determination of Net
Worth pursuant to Section
6.6 and Indebtedness
pursuant to Section 6.10.
For purposes of this Agreement, an
investment shall be valued at the
lesser of (i) cost or (ii) the value
at which such investment is shown on
the books of the Company and its
Restricted Subsidiaries in
accordance with GAAP.
6.8 Limitation on Liens.
The Company will not, and will not
permit any Restricted Subsidiary to,
create or incur, or suffer to be
incurred or to exist, any mortgage,
pledge, security interest,
encumbrance, lien or charge of any
kind on its or their property or
assets, whether now owned or
hereafter acquired, or upon any
income or profits therefrom, or
transfer any property for the
purpose of subjecting the same to
the payment of obligations in
priority to the payment of its or
their general creditors, or acquire
or agree to acquire, or permit any
Restricted Subsidiary to acquire,
any property or assets upon
conditional sales agreements or
other title retention devices,
except:
(a) liens in
existence on the date of
the execution of this
Agreement and in respect
of any extension, renewal
or replacement (or
successive extensions,
renewals or replacements)
in whole or in part of
any such lien; provided,
however, that the
principal amount of
indebtedness so secured
at the time of such
extension, renewal or
replacement shall be
limited to all or a part
of the property (plus, in
the case of tangible
property or assets,
improvements and
construction on such
property or assets) which
was subject to the lien
so extended, renewed or
replaced;
(b) liens, charges,
encumbrances and priority
claims incidental to the
conduct of business or
the ownership of
properties and assets
(including warehousemen's
and attorneys' liens and
statutory landlords'
liens) and deposits,
pledges or liens to
secure the performance of
bids, tenders or trade
contracts, or to secure
statutory obligations,
surety or appeal bonds or
other liens of like
general nature incurred
in the ordinary course of
business and not in
connection with the
borrowing of money,
provided in each case
that (i) the obligation
secured is not overdue
or, if overdue, is being
contested in good faith
by appropriate actions or
proceedings and (ii) the
Company or such
Restricted Subsidiary
shall set aside on its
books reserves deemed by
it to be adequate with
respect thereto;
(c) liens on and
security interests in
property (including
capitalized leases),
including those existing
on such property at the
time of acquisition
thereof by the Company or
any Restricted
Subsidiary, which (i)
existed at the time of
the acquisition of such
property by the Company
or such Restricted
Subsidiary or which
secure indebtedness
assumed or incurred by
the Company or such
Restricted Subsidiary in
connection with the
acquisition of such
property, (ii) do not
extend to any property of
the Company or such
Restricted Subsidiary
other than that so
acquired and (iii) at the
time the indebtedness
secured thereby is issued
or incurred by the
Company or such
Restricted Subsidiary or,
in the case of property
acquired subject to an
existing lien or security
interest, at the time of
such acquisition, the
aggregate amount
remaining unpaid on such
indebtedness secured
thereby (whether or not
assumed by the Company or
such Restricted
Subsidiary) shall not
exceed the acquisition
price;
(d) liens for
property taxes and
assessments or
governmental charges or
levies and liens securing
claims or demands of
mechanics and
materialmen, provided in
each case that (i) the
obligation secured is not
overdue or, if overdue,
is being contested in
good faith by appropriate
actions or proceedings
and (ii) the Company or
such Restricted
Subsidiary shall set
aside on its books
reserves deemed by it to
be adequate with respect
thereto;
(e) liens of,
securing or resulting
from any judgment or
award, the time for the
appeal or petition for
rehearing of which shall
not have expired, or in
respect of which the
Company or a Restricted
Subsidiary shall at any
time in good faith be
prosecuting an appeal or
proceeding for a review
and in respect of which a
stay of execution pending
such appeal or proceeding
for review shall have
been secured, provided
that in each case the
Company or such
Restricted Subsidiary
shall set aside on its
books reserves deemed by
it to be adequate with
respect thereto;
(f) liens arising
in connection with
Receivables
Securitization Programs;
and
(g) any lien other
than those permitted by
clauses (a) through (f)
above, provided that the
aggregate amount of
indebtedness secured by
liens permitted by this
clause (g) shall not at
any time exceed 15% of
the Company's Net Worth.
6.9 Mergers,
Consolidations and Sales of Assets.
(a) Neither the Company nor any
Restricted Subsidiary will
consolidate with or be a party to a
merger with any other corporation,
provided, however, that:
(i) any
Restricted Subsidiary may
merge or consolidate with
or into the Company or
any other Restricted
Subsidiary so long as the
Company or such other
Restricted Subsidiary
shall be the surviving or
continuing corporation;
and
(ii) any
Restricted Subsidiary may
merge or consolidate with
any Person other than the
Company or any other
Restricted Subsidiary so
long as the Company
complies with the
provisions of
subparagraph (b) hereof
with respect to any such
transaction as if such
transaction were
undertaken in the form of
a sale of assets; and
(iii) The
Company may merge or
consolidate with or into
any other corporation if
at the time of such
merger or consolidation
and after giving effect
thereto no Default or
Event of Default shall
have occurred and be
continuing and the
Company shall be the
surviving corporation or,
if not, (x) the surviving
corporation shall
continue to be organized
under the laws of one of
the states of the United
States of America and (y)
the surviving corporation
expressly agrees in
writing to assume all
liabilities under and to
be bound by the Notes and
this Agreement.
(b) Other than in
the ordinary course of their
businesses, the Company and its
Restricted Subsidiaries taken as a
whole will not, in any fiscal year,
sell, lease, transfer or otherwise
dispose of more than 20% of their
total assets (excluding sales of
receivables pursuant to a
Receivables Securitization Program);
provided, however, that the Company
and its Restricted Subsidiaries
taken as a whole may dispose of more
than 20% of their total assets if,
in connection with any such
disposal, the Company and its
Restricted Subsidiaries (including
any Restricted Subsidiary created
for the purpose of acquiring
operating assets) applies the
"Excess Proceeds" of the sale of the
assets within 12 months from the
date of such sale either to the
acquisition of operating assets of
the Company and its Restricted
Subsidiaries or to the retirement of
senior Indebtedness.
6.10 Indebtedness.
(a) The Company will
not incur additional Funded
Indebtedness unless, after
giving effect thereto and to
the application of the proceeds
thereof, total Funded
Indebtedness does not exceed
65% of Total Capitalization.
(b) The Company may
incur Current Indebtedness
without limitation provided,
however, that during any twelve
month period there shall have
been a period of at least 30
consecutive days during which
the amount of the Company's
Current Indebtedness, when
added to outstanding Funded
Indebtedness, equals a sum that
is less than the maximum
amounts of Funded Indebtedness
permitted by the limitation set
forth in the preceding
paragraph.
(c) The Company will
not permit Restricted
Subsidiaries to incur or be
liable for Indebtedness other
than (i) Indebtedness
outstanding as of the date of
the execution of this
Agreement; (ii) any
Indebtedness of a Restricted
Subsidiary outstanding at the
date on which such Restricted
subsidiary is acquired by the
Company; (iii) Indebtedness
incurred by a Restricted
Subsidiary in a country other
than the United States or
Canada with respect to
operations in such country;
(iv) Indebtedness owed to the
Company or another Restricted
Subsidiary; and (v) other
Indebtedness not permitted by
the foregoing categories that
does not, in the aggregate,
exceed 15% of the Company and
its Restricted Subsidiaries
consolidated Net Worth.
6.11 Transactions with
Affiliates. The Company will not,
and will not permit any Restricted
Subsidiary to, enter into or be a
party to any transaction or
arrangement with any Affiliate
(including, without limitation, the
purchase from, sale to or exchange
of property with, or the rendering
of any service by or for, any
Affiliate), except upon terms no
less favorable to the company or
such Restricted Subsidiary than
would obtain in a comparable
arm's-length transaction with a
Person other than an Affiliate or
except as may be consistent with
past practice and as may be
advisable, in the reasonable
judgment of the Company, in
connection with the business of the
Company.
6.12 Repurchase of Notes.
Neither the Company nor any
Restricted Subsidiary or Affiliate,
directly or indirectly, may
repurchase or make any offer to
repurchase any Notes unless the
offer has been made to repurchase
Notes, pro rata, from all holders of
the Notes at the same time and upon
the same terms. In case the Company
or any Restricted Subsidiary or
Affiliate repurchases any Notes,
such Notes shall thereafter be
canceled and no Notes shall be
issued in substitution therefor.
6.13 Regulations U and X.
The Company will not nor will it
permit any Subsidiary to take any
action that would result in any
non-compliance of the loans made
hereunder with Regulations U and X
of the Board of Governors of the
Federal Reserve System.
6.14 Compliance with Laws.
The Company will substantially
comply with and will cause each
Subsidiary to substantially comply
with all statutes, laws, rules and
regulations applicable to the
Company or any Subsidiary (other
than statutes, laws, rules and
regulations the validity or
applicability of which is being
contested by the Company or any
Subsidiary, as the case may be, in
good faith by appropriate proceeds
diligently prosecuted) or any
statutes, laws, rules and
regulations which may be legally
imposed in the future in
jurisdictions in which the Company
or any Subsidiary may then be doing
business, except where failure to so
comply would not materially
adversely affect the properties,
business, operations or condition
(financial or otherwise) of the
Company and its Subsidiaries taken
as a whole or materially adversely
affect the Company's ability to
perform its obligations contained in
this Agreement or the Notes.
6.15 Environmental Laws.
The Company shall, and shall cause
each of its Subsidiaries to, conduct
its operations in compliance with
all Environmental Laws, except for
such noncompliance which
individually or in the aggregate
would not be reasonably expected to
result in material liability to the
Company and its Subsidiaries taken
as a whole.
6.16 ERISA Matters.
Promptly, and in any event within
five days after a Senior Financial
Officer becomes aware of any of the
following, the Company shall provide
each Purchaser a written notice
setting forth the nature thereof and
the action, if any, that the Company
or an ERISA Affiliate proposes to
take with respect thereto:
(a) with respect to
any plan, any reportable event,
as defined in section 4043(B)
of ERISA and the regulations
thereunder, for which notice
thereof has not been waived
pursuant to such regulations as
in effect on the date hereof;
or
(b) the taking by
the PBGC of steps to institute,
or the threatening by the PBGC
of the institution of,
proceedings under section 4042
of ERISA for the termination
of, or appointment of a trustee
to administer, any plan, or the
receipt by the Company or any
ERISA Affiliate of a notice
from a multi-employer plan that
such action has been taken by
the PBGC with respect to such
multi-employer plan; or
(c) any event,
transaction or condition that
would likely result in the
incurrence of any liability by
the Company or any ERISA
Affiliate pursuant to Title I
or IV of ERISA or the penalty
or excise tax provisions of the
Code relating to employee
benefit plans, or in the
imposition of any Lien on any
of the rights, properties or
assets of the Company or any
ERISA Affiliate pursuant to
Title I or IV of ERISA or such
penalty or excise tax
provisions, if such liability
or lien, taken together with
any other such liabilities or
liens then existing, would
reasonably be expected to have
a material adverse effect.
SECTION 7. Events of Default and
Remedies Therefor.
7.1 Events of Default.
Any one or more of the following
shall constitute an "Event of
Default" as the term is used herein:
(a) The Company
shall fail to make payment of
interest on any Note or of the
Make-Whole Premium on any Note
when the same shall become due
and such default shall continue
for a period of more than five
days; or
(b) The Company
shall fail to make any payment
of the principal of any Note at
the expressed or any
accelerated maturity date or at
any date fixed for payment
therefor in accordance with
this Agreement; or
(c) Default shall
occur in the observance or
performance of any other
provision of this Agreement,
any Note or any other
certificates or agreements
furnished by the Company
pursuant hereto which is not
remedied within 30 days; or
(d) If any
representation or warranty made
by the Company herein, or made
by the Company in any statement
or certificate furnished by the
Company in connection with the
consummation of the issuance
and delivery of the Notes or
furnished by the Company
pursuant hereto, is untrue or
misleading in any material
respect as of the date of the
issuance or making thereof; or
(e) The Company or
any Subsidiary shall fail to
pay any principal of, or any
interest when due on any
Indebtedness (or guaranty of
Indebtedness) of the Company or
such Subsidiary having an
aggregate principal amount in
excess of $20,000,000; or
(f) Any default
(matured or unmatured) or other
event or condition shall occur
or exist under or in respect of
any indebtedness (including in
connection with guarantees and
capitalized leases) of the
Company or any Subsidiary with
a principal amount in excess of
$20,000,000, or under any
agreement securing or relating
to such indebtedness and such
default, event or condition
shall cause the holder or
holders of such indebtedness to
accelerate the maturity of such
indebtedness or otherwise to
demand immediate repayment
thereof; or
(g) The Company or
any Material Restricted
Subsidiary becomes insolvent or
bankrupt, is generally not
paying its debts as they become
due or makes an assignment for
the benefit of creditors, or
the Company or any Material
Restricted Subsidiary applies
for or consents to the
appointment of a trustee or
receiver for the Company or
such Subsidiary or for the
major part of the property of
either; or
(h) A custodian,
trustee or receiver is
appointed for the Company or
any Material Restricted
Subsidiary or for the major
part of the property of either
and is not discharged within 60
days after such appointment; or
(i) Bankruptcy,
reorganization, arrangement or
insolvency proceedings, or
other proceedings for relief
under any bankruptcy or similar
law or laws for the relief of
debtors, are instituted by or
against the Company or any
Material Restricted Subsidiary
and, if instituted against the
Company or any Material
Restricted Subsidiary, are
consented to or are not
dismissed within 60 days after
such institution; or
(j) Final judgment
or judgments for the payment of
money aggregating in excess of
$20,000,000 is or are out
-standing against the Company or
any Subsidiary or against any
property or assets of either
and any one of such judgments
has remained unpaid, unvacated,
unbonded or unstayed by appeal
or otherwise for a period of 60
days from the date of its
entry.
7.2 Acceleration of
Maturities. (a) When any Event of
Default described in Section 7.1(a)
or (b) has occurred and is
continuing or any Event of Default
has been declared pursuant to
subparagraph (c) below, any holder
of any Note may, by notice in
writing sent by registered or
certified mail to the Company,
declare the entire principal and all
interest accrued on such Note to be,
and such Note shall thereupon
become, forthwith due and payable,
without any presentment, demand,
protest or other notice of any kind
all of which are hereby expressly
waived by the Company; provided,
however, that if within 30 days
thereof, such default has been cured
and if the holders of at least
two-thirds of the aggregate
principal amount of all Notes then
outstanding consent, such Event of
Default shall not be deemed to have
occurred.
(b) When any Event
of Default described in Sections
7.1(g), (h), or (i) has occurred,
then the Notes shall immediately
become due and payable without
presentment, demand or notice of any
kind or any other action on the part
of the Purchasers.
(c) When any Default
described in Sections 7.1(c), (d),
(e) (f) or (j) has occurred and is
continuing, an Event of Default may
be declared upon written notice of
such action to the Company,
consented to by the holders of at
least two-thirds of the aggregate
principal amount of all Notes then
outstanding.
Upon any of the Notes
becoming due and payable as a result
of any Event of Default as
aforesaid, the Company will
forthwith pay to the holder of such
Notes the entire principal and
interest accrued on the Notes. No
course of dealing on the part of the
Purchasers or the holders of any
Notes nor any delay or failure the
part of the Purchasers or the
holders of any Notes to exercise any
right shall operate as a waiver of
such right or otherwise prejudice
such Purchaser's or holder's rights,
powers and remedies. The Company
further agrees, to the extent
permitted by law, to pay any
Purchaser of the Notes all costs and
expenses incurred by it in the
collection of the Notes upon any
Event of Default occurring hereunder
or thereon, including reasonable
compensation to such holder's
attorneys for all services rendered
in connection therewith.
SECTION 8. Interpretation of
Agreement; Definitions.
8.1 Accounting
Principles. Where the character or
amount of any asset or liability or
item of income or expense is
required to be determined or any
consolidation or other accounting
computation is required to be made
for the purposes of this Agreement,
the same shall be done in accordance
with generally accepted accounting
principles or, if appropriate, the
rules and regulations of the SEC to
the extent applicable, except where
such principles are inconsistent
with the requirements of this
Agreement.
8.2 Directly or
Indirectly. Where any provision in
this Agreement refers to an action
to be taken by any Person, or to an
action which such Person is
prohibited from taking, such
provision shall be applicable
whether the action in question is
taken directly or indirectly by such
Person.
8.3 Definitions. Unless
the context otherwise requires, the
terms hereinafter set forth when
used herein shall have the following
meanings and the following
definitions shall be equally
applicable to both the singular and
plural forms of any of the terms
herein defined:
"Affiliate" shall mean any
Person (other than a Subsidiary)
which directly or indirectly through
one or more intermediaries controls,
or is controlled by, or is under
common control with, the Company. A
Person shall be deemed to control
another person if the controlling
Person possesses, directly or
indirectly, the power to direct or
cause the direction of the
management and policies of the
controlled Person, whether through
the ownership of Voting Stock or by
membership, contract or otherwise.
"Agreement" means this
Note Purchase Agreement, as it may
be amended, modified or supplemented
from time to time and in effect.
"Business Day" shall mean
any day other than a Saturday, a
Sunday or a day on which commercial
banks in New York City are required
or authorized to be closed.
"Code" shall mean the
Internal Revenue Code of 1986, as
amended (or any subsequent Federal
income tax statute or code).
"Company" has the meaning
given to that term in the
introduction to this Agreement, and
shall include the permitted
successors and assigns of the
Company.
"Consolidated Revenues"
shall mean revenues of the Company
and its Restricted Subsidiaries
determined on a consolidated basis
in accordance with generally
accepted accounting principles.
"Current Indebtedness"
shall mean, at any date, the
consolidated current obligations for
borrowed money of the Company and
its Restricted Subsidiaries as shown
on their books and records, less the
current portion of Funded
Indebtedness included therein.
"Date of Issue" has the
meaning given to that term in
Section 1.1.
"Default" shall mean any
event or condition, the occurrence
of which constitutes or would, with
the lapse of time or the giving of
notice, or both, constitute an Event
of Default.
"ERISA" has the meaning
given to that term in Section 3.12.
"ERISA Affiliate" means
any corporation or trade or business
(whether or not incorporated) which
is, along with the Company, a member
of a controlled group of
corporations or a group of
businesses which are under common
control for any purpose within the
meanings of Sections 414(b) and
414(c), respectively, of the Code.
"Environmental Laws" means
all federal, state and local laws,
statutes, common law duties, rules,
regulations, ordinances and codes,
together with all administrative
orders, directed duties, requests,
licenses, authorizations and permits
of, and agreements with, any
judicial, regulating or other
governmental authority, in each case
relating to environmental, health,
safety and land use matters.
"Event of Default" has the
meaning given to that term in
Section 7.1.
"Excess Proceeds" as of
the date of any asset sale
disposition shall mean the sum of
the net proceeds received by the
Company and its Restricted
Subsidiaries from all sales or other
dispositions of assets during the
fiscal year which exceeds an amount
equal to 20% of the Company's and
its Restricted Subsidiaries Total
Assets measured as of the prior
fiscal year end minus an amount
equal to the net proceeds arising on
account of prior asset dispositions
during such fiscal year which have
been reinvested in the ordinary
course of business or which are then
held by the Company or a Restricted
Subsidiary for such reinvestment
purpose.
"Funded Indebtedness"
shall mean Indebtedness of the
Company and its Restricted
Subsidiaries with an original term
to maturity of greater than one
year.
"Guarantee" by any Person
means any obligation, contingent or
otherwise, of such Person directly
or indirectly guaranteeing any
Indebtedness of any other Person or
in any manner providing for the
payment of any Indebtedness of any
other Person or otherwise protecting
the holder of such Indebtedness
against loss (whether by agreement
to keepwell, to purchase assets,
goods, securities, services, or to
take-or-pay or otherwise); provided
that the term Guarantee shall not
include endorsements for collection
or deposits in the ordinary course
of business, or amounts due
contingently or otherwise with
respect to obligations of Lake
Superior Paper Industries, a former
joint venture of the Company or
Flambeau Paper Corp., a former
subsidiary of the Company. The term
"Guarantee" used as a verb has a
correlative meaning.
"Indebtedness" of any
Person means at any date, without
duplication, (i) all obligations of
such Person for borrowed money, (ii)
all obligations of such Person
evidenced by bonds, debentures,
notes or other similar instruments,
(iii) all obligations of such Person
to pay the deferred purchase price
of property or services, except
trade account payable arising in the
ordinary course of business, (iv)
all obligations of such Person as
lessee under capital leases, (v) all
debt of others secured by a Lien on
any asset of such Person, whether or
not such Debt is assumed by such
Person, (vi) all non-contingent
reimbursement obligations of such
Person under letters of credit, and
(vii) and Guarantees of such Person.
For purposes of this definition,
Guarantees shall be included in the
definition of Indebtedness only to
the extent that such liabilities
exceed 10% of Net Worth.
"Institutional Investor"
has the meaning given to the term
"qualified institutional buyer" in
rule 144A of the Securities Act of
1933, as amended, and any other
rules, regulations and releases
promulgated thereunder.
"Make-Whole Premium"
means, with respect to any Note, an
amount equal to the excess, if any,
of the Discounted Value of the
Remaining Scheduled Payments with
respect to the Called Principal of
such Note over the amount of such
Called Principal, provided that the
Make-Whole Amount may in no event be
less than zero. For the purposes of
determining the Make-Whole Amount,
the following terms have the
following meanings:
"Called Principal" means,
with respect to any Note, the
principal of such Note that is
to be prepaid pursuant to
Section 2.2 or has become or is
declared to be immediately due
and payable pursuant to Section
7.2.
"Discounted Value" means,
with respect to the Called
Principal of any Note, the
amount obtained by discounting
all Remaining Scheduled
Payments with respect to such
Called Principal from their
respective scheduled due dates
to the Settlement Date with
respect to such Called
Principal, in accordance with
accepted financial practice and
at a discount factor (applied
on the same periodic basis as
that on which interest on the
Notes is payable) equal to the
Reinvestment Yield with respect
to such Called Principal.
"Reinvestment Yield"
means, with respect to the
Called Principal of any Note,
50 basis points over the yield
to maturity implied by (I) the
yields reported, as of 10:00
A.M. (New York City time) on
the second Business Day
preceding the Settlement Date
with respect to such Called
Principal, in the display
designated as "Page 678" on the
Telerate Access Service (or
such other display as may
replace Page 678 on Telerate
Access Service) for actively
traded U.S. Treasury securities
having a maturity equal to the
Remaining Average Life of such
Called Principal as of such
Settlement Date, or (ii) if
such yields are not reported as
of such time or the yields
reported as of such time are
not ascertainable, the Treasury
Constant Maturity Series Yields
reported, for the latest day
for which such yields have been
so reported as of the second
Business Day preceding the
Settlement Date with respect to
such Called Principal, in
Federal Reserve Statistical
Release H.15 (519) (or any
comparable successor
publication) for actively
traded U.S. Treasury securities
having a constant maturity
equal to the Remaining Average
Life of such Called Principal
as of such Settlement Date.
Such implied yield will be
determined, if necessary, by
(a) converting U.S. Treasury
bill quotations to bond-equivalent yields in accordance
with accepted financial
practice and (b) interpolating
linearly between (1) the
actively traded U.S. Treasury
security with the duration
closest to and greater than the
Remaining Average Life and (2)
the actively traded U.S.
Treasury security with the
duration closes to and less
than the Remaining Average
Life.
"Remaining Average Life"
means, with respect to any
Called Principal, the number of
years (calculated to the
nearest one-twelfth year)
obtained by dividing (I) such
Called Principal into (ii) the
sum of the products obtained by
multiplying (a) the principal
component of each Remaining
Scheduled Payment with respect
to such Called Principal by (b)
the number of years (calculated
to the nearest one-twelfth
year) that will elapse between
the Settlement Date with
respect to such Called
Principal and the scheduled due
date of such Remaining
Scheduled Payment.
"Remaining Scheduled
Payments" means, with respect
to the Called Principal of any
Note, all payments of such
Called Principal and interest
thereon that would be due after
the Settlement Date with
respect to such Called
Principal if no payment of such
Called Principal were made
prior to its scheduled due
date, provided that if such
Settlement Date is not a date
on which interest payments are
due to be made under the terms
of the Notes, then the amount
of the next succeeding
scheduled interest payment will
be reduced by the amount of
interest accrued to such
Settlement Date and required to
be paid on such Settlement Date
pursuant to Section 2.2 or 7.2.
"Settlement Date" means,
with respect to the Called
Principal of any Note, the date
on which such Called Principal
is to be prepaid pursuant to
Section 2.2 or has become or is
declared to be immediately due
and payable pursuant to Section
7.2.
"Material Restricted
Subsidiary" means at any time any
Restricted Subsidiary that would at
such time constitute a "significant
subsidiary" (as such term is defined
Regulation S-X of the SEC as in
effect on the initial Date of
Issue).
"Maturity Date" has the
meaning given to that term in
Section 1.1.
"Net Worth" shall mean the
total stockholders' equity of the
Company computed in accordance with
generally accepted accounting
principles.
"Notes" has the meaning
given to that term in Section 1.1.
"Person" shall mean an
individual, partnership,
corporation, trust or unincorporated
organization, and any governmental
agency or political subdivision
thereof.
"PBGC" means the Pension
Benefit Guaranty Corporation or any
governmental authority succeeding to
the functions thereof.
"Purchasers" has the
meaning given to that term in
Section 1.1, and shall include the
successors and assigns of the
Purchasers, or of any of them.
"Receivables
Securitization Programs" shall mean
receivables financings accounted for
as sales under generally accepted
accounting principles, provided that
the aggregate unrecovered investment
of the purchasers of such
receivables shall not at any time
during any fiscal year exceed 10% of
the Consolidated Revenues of the
Company and its Restricted
Subsidiaries for the preceding
fiscal year.
"Remaining Life to
Maturity" of the principal amount of
any Note being prepaid shall mean,
as of the time of any determination
thereof, the number of months from
the date of such determination to
the Maturity Date.
"Responsible Officer"
shall mean the Chief Executive
officer, President, Executive Vice
President, any Vice President or the
Treasurer of the Company.
"Restricted Subsidiary"
shall mean, any Person, any
corporation, association or other
business entity in which such Person
or one or more of its Subsidiaries
or such Person and one or more of
its Subsidiaries owns sufficient
equity or voting interests to enable
it or them (as a group) ordinarily,
in the absence of contingencies, to
elect a majority of the directors
(or Persons performing similar
functions) of such entity, and any
partnership or joint venture if more
than a 50% interest in the profits
or capital thereof is owned by such
Person or one or more of its
Subsidiaries or such Person and one
or more of its Subsidiaries (unless
such partnership can and does
ordinarily take major business
actions without the prior approval
of such Person or one or more of its
Subsidiaries). Unless the context
otherwise clearly requires, any
reference to a "Subsidiary" is a
reference to a Subsidiary of the
Company.
"SEC" has the meaning
given to that term in Section 3.3.
"Security" shall have the
same meaning as in Section 2(1) of
the Securities Act of 1933, as
amended.
"Senior Financial Officer"
shall mean the Chief Executive
Officer, President, Executive Vice
President, Chief Financial Officer,
any Vice President, the Vice
President-Treasurer or Vice
President-Controller of the Company.
"Statistical Release"
shall mean the statistical release
designated "H.15(519)" or any
successor publication which is
published weekly by the Federal
Reserve System and which establishes
yields on actively traded United
States Government Securities
adjusted to constant maturities or,
if such statistical release is not
published at the time of any
determination hereunder, then any
other reasonably comparable index.
"Subsidiary" means any
Person, any existing or future
corporation, association or other
business entity, the majority of the
outstanding capital stock or voting
power, or both, of which is (or upon
the exercise of all outstanding
warrants, options and other rights
would be) owned at the time in
question by the Company and/or one
or more corporations which are
themselves Subsidiaries of the
Company.
"Total Assets" shall mean
the total assets of the Company and
its Restricted Subsidiaries on a
consolidated basis or, in the event
that the Company shall no longer be
required to file periodic reports
with the SEC, in the most recent
audited financial statement
delivered to the Purchasers pursuant
to Section 6.4 hereof.
"Total Capitalization"
shall mean the sum of Net Worth,
Funded Indebtedness (to include
Current Indebtedness where such
indebtedness is added to Funded
Indebtedness to calculate covenant
compliance) of the Company and its
Restricted Subsidiaries.
"Unrestricted Subsidiary"
shall mean any Subsidiary either (i)
of which 50% or less is owned
(directly or indirectly) by the
Company or (ii) which is then
designated by the Company at the
time as an Unrestricted Subsidiary
in accordance with the following
paragraph:
so long as no Event of
Default shall have occurred and be
continuing, a Senior Financial
Officer may at any time and from
time to time, upon not less than 30
days' prior written notice given to
each holder of a Note, designate a
previously Unrestricted Subsidiary
as a Restricted Subsidiary, or
designate a previously Restricted
Subsidiary as an Unrestricted
Subsidiary; provided that
immediately after such designation
and after giving effect thereto, no
Event of Default shall have occurred
and be continuing. Any election
regarding a change in the status of
a Subsidiary hereunder shall be
irrevocable except as the holders of
at least two-thirds of the aggregate
principal amount of all Notes then
outstanding may otherwise agree.
"Voting Stock" shall mean
Securities of any class or classes,
the holders of which are ordinarily,
in the absence of contingencies,
entitled to elect a majority of the
corporate directors (or Persons
performing similar functions).
SECTION 9. Miscellaneous.
9.1 Registered Notes;
Several Obligations of Purchasers.
(a) The Company
shall cause to be kept at its
principal office a register for the
registration and transfer of the
Notes, and the Company shall
register or transfer or cause to be
registered or transferred, as
hereinafter provided and under such
reasonable regulations as it may
prescribe, the Notes issued pursuant
to this Agreement.
(b) Subject to the
limitations contained in this
Agreement, at any time, and from
time to time, the registered holder
of any Note may transfer such Note,
upon surrender thereof at the
principal office of the Company duly
endorsed or accompanied by a written
instrument of transfer duly executed
by the registered holder of such
Note or its attorney duly authorized
in writing.
(c) The Person in
whose name any Note shall be
registered shall be deemed and
treated as the owner and holder
thereof for all purposes of this
Agreement. Payment of or on account
of the principal, premium, if any,
and interest on any registered Note
shall be made upon the written order
of such registered holder.
(d) If there shall
at any time exist more than one
Purchaser, the obligations of each
Purchaser shall be several and not
joint and no Purchaser shall be
liable or responsible for the acts,
representations, covenants or other
agreements of any other Purchaser.
9.2 Transfer and
Exchanges of Notes. Subject to
Section 4, any Purchaser of the
Notes may at any time transfer the
Notes, or any of them, to another
Institutional Investor in an amount
equal to the lesser of (i) the
principal amount of all Notes held
by such Purchaser or (ii)
$1,000,000; provided that,
notwithstanding the foregoing, no
Purchaser may at any time transfer
the Notes, or any of them, to any
Person that directly or indirectly
through one of its Affiliates
competes with the Company, or any of
the Company's Subsidiaries, in their
respective lines of business without
the prior written consent of the
Company (which consent shall not be
unreasonably withheld). At any
time, and from time to time, upon
not less than ten days' notice to
that effect given by the holder of
any Note initially delivered or of
any Note substituted therefor
pursuant to this Agreement, and,
upon surrender of such Note at its
office, the Company will deliver in
exchange therefor, without expense
to the holder, except as set forth
below, Notes for the same aggregate
principal amount as the then unpaid
principal amount in excess thereof
as such holder shall specify (or if
the aggregate principal of the Note
or Notes held by such holder is less
than $100,000, then in the
denomination of such principal
amount), dated as of the date to
which interest has been paid on the
Note so surrendered or, if such
surrender is prior to the payment of
any interest thereon, then dated as
of the date of issue, registered in
the name of such Person or Persons
as may be designated by such holder,
and otherwise of the same form and
tenor as the Note so surrendered for
exchange.
9.3 Loss, Theft, Etc, of
Notes. Upon receipt of evidence
satisfactory to the Company of the
loss, theft, mutilation or
destruction of any Note, and in the
case of any such loss, theft,
mutilation or destruction upon
delivery of a bond of indemnity in
such form and amount as shall be
reasonably satisfactory to the
Company, or in the event of such
mutilation upon surrender and
cancellation of any Note, the
Company will make and deliver
without expense to the holder
thereof, a new Note, of tenor, in
lieu of such lost, stolen, destroyed
or mutilated Note. If the Purchaser
or any subsequent Institutional
Investor is the owner of any such
lost, stolen or destroyed Note, then
an affidavit of an authorized
officer of such owner, setting forth
the fact of loss, theft or
destruction and of its ownership of
the Note at the time of such loss,
theft or destruction shall be
accepted as satisfactory evidence
thereof and no further indemnity
shall be required.
9.4 Expense; Stamp Tax
Indemnity. Whether or not the
transactions herein contemplated
shall be consummated, the Company
agrees to pay directly all of the
Purchasers' out-of-pocket expenses
(including, without limitation, the
reasonable fees and expenses of
Winston & Strawn, special counsel to
the Purchasers) in connection with
the preparation, negotiation,
documentation, execution and
delivery of the Notes, this
Agreement, and the transactions
contemplated hereby and thereby,
duplicating and printing costs and
charges for shipping the Notes,
adequately insured to each Purchaser
at its respective home office or at
such other place as such Purchaser
may designate, and so long as such
Purchaser holds the Notes, all
expenses (including legal fees)
relating to any amendment, waivers
or consents pursuant to the
provision hereof. The Company also
agrees that it will pay and save
each Purchaser harmless against any
and all liability with respect to
stamp and other taxes (other than
income taxes), if any, which may be
payable or which may be determined
to be payable in connection with the
execution and delivery of this
Agreement whether or not the Notes
are outstanding. The Company agrees
to protect and indemnify each
Purchaser against any liability for
any and all brokerage fees and
commissions payable or claimed to be
payable to any Person for
representation of the Company
(including First Chicago Capital
Markets, Inc. in connection with the
transactions contemplated by this
Agreement.
9.5 Amendments, Waivers
and Consents. (a) Any term,
covenant, agreement or condition of
this Agreement may, with the consent
of the Company, be amended or
compliance therewith may be waived
(either generally or in a particular
instance and either retroactively or
prospectively), if the Company shall
have obtained the consent in writing
of the holders of at least 66-2/3%
in aggregate principal amount of
outstanding Notes; provided that
without the written consent of the
holders of all of the Notes then
outstanding, no such waiver,
modification, alteration or
amendment shall be effective (i)
which will change the time of
payment of the principal of or the
interest on any Note or reduce the
principal amount thereof or change
the rate of interest thereon, (ii)
which will change any of the
provisions with respect to
prepayments under Section 2, (iii)
which will change the percentage of
holders of the Notes required to
consent to any such amendment,
alteration or modification or (iv)
which will amend any of the
provisions of Section 6.12, Section
7 or this Section 9.5; provided,
however, that notwithstanding the
foregoing, any Default or Event of
Default described in Section 7.1(c),
(d), (e), (f) or (j) may be waived
if the Company shall have obtained
the waiver in writing of the holders
of at least 66-2/3% in aggregate
principal amount of the Notes then
outstanding.
(b) The Company will
not solicit, request or negotiate
for or with respect to any proposed
waiver or amendment of any of the
provisions of this Agreement or the
Notes unless each holder of the
Notes (irrespective of the amount of
Notes then owned by it) shall be
informed thereof by the Company and
shall be afforded the opportunity of
considering the same and shall be
supplied by the Company with any
information it may reasonably
request to make an informed decision
with respect thereto. Executed or
true and correct copies of any
waiver or consent effected pursuant
to the provisions of this Section
9.5 shall be delivered by the
Company to each holder of
outstanding Notes forthwith
following the date on which the same
shall have been executed and
delivered by the holder or holders
of the requisite percentage of
outstanding Notes. The Company will
not, directly or indirectly, pay or
cause to be paid any remuneration,
whether by way of supplemental or
additional interest, fee or
otherwise, or grant any security
interest in any property to any
holder of the Notes or any waiver or
amendment of any of the terms and
provisions of this Agreement unless
such remuneration is concurrently
paid or such security interest is
concurrently and ratably granted, on
the same terms, ratably to the
holders of all of the Notes then
outstanding.
(c) Any such
amendment or waiver shall apply
equally to all of the holders of the
Notes and shall be binding upon
them, upon each future holder of any
Note and upon the Company, whether
or not such Note shall have been
marked to indicate such amendment or
waiver. No such amendment or waiver
shall extend to or affect any
obligation not expressly amended or
waived or impair any right
consequent thereon.
9.6 Powers and Rights Not
Waived; Remedies Cumulative. No
delay or failure on the part of the
holder of any Note in the exercise
of any power or right shall operate
as a waiver thereof; nor shall any
single or partial exercise of the
same preclude any other or further
exercise thereof, or the exercise of
any other power or right, and the
rights and remedies of the holder of
any Note are cumulative and are not
exclusive of any rights or remedies
any such holder would otherwise
have, and no waiver or consent shall
extend to or affect any obligation
or right not expressly waived or
consented to.
9.7 Notices. All
communications provided for
hereunder shall be in writing and,
if to a particular Purchaser,
delivered by overnight or same day
courier or mailed by registered or
certified mail, addressed to such
Purchaser at its address appearing
on Schedule I to this Agreement or
such other address as such
Purchaser, or the subsequent holder
of the Notes initially issued to
such Purchaser, may designate to the
Company in writing, and if to the
Company, delivered or mailed by
registered or certified mail to:
Pentair, Inc.
1500 County Road B2 West
St. Paul, Minnesota 55113
Attn: Chief Financial Officer
or to such other address as the
Company may in writing designate to
the Purchasers or to a subsequent
holder of the Notes initially issued
to the Purchasers.
9.8 Successors and
Assigns. This Agreement shall be
binding upon the Company and its
successors and assigns and shall
inure to the Purchasers' benefit and
to the benefit of the Purchasers'
successors and assigns, including
each successive holder or holders of
the Notes, and if any subsequent
holder of any Note or Notes shall
have presented the same to the
Company for inspection, accompanied
by a written designation of the
address to which notice in respect
of a Note or Notes of such holder is
to be given, then wherever in this
Agreement it is provided that notice
shall be given to the holders of
Notes, the notice in respect of the
Notes so presented shall be
addressed to such holder at the
address so given.
9.9 Survival of Covenants
and Representations. All covenants,
representations and warranties made
by the Company herein and in any
certificate delivered pursuant
hereto, whether or not in connection
with the closing, shall survive the
closing and the delivery of this
Agreement and the Notes. In
addition, the right to take any
action, including, without
limitation, instituting any legal
proceeding based upon any breach of
the representations and warranties
made by the Company herein, in the
Notes, this Agreement and in any
certificate delivered pursuant
thereto, whether or not in
connection with the closing, shall
survive the closing and the delivery
of this Agreement and the Notes.
9.10 Severability. Should
any part of this Agreement for any
reason be declared invalid, such
decision shall not affect the
validity of any remaining portion,
which remaining portion shall remain
in full force and effect as if this
Agreement had been executed with the
invalid portion thereof eliminated
and it is hereby declared the
intention of the parties hereto that
they would have executed the
remaining portions of this Agreement
without including therein any such
part, parts, or portion which may,
for any reason, be hereafter
declared invalid.
9.11 Governing Law. This
Agreement and the Notes issued and
sold hereunder shall be governed by
and construed in accordance with the
internal laws of the State of
Minnesota, and not by the conflicts
of law principles of such state.
9.12 Counterparts. This
Agreement may be executed in any
number of counterparts, each
executed counterpart constituting an
original but all together only one
agreement.
9.13 Captions. The
descriptive headings of the various
Sections or parts of this Agreement
are for convenience only and shall
not affect the meaning or
construction of any of the
provisions hereof.
[signature pages follow]
The execution hereof by
the Purchasers shall constitute a
contract between the Company and the
Purchasers for the uses and purposes
set forth herein, and this Agreement
may be executed in any number of
counterparts, each executed
counterpart constituting an original
but all together only one agreement.
PENTAIR, INC.
By:________________________________
Its:_______________________________
AMERICAN UNITED LIFE INSURANCE
COMPANY
By:________________________________
Its:_______________________________
EMPLOYERS LIFE INSURANCE COMPANY OF
WAUSAU
By:________________________________
Its:_______________________________
KNIGHTS OF COLUMBUS
By:________________________________
Its:_______________________________
LUTHERAN BROTHERHOOD
By:________________________________
Its:_______________________________
MUTUAL OF OMAHA INSURANCE COMPANY
By:________________________________
Its:_______________________________
NATIONWIDE LIFE INSURANCE COMPANY
By:________________________________
Its:_______________________________
THE STATE LIFE INSURANCE COMPANY
By:________________________________
Its:_______________________________
UNITED OF OMAHA LIFE INSURANCE
COMPANY
By:________________________________
Its:_______________________________
WEST COAST LIFE INSURANCE COMPANY
By:________________________________
Its:_______________________________
SCHEDULE I
(to Note Purchase Agreement)
Name and Address
of Purchaser
American United Life Insurance
Company
One American Square
Post Office Box 368
Indianapolis, Indiana 46206
Attn: Christopher D. Pahlke,
Securities Department
Principal Amount of Series A
Notes to be Purchaed
$6,000,000
Principal Amount of Series B
Notes to be Purchaed
$0
Principal Amount of Series C
Notes to be Purchaed
$0
Payments
All payments on or in
respect of the Notes to be
by bank wire transfer of
Federal or other
immediately available funds
(identifying each payment
as Pentair, Inc. 6.99%
Senior A Notes due 2007,
principal or interest,
Pentair, Inc. 6.79% Senior
B Notes due 2004, principal
or interest, or Pentair,
Inc. 6.74% Senior C Notes
due 2004, principal or
interest) to:
Bank of New York
One Wall Street
3rd Floor, Window A
New York, NY 10286
ABA # 021000018
For credit to: American
United Life, Acct. #186683
Notices
All notices and
communications to this
Purchaser should be
addressed as first provided
above, except notice with
respect to payment, and
written confirmation of
each such payment, to be
addressed:
American United Life
Insurance Company
One American Square
Indianapolis, IN 46282
Taxpayer I.D. #35-0145825
SCHEDULE I
(to Note Purchase Agreement)
(continued)
Name and Address
of Purchaser
Employers Life Insurance
Company of Wausau
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2210
Attention: Corporate Fixed-
Income Securities
Principal Amount of Series A
Notes to be Purchaed
$3,000,000
Principal Amount of Series B
Notes to be Purchaed
$0
Principal Amount of Series C
Notes to be Purchaed
$0
Payments
All payments on or in
respect of the Notes to be
by bank wire transfer of
Federal or other
immediately available
funds (identifying each
payment as Pentair, Inc.
6.99% Senior A Notes due
2007, principal or
interest, Pentair, Inc.
6.79% Senior B Notes due
2004, principal or
interest, or Pentair, Inc.
6.74% Senior C Notes due
2004, principal or
interest) to:
The Bank of New York
P.O. Box 19266
Attention: P&I Department
Newark, New Jersey 07195
ABA # 021-000-018
For credit to:
BNF: IOC566, F/A/O
Employers Life Custody A/C
#267827
Attention: P&I Department
Notices
All notices and
communications to this
Purchaser should be
addressed as first
provided above, except
notice with respect to
payment, and written
confirmation of each such
payment, to be addressed:
Employers Life Insurance
Company of Wausau
200 Westwood Drive
Wausau, Wisconsin 54401
Attention: Ms. Cindy
Peterson
Taxpayer I.D. # 39-1049873
SCHEDULE I
(to Note Purchase Agreement)
(continued)
Name and Address
of Purchaser
Knights of Columbus
One Columbus Plaza
New Haven, Connecticut 06510-3326
Attn: Investment Department
Telecopier#: (203) 772-0037
Principal Amount of Series A
Notes to be Purchaed
$4,000,000
Principal Amount of Series B
Notes to be Purchaed
$2,000,000
Principal Amount of Series C
Notes to be Purchaed
$0
Payments
All payments on or in
respect of the Notes to be
by bank wire transfer of
Federal or other
immediately available
funds (identifying each
payment as Pentair, Inc.
6.99% Senior A Notes due
2007, principal or
interest, Pentair, Inc.
6.79% Senior B Notes due
2004, principal or
interest, or Pentair, Inc.
6.74% Senior C Notes due
2004, principal or
interest) to:
Bank of New York
One Wall Street
New York, NY 10286
ABA # 021-000-018
For credit to: Knights of
Columbus General Account,
Account #8900300825
Notices
All notices and
communications to this
Purchaser should be
addressed as first
provided above, except
notice with respect to
payment, and written
confirmation of each such
payment, to be addressed:
Knights of Columbus
P.O. Box 2016
New Haven, CT 06521-2016
Attn: Accounting Department
Taxpayer I.D. # 06-0416470
SCHEDULE I
(to Note Purchase Agreement)
(continued)
Name and Address
of Purchaser
Lutheran Brotherhood
625 Fourth Avenue South
10th Floor
Minneapolis, Minnesota 55415
Attention: Investment Division
Telecopier: (612) 340-5776
Principal Amount of Series A
Notes to be Purchaed
$4,000,000
Principal Amount of Series B
Notes to be Purchaed
$3,000,000
Principal Amount of Series C
Notes to be Purchaed
$0
Payments
All payments on or in
respect of the Notes to be
by bank wire transfer of
Federal or other
immediately available
funds (identifying each
payment as Pentair, Inc.
6.99% Senior A Notes due
2007, Private Placement
Number 709631D*3,
principal or interest, or
Pentair, Inc. 6.79% Senior
B Notes due 2004, Private
Placement Number
709631D@1, principal or
interest, to:
Norwest Bank Minnesota,
N.A.
P.O. Box 1450
NW9919
Minneapolis, MN 55485
ABA # 091000019
For credit to:
Trust Clearing Account
#08-40-245
Attn: Income Collection
For credit to: Lutheran
Brotherhood, Acct. No.
12651300
Notices
All notices and
communications to this
Purchaser should be
addressed as first
provided above, except
notice with respect to
payment, and written
confirmation of each such
payment, to be addressed:
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, MN 55415
Taxpayer I.D. # 41-0385700
SCHEDULE I
(to Note Purchase Agreement)
(continued)
Name and Address
of Purchaser
Mutual of Omaha Insurance
Company
Mutual of Omaha Plaza
Omaha, Nebraska 68175
Attention: Investment Division
Principal Amount of Series A
Notes to be Purchaed
$0
Principal Amount of Series B
Notes to be Purchaed
$0
Principal Amount of Series C
Notes to be Purchaed
$5,000,000
Payments
All payments on or in
respect of the Notes to be
by bank wire transfer of
Federal or other
immediately available
funds (identifying each
payment as Pentair, Inc.
6.99% Senior A Notes due
2007, principal or
interest, Pentair, Inc.
6.79% Senior B Notes due
2004, principal or
interest, or Pentair, Inc.
6.74% Senior C Notes due
2004, principal or
interest) to:
First National Bank Omaha
16th & Dodge Street
Omaha, NE 68102
ABA # 1040-00016
For credit to: Mutual of
Omaha Insurance Company,
Account # 26-743587
Notices
All notices and
communications to this
Purchaser should be
addressed as first
provided above, except
notice with respect to
payment, and written
confirmation of each such
payment, to be addressed:
Mutual of Omaha Insurance
Company
Mutual of Omaha Plaza
Omaha, NE 68175
Attention: Investments/
Securities Accounting
Taxpayer I.D. # 47-0246511
SCHEDULE I
(to Note Purchase Agreement)
(continued)
Name and Address
of Purchaser
Nationwide Life Insurance
Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2210
Attention: Corporate Fixed-
Income Securities
Principal Amount of Series A
Notes to be Purchaed
$15,000,000
Principal Amount of Series B
Notes to be Purchaed
$0
Principal Amount of Series C
Notes to be Purchaed
$0
Payments
All payments on or in
respect of the Notes to be
by bank wire transfer of
Federal or other
immediately available
funds (identifying each
payment as Pentair, Inc.
6.99% Senior A Notes due
2007, principal or
interest, Pentair, Inc.
6.79% Senior B Notes due
2004, principal or
interest, or Pentair, Inc.
6.74% Senior C Notes due
2004, principal or
interest) to:
The Bank of New York
P.O. Box 19266
Attention: P&I Department
Newark, New Jersey 07195
ABA # 021-000-018
For credit to:
BNF: IOC566, F/A/O
Nationwide Life Insurance
Company
Attention: P&I Department
Notices
All notices and
communications to this
Purchaser should be
addressed as first
provided above, except
notice with respect to
payment, and written
confirmation of each such
payment, to be addressed:
Nationwide Life Insurance
Company
One Nationwide Plaza
(1-32-05)
Attention: Investment
Accounting
Taxpayer I.D. # 31-4156830
SCHEDULE I
(to Note Purchase Agreement)
(continued)
Name and Address
of Purchaser
The State Life Insurance
Company
c/o American United Life
Insurance Company
One American Square
Post Office Box 368
Indianapolis, Indiana 46206
Attn: Christopher D. Pahlke,
Securities Department
Principal Amount of Series A
Notes to be Purchaed
$1,000,000
Principal Amount of Series B
Notes to be Purchaed
$0
Principal Amount of Series C
Notes to be Purchaed
$0
Payments
All payments on or in
respect of the Notes to be
by bank wire transfer of
Federal or other
immediately available
funds (identifying each
payment as Pentair, Inc.
6.99% Senior A Notes due
2007, principal or
interest, Pentair, Inc.
6.79% Senior B Notes due
2004, principal or
interest, or Pentair, Inc.
6.74% Senior C Notes due
2004, principal or
interest) to:
The Bank of New York
One Wall Street
3rd Floor, Window A
New York, NY 10286
ABA # 021000018
For credit to: State Life,
c/o American United Life,
Acct. #343761
Notices
All notices and
communications to this
Purchaser should be
addressed as first
provided above, except
notice with respect to
payment, and written
confirmation of each such
payment, to be addressed:
American United Life
Insurance Company
One American Square
Indianapolis, IN 46282
Taxpayer I.D. #35-0684263
SCHEDULE I
(to Note Purchase Agreement)
(continued)
Name and Address
of Purchaser
United of Omaha Life Insurance
Company
Attn: Investment Division
Mutual Of Omaha Plaza
Omaha, Nebraska 68175
Principal Amount of Series A
Notes to be Purchaed
$0
Principal Amount of Series B
Notes to be Purchaed
$0
Principal Amount of Series C
Notes to be Purchaed
$5,000,000
Payments
All payments on or in
respect of the Notes to be
by bank wire transfer of
Federal or other
immediately available
funds (identifying each
payment as Pentair, Inc.
6.99% Senior A Notes due
2007, principal or
interest, Pentair, Inc.
6.79% Senior B Notes due
2004, principal or
interest, or Pentair, Inc.
6.74% Senior C Notes due
2004, principal or
interest) to:
First Bank, N.A.
17th & Farnam Streets
Omaha, Nebraska
ABA # 1040-0002-9
For credit to: United of
Omaha Life Insurance
Company, Account
# 1-487-1447-0769
Notices
All notices and
communications to this
Purchaser should be
addressed as first
provided above, except
notice with respect to
payment, and written
confirmation of each such
payment, to be addressed:
United of Omaha Life
Insurance Company
Attention:
Investments/Securities
Accounting
Mutual of Omaha Plaza
Omaha, NE 68173
Taxpayer I.D. # 47-0322111
SCHEDULE I
(to Note Purchase Agreement)
(continued)
Name and Address
of Purchaser
West Coast Life Insurance
Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2210
Attention: Corporate Fixed-
Income Securities
Principal Amount of Series A
Notes to be Purchaed
$2,000,000
Principal Amount of Series B
Notes to be Purchaed
$0
Principal Amount of Series C
Notes to be Purchaed
$0
Payments
All payments on or in
respect of the Notes to be
by bank wire transfer of
Federal or other
immediately available
funds (identifying each
payment as Pentair, Inc.
6.99% Senior A Notes due
2007, principal or
interest, Pentair, Inc.
6.79% Senior B Notes due
2004, principal or
interest, or Pentair, Inc.
6.74% Senior C Notes due
2004, principal or
interest) to:
The Bank of New York
P.O. Box 19266
Attention: P&I Department
Newark, New Jersey 07195
ABA # 021-000-018
For credit to:
BNF: IOC566, F/A/O West
Coast Life Insurance
Company
Attention: P&I Department
Notices
All notices and
communications to this
Purchaser should be
addressed as first
provided above, except
notice with respect to
payment, and written
confirmation of each such
payment, to be addressed:
West Coast Life Insurance
Company
One Nationwide Plaza
(1-32-05)
Columbus, Ohio 43215-2210
Attention: Investment
Accounting
Taxpayer I.D. # 94-0971150
Schedule 3.2
SUBSIDIARIES
All of the following are Restricted
Subsidiaries.
All of the following are
wholly-owned Subsidiaries of the
Company:
State or Other
Jurisdiction of
Incorporation
Subsidiary or Organization
Century Mfg. Co. Minnesota
Delta International Machinery Corp. Minnesota
Biesemeyer Manufacturing Corporation
Arizona
Pentair Canada, Inc.1 Ontario, Canada
Pentair Financial Services Ireland Ireland
EuroPentair GmbH Germany
FLEX Elektrowerkzeuge GmbH Germany
Lincoln GmbH2 Germany
Lincoln Czech Republic Czech Republic
Schroff GmbH Germany
Schroff Scandinavia AB Sweden
Schroff U.K. Ltd. United Kingdom
Hoffman Engineering Company Limited United Kingdom
Schroff S.A. France
Schroff Srl Italy
S.I.A.T.A. S.p.A. Italy
(Societa Italiana Apparecchiature
Trattamento Acqua, Societa per Azioni)
FC Holdings Inc. Delaware
Federal-Hoffman, Inc. Minnesota
Hoffman Engineering S.A. de C.V. Mexico
Schroff K.K. Japan
Schroff Co. Ltd. Taiwan
Schroff Inc. Rhode Island
Fleck Controls, Inc. Wisconsin
Fleck Europe, S.A.S. France
McNeil (Ohio) Corporation Minnesota
Aplex Industries, Inc. Texas
Apno S.A. de C.V. Mexico
Pentair Canada, Inc.1 Ontario, Canada
Pentair Financial Services Ireland Ireland
Pentair FSC Corporation U.S. Virgin Islands
Pentair Asia PTE Ltd. Singapore
Hoffman-Schroff PTE Ltd. Singapore
Penwald Insurance Co.3 Vermont
Porter-Cable Corporation Minnesota
__________________
1. Owned 50% by Delta
International Machinery
Corp. and 50% by McNeil
(Ohio) Corporation.
2. Owned 97% by EuroPentair
GmbH and 7% by McNeil
(Ohio) Corporation.
3. Owned 75% by Pentair,
Inc. and 25% by Pentair
Canada, Inc.
Schedule 3.3
FINANCIAL STATEMENT MATTERS
None
Schedule 3.5
PENDING LITIGATION
None
EXHIBIT A
(to Note Purchase Agreement)
FORM OF NOTE
THIS NOTE HAS NOT BEEN
REGISTERED UNDER THE
SECURITIES ACT OF 1933,
AS AMENDED, AND MAY BE
REOFFERED AND SOLD ONLY
IF REGISTERED PURSUANT TO
THE PROVISIONS OF SAID
SECURITIES ACT OR IF AN
EXEMPTION FROM
REGISTRATION IS
AVAILABLE.
PENTAIR, INC.
[6.99% Senior Notes, Series A]
[6.79% Senior Notes, Series B]
[6.74% Senior Notes, Series C]
[Due 2007] [Due 2004]
$____________ [Date of Issue]
Private Placement No.:_____________
PENTAIR, INC., a Minnesota
corporation (the "Company"), for
value received, hereby promises to
pay to _________________ (the
"Purchaser"), or its registered
assigns, on the __th day of January,
[2007] [2004], the principal amount
of
Dollars ($_________) and to
pay interest (computed on the basis
of a 360-day year of twelve 30-day
months) on the principal amount from
time to time remaining unpaid hereon
at the rate of [6.99%] [6.79%]
[6.74%] per annum from the date
hereof until maturity, payable
semi-annually in arrears on the first day
of each May and November in each
year commencing [May 1, 1997 for the
Series C Notes] [November 1, 1997
for each of the Series A Notes and
Series B Notes] and at maturity.
The Company agrees to pay interest
on overdue principal (including any
overdue optional prepayment of
principal) and premium, if any, and
(to the extent legally enforceable)
on any overdue installment of
interest, at the rate of [8.99%]
[8.79%] [8.74%] per annum after
maturity, whether by acceleration or
otherwise, until paid. Both the
principal hereof and interest hereon
are payable at the principal office
of the Company in St. Paul,
Minnesota in coin or currency of the
United States of America which at
the time of payment shall be legal
tender for the payment of public and
private debts.
This Note is one of the
[6.99%] [6.79%] [6.74%] Senior Notes
[Series A] [Series B] [Series C] of
the Company in the aggregate
principal amount of $35,000,000
issued or to be issued under and
pursuant to the terms and provisions
of that certain Note Purchase
Agreement dated as of January 24,
1997 by and between the Company and
the Purchasers (the "Agreement") and
this Note and the holder hereof are
entitled equally and ratably with
the holders of all other Notes
outstanding under the Agreement to
all the benefits and security
provided for thereby or referred to
therein, to which Agreement
reference is hereby made for the
provisions thereof.
This Note and the other
Notes outstanding under the
Agreement may be declared due prior
to their expressed maturity dates,
all in the events, on the terms and
in the manner and amounts as
provided in the Agreement.
The Notes are subject to
mandatory prepayment as set forth in
Section 2 of the Agreement. The
Notes are not subject to prepayment
or redemption at the option of the
Company prior to their expressed
maturity dates except on the terms
and conditions and in the amount and
with the premium, if any, set forth
in Section 2 of the Agreement.
This Note is registered on
the books of the Company and is
transferable only by surrender
thereof at the principal office of
the Company duly endorsed or
accompanied by a written instrument
of transfer duly executed by the
registered holder of this Note or
its attorney duly authorized in
writing. Payment of or on account
of principal, premium, if any, and
interest of this Note shall be made
only to or upon the order in writing
of the registered holder.
This Note shall be
governed by, and shall be construed
and enforced in accordance with, the
laws of the State of Minnesota.
PENTAIR, INC.
By:________________________________
Title:_____________________________
EXHIBIT B
(to Note Purchase Agreement)
PENTAIR, INC.
CLOSING CERTIFICATE
All Purchasers on Schedule I
Ladies and Gentlemen:
This certificate is
delivered to you in compliance with
a requirements of that certain Note
Purchase Agreement dated as of
January 24, 1997 (the "Agreement"),
entered into by the undersigned,
Pentair, Inc., a Minnesota
corporation (the "Company"), with
you, and as an inducement to and as
part of the consideration for your
purchase on this date of $35,000,000
aggregate principal amount of the
Company's 6.99% Senior Notes, Series
A, due 2007, (b) $5,000,000,
aggregate principal amount of the
Company's 6.79% Senior Notes, Series
B, due 2004 and (c) $10,000,000
aggregate principal amount of the
Company's 6.74% Senior Notes, Series
C, due 2004 (collectively, the
"Notes") of the Company pursuant to
the Agreement. Capitalized terms
used but not defined herein shall
have the meanings assigned to such
terms in the Agreement.
The undersigned hereby
certifies as follows on behalf of
the Company at and as of the date
hereof:
1. No Default or Event
of Default has occurred and is
continuing under the Agreement or
would occur in connection with the
issuance of the Notes;
2. No material adverse
change in the financial condition of
the Company and its Subsidiaries,
taken as a whole, has occurred since
December 31, 1995;
3. The Company has
performed and complied with all
covenants, agreements and conditions
contained in the Agreement and in
all other agreements contemplated
thereby or delivered in connection
therewith which are required to be
performed or complied with by the
Company before or on [Date of
Issue]; and
4. All representations
and warranties made in the Agreement
by the Company are true and correct
in all material respects as of the
date hereof and upon the issuance of
the Notes.
Dated: [Date of Issue] PENTAIR, INC.
By:___________________________
Its:__________________________
Exhibit C-1
(to Note Purchase Agreement)
FORM OF OPINION OF HENSON & EFRON,
P.A.
[Date of Issue]
All Purchasers on Schedule I
Ladies and Gentlemen:
We are counsel to Pentair,
Inc., a Minnesota corporation (the
"Company"), and have represented the
Company in connection with the
transactions effected and to be
effected pursuant to the following
agreements and documents:
(i) that certain Note
Purchase Agreement dated as of
January 24, 1997 (the "Agreement")
between the Company, American United
Life Insurance Company, Employers
Life Insurance Company of Wausau,
Knights of Columbus, Lutheran
Brotherhood, Mutual of Omaha
Insurance Company, Nationwide Life
Insurance Company, The State Life
Insurance Company, United of Omaha
Life Insurance Company and West
Coast Life Insurance Company
(collectively the "Purchasers");
(ii) that certain 6.99%
Senior Notes, Series A dated the
date hereof (the "Series A Notes")
issued by the Company to the
Purchasers;
(iii) that certain 6.79%
Senior Notes, Series B dated the
date hereof (the "Senior B Notes")
issued by the Company to the
Purchasers;
(iv) that certain 6.74%
Senior Notes, Series C dated the
date hereof (the "Series C Notes")
issued by the Company to the
Purchasers (the Series A Notes,
Series B Notes and Series C Notes
are herein collectively referred to
as the "Notes"); and
(v) the other documents,
instruments and agreements executed
and delivered by the Company in
connection with the transactions
contemplated by the Agreement
(collectively, the "Other
Documents").
The Agreement, the Notes
and the Other Documents are
collectively referred to herein as
the "Transaction Documents."
Capitalized terms used but not
defined herein shall have the
meanings ascribed to such terms in
the Agreement.
In rendering the opinions
set forth herein, we have examined
originals or copies, certified to
our satisfaction, of such (i)
certificates of public officials,
(ii) certificates of officers and
representatives of the Company, and
(iii) other documents, records,
financial statements and papers, and
we have made such inquiries of
officers and representatives of the
Company, as we have deemed relevant
or necessary as the basis for such
opinions. We have, with your
consent, relied upon, and assumed
the accuracy of, such certificates
and other statements, documents,
records, financial statements and
papers with respect to the factual
matters set forth therein and we
have, with your consent, assumed the
genuineness of all signatures and
the authenticity of all documents
submitted to us as originals and the
conformity to original documents of
all documents submitted to us as
certified or photostatic copies.
Based upon the foregoing,
and subject to the qualifications
stated herein, we are of the opinion
that:
1. The Company (i) is
duly organized, validly existing and
in good standing under the laws of
the State of Minnesota; (ii) is duly
qualified to do business in each
jurisdiction in which it owns or
leases real property or in which the
failure to so qualify would have a
material adverse effect on the
business, operations, condition
(financial or otherwise) or affairs
of the Company and its Subsidiaries
taken as whole; and (iii) has the
requisite corporate power and
authority to own, pledge, mortgage
and operate its properties, to lease
any properties it operates under
lease, to conduct its business and
to enter into, consummate all of the
transactions contemplated by, and
perform all of its obligations
under, each of the Transaction
Documents to which it is a party.
2. The execution,
delivery and performance by the
Company of the Agreement and the
Notes, and the consummation by the
Company of each of the transactions
contemplated by the Agreement and
the Notes, have been duly authorized
by all necessary or proper corporate
action of the Company; are not in
contravention of any provision of
the articles of incorporation or
by-laws of the Company; will not
violate any applicable law or
regulation (including any applicable
order or decree of any court or
governmental instrumentality of
which we have knowledge); will not
result in the breach of, or
constitute a default under, any
indenture, mortgage, deed of trust,
lease or sublease agreement or other
instrument of which we have
knowledge and to which the Company
is a party or by which the Company
or any of its properties is bound
which breach or default would have a
material adverse effect on the
business, operations, condition
(financial or otherwise) or affairs
of the Company and its Subsidiaries
taken as a whole; will not result in
the creation or imposition of any
lien upon any material property of
the Company; and do not require the
consent or approval of, or any
filing with, any federal, state or
local governmental body, agency or
authority or any other person other
than such as are not yet required
and those which have been received
on or prior to the date hereof.
3. Except as set forth
on Schedule 3.5 to the Agreement, to
the best of our knowledge, there are
no judgments outstanding against the
Company nor is there now pending or
threatened any action, suit or
proceeding before any court or any
governmental or regulatory
authority, by, against or involving
the Company which, if adversely
determined, would have a material
adverse effect on the business,
operations, condition (financial or
otherwise) or affairs of the Company
and its Subsidiaries taken as a
whole. To the best of our
knowledge, the company is not in any
default with respect to any order,
writ, injunction or decree of any
court, nor is the Company in default
under or in violation of any
applicable law, order, regulation or
demand of any governmental agency or
instrumentality where such default
or violation would have a material
adverse effect on the business,
operations, condition (financial or
otherwise) or affairs of the Company
and its Subsidiaries taken as a
whole or on the ability of the
Company to perform its obligations
under the Agreement or the Notes.
4. To the best of our
knowledge, there is no default by
the Company under any contract,
lease agreement, instrument or
commitment to which the Company is a
party which has, or would have, a
material adverse effect upon the
business, operations, condition
(financial or otherwise) or affairs
of the Company and its Subsidiaries
taken as a whole.
5. The Agreement and the
Notes have each been duly executed
and delivered by a duly authorized
officer of the Company and
constitute the legal, valid and
binding obligations of the Company
enforceable against the Company in
accordance with their respective
terms except to the extent
enforceability thereof may be
limited by applicable bankruptcy,
insolvency, reorganization,
moratorium and other laws of general
application relating to or affecting
the enforcement of creditors' rights
and by general equitable principles
including concepts of materiality,
reasonableness and good faith and
fair dealing; provided, further,
that no opinion is given that any
particular provision will be
enforceable by specific performance
or injunctive relief.
6. Assuming the accuracy
of the representations and
warranties set forth in the
Agreement, it is not necessary in
connection with the offering,
issuance, sale and delivery of the
Notes pursuant to the terms and
conditions set forth in the
Agreement to register the Notes
under the Securities Act of 1933, as
amended, or to qualify an indenture
in respect thereof under the Trust
Indenture Act of 1939, as amended.
The foregoing opinions are
limited to the laws of the State of
Minnesota and the federal laws of
the United States of America and we
express no opinion with respect to
the laws of any other state or
jurisdiction.
This opinion is furnished
by us as counsel to the Company and
is solely for your benefit and the
benefit of any Person which may
subsequently become a holder of the
Notes. Winston & Strawn, as special
counsel to you, may rely on the
opinions set forth herein insofar as
they relate to the opinions being
given to you by such counsel in
connection with the Transaction
Documents.
Very truly yours,
HENSON & EFRON, P.A.
Exhibit C-2
(to Note Purchase Agreement)
[FORM OF OPINION OF WINSTON &
STRAWN]
[Date of Issue]
Purchases Listed on Schedule I
Ladies and Gentlemen:
We have acted as special
counsel to American United Life
Insurance Company, Employers Life
Insurance Company of Wausau, Knights
of Columbus, Lutheran Brotherhood,
Mutual of Omaha Insurance Company,
Nationwide Life Insurance Company,
The State Life Insurance Company,
United of Omaha Life Insurance
Company and West Coast Life
Insurance Company (collectively the
"Purchasers"), in connection with
the agreements referenced below. In
our capacity as such special
counsel, we have examined originals,
or copies identified to our
satisfaction as being true copies,
of such records, documents and other
instruments as in our judgment are
necessary or appropriate to enable
us to render the opinions expressed
below. These records, documents and
instruments included the following:
(i) that certain Note
Purchase Agreement dated as of
January 24, 1997 (the "Agreement")
between Pentair, Inc., a Minnesota
corporation (the "Company") and the
Purchasers;
(ii) that certain 6.99%
Senior Notes, Series A dated the
date hereof (the "Series A Notes")
issued by the Company to the
Purchasers;
(iii) that certain 6.79%
Senior Notes, Series B dated the
date hereof (the "Series B Notes")
issued by the Company to the
Purchasers;
(iv) that certain 6.74%
Senior Notes, Series C dated the
date hereof (the "Series C Notes")
issued by the Company to the
Purchasers (the Series A Notes, the
Series B Notes and the Series C
Notes are herein collectively
referred to as the "Notes");
(iv) the other documents,
instruments and agreements executed
and delivered by the Company in
connection with the transactions
contemplated by the Agreement
(collectively, the "Other
Documents").
The Agreement, the Notes
and the Other Documents are
collectively referred to herein as
the "Transaction Documents."
Capitalized terms used but not
defined herein shall have the
meanings ascribed to such terms in
the Agreement.
We have been furnished
with, and with your consent have
relied upon, certificates of
officers of the Company with respect
to certain factual matters, and in
addition, we have obtained and
relied upon such certificates and
assurances from public officials as
we have deemed necessary. In
stating our opinion, we have, with
your consent, assumed the
authenticity of all documents
submitted to us as originals, the
conformity to authentic original
documents of all documents submitted
to us as certified, conformed or
photostatic copies, and the
genuineness of all signatures on all
documents.
We have investigated such
questions of law for the purpose of
rendering this opinion as we have
deemed necessary. We are opining
herein as to the effect on the
subject transactions and the
Transaction Documents of only the
laws of the State of Illinois and
United States federal law and we
express no opinion with respect to
the laws of any other state or
jurisdiction. We have, with your
permission, assumed for the purposes
of this opinion without
independently verifying the same,
that the laws of the State of
Minnesota are identical to the laws
of the State of Illinois and that
all the representations and
warranties in the Agreement are true
and correct. As to all matters in
this opinion which are governed by
the laws of the State of Minnesota,
we have relied with your permission
solely on the opinion of Henson &
Efron, counsel to the Company,
delivered to you today in connection
with the Agreement. Certain of the
opinions rendered herein are
qualified by the discussion
following the numbered paragraphs in
our opinion.
On the basis of the foregoing,
and in reliance thereon, and subject
to the limitations, qualifications
and exceptions set forth below, we
are of the opinion that:
1. Based solely on the
certificate from the Secretary of
the State of Minnesota as to the
good standing of the Company which
is being delivered in connection
with the Agreement, the Company is a
corporation organized and in good
standing under the laws of the State
of Minnesota and has the corporate
power and authority and is duly
authorized to enter into and perform
the Agreement and to issue the Notes
and incur the indebtedness to be
evidenced thereby.
2. The Agreement and
the Notes have been duly authorized,
executed and delivered by the
Company and constitutes the legal,
valid and binding obligation of the
Company enforceable against the
Company in accordance with its
terms.
3. Assuming the
accuracy of the representations and
warranties set forth in the
Agreement, it is not necessary in
connection with the offering,
issuance, sale and delivery of the
Notes pursuant to the terms and
conditions set forth in the
Agreement to register the Notes
under the Securities Act of 1933, as
amended, or to qualify an indenture
in respect thereof under the Trust
Indenture Act of 1939, as amended.
In connection with the
above, we wish to point out that the
provisions of any agreement which
permits the Purchasers to take
actions or make determinations may
be subject to a requirement that
such actions be taken or such
determinations be made in a
commercially reasonable manner and
in good faith.
Our opinions herein are
based upon a review of and relate
only to those (i) federal and
Illinois statutes, rules, regula
- -tions, governmental consents,
approvals, authorizations, registra
- -tions, declarations and filings
which, in our experience, are
normally applicable to transactions
of the type contemplated by the
Transaction Documents and (ii)
federal and Illinois statutes,
rules, regulations, governmental
consents, approvals, authoriza
- -tions, registrations, declarations
and filings applicable to corpo
- -rations generally.
Our opinions are subject
to (i) applicable bankruptcy,
insolvency, fraudulent conveyance
and transfer, limitations upon
dividends generally, reorganization,
moratorium or similar laws and
judicial decisions affecting
creditors' rights generally, (ii)
general principles of equity
(regardless of whether such
enforcement is sought in a
proceeding at law or in equity) and
the discretion of the court before
which any proceeding therefor may be
brought, and (iii) public policy
considerations or court decisions
which may limit the rights of any
Purchaser to obtain indemnification,
injunctive relief or other equitable
remedies. We express no opinion of
any kind with respect to the
enforceability of provisions in the
Agreement whereby the Company waives
claims against any Purchasers based
on such party's exercise of remedies
or rights other than in accordance
with applicable law, as to the
enforceability of any provision
imposing the payment of interest on
interest, as to the enforceability
of cumulative remedies to the extent
such cumulative remedies purport to
or would have the effect of
compensating the party entitled to
the benefits thereof in amounts in
excess of the actual loss suffered
by such party, or as to the
enforceability of provisions of the
Agreement to the effect that
provisions thereof may only be
waived in writing may not be valid,
binding or enforceable to the extent
that an oral agreement or an implied
agreement by trade practice or
course of conduct has been created
modifying any provision of such
documents. We call to your
attention that certain other rights,
remedies and waivers contained in
the Agreement may be rendered
ineffective, or limited by,
applicable laws or judicial
decisions governing such provisions,
but such laws and judicial decisions
do not, in our opinion, make the
Agreement inadequate for the
practical realization of the
benefits provided by the Agreement.
To the extent that the
obligations of the Company may be
dependent upon such matters, we
assume for purposes of this opinion
that each person who is a party to
any of the Transaction Documents or
any other agreements referred to in
this opinion (other than the
Company) is duly organized, validly
existing and in good standing under
the law of its jurisdiction of
organization or is otherwise
competent to execute any agreement
to which it is a party; that each of
such Transaction Documents or any
other agreements has been duly
authorized, executed and delivered
by each such person (other than the
Company) a party thereto and
constitutes or will constitute the
valid and binding obligation of each
such person (other than the Company)
enforceable in accordance with their
respective terms; and that each such
person (other than the Company) has
the requisite organizational power
and authority to perform its
obligations under such Transaction
Documents or any other agreements.
Except as expressly covered in this
opinion, we are not expressing any
opinion as to the effect of any such
person's compliance with any state
or federal laws or regulations
applicable to the transactions
because of the nature of such
person's business.
Whenever our opinion with
respect to the existence or absence
of facts is based on our knowledge
or awareness, we are referring to
the actual knowledge of Winston &
Strawn attorneys who have
represented the Purchasers during
the course of our limited
representation of such parties in
connection with the Transaction
Documents. Except as expressly set
forth herein, we have not undertaken
any independent investigation to
determine the existence or absence
of any facts and no inference as to
our knowledge concerning any facts
should be drawn as a result of the
limited representation of the
parties undertaken by us.
This opinion is rendered
only to the addresses hereof and is
solely for their benefit in
connection with the above
transactions. This opinion may not
be relied upon for any other
purpose, or relied upon by any other
person, firm or corporation for any
purpose without our prior written
consent. The opinions expressed
herein are expressed as of the date
hereof without any undertaking to
amend or supplement this opinion
letter to take into account any
change in law or facts or otherwise
after the date hereof.
Very truly yours,
WINSTON & STRAWN
PENTAIR, INC.
FOURTH AMENDED AND
RESTATED
COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
Revised February 26, 1997
1. Background and Effective Date. The Pentair, Inc.
Fourth Amended and Restated Compensation Plan for Non-Employee Directors
is effective April 23, 1997 (i.e., the effective
date). This version of the Plan shall govern benefits as provided to
non-employee directors from and after its effective date; prior
versions of the Plan govern benefits provided during such time as
each such version was in effect.
2. Purpose. Pentair has created this Plan for the following
purposes:
(a) to enable non-employee Directors of Pentair to
receive annual retainer and meeting fees
currently in cash or elect to defer such
compensation for future payment, together with
earnings measured by changes in the value of
Pentair Stock; and
(b) to assure non-employee Directors receive a
competitive total compensation package which
includes a significant component tied to long-term
growth in shareholder value.
3. Definitions. Unless the context requires otherwise, when
capitalized the terms listed below shall have the following
meanings when used in the Plan:
(a) "Administrator" is the Board or any
committee or individual to whom the Board
may delegate authority to administer the Plan.
The Administrator shall interpret the Plan,
appoint a plan agent to serve from time to time,
and make all decisions with respect to the rights
of Directors hereunder.
(b) "Board" is the Board of Directors of Pentair.
(c) "Deferred Compensation" is the amount of
Fees with respect to which a Director has
voluntarily elected to defer payment pursuant to
the terms of the Plan, together with any
matching contributions thereon made by
Pentair.
(d) "Director" is a non-employee member of the
Board.
(e) "Equity Compensation" is that portion of a
Director's total annual compensation which is
accrued monthly and deferred for payment after
the Director is no longer a member of the
Board.
(f) "Fees" are a Director's annual retainer,
meeting, chair retainer, and chair fees or similar
amounts paid monthly by Pentair.
(g) "Pentair" is Pentair, Inc., a Minnesota
corporation.
(h) "Plan" is the Pentair, Inc. Fourth Amended and
Restated Compensation Plan for Non-Employee
Directors as revised February 26, 1997 and
effective April 23, 1997.
(i) "Plan Year" is the twelve (12) consecutive
month period beginning January 1 and ending
December 31.
(j) "Share Units" are the units used to credit
Deferred or Equity Compensation to a
Director's account, which units are valued by
reference to the actual cost per share of Stock
purchased on behalf of Pentair by the duly
appointed plan agent pursuant to applicable
Plan provisions.
(k) "Stock" is Pentair common stock.
4. Deferred Compensation.
(a) Eligibility. All Directors may elect to defer
payment of some or all of their Fees until such future time as the
Director shall select. If a Director does not elect to defer payment
of Fees, then all Fees shall be paid in monthly installments to the
Director in cash.
(b) Deferral Elections. Each Plan Year a Director
may elect to defer receipt of a designated percentage of Fees, in ten
percent (10%) increments up to one hundred percent (100%) of
such Fees, and to receive such amount as Deferred Compensation.
No election to receive Deferred Compensation shall be valid unless
entered into prior to the time a Director becomes entitled to receipt
of such Fees. For current Directors, a deferral election shall be
made prior to the first day of a Plan Year; for individuals who
become Directors during a Plan Year, any deferral election with
respect to Fees to be paid during that Plan Year shall be made no
later than the date such individual's Board service begins. Any
election to receive Deferred Compensation shall be irrevocable
with respect to the Plan Year for which the election is made.
(c) Matching Contribution. Directors who elect to
defer payment of their Fees shall receive from Pentair as additional
Deferred Compensation a matching contribution equal to twenty-five
percent (25%) of the first $750.00 per month of Fees the
Director has elected to receive as Deferred Compensation.
(d) Accounting for Deferred Compensation. Pentair
shall establish a bookkeeping account for each Director who elects
to receive Deferred Compensation and shall allocate to such
account as of the last day of each month the Fees subject to a
Director's deferral election and any matching contribution made
with respect thereto. All Deferred Compensation so allocated shall
be converted into Share Units. The plan agent appointed by
Pentair for this purpose shall purchase Stock on the open market
at the best price obtainable at the time it receives funds from
Pentair. All Stock so purchased shall be held in a street name or
a nominee name; no Director shall have any right to vote the Stock
acquired hereunder. Stock purchased by the plan agent shall be
held as an investment to assist Pentair in meeting its obligation to
pay Deferred Compensation.
The plan agent shall provide to Pentair confirmation of its
Stock purchases and periodic statements showing the number of
Share Units allocated to each Director's account. Share Units
allocated to individual accounts shall be adjusted to reflect Stock
dividends or splits or other similar adjustments. Cash dividends
paid with respect to such Stock shall be combined with a
Director's Deferred Compensation for purposes of purchasing
Stock and allocated as additional Share Units to such Director's
account.
(e) Distribution of Deferred Compensation. When
making an election to receive Deferred Compensation, the Director
shall also elect the time at which such Deferred Compensation will
be paid to said Director, which election shall be irrevocable with
respect to the Deferred Compensation covered by said election.
Payment of such Deferred Compensation shall be made in a lump
sum and in accordance with the distribution option elected by the
Director.
The Director may elect to receive payment of Deferred
Compensation by selecting one or more of the following options:
(i) On a specific date;
(ii) Upon attainment of a specific age; or
(iii) On the occurrence of a stated event, such as
death, retirement from principal business
activity, termination of services as a Director,
disability or any other event or occurrence
stipulated by the Director and approved by the
Administrator.
provided, however, a Director may not receive payment of
Deferred Compensation sooner than six (6) months after the date
of the election to defer.
(f) Form of Distribution of Deferred Compensation.
Deferred Compensation shall be distributed in Stock on the
distribution date elected by the Director. Stock distributed to the
Director must either be registered with the Securities and
Exchange Commission or bear an appropriate legend unless
Pentair has received an opinion from counsel that such legend is
unnecessary.
5. Equity Compensation.
(a) Determination of Equity Compensation. Each
Plan Year, Directors shall receive monthly allocations of Equity
Compensation equal to one-twelfth (1/12) of the amount
determined by subtracting from the total Board compensation
figure set for such Plan Year (i) all Fees; (ii) any matching
contributions made with respect to Fees subject to a deferral
election, and (iii) the value of all options granted to the Director
pursuant to the terms of the Pentair, Inc. Outside Directors Non-Qualified
Stock Option Plan. All Equity Compensation shall be
deferred and paid in Stock at such future time as the Director shall
elect.
(b) Accounting for Equity Compensation. Each
month Pentair shall allocate Equity Compensation earned to a
bookkeeping account established for each Director. All Equity
Compensation so allocated shall be converted into Share Units.
The duly appointed plan agent shall purchase Stock on the open
market at the best price obtainable at the time it receives funds
from Pentair. All Stock so purchased shall be held in a street name
or a nominee name; no Director shall have any right to vote the
Stock acquired hereunder. Stock purchased by the plan agent shall
be held as an investment to assist Pentair in meeting its obligation
to pay Equity Compensation.
The plan agent shall provide to Pentair confirmation of its
Stock purchases and periodic statements of the number of Share
Units allocated to each Director's account. Share Units allocated
to a Director's account shall be adjusted to reflect Stock dividends
or splits or other similar adjustments. Cash dividends paid with
respect to such Stock shall be combined with a Director's Equity
Compensation for purposes of purchasing Stock and allocated as
additional Share Units to such Director's account.
(c) Distribution of Equity Compensation. Each Plan
Year, Directors shall elect the time at which Equity Compensation
credited for such year shall be paid; provided, however, no
Director may elect to receive payment of Equity Compensation
prior to the date such Director ceases to be a member of the Board.
All such elections must be made prior to the first day of a Plan
Year or, if an individual shall first become eligible to receive
Equity Compensation during a Plan Year, then prior to the date
such eligibility begins. An election hereunder shall be irrevocable
when made with respect to Equity Compensation earned in said
Plan Year. Payment of Equity Compensation shall be made in a
lump sum and in accordance with the distribution option elected by
the Director.
Subject to the above limitation, a Director shall be
entitled to receive payment of Equity Compensation by electing one
or more of the following options:
(i) On a specific date;
(ii) Upon the attainment of a specific age; or
(iii) On the occurrence of a stated event, such as
death, retirement from principal business
activity, termination of services as a Director,
disability or any other event or occurrence
stipulated by the Director and approved by the
Administrator.
provided, however, a Director may not receive payment of Equity
Compensation during the time such Director remains a member of
the Board.
(d) Form of Distribution of Equity Compensation.
Equity Compensation shall be distributed in Stock on the
distribution date elected by the Director. Stock distributed to the
Director must either be registered with the Securities and
Exchange Commission or bear an appropriate legend unless
Pentair has received an opinion from counsel that such legend is
unnecessary.
6. Retirement Benefit.
(a) Background. Under prior versions of the
Compensation Plan for Non-Employee Directors, Directors who
retired from the Board due to either disability, ineligibility to stand
for re-election on account of age or length or service, or after
having served at least five (5) years as a Director, could be granted
a retirement benefit. This benefit, if approved by all other Board
members, provided the Director a monthly cash payment of one-twelfth
(1/12) of the annual retainer fee being paid to the Director
at the time Board service ended over a term equal to the Director's
months of service on the Board. This retirement benefit is hereby
eliminated from the Plan and, except as otherwise provided herein,
from and after the Plan's effective date, no Director shall be
eligible to receive this retirement benefit.
(b) Retirement Benefit Conversion. All Directors
who had completed service on the Board prior to the Plan's
effective date and who will remain Directors after the Plan's
effective date may choose to receive as an offset for the elimination
of the retirement benefit a one-time grant of Equity Compensation.
Any Director who does not elect to receive this grant of Equity
Compensation shall remain eligible for the cash retirement benefit
as described above, payable after Board service ends and
calculated using service as a member of the Board through the
Plan's effective date and the 1997 retainer fee. After the Plan's
effective date, however, a Director shall be eligible for grants of
Equity Compensation only pursuant to Section 5 of the Plan.
A Director who elects to receive the offsetting grant of
Equity Compensation shall receive a grant equal to the present
value of the benefit which otherwise could have been payable to the
Director at the time of mandatory retirement (i.e., completion of
twelve (12) years of service on the Board or the attainment of age
70, whichever would first occur), using the 1997 retainer fee and
the years of service completed as a Director through the Plan's
effective date. The discount rate used for this calculation shall be
the interest rate used under the Pentair Pension Plan to determine
a lump sum benefit.
Former Directors now receiving retirement benefit
payments under a prior version of the plan shall continue to receive
such payments. Any Directors whose service on the Board will
end on or before the Plan's effective date shall be eligible for only
a retirement benefit under the prior plan.
(c) Treatment of Conversion. All offsetting grants
of Equity Compensation made pursuant to this Section 6 shall be
subject to the same procedures and elections as are described in
Section 5. Each Director shall make all necessary elections prior
to the Plan's effective date.
7. Reports. The plan agent shall periodically report the
following information to Pentair:
(a) the total number of Share Units allocated to a
Director's account each quarter;
(b) the total number of shares purchased by the
plan agent each quarter; and
(c) the total number of shares of Stock into which
Share Units may be converted.
Pentair shall pay all commissions and charges arising due to
operation of the Plan and use of the plan agent.
8. Distribution in Event of Death. In the event of death,
distribution of the Deferred and Equity Compensation allocated to
such Director's account will be made to the beneficiary named by
the Director or to the person who would have a right to receive
such distribution by will or (if there shall be no will) by the laws of
descent and distribution of the state in which the Director was
domiciled at death, subject to the terms of the deferral elections
made by the Director.
9. Nonalienability. No disposition, charge or encumbrance
by any Director on Deferred or Equity Compensation or any
income earned thereon by way of anticipation shall be valid or in
any way binding on Pentair. No Director shall have the right to
assign, transfer, encumber or otherwise dispose of any Deferred or
Equity Compensation or any earnings thereon (except by will or the
laws of descent and distribution) until the same shall be paid to
such Director. No Deferred or Equity Compensation or income
earned thereon shall be in any way liable to the claims of any
creditor of a Director until the same is paid to such Director.
10. Depository Agreement. Upon a change in control,
Pentair shall enter into Depository Agreements in the form as
recommended by counsel and shall deposit in trust with a bank or
banks in Minnesota having trust powers, sufficient funds to carry
out distributions to Directors in accordance with the terms and
conditions of the Plan. The funds deposited in trust (or if no such
trust is established, the funds held by Pentair to pay the amounts
due under this Plan) on account of a change in control shall remain
subject to the claims of the general creditors of Pentair as if such
funds were general assets of Pentair.
For purposes of this paragraph, a change in control shall
be deemed to occur if any person or entity shall acquire control of
Pentair either by substantial market purchases or by a tender offer,
or both, which is opposed by a majority of the Board.
11. Funding. The Plan is a non-qualified, unfunded deferred
compensation arrangement. Pentair shall not establish, nor is it
required to establish any trust to fund benefits provided to
Directors hereunder, nor shall it establish or is it required to
establish any type of earmarking or segregation of assets to provide
for such benefits. In the event of default of payment hereunder by
Pentair, the Directors shall have no greater entitlements or security
than does a general creditor of Pentair.
12. Default. In the event Pentair shall fail to pay when due
any Deferred or Equity Compensation, and such failure to pay
continues for a period of thirty (30) days from receipt of written
notice of nonpayment from the affected Director, Pentair shall be
in default hereunder and shall pay to the Director any expenses
incurred in the collection of such amount, including reasonable
attorney's fees.
13. Amendment or Termination. The Plan may be
amended or terminated at any time by the Board; provided that the
rights of Directors or former Directors accrued under the Plan
through the date of such amendment or termination shall not be
affected by such action without the express written consent of those
individuals.
14. Construction. The Plan shall be interpreted and
construed in accordance with the substantive laws of the State of
Minnesota. If any provision of the Plan shall be held illegal or
invalid for any reason, such illegality or invalidity shall not affect
the remaining Plan provisions, and the Plan shall be construed and
enforced as if said illegal or invalid provisions had never been
included.
IN WITNESS WHEREOF, this amended and restated
Plan has been executed this ____ day
of _______________, 1997.
PENTAIR, INC.
By ___________________________________
Its _______________________
<TABLE>
EXHIBIT 11
PENTAIR, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
YEARS ENDED DECEMBER 31
1992 1993 1994 1995 1996
INCOME ($ THOUSANDS)1
<S> <C> <C> <C> <C> <C>
Income before cumulative effects
of accounting changes $42,800 $46,600 $53,600 $77,200 $74,509
Cumulative effects of
accounting changes (41,625) - - - -
Net Income 1,175 46,600 53,600 77,200 74,509
Preferred Dividend Requirements 8,545 6,114 5,416 5,203 4,928
Earnings Available to Common and
Common Equivalent Shares
- Primary (7,370) 40,486 48,184 71,997 69,581
Preferred dividends assuming
conversion of Preferred Stock:
Series 1987 3,000 620 0 0 0
Series 1988 1,065 1,044 1,016 983 940
Series 1990 4,480 4,450 4,400 4,220 3,988
Tax benefit on preferred
ESOP dividend eliminated
due to conversion into common (700) (833) (1,046) (1,243) (1,333)
Tax benefit on ESOP dividend
assuming conversion to common
- at common dividend rate 215 276 366 481 644
Earnings available to Common and
Common Equivalent shares
- Diluted $ 690 $46,043 $52,920 $76,438 $73,820
SHARES (thousands)1
Weighted average number
of shares outstanding
during the period 31,584 35,356 36,408 36,812 37,491
Shares issuable on
exercise of stock
options less shares
repurchaseable
from the proceeds 288 426 436 488 458
Common and Common Equivalent
Shares - Primary 31,872 35,782 36,844 37,300 37,949
Shares issuable on conversion of:
$1.50 Cumulative Convertible
Preferred Stock Series 1987 4,356 830 0 0 0
$7.50 Callable Cumulative
Convertible Preferred
Stock Series 1988 1,122 1,044 1,016 982 940
8% Callable Cumulative
Voting Convertible
Preferred Stock Series 1990 4,284 4,254 4,220 4,098 3,863
Common and Common Equivalent
Shares - Diluted 41,634 41,910 42,080 42,380 42,752
EARNINGS PER SHARE1
PRIMARY
Income from Continuing Operations $0.64 $0.76 $1.21 $1.48 $1.83
Income from Discontinued Operations 0.43 0.37 0.10 0.45 -
Earnings before cumulative effects
of accounting changes 1.07 1.13 1.31 1.93 1.83
Cumulative effects of
accounting changes (1.30) - - - -
Net income (loss) $(.23) $1.13 $1.31 1.93 1.83
DILUTED
Income from Continuing Operations $0.64 $0.76 $1.17 $1.41 $1.73
Income from Discontinued Operations 0.37 0.34 0.09 0.40 -
Earnings before cumulative effects
of accounting changes $1.01 $1.10 $1.26 $1.81 $1.73
</TABLE>
NOTES:
1 Adjusted for stock dividend of 50% in June 1993 and
stock dividend of 100% in February 1996.
EXHIBIT 13
cover
Pentair Annual Report 96
page 1
Pentair Focus on Fundamentals 96
We walk
our talk,
gaining ground,
step by step, leaving lasting impressions.
The source of Pentair's continuous momentum is and
always has been hard-working employees who come to work
each day with a roll-up-the-shirt-sleeves,
make-good-things-happen attitude. The indelible impression
these men and women have made on Pentair is symbolized by
the boot print on our cover.
page 2-3
Hoffman Engineering employees Forrest Wilson, Tim
Lund, and Deb Carmony are among the 10,000 Pentair
employees who helped set the pace for a record earnings year in
1996. Employees from Pentair's ten subsidiaries are featured in
the pages of this annual report.
page 4
Pentair Financial Highlights 96 and Company Profile
charts
Sales
($ Millions)
92 864.0
93 946.6
94 1,261.7
95 1,402.9
96 1,567.1
Income from Continuing Operations
($ Millions)
92 27.2
93 32.7
94 50.1
95 60.5
96 74.5
Earnings per Share -- Diluted
($ per Share, Adjusted for Stock Splits)
92 .64
93 .76
94 1.17
95 1.41
96 1.73
end charts
Pentair, with approximately 10,000 employees worldwide,
is a diversified manufacturer operating in three principal markets:
electrical and electronic enclosures; professional tools and
equipment; and water products. Its subsidiaries operate under a
common Code of Business Conduct and provide construction,
woodworking, recreation, electronics, law enforcement, water
conditioning, automotive, and industrial markets with a wide
range of innovative, quality products. Headquartered in St. Paul,
Minnesota, Pentair was incorporated in 1966. Its subsidiaries
operate from 48 manufacturing and distribution locations in North
America, Europe, and Asia.
page 5
Financial Highlights 96
In Thousands, Except per Share Data and Percentages
<TABLE>
<CAPTION>
1996 1995 % Change
<S> <C> <C> <C>
Net Sales $1,567,065 $1,402,871 11.7%
Operating Income $142,919 $116,247 22.9%
Income from
Continuing Operations $74,509 $60,500 23.2%
Earnings per Share
from Continuing Operations
Primary $1.83 $1.48
Diluted $1.73 $1.41 22.7%
Cash Dividends
per Common Share $.50 $.40
Return on Average
Common Shareholders' Equity 14.3% 16.9%
Common Shares
Outstanding at Year-end 37,717 37,035
Stock Price at Year-end $32 1/4 $24 7/8
Capital Expenditures $71,646 $63,838
Long-term Debt $279,889 $219,896
Total Assets $1,289,014 $1,252,493
Debt-to-Capital Ratio 33% 31%
Number of Employees 9,770 9,150
</TABLE>
Share and per share data have been restated to reflect stock
dividend in February 1996.
page 6-7
A Letter to Our Shareholders from Winslow H. Buxton
Pentair gained ground on many fronts in 1996 and ended
the year with an outstanding record of performance. Net sales
from continuing operations increased 11.7 percent, from $1.403
billion in 1995 to $1.567 billion this year. Income from continuing
operations grew 23.2 percent, from $60.5 million in 1995 to $74.5
million in 1996. Earnings per share for 1996 totaled $1.73 on a
fully diluted basis, a 22.7 percent improvement over the previous
year. The appreciation of our share price from $247_8 at the end
of 1995 to $321_4 on December 31, 1996, coupled with a $.50
dividend, resulted in a 31.7 percent total return to shareholders
for 1996.
Our performance was driven by five strategies which
characterize the new Pentair. We are:
[1] focused on building our strength in three key markets:
Enclosures, Professional Tools and Equipment, and Water
Products.
[2] maintaining the diversity of our business mix within
these three markets. Participating in multiple industries helps to
insulate our performance from the effects of economic cycles in
any one market. This provides a measure of earnings
consistency.
[3] growing through internal development and
acquisitions. Our long-term plan is to generate close to half of our
growth internally and the balance through acquisitions.
[4] transforming our company from one that was
principally concerned with North American markets to one that is
global in its outlook.
[5] constantly improving our performance against financial
goals while maintaining a strong balance sheet. Our targets are
17 percent return on equity and 15 percent annual growth in
earnings per share.
These five strategies are working well. We built our
strength in 1996 and early 1997 by acquiring five companies that
increased our market share in targeted industries and provided
new avenues for geographic expansion. The acquisition of Aplex
in early 1996 broadened Myers industrial pump offerings.
FLEX supplemented the Porter-Cable tool and equipment line
and gave us a platform for expansion in Europe. Century
Manufacturing boosted our share of the vehicle service
equipment market. SIATA brought new products and technology
to Fleck Controls. Transrack added strength to the
Hoffman/Schroff partnership, augmenting its leading market
share in Europe.
These acquisitions reflect, in part, our efforts to reposition
Pentair to meet the challenges of the changing global
marketplace and to maximize value for our shareholders. We are
moving from a domestic base to a multinational base not only
through European acquisitions, but also through internal
initiatives aimed at expanding our current market reach in many
parts of the world. We are moving into channels of distribution
that provide above-average opportunity, and entering them with
products that stand out from the ordinary. We increasingly offer
value-added services, products, and technologies, applying them
in ways that open doors to high-growth markets. We are mindful
of the needs of our customers; only by meeting those needs can
our businesses grow and generate increased financial returns.
Our willingness and ability to adapt to change and evolve
have been an integral part of the Pentair success story. And yet,
so have certain elements of our organization that have not
changed since the Company was formed. These fundamentals
whether we call them values, or character traits, or just plain
common-sense business practices have contributed to the
formation of several distinct Pentair characteristics: our high
performance goals; the strong standards of ethics embodied in
the Pentair Code of Business Conduct; and a corporate culture
built on trust, knowledge, and participation. Our people their
skills and leadership, their entrepreneurial spirit and work ethic,
and their commitment to our company are a vital part of
Pentair's success and its ability to grow. Our focus on
fundamentals, together with a clearly identified vision, provide
common purpose and a sense of direction that is shared
throughout our diverse businesses.
We exceeded our EPS growth goal in 1996, and are
continually working to reach the goals we set. In the year ahead,
we anticipate stronger internal growth supplemented by strategic
acquisitions. We continue to emphasize internal financial
performance to support and bolster the gains we foresee from
top-line growth. We move forward in 1997 with confidence that
we are on solid ground and heading into another excellent year.
Winslow H. Buxton
Chairman, President, and CEO
page 8-9
Enclosure Business Schroff and Hoffman Engineering
Company
By creating new products, new marketing organizations,
and new geographic presence,our enclosure businesses made
great strides in leveraging their worldwide market leadership
position.
A bank of PROLINE cabinets house Local Area Network
(LAN) routing and switching equipment at the regional
employment office in Karlsruhe, Germany.
DeTeLine Rastatt purchased more than 1,500 PROLINE
enclosures a product jointly developed by Schroff and Hoffman
Engineering for installation at 350 locations throughout
Germany.
page 10-11
Enclosure Business Schroff and Hoffman Engineering
Company
Hoffman and Schroff leveraged their leadership position
in the global enclosure market in 1996 and early 1997 through
acquisitions, new marketing strategies, geographic expansion,
and product development. The new PROLINE enclosure line, a
modular enclosure system that uses a common product platform
to meet the multiple application needs of the electronics,
information technology, and electrical industries, was developed
in 1995 and introduced in Europe in April 1996. Sales of
PROLINE in the first six months exceeded target by 65 percent.
North American sales, which were launched in October, are
expected to track at a similarly high rate.
HS Systems, a new arm of the Hoffman/Schroff
partnership, was established in September to focus joint
capabilities on high-growth opportunities. Our strategy capitalizes
on our broad electrical and electronic product offering, which
ranges from powered subsystems to outdoor enclosures, and
integrates them into application-specific systems solutions. The
new business focuses on providing industrial and wide area
network (WAN) telecommunications original equipment
manufacturers (OEMs) with unique products from both Hoffman
and Schroff. Our entry into this high-potential niche of the global
enclosures market will broaden the reach of Hoffman and Schroff
and reinforce their worldwide reputations.
Our goal of expanding into new geographic territories was
achieved on several fronts. To support our growth strategy in
Asia, we realigned the Hoffman/Schroff operations in Singapore
and Japan under a new organization dedicated to Asia/Pacific
Rim business development. This process included broadening
the Schroff line to make electrical products available in
Meiwa-Cho, Japan, and establishing a new distribution facility in
Singapore. In Europe, we increased the number of
Hoffman/Schroff distributors in Slovakia, Hungary, Poland, and
the Czech Republic. In North America, we broke ground for a
manufacturing facility in Mount Sterling, Kentucky. The
300,000-square-foot plant will streamline enclosure production
and offer flexibility and short lead times in producing
customer-specific enclosures.
Durell Brown
temporary sheet metal worker
Hoffman Engineering
In early 1997, we increased our leading position in the
French electronic enclosure market when we purchased
Transrack. A manufacturer of cabinets, enclosures, subracks,
and workstations, Transrack designs its products for
telecommunications, data processing, aerospace, and test and
measurement applications. Transrack's 240 employees operate
from two locations: a headquarters and manufacturing facility in
Bonneuil-sur-Marne and a painting and assembly operation in
Saint-Maur, France. Transrack is a 30-percent owner of the
SAITEK enclosure business located in Barcelona, Spain.
Although Transrack will continue to operate and market
products under its own name, the company will work in tandem
with our existing Pentair enclosure businesses. We expect to
draw immediate value by cross-marketing the products of
Transrack with those of Hoffman and Schroff, and by maximizing
the synergies that exist between Transrack and Schroff in
France.
Both Schroff and Hoffman had record earnings in 1996
while aggressively targeting their organizations towards the
OEM/Telecom market and Pacific Rim geographical area. Pentair
continues to strengthen its leadership position in the global
enclosure market.
page 12
Professional Tools and Equipment Business
Porter-Cable Corporation, Delta International Machinery
Corporation, Lincoln Automotive and Century Manufacturing
The FLEX automotive finish polisher is specified by
Mercedes-Benz for use on the manufacturer's premium
automobiles. FLEX, with a brand name recognized throughout
Europe for quality and reliability, was an ideal acquisition for
Porter-Cable, a leading brand of professional power tools in the
United States.
Our tools and automotive service
equipment businesses
gained new
ground
with the acquisition of FLEX
and Century Manufacturing,
and the creation of a vehicle
service equipment organization.
Century's 130-amp, 120-volt MIG welder is representative
of the company's line of medium-duty welders used by
professionals and do-it-yourself customers. Century's long history
of innovative product development is reflected in the fact that it
was one of the first U.S. manufacturers to offer a 120-volt MIG
welder.
page 14-15
Professional Tools and Equipment Business
Porter-Cable Corporation, Delta International Machinery
Corporation, Lincoln Automotive and Century Manufacturing
In 1996, Pentair identified strategic commonalities
between professional tools and professional automotive service
equipment and formed a professional tools and equipment
business. We then set out to create top-line growth in these
businesses through acquisitions. The professional tools business
was fortified in June 1996 when we purchased a well-established
European power tool company.
The acquisition of FLEX power tools of Steinheim,
Germany, brought together two of the most highly respected
names in the power tool industry FLEX and Porter-Cable. FLEX
manufactures a wide range of power tools and accessories
primarily for the metalworking and masonry segments of the
European tool market. As the European portable power tool
division of Porter-Cable, FLEX is providing new opportunities for
joint efforts in cross-marketing, product development, and
geographic expansion. With its strong brand name, leading
market position, and complementary product line, FLEX is an
ideal fit with the strategic objectives of both Pentair and
Porter-Cable.
Pentair augmented the strength of its professional
automotive service equipment offerings in November 1996 with
the acquisition of Century Manufacturing of Bloomington,
Minnesota. Century designs, manufactures, and markets vehicle
service equipment including welding equipment, battery service
systems, automotive antifreeze and refrigerant recycling systems,
and portable power supplies. The addition of Century gave
Pentair a leading position in the vehicle service equipment (VSE)
market.
Holly Nava, customer service account
representative, Delta International
Although Century is operating under its own identity, and
as a separate business within Pentair, its purchase initiated a
synergistic relationship with Pentair's existing VSE company,
Lincoln Automotive. Century products are distributed primarily
through retail and professional channels, while Lincoln
Automotive products are distributed mainly through traditional
automotive channels.
The Century/Lincoln Automotive alliance allows the
companies to cooperate in product development, marketing,
distribution, and manufacturing. Additionally, Century's
international experience advances Pentair's entry into global VSE
markets.
To better orchestrate the synergies between the two
businesses and promote accelerated growth, Pentair formed a
vehicle service equipment organization. G.Robert Gey, formerly
Pentair vice president of corporate development, was named to
the newly created position of president, vehicle service
equipment businesses.
Each of our professional tools and equipment businesses
continues to focus on professional users and the upper end of
the do-it-yourself market. Similarly, the businesses all place a
high value on developing innovative products and leveraging the
existing strengths of their brand names. Working from stable cost
positions, these businesses also seek to implement and maintain
efficiencies that will contribute to greater productivity in all facets
of their operations.
Inez Gage, assembler, Lincoln Automotive
Delta, Porter-Cable, and Lincoln Automotive had record
years in 1996, registering the highest sales and earnings ever.
Successful new product introductions, entrance into new markets,
and expanding distribution drove internal growth. Bolstered by
our unparalleled 1996 accomplishments, we continue to
aggressively apply our strategies and pursue complementary
acquisitions to accelerate the growth and performance of the
professional tools and equipment business.
page 16-17
Water Products Business
F.E.Myers and Fleck Controls
Fleck Controls' new Model 8500 water conditioning
control valve provides residential customers the operating
efficiency of a commercial-grade twin-tank system with the low
cost of a glass-filled resin valve body. The Model 8500 valve, first
introduced into Germany in partnership with a large Fleck
customer, is now available worldwide. More than 3,000 units have
been installed in Europe and the United States.
The water products business reinforced its global position
step by step
through the acquisition of
Aplex and SIATA, and the
development of products for international markets.
Myers sump pumps helped thousands of homeowners
keep their homes dry despite flood conditions that affected much
of the United States in 1996.
Myers' ability to deliver emergency sump pump orders
quickly often in 24 hours or less enhanced its reputation as one
of the nation's leading pump manufacturers.
page 18-19
Water Products Business
F.E.Myers and Fleck Controls
Since identifying the water products market as a strategic
focus more than a year ago, we have refined our strategies,
made great strides in performance improvement, and completed
three key acquisitions that built upon the foundation provided by
our existing Myers pump business.
That foundation was never stronger than in 1996, when
Myers recorded the most successful year in its history. This
extraordinary performance was driven by rapid growth in the
company's retail channels, an aggressive product development
program, and the integration of the Aplex industrial pump
business acquired in January 1996.
Integrating Aplex enabled Myers to establish a united
sales force which markets the industrial pump products of both
companies through one catalog. Additional benefits were realized
when the manufacture of Aplex pump components was
transferred from outside vendors to Myers, better utilizing Myers'
plant capacity and reducing overall manufacturing costs.
Myers approached its product development in two ways.
First, Myers expanded the breadth of its product line by
developing a record number of new products for introduction in
1997. Second, Myers modified its existing products, which are
designed for 60-Hertz power sources, to make them compatible
with the 50-Hertz power sources found in most foreign markets.
These efforts will make an unprecedented number of products
available to a significant number of new geographic markets.
Entering new geographic markets was also an objective
of Fleck Controls. In December 1996, Fleck took a major step
toward this end when it acquired SIATA, a Florence, Italy-based
manufacturer of water conditioning control equipment for
commercial and residential applications. This purchase
significantly boosted Fleck's European market share, and
provided new electronics technology to expand the existing Fleck
product line. SIATA's electronics expertise also opens the door to
innovative water treatment technologies offering high growth
potential. With its joint venture sales and distribution operation in
Singapore, SIATA gives us a foothold for further expansion in
China, Japan, and other Asian countries.
Mitch Hastings, wastewater systems assembler, F.E.
Myers
Fleck Controls, which Pentair acquired in late 1995,
enhanced its own growth potential by strengthening its customer
relationships during the ownership transition. The company also
began implementing cellular manufacturing techniques in 1996,
and has invested capital in new manufacturing processes and
information systems. To accelerate sales, Fleck augmented its
sales force, focusing on thriving commercial/industrial markets
and pursuing new sales opportunities in Eastern Europe, the
Middle East, and Africa.
Capitalizing on the strengths of Myers and Fleck Controls,
Pentair has made significant progress in developing its water
products business. We continue to pursue aggressive growth
strategies and add complementary acquisitions to enhance the
strong brand names, reputable products, and distribution
capabilities in worldwide water markets.
page 20-21
Emerging Businesses
Lincoln Industrial and Federal Cartridge Company
The Rhein-Main-Sieg Coca-Cola bottling plant in Bendorf,
Germany, employs an automated conveyor and machine
lubrication system designed and manufactured by Lincoln
Industrial. This one-of-a-kind, two-line/progressive system is
self-monitoring and lubricates over 3,000 points from a single
source, ensuring reliable, long-term operation with a minimum of
maintenance. Patrick Sandker, Lincoln Industrial application
engineer, coordinated the layout and design. The system will
save the customer an estimated $250,000 in annual maintenance
costs.
Our emerging
businesses are a
foothold for expansion.
Each has the potential
to become a strategic
Pentair business focus
when paired with
complementary acquisitions.
page 22-23
Emerging Businesses
Lincoln Industrial and Federal Cartridge Company
The businesses we define as emerging Lincoln Industrial
and Federal Cartridge are well-managed companies that each
have the potential to become a strategic Pentair business focus.
Up until November 1996, Lincoln Automotive was among
these businesses. At that time, we acquired Century
Manufacturing, which gave us a broader product line and a more
significant share of the vehicle service equipment market. We
also had identified commonalities between professional tools and
vehicle service equipment, and subsequently created a vehicle
service equipment organization, which we aligned with our tool
companies, forming the professional tools and equipment
business.
Our emerging businesses are enhancing their
manufacturing, marketing, and product development to escalate
internal growth. In 1996, Lincoln Industrial, our international
lubrication business which holds the leading global market share
in automated and full-line grease lubrication systems, laid the
groundwork for new growth and expansion. Working from two
strong foundations in Europe and North America, Lincoln has
redirected its growth initiatives toward building a seamless
international presence. This objective will be met by implementing
a worldwide sales and marketing strategy, focusing management
resources on business development in the Asia and Pacific Rim
markets, and bringing to market new lubrication equipment
solutions for global applications. These strategies reinforce the
already-strong business activity in North America and Europe,
and will allow us to participate in the rapid growth of Asia and
Pacific Rim markets over the next five years.
Sharon Brown, manufacturing associate Federal
Cartridge
Similarly, Federal Cartridge, an industry leader in
ammunition innovation, is taking steps to expand its sales in
countries outside the United States and Canada. A new
international division provides support for in-country marketing
and sales programs designed to build Federals distribution and
consumer sales in key foreign locations. A global development
team, comprising personnel from all Federal functions, has been
formed to coordinate the international expansion efforts.
Federal is setting the pace in the ammunition industry and
meeting the needs of a changing society by creating a
continuous flow of new, innovative products. Concerns about the
environment, and wildlife and human health have driven the
development of Federal's Premium Tungsten nontoxic shotshells
and BallistiClean .22, the world's first lead-free, nontoxic rimfire
cartridge. Federal also is introducing the first handgun
ammunition specifically designed and marketed for personal
defense. These products, along with Gold Medal Match Brass,
Top Gun target loads, Premium handgun hunting loads, and
Premium high-velocity lead loads, are building Federal's strong
reputation for ammunition selection and expertise.
Steven Zeug, manufacturing associate
Federal Cartridge
Although Federal has been affected by a weak
ammunition market in the last two years, new product
development, along with continuing efforts to increase
productivity and reduce costs, will position the company to take
advantage of the stronger demand anticipated in 1997.
We continue to support our emerging businesses with
management expertise and capital investments, enhancing their
value and positioning them for future growth.
page 24-25
Subsidiary Profiles
Century Manufacturing
Products Battery chargers and testers, portable power
supplies, automotive refrigerant and coolant recyclers, arc and
MIG welders, plasma cutters, and welding accessories.
Brand Names Century, Solar, Booster Pac.
Markets Automotive aftermarket and retail channels for
professional and do-it-yourself automotive and body repair.
Wholesale, retail, and commercial distribution for industrial
maintenance, farm, and home metalworking.
Employees 446
Facilities Headquarters, manufacturing, and distribution
facilities are located in Bloomington, Minnesota, with additional
facilities in Pierre, South Dakota, and St.-Jean-sur-Richelieu,
Quebec.
Address 9231 Penn Avenue South, Minneapolis, MN
55431, (612) 884-3211
Delta International Machinery Corp.
Products A full line of homeshop products and contractor
tools, a broad line of general purpose stationary woodworking
machinery, and a complete line of accessories.
Brand Names Delta, Biesemeyer.
Markets Do-it-yourself/homeshop craftsmen; residential,
commercial, and industrial construction; remodelers; and cabinet
manufacturers, case goods, and furniture makers.
Employees 710
Facilities Headquartered in Pittsburgh, Pennsylvania,
Delta has manufacturing plants in Tupelo, Mississippi, and Mesa,
Arizona; distribution, customer service, and technical service
centers in Memphis, Tennessee, and Guelph, Ontario, Canada;
and an engineering/sourcing office in Taichung, Taiwan.
Address 246 Alpha Drive, Pittsburgh, PA 15238, (412)
963-2400
Federal Cartridge
Products Shotshell, centerfire, and rimfire cartridges;
ammunition components; and clay targets.
Brand Names Premium, Gold Medal, Classic,
BallistiClean, Tactical.
Markets Hunting; trap, skeet, sporting clay, and target
shooting; the U.S. government; and law enforcement.
Employees 879
Facilities The headquarters and manufacturing facilities
are located in Anoka, Minnesota. The Champion Target division,
which produces clay targets, is located in Richmond, Indiana.
Address 900 Ehlen Drive, Anoka, MN 55303, (612)
421-7100
Fleck Controls
Products A complete line of control valves used in the
manufacture of water softeners and filtration, deionization, and
desalination systems.
Brand Names Fleck, SIATA.
Markets Residential, commercial, industrial, and municipal
water treatment; manufacturers who supply residential,
commercial and industrial markets with standard and custom
designed products.
Employees 373
Facilities Headquarters, manufacturing, and distribution
facilities are located in Brookfield, Wisconsin, near Milwaukee.
Secondary manufacturing and distribution facilities are located in
Buc, France, near Versailles; and Florence, Italy.
Address 20580 Enterprise Avenue, Brookfield, WI 53045,
(414) 784-4490
Hoffman
Products Metallic and composite enclosures and cabinets
that house electrical and electronic controls, instruments, and
components.
Brand Name Hoffman.
Markets Automotive, petroleum and petrochemical, food,
machine tool, and other industrial manufacturing customers.
Original equipment manufacturers; plant maintenance and repair;
and construction.
Employees 2,251
Facilities The headquarters and primary manu-facturing
facilities are located in Anoka, Minnesota. Manufacturing and
office facilities are located in Brooklyn Center, Minnesota; Hemel
Hempstead, U.K.; and Reynosa, Mexico. A manufacturing and
distribution Center, which is currently under construction in Mt.
Sterling, Kentucky, will be operational in the spring of 1997.
Address 900 Ehlen Drive, Anoka, MN 55303, (612)
421-2240
page 26-27
Subsidiary Profiles
Lincoln Industrial
Products Automated and manual lubrication systems and
equipment; pumps and pumping stations for thick fluid transfer
applications.
Brand Names Air Brake, BearingSaver, Centro-Matic,
Cobra, Dispense Pak, Ecolub, Helios, Lincoln, Magna-Ram,
Modular Lube, Multi-Luber, PowerMaster, PileDriver, PL2000,
Quicklink, Quicklub, System Sentry, Zerk-lock.
Markets Heavy industry (steel mills, cement plants, pulp
and paper, power plants), automobile manufacturers, commercial
vehicles, agriculture, construction equipment, food & beverage,
mining, printing, and general industrial manufacturing.
Employees 744
Facilities Headquartered in St. Louis, Missouri, Lincoln
Industrial has manufacturing facilities in St. Louis, Missouri;
Walldorf/Baden, Germany; Chodov, Czech Republic; and a joint
venture operation in Bangalore, India. Additional locations include
a technical center in Detroit, Michigan, and sales offices in Tokyo
and Singapore.
Address One Lincoln Way, St. Louis, MO 63120, (314)
679-4200
Lincoln Automotive
Products Vehicle service products including lubricating
tools and equipment, battery charging and testing equipment,
welding equipment and supplies, and a complete line of lifting
equipment including hydraulic jacks and specialty tools.
Brand Names Lincoln, Blackhawk Automotive, Marquette,
Porto-Power, Banner, Winner, Pro-Arc.
Markets Automotive aftermarkets including automotive
repair and vehicle maintenance, farm, and industrial.
Employees 582
Facilities Headquarters are located in St. Louis, Missouri,
while manufacturing facilities are located in Jonesboro, Arkansas,
and Nogales, Mexico. A distribution facility for the Canadian
market is located in Mississauga, Ontario, Canada.
Address One Lincoln Way, St. Louis, MO 63120, (314)
679-4300
F.E. Myers
Products Pumps for residential and municipal wells; sump
pumps for residential service; submersible non-clog and grinder
pumps and systems for residential, commercial, and municipal
service; and reciprocating and centrifugal pumps for commercial
and industrial services.
Brand Names Myers, Water Ace, Shur-Dri, Aplex.
Markets Wholesale and retail distribution to residential
users, municipal environmental organizations, and industrial
manufacturing companies.
Employees 638
Facilities The headquarters, manufacturing, and
distribution facilities are located in Ashland, Ohio; with a
manufacturing, distribution, and sales office in Midland, Texas;
and sales offices and distribution centers in Kitchener, Ontario,
Canada; Jacksonville, Florida; and Sacramento, California.
Address 1101 Myers Parkway, Ashland, OH 44805, (419)
289-1144
Porter-Cable Corporation
Products Portable electric tools and air-powered nailing
products including saws, routers, sanders, grinders, cordless
tools, drills, and pneumatic fastening products.
Brand Names Porter-Cable, Flex.
Markets Woodworking, residential, and industrial
construction; industrial fabrication and maintenance; and home
craftsmen.
Employees 1,365
Facilities Headquarters, U.S. manufacturing, and
distribution facilities are located in Jackson, Tennessee.
European manufacturing and distribution facilities are located in
Steinheim, Germany.
Address 4825 Highway 45 North, Jackson, TN 38302,
(901) 668-8600
Schroff
Products Cabinets, cases, subracks, micro-computer
packaging systems, and a full line of accessories including
backplanes, power supplies, and technical workstations.
Brand Names Schroff, Transrack.
Markets Schroff serves the worldwide industrial
electronics industry including key segments such as computers,
test & measurement, private LANs/data communication, industrial
control and factory automation, medical, and telecommunications.
Employees 1,728
Facilities The headquarters and primary manufacturing
facility are located in Straubenhardt, Germany. Other operations
include Betschdorf, France; Bonneuil-sur-Marne, France; Hemel
Hempstead, U.K.; Warwick, Rhode Island; Yokohama and
Meiwa-Cho, Japan; Skarpnack, Sweden; Gallarate (Varese),
Italy; and Singapore.
Address Langenalber Str. 96-100,
75334 Straubenhardt, Germany, 011-49-7082-794-0
page 28
Focus on Results
1996 Management's Discussion & Analysis
Strong business results
continue to provide the
financial
footing
for Pentair's
growth strategies.
page 29
Financial Review
Pentair, Inc. & Subsidiaries
Overview The Pentair vision is to be an independent,
top-performing, consistently growing, diversified industrial
company composed of subsidiaries that are recognized as
leaders in their markets and whose combined performance
maximizes benefits to shareholders, employees, customers and
other stakeholders. Pentair is guided by its Business Code of
Conduct and is respected for and by its people.
Pentair, Inc. has strategic and financial objectives that
guide management decision-making in creating value for its
shareholders.
Pentair achieved solid financial results in 1996. Sales
from continuing operations of $1.6 billion represented an increase
of 12% over the previous year's comparable results. Earnings per
share from continuing operations increased 23% to $1.73 per
share in 1996. Free cash flow from continuing operations was
$30 million in 1996 compared to $42 million in 1995.
Total Return to Shareholders Pentair seeks to maximize
value with strategic planning for long-term performance. The
Company believes shareholder value is best measured by
dividend returns and equity value growth, which are enhanced
when EPS growth and ROE goals are achieved.
The Company continued its strong track record attaining a
20.5% annual compounded return to shareholders for the
five-year period ended December 31, 1996. Pentair achieved a
31.7% total return to shareholders for 1996.
In 1995, the Company raised its financial goals to 15%
EPS growth (annual growth in earnings per share) coupled with
17% ROE (average return on common shareholders' equity).
The 1996 results were 22.7% EPS growth and 14.3% ROE. Prior
to 1996, the financial goals were to achieve 10% EPS growth and
15% ROE.
chart
Earnings per Share
($ per share, restated for stock dividends, from continuing
operations only)
92 0.64
93 0.76
94 1.17
95 1.41
96 1.73
end chart
The following chart illustrates the performance of Pentair
stock in 1996 compared to the S&P 400 MidCap Index of which
Pentair Stock is a component.
chart
1996 Pentair Stock Trend
page 30
Management's Discussion & Analysis
Results of Operations
Strategic Direction In thirty years of business, Pentair has
achieved a reputation as one of the nation's premier diversified,
growth-oriented manufacturing companies. To maintain this
reputation and enhance value for our shareholders, the Company
will continue to stress the fundamentals as it pursues its more
aggressive strategic plan. Pentair's fundamentals are to grow its
businesses through innovative marketing and product design;
intensive productivity improvement coupled with substantial
capital investment; and employee training and participation.
Pentair has a leading presence and is building worldwide
capabilities in its major markets. The strategic plan focuses
Pentair's internal and acquisition growth toward those market
areas.
<TABLE>
Results of Operations
In Thousands
<CAPTION>
General
Specialty Industrial
Products Equipment Corporate Total
<C> <C> <C> <C> <C>
Sales
1996 $678,247 $888,921 $(103) $1,567,065
1995 516,841 886,030 0 1,402,871
1994 465,573 796,132 0 1,261,705
Operating Income
1996 $83,221 $84,233 $(24,535) $142,919
1995 56,655 82,872 (23,280) 116,247
1994 49,518 76,003 (19,947) 105,574
</TABLE>
charts
Sales
($ Millions, from continuing operations)
92 864.0
93 946.6
94 1,261.7
95 1,402.9
96 1,567.1
Operating Income
($ Millions, from continuing operations)
92 61.9
93 68.1
94 105.6
95 116.2
96 142.9
end charts
page 31
Managements Discussion & Analysis
Results of Operations
Consolidated
1996 versus 1995 Consolidated net sales from continuing
operations increased to $1,567.1 million in 1996, representing an
11.7% increase over 1995. The double digit growth rate is
attributed to continued strength in North American markets and
strategic acquisitions that strengthened our market positions
throughout the world. The Specialty Products segment sales
increased over 30% due to new product introductions, further
distribution channel penetration and acquisitions. The General
Industrial segment sales increased slightly over 1995. North
American sales grew but were partially offset as the result of
weak economic conditions in Europe, a stronger U.S. Dollar, and
depressed sporting ammunition markets.
Operating income from continuing operations increased to
$142.9 million in 1996, up 22.9% over 1995, and operating
income as a percent of sales improved from 8.3% to 9.1%. Gross
profit margins improved nearly 1% in 1996 to 29.9% versus
29.0% in 1995. This is primarily due to productivity gains and
volume efficiencies. Selling, general and administrative expense
(SG&A) as a percent of sales was 19.8% in 1996 as compared to
19.7% in 1995. Extra selling effort was expended during 1996 to
support new product introductions and new market expansion
activities. In addition, the Company incurred expenses to support
major information system upgrades.
Interest expense was lower in 1996 as compared to 1995
due to lower interest rates and a slightly lower average debt level.
Interest income was lower in 1996 as compared to the prior year.
1995 included interest income received on the note receivable
held in relation to the sale of the paper businesses.
Income from continuing operations increased 23.2% to
$74.5 million versus $60.5 million in 1995. EPS of $1.73 in 1996
represented an increase of 22.7% over 1995 EPS from
continuing operations of $1.41.
1995 versus 1994 Consolidated net sales from continuing
operations increased to $1,402.9 million in 1995, representing an
11.1% increase over 1994. Continued strength in both domestic
markets as well as international sales helped propel the double
digit growth rate. The acquisition of Fleck Controls at the
beginning of November contributed less than 1% to this increase.
Sales growth was split evenly across the Specialty Product and
General Industrial segments, with continued strength from new
product introductions and further distribution channel penetration.
Operating income from continuing operations increased to
$116.2 million in 1995, up 10.1% over 1994. Net income
increased by 44.0% to $77.2 million versus $53.6 million in 1994.
Double digit growth from continuing industrial operations, lower
interest cost and a gain from the sale of our Paper operations
drove the substantial increase in net income.
Gross profit margin was slightly lower at 29.0% versus
29.3% in 1994 due primarily to additional cost in penetrating new
channels of distribution and a product mix shift in sporting
ammunition. As a result of increased sales and productivity
improvement, the industrial businesses again reduced their
SG&A as a percent of sales from 19.9% in 1994 to 19.7% in
1995.
Operating income as a percent of net sales for the
continuing operations was 8.3% in 1995 compared to 8.4% in
1994. This compares to 7.1% for the total business, including
paper operations, in 1994. Most businesses increased their
operating income margin with the exception of Federal. Federal's
margins were down due to product mix changes created by
external market factors in 1995 and higher raw material cost.
Product mix had created very favorable profits for Federal in
1994.
Interest expense was lower in 1995 as compared to 1994
due to lower average debt levels related to the reduction of
borrowings by application of the proceeds from the sale of the
paper businesses.
page 32
Management's Discussion & Analysis
Results of Operations
This was somewhat offset by an increase in interest rates.
Interest income was higher in 1995 as compared to 1994 due to
interest income received on the note receivable held in relation to
the sale of the paper businesses.
Segment Discussion
Specialty Products Businesses in this group manufacture
tools and equipment designed and marketed for commercial,
residential and municipal construction and a variety of
professional craftsman and do-it-yourself applications. The
products include woodworking machinery (Delta); portable power
tools (Porter-Cable); residential water systems, sump pumps,
environmental pumps and grinders, and industrial pumps (Myers);
and residential, commercial, and industrial control valves and
accessories for water softening, conditioning, and filtration (Fleck
Controls).
1996 versus 1995 Specialty Products sales increased
$161.4 million or 31.2%, propelled by new product introductions,
expanded distribution in home center and hardware channels,
and acquisitions. Fleck Controls and Biesemeyer (Delta)
contributed a full year of sales and income to Pentair in 1996
(versus two months in 1995). Growth was also augmented with
successive strategic acquisitions in 1996 of Aplex (by Myers),
FLEX (by Porter-Cable), and SIATA (by Fleck Controls).
Operating income as a percent of sales increased to
12.3% in 1996 from 11.0% in 1995 due to favorable product mix,
volume efficiencies and productivity gains.
1995 versus 1994 Specialty Products sales increased
$51.3 million or 11.0% as a result of new product introductions
and expanded distribution in home center and hardware
channels. Acquired in November, Fleck Controls and Biesemeyer
contributed two months of sales and income to Pentair in 1995.
Operating income as a percent of sales increased to
11.0% from 10.6% because of productivity gains and capacity
efficiencies.
Outlook New products, broader distribution through
market expansion, and continued productivity gains should
contribute to increased sales and operating income from both the
tool and water businesses in 1997. Specialty Products will benefit
from full year operations and synergies from 1996 acquisitions.
General Industrial Equipment The products of this group
include electrical and electronic enclosures (Hoffman & Schroff),
and lubrication systems and material dispensing equipment
(Lincoln Industrial). These products are designed to facilitate
industrial and commercial expansion and efficiencies. This group
also includes sporting and law enforcement ammunition (Federal)
and vehicle service equipment (Lincoln Automotive & Century
Manufacturing).
1996 versus 1995 General Industrial Equipment sales
increased slightly over 1995. European sales (especially as
measured in a stronger U.S. Dollar) from the enclosure and
lubrication systems businesses reflected weak economic
conditions in Europe in 1996. North American sales growth was
strong enough to result in a total worldwide sales increase over
1995 for these businesses. Orders at Federal were down in 1996,
in parallel with the weakness throughout the entire sporting
ammunition industry, as the market continued to absorb the
unprecedented 1994 stock-piling of ammunition that had
occurred in anticipation of proposed handgun-related regulations.
Sales from the vehicle service equipment businesses increased
in 1996 due to new product introductions and the acquisition of
Century Manufacturing which contributed two months of sales
and income to Pentair in 1996.
page 33
Management's Discussion & Analysis
Results of Operations and Financial Condition
Operating income as a percent of sales increased to 9.5%
in 1996 from 9.4% in 1995. Federal experienced unfavorable
factory absorption as it scaled back production to reduce
inventories. The operating margins of all the other businesses
improved due to cost control measures and strong productivity
gains.
1995 versus 1994 General Industrial Equipment sales
increased $89.9 million or 11.3% over 1994, driven by new
product introductions and continued strong market demand
across product lines. The active worldwide durable goods
markets which characterized 1994 continued in 1995, increasing
orders at Hoffman and Schroff. In contrast to 1994, orders at
Federal were unusually weak in 1995 as customers and
distributors worked down stock-piled inventories of ammunition
that had been built the previous year in anticipation of new
proposed handgun-related regulations. Lincoln Automotive
markets were approximately flat year to year, though operating
efficiencies and higher sales to key customers helped the
company improve performance over 1994. Lincoln Industrial
performed well as a result of productivity improvements, reduced
working capital and increased sales.
Volume efficiencies and productivity improvements in
most of the General Industrial Equipment businesses were offset
by an unfavorable product mix at Federal, resulting in a decrease
in operating income as a percent of sales from 9.5% to 9.4%.
Outlook New products, continued productivity gains, and
strategic acquisitions are expected to contribute to increased
sales and operating income for 1997. Both the enclosure and
lubrication systems businesses have targeted the Asia/Pacific
Rim regions for market expansion. Federal is positioned to take
advantage of ammunition market improvements. The General
Industrial segment will also benefit from a full year of Century
Manufacturing operations in 1997.
Financial Condition The Company's financial condition
continued to grow stronger in 1996 with cash from operations
being sufficient to fund capital expenditures and payment of
dividends. Historically, Pentair's continuing businesses have
generated strong cash flow sufficient to fund aggressive internal
growth, to pay dividends, and to increase leverage available for
acquisitions. The 1995 sale of the paper businesses added
significant capacity to grow the continuing businesses.
The Company has managed its financial condition to
position itself in accordance with its strategic plan of focusing on
its industrial businesses. The success of this financial
management has led to efficient use of resources in maximizing
cash flow from operations and minimizing external borrowing.
Cash from operating activities was $101.7 million in 1996
compared to $105.7 million from continuing operations in 1995.
The Company attained a positive free cash flow from continuing
operations of $30.1 million in 1996 compared to $41.8 million in
1995. Free cash flow, a measure of the internal financing of
operational cash needs, is defined as cash from operations less
capital expenditures.
Looking ahead to 1997, the Company expects that cash
from operating activities should continue to provide the funds for
capital investments, dividends and small acquisitions. The
Company has the capacity to finance larger acquisitions while
maintaining reasonable financial ratios.
page 34
Management's Discussion & Analysis
Financial Condition
chart
Capital Spending
($ Millions)
92 28.0
93 28.1
94 57.8
95 63.8
96 71.6
end chart
Pentair invests capital to maintain existing businesses,
implement productivity improvements, introduce new products
and develop new businesses. In the last five years, $249 million
have been reinvested in the businesses as shown in the chart
above.
Capital outlays in 1997 are expected to be in the $70 to
$80 million range. Projects include completion of the
manufacturing plant for Hoffman Engineering in Mount Sterling,
Kentucky, reconfiguration and expansion of manufacturing
facilities and new product development. In the continuing
businesses, capital expenditures strictly for environmental
compliance have accounted for less than 5% of the total capital
spending and amounts for the future are anticipated to be
consistent with historic trends.
As of December 31, 1996, the debt to total capital ratio
was 33 percent, even though the Company paid $75.2 million to
acquire new companies in 1996. The ratio was 31 percent at the
end of 1995.
The Company raised its 1997 quarterly dividend to 13.5
cents per share to an annual rate of $.54 per share. This is an
8% increase over 1996.
Pentair has increased its dividend payment each year
since 1976. Since the first cash dividend in 1976, dividends have
increased at an average annualized growth rate of 16%.
chart
Dividends ($ per Share)
Restated for Stock Dividends
76 0.03
77 0.04
78 0.06
79 0.09
80 0.11
81 0.13
82 0.14
83 0.15
84 0.16
85 0.18
86 0.20
87 0.21
88 0.22
89 0.26
90 0.29
91 0.30
92 0.32
93 0.34
94 0.36
95 0.40
96 0.50
97E 0.54
end chart
page 35
Management's Discussion & Analysis
Other Disclosures
Inflation The rate of inflation remains at reasonable levels
in the United States and most of the foreign economies that
affect Pentair results.
Insurance Subsidiary The Company's captive insurance
subsidiary provides a cost effective means of obtaining insurance
coverage for general and product liability, workers' compensation
and auto liability. The insurance subsidiary insures directly and
reinsures an admitted carrier. Loss reserves are established
based on actuarial projections of ultimate loss.
Environmental Matters Pentair believes, that under
current laws and regulations, its environmental matters are
manageable in the ordinary course of the operations of affected
businesses. Some subsidiaries face remediation of soil and
groundwater as a result of predecessors or their own previous
disposal practices. In addition, Pentair subsidiaries have been
named as potentially responsible parties at a small number of
Superfund or other sites being studied or remediated. In all cases
to date, the affected business has been deemed to be a de
minimis defendant or the business's share of remediation costs
has not been material to Pentair. Pentair contractually retained
certain obligations pertaining to environmental issues of a
discontinued paper business. Payments related to these retained
obligations were not material to the Company's operations in
1996 or 1995.
For purposes of maintaining appropriate reserves against
liabilities associated with environmental issues, whether involving
on- or off-site locations, Pentair management reviews each
individual site, taking into consideration the number of parties
involved with the site, the joint and several liability imposed by
certain environmental laws, the expected level of contributions of
the other parties, the nature and quantities of wastes involved,
the expected method and extent of remediation, the estimated
professional expenses involved and the time period over which
any costs would be incurred. Based on this evaluation, reserves
are established when loss amounts are probable and reasonably
estimable. Insurance recoveries are recorded only when claims
for recovery are settled.
Pentair also engages environmental professionals to
perform periodic audits of its facilities to assist Pentair in
complying with the various environmental laws and regulations
faced by its businesses. Capital expenditures necessary for
compliance with environmental regulations were not material
during 1996 or 1995, nor are they anticipated to be material in the
foreseeable future.
Notification Regarding Forward-looking Information
Except for historical information contained herein, certain
statements are forward-looking statements that involve risks and
uncertainties, including, but not limited to, product demand and
market acceptance risks, the effect of economic conditions, the
impact of competitive products and pricing, product development,
commercialization and technological difficulties, capacity and
supply constraints or difficulties, the results of financing efforts,
actual purchases under agreements, the effect of the Company's
accounting policies, and other risks detailed in other SEC filings.
page 36
Report of Management
and Report of Independent Certified Public Accountants
Management's Responsibility for Financial Reporting The
consolidated financial statements of Pentair, Inc. have been
prepared by company management who are responsible for their
integrity and objectivity. These statements have been prepared in
accordance with generally accepted accounting principles and,
where appropriate, reflect estimates based on judgments of
management.
Pentair maintains a system of internal controls. Our
systems provide reasonable assurance that assets are protected,
transactions are appropriately reported, and established
procedures are followed.
The financial statements have been audited by Deloitte &
Touche LLP, independent certified public accountants, whose
report appears on this page.
The Audit Committee of the Board of Directors, comprised
of outside directors, meets periodically with the independent
certified public accountants and management to monitor activities
and to ensure that each is properly discharging its
responsibilities. The independent certified public accountants
have free access to the Audit Committee, without management
present, to discuss the results of their audit, the adequacy of
internal accounting controls, and the quality of financial reports.
Winslow H. Buxton
Chairman of the Board, President, and Chief Executive Officer
Richard W. Ingman
Executive Vice President and Chief Financial Officer
Report of Independent Certified Public Accountants To
the Directors and Shareholders of Pentair, Inc.:
We have audited the accompanying consolidated balance
sheets of Pentair, Inc. and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial position of
Pentair, Inc. and subsidiaries at December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Minneapolis, Minnesota
February 7, 1997
page 37
Pentair, Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
In Thousands, Except per Share Amounts
<CAPTION>
Years Ended December 31 1996 1995 1994
<S> <C> <C> <C>
Net Sales $1,567,065 $1,402,871 $1,261,705
Operating Costs
Cost of Goods Sold 1,098,064 996,576 892,321
Selling, General
and Administrative 310,606 276,683 251,685
Research and Development 15,476 13,365 12,125
Total Operating Costs 1,424,146 1,286,624 1,156,131
Operating Income 142,919 116,247 105,574
Interest Expense (19,537) (21,861) (23,519)
Interest Income 1,220 7,308 1,450
Income from Continuing
Operations before
Income Taxes 124,602 101,694 83,505
Provision for Income Taxes 50,093 41,194 33,402
Income from Continuing Operations 74,509 60,500 50,103
Discontinued Operations:
Income from Operations of
Discontinued Paper Products
and Joint Venture Segments
(Net of Applicable
Income Taxes of $0, $2,740
and $2,098, Respectively) 0 4,566 3,497
Gain on Sale of Discontinued Operations
(Less Applicable Income Taxes of $7,734) 0 12,134 0
Net Income 74,509 77,200 53,600
Preferred Dividend Requirements 4,928 5,203 5,416
Earnings Applicable to Common Stock $69,581 $71,997 $48,184
Earnings per Common Share
Primary
Continuing Operations $1.83 $1.48 $1.21
Discontinued Operations .00 .45 .10
$1.83 $1.93 $1.31
Fully Diluted
Continuing Operations $1.73 $1.41 $1.17
Discontinued Operations .00 .40 .09
$1.73 $1.81 $1.26
Average Common Shares Outstanding
Primary 37,949 37,300 36,844
Diluted 42,752 42,380 42,080
</TABLE>
See Notes to Consolidated Financial Statements.
page 38
Pentair, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
In Thousands
December 31 1996 1995
<S> <C> <C>
Assets
Current assets
Cash and Cash Equivalents $22,973 $36,648
Accounts and
Notes Receivable - Trade (Net) 299,055 262,503
Note Receivable 0 100,000
Inventories 256,715 212,685
Deferred Income Taxes 23,084 26,017
Other Current Assets 12,428 9,391
Total Current Assets 614,255 647,244
Property, Plant and Equipment
Land and Land Improvements 19,314 18,284
Buildings 110,983 100,355
Machinery and Equipment 364,953 312,250
Construction in Progress 30,668 21,219
Total 525,918 452,108
Less Accumulated Depreciation 227,069 185,381
Property, Plant and Equipment 298,849 266,727
Marketable Securities
- Insurance Subsidiary 40,764 33,036
Goodwill - Net 298,372 282,376
Deferred Income Taxes 2,381 0
Other Assets 34,393 23,110
Total Assets $1,289,014 $1,252,493
See Notes to Consolidated Financial Statements.
page 39
Pentair, Inc. and Subsidiaries
Consolidated Balance Sheets
In Thousands
December 31 1996 1995
Liabilities
Current Liabilities
Accounts and Notes Payable - Trade $98,146 $90,846
Notes Payable 0 120,732
Compensation and Other
Benefits Accruals 61,713 68,414
Income Taxes 24,919 17,812
Accrued Product Claims
and Warranties 25,167 21,684
Accrued Expenses and
Other Liabilities 58,765 58,363
Current Maturities of
Long-term Debt 32,928 18,950
Total Current Liabilities 301,638 396,801
Long-term Debt 279,889 219,896
Other Liabilities 17,251 21,209
Pensions and Other
Retirement Compensation 47,018 38,220
Postretirement Medical
and Other Benefits 47,045 46,158
Reserves - Insurance Subsidiary 32,322 27,354
Commitments and Contingencies
(Notes 9 and 19)
Shareholders' equity
Preferred Stock -
at Liquidation Value
Outstanding:
1,769,983 Shares in 1996
and 1,873,051 Shares in 1995 62,058 65,656
Unearned ESOP Compensation (14,440) (21,074)
Common Stock - Par $.16 2/3
Outstanding:
37,717,022 in 1996 and
37,035,082 in 1995 6,287 6,172
Additional Paid-in Capital 179,143 169,832
Currency Translation, Pension and
Marketable Security Adjustments 8,053 11,020
Retained Earnings 322,750 271,249
Total Shareholders' Equity 563,851 502,855
Total Liabilities and
Shareholders' Equity $1,289,014 $1,252,493
</TABLE>
See Notes to Consolidated Financial Statements.
page 40
Pentair, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
In Thousands
Years Ended December 31 1996 1995 1994
<S> <C> <C> <C>
Preferred Stock
Beginning Balance $65,656 $68,444 $69,380
Conversions into Common (3,598) (2,788) (936)
Ending Balance 62,058 65,656 68,444
Unearned ESOP Compensation $(14,440) $(21,074) $(27,528)
Common Stock
Beginning Balance $6,172 $6,082 $6,044
Employee Stock Plans - Net 69 54 26
Conversions into Common 46 36 12
Ending Balance 6,287 6,172 6,082
Additional Paid in Capital
Beginning Balance $169,832 $163,273 $160,438
Employee Stock Plans - Net 5,770 3,828 1,926
Conversions into Common 3,541 2,731 909
Ending Balance 179,143 169,832 163,273
Currency Translation, Pension and
Marketable Security Adjustments
Beginning Balance $11,020 $8,033 $(7,047)
Currency Translation (3,072) (765) 12,106
Marketable Security Adjustments 875 1,692 (692)
Pension Adjustments (770) 2,060 3,666
Ending Balance 8,053 11,020 8,033
Retained Earnings
Beginning Balance $271,249 $213,670 $177,487
Net Income 74,509 77,200 53,600
Dividends
Common (18,735) (14,718) (13,105)
Preferred (4,928) (5,203) (5,416)
Payment for Redemption
of Stock Rights 0 (558) 0
Tax Benefit of Preferred Dividends 655 858 1,104
Ending Balance 322,750 271,249 213,670
Total Shareholders' Equity $563,851 $502,855 $431,974
</TABLE>
See Notes to Consolidated Financial Statements.
page 41
Pentair, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
In Thousands
Years Ended December 31 1996 1995 1994
<S> <C> <C> <C>
Operating activities
Net Income $74,509 $77,200 $53,600
Adjustment for
Discontinued Operations 0 (16,700) (3,497)
Adjustments to
Reconcile to Cash Flow
Depreciation 47,925 41,570 34,924
Amortization of Intangible Assets 11,595 7,364 5,895
Deferred Income Taxes 484 5,725 2,903
Changes in Assets and Liabilities,
Net of Effects of Acquisitions
Receivables (16,791) (34,103) (24,099)
Inventories (16,345) (9,257) (12,364)
Other Assets (13,488) (10,060) (8,597)
Accounts Payable 2,615 10,038 2,584
Accrued Compensation and Benefits (9,277) 17,735 10,383
Income Taxes 7,025 9,692 (7,000)
Pensions and Other
Retirement Compensation 8,695 12,038 (12,251)
Reserves - Insurance Subsidiary 4,968 6,270 7,219
Other Liabilities (210) (11,849) 25,462
Cash from Operations:
Continuing Operations 101,705 105,663 75,162
Payments Related to
Discontinued Operations 0 (34,925) (5,405)
Total Cash from
Operating Activities 101,705 70,738 69,757
Investing Activities
Capital Expenditures (71,646) (63,838) (57,861)
Proceeds from Sale of
Discontinued Operations 100,000 216,086 0
Acquisition of Businesses
- Net of Cash Acquired (75,185) (16,517) (139,750)
Payment of Notes Related
to Prior Acquisition (120,732) 0 0
Construction Funds
Held in Escrow (9,251) 0 0
Purchase of
Marketable Securities (15,966) (13,081) (9,598)
Proceeds from Sale of
Marketable Securities 6,274 6,091 4,537
Cash Provided by (Used for)
Investing Activities (186,506) 128,741 (202,672)
Financing Activities
Long-term Borrowings 91,528 30,792 171,528
Payments of Long-term Debt (15,425) (210,236) (19,231)
Unearned ESOP
Compensation Decrease 6,634 6,454 7,925
Employee Stock Plans and Other 6,483 4,161 3,041
Dividends (23,663) (19,921) (18,521)
Cash Provided by (Used for)
Financing Activities 65,557 (188,750) 144,742
Effects of Currency Exchange
Rate Changes 5,569 (6,758) 10,523
Increase (Decrease) in Cash
and Cash Equivalents (13,675) 3,971 22,350
Cash and Cash Equivalents -
Beginning of Period 36,648 32,677 10,327
End of Period $22,973 $36,648 $32,677
</TABLE>
See Notes to Consolidated Financial Statements.
page 42
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of Consolidation The consolidated financial
statements include Pentair, Inc. and its wholly-owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Cash Equivalents The Company considers all highly liquid
investments purchased with a maturity of three months or less to
be cash equivalents.
Property, Plant and Equipment Property, plant and
equipment is stated at cost. Depreciation is computed using the
straight-line method. Estimated useful lives are:
Land Improvements 5 Years
Buildings 6 to 33 Years
Machinery and Equipment 3 to 16 Years
Insurance Subsidiary The Company's wholly-owned
insurance subsidiary, established in June 1992, insures general
and product liability, workers' compensation, and auto liability
risks. The insurance subsidiary invests in marketable securities
including debt and equity securities classified as
available-for-sale in accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Debt and equity
securities classified as available-for-sale are carried at fair value
on the balance sheet with unrealized gains and losses reported in
a component of shareholders' equity.
These investments are treated as operating assets of the
insurance subsidiary and the related earnings ($1,824,000,
$1,470,000, and $1,108,000 in 1996, 1995 and 1994,
respectively) are recorded as a reduction of the insurance
component of cost of sales. Reserves for policy claims
($40,403,000 in 1996 and $34,192,000 in 1995) are established
based on actuarial projections of ultimate loss.
The cost and market value of debt and equity securities of
the insurance subsidiary at december 31, by contractual maturity,
are shown below:
<TABLE>
<CAPTION>
In Thousands 1996 1995
Cost Market Cost Market
<S> <C> <C> <C> <C>
Debt Securities:
Due During the Next Year $2,105 $2,103 $1,504 $1,504
Due After One Year
through Five Years 17,381 17,408 17,405 17,159
Due After Five Years
through Ten Years 8,02 8,160 4,957 5,844
27,506 27,671 23,866 24,507
Equity Securities: 10,262 13,093 7,492 8,529
Total $37,768 $40,764 $31,358 $33,036
</TABLE>
Goodwill The excess purchase price paid over net assets
of businesses acquired is amortized on a straight-line basis over
periods ranging from 25 to 40 years. The amortization recorded
for 1996, 1995 and 1994 was $11,160,000, $7,253,000 and
$5,895,000, respectively. Accumulated amortization was
$36,685,000 and $25,860,000 at December 31, 1996 and 1995,
respectively. The Company periodically reviews goodwill to
assess recoverability. The Company evaluates the recoverability
by measuring the unamortized balance of such goodwill against
estimated future cash flows. If events or changes in
circumstances indicated that the carrying amount of such asset
may not be recoverable, the asset would be adjusted to the
present value of the estimated future cash flows. Based on
evaluations performed, there was no adjustment to the carrying
value of goodwill in 1996.
page 43
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Long-lived Assets Pentair evaluates the carrying value of
long-lived assets. When the carrying value exceeds the projected
undiscounted cash flows from the assets, an impairment is
recognized to reduce the carrying value to the fair market value.
Losses on long-lived assets to be disposed of are determined in
a similar manner, except that the fair market values are reduced
for the cost to sell. Based on evaluations performed, there was
no adjustment to the carrying value of such assets in 1996.
Foreign Currency Translation Translation gains or losses
resulting from translating foreign currency financial statements
are reported in a component of shareholders' equity. Foreign
currency transaction gains and losses are included in earnings as
incurred.
Revenue Recognition Revenue from sales is recognized
at the time the product is shipped.
Product Warranty Costs Provision for estimated warranty
costs is recorded at the time of sale and periodically adjusted to
reflect actual experience.
Research and Development Research and development
expenditures are expensed as incurred. Development activities
generally relate to creating new products, improving or creating
variations of existing products, or modifying existing products to
meet new applications.
Earnings per Common Share Earnings per common
share are based on the weighted average number of common
and common equivalent shares outstanding during each period.
The tax benefits applicable to preferred dividends paid to ESOPs
are: for allocated shares credited to income tax expense; for
unallocated shares; credited to retained earnings and not
considered earnings applicable to common stock.
Fully diluted computations assume full conversion of each
series of preferred stock into common stock, the elimination of
preferred dividend requirements, and the recognition of the tax
benefit on deductible ESOP dividends applicable to allocated
shares payable based on the converted common dividend rate.
Conversion was assumed during the portion of each period that
the securities were outstanding.
On January 22, 1996 the board of directors approved a
two-for-one stock split in the form of a 100% stock dividend. The
dividend was payable February 16, 1996 to shareholders of
record at the close of business on February 2, 1996. All
references in the financial statements to average number of
shares outstanding and related prices, per share amounts, and
the stock plan data have been restated to reflect this stock split.
Reclassifications Certain reclassifications have been
made to prior years' financial statements to conform to the
current year presentation.
2. Supplemental Cash Flow Information Cash payments
for interest were $25,591,000, $22,571,000 and $22,856,000 for
the years ended December 31, 1996, 1995 and 1994,
respectively.
Cash payments for income taxes were $38,127,000,
$34,754,000 and $27,649,000 for the years ended December 31,
1996, 1995 and 1994, respectively.
3. Acquisitions
1996 Acquisitions In 1996, the Company paid
$75,185,000 to acquire new companies. The pro forma effect of
these acquistions is not material to the Company.
Fleck Acquisition Effective November 1, 1995, the
Company acquired Fleck Controls, Inc., a manufacturer of control
valves which are major components in residential water
softeners, and commercial and industrial water conditioning
systems for $133.9 million of which $13.2 million was paid in cash
and promissory notes due January 2, 1996 for
page 44
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
$120.7 million were given for the remainder. The
acquisition was accounted for by the purchase method;
accordingly, the purchase price was allocated to the assets
acquired based on their estimated fair values as follows: working
capital, $11.1 million; property, plant and equipment, $10.5
million; other non-current liabilities, $.2 million; other intangible
assets, $3.5 million; and goodwill, $109.1 million. Goodwill will be
amortized on a straight line basis over 25 years.
The Fleck operating results are included in the
Company's consolidated results from November 1, 1995. Had
the acquisition occurred at January 1, 1994, unaudited pro forma
results for 1994 are: net sales $1,322.2 million; income from
continuing operations, $51.2 million and primary and diluted
earnings per share from continuing operations, $1.25 and $1.20,
respectively. Unaudited pro forma results for 1995 are: net sales
$1,460.0 million; income from continuing operations, $61.8 million
and primary and diluted earnings per share from continuing
operations, $1.52 and $1.44, respectively.
These results have been prepared for comparative
purposes only and do not purport to be indicative of what would
have occurred had the acquisition been made at the beginning of
1994, or of the results which may occur in the future.
Schroff Acquisition Effective January 1, 1994, the
Company acquired Schroff GmbH and its international
subsidiaries, manufacturers of cabinets, cases, subracks and
accessories for the electronics industry, for $139.8 million. The
Schroff operating results are included in the Company's
consolidated results from January 1, 1994.
4. Discontinued Operations - Paper Products and Joint
Venture Segments
On April 1, 1995 the Company sold its Cross Pointe
Paper Corporation subsidiary for $203.3 million, of which $103.3
million was received in cash and a promissory note due January
2, 1996 was received for the remainder. 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)
joint venture for $115.6 million cash.
The gain on the sales was $12.1 million after income tax
expense of $7.7 million. The transaction added 28 cents to
diluted earnings per share in 1995.
The prior years have been restated to include the
Company's former paper businesses (Paper Products and Joint
Venture segments) as discontinued operations.
Summarized results of operations of discontinued
operations were as follows:
<TABLE>
<CAPTION>
Results of Operations
In Millions 1995 1994
<S> <C> <C>
Net Sales $145.1 $387.5
Operating Income 9.0 13.7
Earnings, Net of Tax 4.6 3.5
Gain on Sale, Net of Tax 12.1 0.0
</TABLE>
5. Balance Sheet Information Accounts receivable are
stated net of allowances for doubtful accounts of $7,348,000 in
1996 and $7,840,000 in 1995.
Inventories are stated at the lower of cost or market. All
non-U.S. companies use the first-in, first-out-FIFO and moving
average methods. The U.S. companies use the last-in,
first-out-LIFO method.
<TABLE>
<CAPTION>
In Thousands 1996 1995
<S> <C> <C>
Finished Goods $159,617 $134,456
Work in Process 47,689 40,801
Raw Materials and Supplies 49,409 37,428
Total $256,715 $212,685
</TABLE>
If all LIFO inventories were valued at FIFO, aggregate
inventory would have been $261,664,000 and $218,095,000 at
December 31, 1996 and 1995, respectively.
page 45
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
6. Long-term Debt and Credit Facilities Revolving credit
agreements are with seven banks providing credit facilities of
U.S. $275 million which can be borrowed in U.S. $ or any other
G7 currency. G7 currencies include any of German
Deutschmarks, French Francs, British Pounds Sterling, Japanese
Yen, Canadian Dollars, or Italian Lira. The Company must pay a
commitment fee rate ranging from .100 to .150 of 1% per annum
on the total amount of the credit facility. The rate is assessed
pursuant to a sliding scale based on the Company's debt to
total capital ratio as calculated quarterly. Borrowings under the
revolving credit facilities mature on June 30, 2001.
<TABLE>
Debt is summarized as follows:
<CAPTION>
In Thousands 1996 1995
<S> <C> <C>
Revolving Credit Facilities,
Average Interest Rate of 4.27% $168,413 $92,574
Private Placement Debt, Due 1997 to 2003,
Average Interest Rate of 7.23% 115,000 125,000
Other, Due Periodically to 2005,
Average Interest Rate 6.2% 29,404 21,272
Total 312,817 238,846
Current Maturities 32,928 18,950
Total Long-term Debt $279,889 $219,896
</TABLE>
At December 31, 1996, outstanding debt included $65.0
million in U.S. dollars with an average current interest rate of
5.68% and $103.4 million in foreign currencies (primarily German
Deutschmarks) with an average current interest rate of 3.39%.
The average credit facilities borrowing rates were 4.5% in 1996
and 6.0% in 1995. See also interest rate swap agreements at
Note 7.
Various debt agreements have restrictions relating to
minimum net worth, certain financial ratios, and dividends and
certain other restricted payments. Under the most restrictive
covenants, $118,000,000 of the December 31, 1996 retained
earnings were unrestricted for such purposes. The Company has
remained in compliance with these covenants.
Total long-term debt maturities, excluding revolving credit
facilities, are $32,928,000, $24,964,000, $39,537,000,
$23,025,000 and $17,518,000 for the years 1997 to 2001,
respectively.
In January 1997, the Company completed a private
placement to be funded in February 1997 ($10 million) and May
1997 ($40 million) with an average life of nine years and an
average interest rate of 6.92%.
7. Financial Instruments The Company utilizes various
derivatives such as interest rate swap agreements, foreign
currency hedging agreements and interest rate cap agreements.
The Company uses these derivatives in a strategic manner to
minimize interest rate and foreign currency risk. The instruments
are not purchased as speculative investments.
The Company has entered into interest rate swap
agreements with major financial institutions to exchange variable
rate interest payment obligations to fixed rate obligations without
the exchange of the underlying principal amounts in order to
manage interest rate exposures. Net payments or receipts under
the agreements are recorded as adjustments to interest expense
and credit risk is considered remote.
page 46
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
As of December 31, 1996 the Company has one swap
agreement outstanding with an aggregate notional amount of
$10,000,000. The Company also has in place forward starting
swap agreements, which activate during the period from June
1997 through June 1999, with an aggregate notional amount of
$64,500,000. The swap agreements have an average fixed
interest rate of 6.56% and an ultimate maturity of 8 years. Under
the interest rate environment existing as of December 31, 1996,
the net fair value of the Company's swap agreements was a net
liability of $1,309,000.
Long-term debt, including current maturities, has a
carrying value of $312,817,000 and a fair value of $320,000,000.
The estimated fair value represents the present value of debt
service at rates currently available to the Company for issuance
of debt with similar terms. Except for the above, all financial
instruments are carried at amounts that approximate estimated
fair value.
8. Lease Commitments Rent expense related to operating
leases amounted to $11,400,000, $13,117,000 and $7,199,000
in 1996, 1995 and 1994, respectively. The majority of the lease
commitments are for information systems.
Future minimum rental payments under all operating
leases are $9,349,000, $7,268,000, $5,049,000, $4,140,000 and
$8,263,000 for the years 1997 to 2001, respectively.
9. Commitments and Contingencies
Various lawsuits, claims and proceedings have been or
may be instituted or asserted against the Company relating to the
conduct of its businesses, including those pertaining to product
liability, environmental, safety and health, and employment
matters. The Company records liabilities when loss amounts are
determined to be probable and reasonably estimable. Insurance
recoveries are recorded only when claims for recovery are
settled. Although the outcome of litigation cannot be predicted
with certainty and some lawsuits, claims or proceedings may be
disposed of unfavorably to the Company, management believes,
based on facts presently known, that the outcome of such legal
proceedings and claims will not have a material adverse effect on
the Company's financial position, liquidity, or future results of
operations.
Under a $382,000,000 leveraged-lease financing for its
former joint venture LSPI, the Company is committed to provide
up to $95,000,000 additional cash to LSPI if needed to meet its
lease obligation. In connection with the sale of LSPI,
Consolidated Papers, Inc. (the purchaser) has agreed to
indemnify the Company for any required payments.
10. Capital Stock
Preferred Stock The two classes of preferred stock (par
value - $.10) are: $7.50 Callable Cumulative Convertible
Preferred Stock, Series 1988; and 8% Callable Cumulative Voting
Convertible Preferred Stock, Series 1990. Both issues are held
by ESOPs (see Note 12). The preferred shares are convertible
into common stock and are redeemable, in whole or in part, at the
option of the Company on or after the dates indicated below, and
at redemption prices declining to the original price per share after
ten years.
<TABLE>
<CAPTION>
Series 1988 Series 1990
<S> <C> <C>
Shares
Authorized 300,000 2,500,000
Issued and Outstanding 122,099 1,647,884
Liquidation Value $100.00 $30.25
Conversion
Price of Common $10.66 to $13.34 $13.11
Shares of Common 9.375 to 7.5 2.3077
Early Redemption Date January 1991 March 1994
</TABLE>
page 47
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Upon the retirement or other termination of an ESOP
participant, the shares of preferred stock (Series 1988 and 1990)
in which he or she is vested are automatically converted into
common shares and distributed in that form, with fractional
shares paid in cash.
Common Stock The authorized stock of the Company
also consists of 122,200,000 shares of Common Stock with a par
value of $.162_3. On January 22, 1996, the board of directors
approved a two-for-one stock split in the form of a 100% stock
dividend. The dividend was payable February 16, 1996 to
shareholders of record at the close of business on February 2,
1996.
Changes in outstanding common shares are summarized as follows:
<TABLE>
<CAPTION>
In Thousands 1996 1995 1994
<S> <C> <C> <C>
Beginning Balance 37,035 36,496 36,269
Employee Stock Plans - Net 409 325 157
Conversion of Preferred Stock 273 214 70
Ending Balance 37,717 37,035 36,496
</TABLE>
11. Share Rights Plan On July 21, 1995, the board
declared a dividend of one common share purchase right for
each outstanding share of common stock. The dividend was
effective July 31, 1995 for shareholders of record on such date.
Each right entitles the registered holder to purchase from the
Company one common share at a price of $80.00, subject to
adjustment. Such rights only become exercisable ten business
days after a person or group acquires beneficial ownership of, or
commences a tender or exchange offer for, 15% or more of the
Company's common stock.
The Company can redeem the rights for $.01 per right.
The rights will expire on July 31, 2005, unless the rights are
earlier redeemed or exchanged by the Company.
12. Employee Stock Ownership Plan (ESOP) The
Company has an Employee Stock Ownership Plan (ESOP)
covering non-bargaining and some bargaining U.S. employees.
The employees receive Series 1990 Preferred Stock in lieu of
cash 401(k) matching contributions and other cash
compensation.
To finance the plan, the ESOP borrowed $56,500,000
from the Company and exchanged it for 1,867,768 shares of
Callable Cumulative Voting Convertible Preferred Stock, Series
1990 at $30.25 per share. The unpaid balance of the
twenty-year, 8.75% loan with interest only for the first four years
is included in the Company's balance sheet as unearned ESOP
compensation.
Gross compensation expense (i.e. the value of shares
allocated to participant accounts) was $5,561,000, $5,391,000,
and $6,894,000 in 1996, 1995 and 1994, respectively. The stock
held by the ESOP is released for allocation to the participants
accounts as principal and interest is paid from dividends on
unallocated shares ($1,679,000, $2,202,000, and $2,831,000 in
1996, 1995 and 1994, respectively) and Company contributions.
Through December 31, 1996, the loan has been reduced
$54,655,000; of this, $42,060,000 (1,390,000 shares) has been
allocated to participants accounts as compensation and
dividends; and the difference is included in unearned
compensation.
A separate frozen ESOP holds the Series 1988 Preferred
Stock.
page 48
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
13. Stock Incentive Plans
Omnibus Stock Incentive Plan In April 1996, shareholders
approved amendments to the Omnibus Stock Incentive Plan (the
Plan) to authorize the issuance of additional shares of the
Company's common stock. The Plan extends to February 14,
2006. At December 31, 1996, there were 3,245,427 shares
available for grant under the Plan.
The Plan allows for the granting of nonqualified stock
options, incentive stock options, restricted stock, rights to
restricted stock and incentive compensation units (ICUs).
Although none have been issued, the Plan also allows for
granting of stock appreciation rights, performance shares and
performance units.
Restricted Shares, Rights to Restricted Stock and ICUs
Restrictions on the restricted shares, rights to restricted stock and
ICUs generally expire in the third, fourth and fifth years after
issuance. Beginning with 1993 grants, ICU restrictions will expire
at the end of three years. The value of each ICU is based on the
increase in book value of common stock during the restriction
period and is payable when the restrictions lift. Compensation
expense consists of (a) amortization of the market value of the
stock on the date of award over the period in which the
restrictions lapse, and (b) the annual increase in ICU value.
Compensation expense was $4,909,000 in 1996, $5,040,000 in
1995, and $3,050,000 in 1994. The Company records
incremental tax benefits resulting from the program as additional
paid-in capital.
Options Options are granted to purchase shares at not
less than fair market value of shares on date of grant. Options
generally expire after five years but may expire up to ten years
from date of grant.
Outside Directors Nonqualified Stock Option Plan The
Plan allows for the granting of nonqualified stock options. Options
are granted to purchase shares at not less than fair market value
of shares on date of grant. Options generally expire after five
years but may expire up to ten years from date of grant. The Plan
extends to January 1998. At December 31, 1996, there were
429,448 shares available for grant under the Plan.
Details of options for both plans are as follows:
<TABLE>
<CAPTION>
Weighted
Number Average
of Shares Exercise Price
<S> <S> <C> <C>
1994 Granted 395,896 $ 17.75
Exercised 162,302 $ 10.5138
Forfeited 16,412 $ 15.2194
Outstanding, End of Year 1,472,924 $ 13.7563
Exercisable, End of Year 709,570 $ 11.3190
1995 Granted 451,718 $ 21.50
Exercised 427,192 $ 11.0967
Forfeited 40,392 $ 20.2416
Outstanding, End of Year 1,457,058 $ 16.8973
Exercisable, End of Year 690,738 $ 14.1777
1996 Granted 398,278 $ 25.00
Exercised 456,031 $ 14.0283
Forfeited 51,546 $ 22.2582
Outstanding, End of Year 1,347,759 $ 19.9397
Exercisable, End of Year 602,412 $ 16.5584
</TABLE>
page 49
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Options outstanding and exercisable by price range as of December 31, 1996:
<TABLE>
<CAPTION>
Weighted
Average
Remaining Weighted
Con- Average
Range of Number tractual Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
<S> <C> <C> <C> <C> <C>
$12.2917 - $14.7083 300,166 1.02 $13.50 300,166 $13.50
$17.75 300,450 2.06 $17.75 185,913 $17.75
$21.375 - $22.5625 372,565 3.05 $21.50 116,333 $21.50
$25.00 374,578 4.06 $25.00 0 $0.00
$12.2917 - $25.00 1,347,759 2.60 $19.9397 602,412 $16.5584
</TABLE>
In accordance with generally accepted accounting
principles, the Company has chosen to continue accounting for
its plans using the "intrinsic value based" method in accordance
with Accounting Principles Board Opinion No. 25. Had
compensation cost for the plans been determined using the "fair
value based" method as defined in Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), the effect on the Company's
income from continuing operations and earnings per share would
have been immaterial.
14. Provision for Income Taxes
The components of earnings before income taxes were as follows:
<TABLE>
<CAPTION>
In Thousands 1996 1995 1994
<S> <C> <C> <C>
U.S. $89,833 $76,294 $71,236
International 34,769 25,400 12,269
$124,602 $101,694 $83,505
</TABLE>
The provisions for income taxes, excluding tax benefits credited directly
to shareholders' equity, were as follows:
<TABLE>
<CAPTION>
In Thousands 1996 1995 1994
<S> <C> <C> <C>
Current
U.S. (Less
Foreign Tax Credits) $33,897 $23,751 $26,251
State 6,760 4,127 3,415
International 8,952 7,591 833
Current Provision 49,609 35,469 30,499
Deferred
U.S. (4,687) 2,421 (2,374)
International 5,171 3,304 5,277
Deferred Provision 484 5,725 2,903
Total Provision $50,093 $41,194 $33,402
</TABLE>
page 50
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
A reconciliation of the statutory federal tax rate to the effective rate
follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Statutory U.S. Income Tax Rate 35.0% 35.0% 35.0%
State and Local Income Taxes,
Net of U.S. Income Tax Benefit 3.3 3.1 2.6
Incremental International Tax Rate 1.6 2.0 2.2
Goodwill 2.0 1.2 1.2
ESOP Dividend Benefit (0.9) (1.1) (1.2)
Other (0.8) 0.3 0.2
Effective Rate 40.2% 40.5% 40.0%
</TABLE>
The tax effect of the primary temporary differences giving
rise to the company's deferred tax assets and liabilities at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
In Thousands, December 31 1996 1995
<S> <C> <C>
Deferred Tax Assets:
Accounts Receivable Allowances $4,026 $3,473
Retiree Medical Liability 19,376 19,081
Warranty/Product Liability Accruals 15,632 15,270
Employee Benefit Accruals 17,173 16,981
Other 14,232 9,037
Gross Deferred Tax Assets 70,439 63,842
Deferred Tax Liabilities:
Inventory Allowances (5,376) (8,230)
Accelerated Depreciation (22,300) (21,637)
Other (17,298) (8,026)
Gross Deferred Tax Liabilities (44,974) (37,893)
Net Deferred Tax Assets $25,465 $25,949
</TABLE>
15. Retirement Plans The Company has several
non-contributory defined benefit employee pension plans
covering substantially all employees of its U.S. and certain
non-U.S. subsidiaries. Employees covered under the bargaining
plans are eligible to participate at the time of employment and the
benefits are based on a fixed amount for each year of service.
Employees covered under the non-bargaining pension plans are
eligible to participate upon the attainment of age 21 and the
completion of one year of service; and benefits are based upon
final average salary and years of service. All employees are fully
vested in the plans after 5-7 years of service. The Company's
funding policy is to make quarterly contributions as required by
applicable regulations.
page 51
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The components of pension cost are as follows:
<TABLE>
<CAPTION>
In Thousands 1996 1995 1994
<S> <C> <C> <C>
Service Cost $11,128 $9,020 $9,578
Interest Cost
on Projected Benefit Obligation 18,023 16,772 13,464
Actual Return on Assets (41,358) (43,012) (4,564)
Net Amortization and Deferral 22,778 28,165 (8,960)
Net Periodic Pension Cost $10,571 $10,945 $9,518
</TABLE>
Assumptions used to develop pension data were:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Expense:
Discount Rate 7.0% 8.5% 7.0%
Long-term Rate of Return on Assets 8.5% 8.5% 8.5%
Rate of Increase in Compensation 5.0% 6.0% 5.0%
PBO Discount Rate Year-end 7.5% 7.0% 8.5%
</TABLE>
The funded status and accrued pension cost at December 31 are as follows:
<TABLE>
<CAPTION>
Plans Whose Plans Whose
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
In Thousands 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Plan Assets at Fair Value $272,135 $219,892 $146 $8,658
Accumulated Benefit Obligation (ABO):
Vested Benefits 177,743 168,088 17,523 23,922
Nonvested Benefits 2,885 2,229 13,175 10,851
Total ABO 180,628 170,317 30,698 34,773
Provision for Salary Increases 44,687 50,477 5,645 5,410
Projected Benefit Obligation (PBO) $225,315 $220,794 $36,343 $40,183
Plan Assets (in excess of)
less than PBO $(46,820) $902 $36,197 $31,525
Net Transition (Liability) Asset 671 671 (233) (106)
Unrecognized Prior Service Cost (2,669) (2,836) (454) (764)
Unrecognized Net Gains (Losses) 48,032 7,089 (6,890) (6,707)
Minimum Liability Adjustment 0 0 3,517 2,685
Accrued Pension Liability $(786) $5,826 $32,137 $26,633
</TABLE>
In German practice, it is uncommon to fund pension
plans. Approximately $23 million of the $36 million underfunding
shown above (Plan assets less than PBO) relates to the German
pension plans.
At December 31, 1996, approximately 90% of the plan
assets are invested in listed stocks and bonds or cash and
short-term investments. The rest of the plan assets are invested
primarily in fixed-rate guaranteed investment type contracts
purchased from insurance companies. The Company's own
common stock accounted for 12.5% of plan assets.
page 52
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
16. Postretirement Medical and Other Benefits The
Company provides certain health care and life insurance benefits
for retired employees. Employees become eligible for these
benefits if they meet minimum age and service requirements and
are eligible for retirement benefits.
The accrued postretirement medical and other benefits costs
that are not funded were as follows at December 31:
<TABLE>
<CAPTION>
In Thousands 1996 1995
<S> <C> <C>
Accumulated Postretirement
Benefit Obligation (APBO):
Retirees $24,864 $26,199
Fully Eligible Active Plan Participants 7,768 8,115
Other Active Plan Participants 8,311 8,879
Total APBO 40,943 43,193
Unrecognized Prior Service Cost 5,084 6,032
Unrecognized Net Gains (Losses) 2,939 (300)
Accrued Postretirement Medical and
Other Benefits Liability $48,966 $48,925
</TABLE>
The components of the net periodic cost are as follows:
<TABLE>
<CAPTION>
In Thousands 1996 1995 1994
<S> <C> <C> <C>
Service Cost $630 $624 $600
Interest Cost on Projected Benefit Obligation 2,921 3,870 2,677
Amortization of Plan Amendment (948) (913) (472)
Net Periodic Postretirement Cost $2,603 $3,581 $2,805
</TABLE>
The discount rate used in determining actuarial present
value of the benefit obligations was 7.5% in 1996 and 7.0% in
1995. The assumed health care cost trend rate used in
measuring the accumulated postretirement benefit obligation was
9.4% in 1996, declining to 5.75% by the year 2020. If the health
care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefit obligation as of December
31, 1996 would be increased by 2.7%. The effect of this change
on the sum of the service cost and interest cost would be an
increase of 2.6%.
page 53
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
17. Industry Segment and Geographic Information (unaudited)
Businesses in the Specialty Products Segment
manufacture products designed and marketed for commercial,
residential and municipal construction and a variety of
professional craftsman and do-it-yourself woodworking
applications. The products include woodworking machinery
(Delta), portable power tools (Porter-Cable), residential water
systems, sump pumps, environmental pumps and grinders, and
industrial pumps (Myers), and control valves which are major
components in residential water softeners, and commercial and
industrial water conditioning systems (Fleck).
Businesses in the General Industrial Equipment Segment
manufacture products designed to facilitate industrial and
commercial expansion and efficiencies. The products include
electrical and electronic enclosures (Hoffman & Schroff),
lubrication systems and material dispensing equipment (Lincoln
Industrial), vehicle service equipment (Lincoln Automotive &
Century Manufacturing) and sporting and law enforcement
ammunition (Federal).
Corporate expense includes administrative costs, charges
that do not relate to current operations and captive insurance
activities. Corporate assets include all cash and cash equivalents.
Sales and operating income by business segment are included in the
table on page 30. The following tables provide additional segment
<TABLE>
<CAPTION>
General
Specialty Industrial
In Thousands Products Equipment Corporate Total
<C> <C> <C> <C> <C>
Identifiable Assets
1996 $488,146 $721,853 $79,015 $1,289,014
1995 383,983 686,170 182,340 1,252,493
1994 227,764 618,265 315,113 1,161,142
Depreciation and Amortization
1996 $18,318 $41,044 $158 $59,520
1995 10,147 38,625 162 48,934
1994 8,036 32,667 116 40,819
Capital Expenditures
1996 $21,542 $50,032 $72 $71,646
1995 16,046 47,694 98 63,838
1994 12,238 45,400 223 57,861
</TABLE>
page 54
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information by geographic area follows:
(The components of this table are accumulated based upon the geographic
location of the subsidiary.)
<TABLE>
<CAPTION>
United Elimin-
In Thousands States Europe Other ations Total
1996
<S> <C> <C> <C> <C> <C>
Sales:
Unaffiliated Customers $1,245,046 $242,963 $79,056 $0 $1,567,065
Intercompany 37,520 92,177 355 (130,052) 0
Total Sales $1,282,566 $335,140 $79,411 $(130,052) $1,567,065
Operating Income $108,783 $25,663 $8,473 $0 $142,919
Assets:
Identifiable Assets $959,030 $281,345 $55,346 $(85,722) $1,209,999
Corporate Assets 79,015
Total Assets $1,289,014
1995
Sales:
Unaffiliated Customers $1,094,784 $230,344 $77,743 $0 $1,402,871
Intercompany 15,915 90,124 0 (106,039) 0
Total Sales $1,110,699 $320,468 $77,743 $(106,039) $1,402,871
Operating Income $83,420 $24,057 $8,770 $0 $116,247
Assets:
Identifiable Assets $810,103 $270,679 $34,748 $(45,377) $1,070,153
Corporate Assets 182,340
Total Assets $1,252,493
1994
Sales:
Unaffiliated Customers $1,014,599 $175,931 $71,175 $0 $1,261,705
Intercompany 26,317 69,568 0 (95,885) 0
Total Sales $1,040,91 6 $245,499 $71,175 $(95,885) $1,261,705
Operating Income $87,451 $12,054 $6,069 $0 $105,574
Assets:
Identifiable Assets $597,918 $256,630 $32,152 $(40,671) $846,029
Corporate Assets 315,113
Total Assets $1,161,142
</TABLE>
page 55
Pentair, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
18. Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
In Thousands, Except per Share Amounts
1996 1st 2nd 3rd 4th Total
<S> <C> <C> <C> <C> <C>
Net Sales $366,290 $362,900 $410,970 $426,905 $1,567,065
Gross Profit 114,736 106,486 115,988 131,791 469,001
Operating Income 32,625 32,852 35,623 41,819 142,919
Income - Continuing 16,500 17,109 18,578 22,322 74,509
Net Income 16,500 17,109 18,578 22,322 74,509
Earnings per Share
- Continuing
Primary $.40 $.42 $.46 $.55 $1.83
Diluted .38 .40 .43 .52 1.73
1995 1st 2nd 3rd 4th Total
Net Sales $333,823 $338,216 $353,338 $377,494 $1,402,871
Gross Profit 101,199 98,941 97,949 108,206 406,295
Operating Income 29,228 26,615 28,199 32,205 116,247
Income - Continuing 13,851 13,349 15,300 18,000 60,500
Net Income 15,350 28,550 15,300 18,000 77,200
Earnings per Share
- Continuing
Primary $.34 $.32 $.38 $.44 $1.48
Diluted .32 .31 .36 .42 1.41
</TABLE>
All per share data has been adjusted for the two-for-one
stock split in the form of a 100% stock dividend in February 1996.
19. Disclosure of Risks and Uncertainties Pentair, Inc. is
engaged principally in the design, engineering, and
manufacturing of various industrial and specialty products. The
diversified businesses manufacture enclosures for electrical and
electronic enclosures, woodworking equipment, power tools,
pumps, water conditioning control valves, sporting and law
enforcement ammunition, vehicle service equipment and
industrial lubrication systems and material dispensing equipment.
The preparation of the financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Certain obligations of discontinued businesses have been
retained by the Company. Based on evaluations by management
and environmental professionals, amounts for any estimated risks
or obligations have been accrued.
Although the individual subsidiaries deal with major
customers throughout North America and Europe, Pentair as a
whole has mitigated any significant impact or potential risk of
concentration of customers, products, or in certain markets or
geographic areas. This is due to the diversified nature of the
Company and its product lines.
page 56
Pentair, Inc. and Subsidiaries
Selected Financial Data: 10-Year Summary
<TABLE>
In Millions, Except per Share Data
<CAPTION>
96 95 94 93 92
Income Statement Data
<S> <C> <C> <C> <C> <C>
Net Sales
Specialty Products 678.2 516.9 465.6 411.6 377.5
General Industrial 888.9 886.0 796.1 535.0 486.5
Total 1,567.1 1,402.9 1,261.7 946.6 864.0
Operating Income
Specialty Products 83.2 56.7 49.5 42.0 40.2
General Industrial 84.2 82.9 76.0 42.2 38.6
Corporate (24.5) (23.4) (19.9) (16.1) (16.9)
Total 142.9 116.2 105.6 68.1 61.9
Earnings before
Income Taxes 124.6 101.7 83.5 55.1 47.7
Income From:
Continuing
Operations 74.5 60.5 50.1 32.7 27.2
Net Income (a) 74.5 77.2 53.6 46.6 42.8
<CAPTION>
91 90 89 88 87
<S> <C> <C> <C> <C> <C>
Net Sales
Specialty Products 344.6 344.9 337.5 317.1 289.7
General Industrial 458.3 460.3 460.9 127.9 112.5
Total 802.9 805.2 798.4 445.0 402.2
Operating Income
Specialty Products 33.6 28.1 29.5 30.6 31.2
General Industrial 35.9 34.5 32.6 9.9 11.1
Corporate (16.4) (14.7) (10.0) (11.4) (7.7)
Total 53.1 47.9 52.1 29.1 34.6
Earnings before
Income Taxes 38.4 31.6 35.2 21.7 29.5
Income From:
Continuing
Operations 18.8 16.9 19.4 10.7 19.0
Net Income (a) 41.1 33.0 36.4 39.8 21.9
Common Share Data
<CAPTION>
96 95 94 93 92
<S> <C> <C> <C> <C> <C>
EPS - Diluted (a) (b) 1.73 1.41 1.17 .76 .64
Cash Dividends .50 .40 .36 .34 .32
Stock Dividends 100 0 0 50 0
Book Value 13.69 12.37 10.71 9.29 8.21
Stock Price 32 1/4 24 7/8 21 3/8 16 1/2 13 3/16
Market
Capitalization 1,378 1,045 899 692 549
<CAPTION>
91 90 89 88 87
<S> <C> <C> <C> <C> <C>
EPS - diluted (a)(b) .47 .42 .50 .32 .56
Cash Dividends .30 .29 .26 .22 .21
Stock Dividends 0 0 0 10 0
Book Value 8.79 7.97 7.42 6.67 5.53
Stock Price 13 7/16 8 1/4 9 3/16 10 7/16 6 1/4
Market
Capitalization 558 342 352 395 200
Balance Sheet Data
<CAPTION>
96 95 94 93 92
<S> <C> <C> <C> <C> <C>
Preferred Equity (net) 47.6 44.6 40.9 33.9 77.4
Common Equity 516.2 458.3 391.1 336.9 260.0
ROE % (a) 14.3 16.9 13.2 13.6 12.8
Capital Expenditures 71.6 63.8 57.8 28.1 28.0
Total Assets 1,289.0 1,252.5 1,161.1 863.1 769.5
Long-term Debt 279.9 219.9 408.5 236.7 209.3
Debt to Capital % 33 31 49 39 38
<CAPTION>
91 90 89 88 87
<S> <C> <C> <C> <C> <C>
Preferred Equity (net) 74.1 68.4 65.9 67.6 50.0
Common Equity 275.7 247.8 241.0 214.2 158.6
ROE% (a) 13.3 11.1 14.1 19.8 12.9
Capital Expenditures 26.5 28.0 28.7 20.2 19.2
Total Assets 698.4 696.5 708.9 675.2 376.9
Long-term Debt 191.2 217.5 243.4 242.9 81.0
Debt to Capital % 35 41 44 46 28
</TABLE>
All share and per share data adjusted for stock dividends.
(a) 1992 - before the cumulative effects of accounting
changes.
(b) From continuing operations.
page 57
Pentair, Inc. and Subsidiaries
Investor Information
Pentair Stock Data For the calendar year 1996, Pentair
common stock was listed on the NASDAQ National Market
System up until March 1, 1996; on March 4, 1996, Pentair
common stock was listed on the New York Stock Exchange under
the symbol PNR. The price information below represents closing
sale prices reported in the NASDAQ/NMS Monthly Statistical
Report up until March 1, 1996, and the Dow Jones Historical
Stock Quote Reporter Service for the remainder of the year.
There were 3,798 shareholder accounts on December 31, 1996.
Price Range And Dividends Of Common Stock
<TABLE>
<CAPTION>
1996 High Low Dividends Last
<S> <C> <C> <C> <C>
First quarter $28 3/4 $23 1/16 $.125 $25 1/4
Second quarter $31 $25 3/8 $.125 $30
Third quarter $30 $24 3/4 $.125 $26 1/2
Fourth quarter $32 1/4 $24 5/8 $.125 $32 1/4
1995 High Low Dividends Last
First quarter $22 1/8 $19 7/8 $.10 $21 1/8
Second quarter $24 5/16 $21 3/8 $.10 $21 3/4
Third quarter $23 19/32 $21 13/16 $.10 $22 1/2
Fourth quarter $26 1/4 $21 7/8 $.10 $24 7/8
</TABLE>
Common Dividends In December 1996, the board of
directors increased the cash dividend to $.135 per share quarterly
for an indicated annual rate of $.54 per share. Pentair has now
paid 84 consecutive quarterly dividends. See Note 6 of Notes to
Consolidated Financial Statements for certain dividend
restrictions.
Dividend Reinvestment Pentair has established a
Dividend Reinvestment Plan. This plan enables shareholders to
automatically reinvest Pentair dividends and to invest up to an
additional $3,000 per quarter in Pentair common stock, with any
costs of purchasing the shares paid by the Company. The plan
brochure and enrollment cards are available from the Company
or Norwest Bank Minnesota, N.A.
Direct Book Entry Registration Pentair offers its
shareholders the opportunity to participate in the Company's
Direct Book Entry Registration service. Direct Book Entry is an
uncertificated form of stock ownership that provides protection
against loss, theft, and inadvertent destruction of stock
certificate(s), while reducing administrative costs. A plan brochure
and enrollment forms are available from the Company or Norwest
Bank Minnesota, N.A.
Annual Meeting The annual meeting of shareholders will
be held at the Northland Inn, 7101 Northland Circle, Brooklyn
Park, Minnesota, at 10:00 a.m. on April 23, 1997. Management
and directors encourage all shareholders to attend the annual
meeting.
Form 10-K Available A copy of the Company annual
report on Form 10-K, as filed with the Securities and Exchange
Commission, will be provided on request to shareholders. Written
requests should be directed to Investor Relations, Pentair, Inc.,
Waters Edge Plaza, 1500 County Road B2 West, Suite 400, St.
Paul, Minnesota 55113.
Takeover Defense Pentair is committed to protecting its
stakeholders from harm by corporate raiders and unfriendly
takeover actions. Information on our position may be obtained by
writing to the Pentair, Inc. corporate secretary at the corporate
office.
Registrar And Transfer Agent Norwest Bank Minnesota,
N.A., South St. Paul, MN 55075
Certified Public Accountants Deloitte & Touche LLP,
Minneapolis, MN 55402
General Counsel Henson & Efron, P.A., Minneapolis, MN
55401
page 58
Corporate Information
Board of Directors
Pentair Officers & Subsidiary Presidents
Board of Directors
GEORGE N. BUTZOW (1,2, 6), 67, Retired Chairman of
MTS Systems Corporation.
WINSLOW H. BUXTON (3,5,7), 57,
Chairman, President, and Chief Executive Officer of
Pentair, Inc.
WILLIAM J. CADOGAN (2,5), 48,
Chairman, President, and Chief Executive Officer of ADC
Telecommunications.
BARBARA B. GROGAN (6,8), 49,
Chairman and President of
Western Industrial Contractors, Inc.
CHARLES A. HAGGERTY (1,6,8), 55, Chairman,
President, and Chief Executive Officer of Western Digital.
HAROLD V. HAVERTY (2,3,7), 66, Retired President and
Chief Executive Officer of Deluxe Corporation.
QUENTIN J. HIETPAS (2,5,7), 66,
Senior Vice President of External Affairs
at the University of St. Thomas.
WALTER KISSLING (3,6), 65,
President and Chief Operating Officer of
H. B. Fuller Company.
D. EUGENE NUGENT (3, 5,8), 69, Retired Chairman and
Chief Executive Officer of Pentair, Inc.
RICHARD M. SCHULZE (1, 8), 56, Founder, Chairman,
and Chief Executive Officer of
Best Buy Company, Inc.
KAREN E. WELKE (1,7), 52, Group Vice President of
Medical Products Group, 3M Company.
[1] Audit Committee, [2] Compensation/HR Committee,
[3] Executive Committee, [4] Shareholder Affairs
Committee, [5] Nominating and Governance Committee,
[6] Share Rights Committee, [7] Public Policy Committee,
[8] Finance/Investment Policy Committee.
Pentair Officers
Winslow H. Buxton
Chairman, President, and Chief Executive Officer
Richard J. Cathcart
Executive Vice President
Joseph R. Collins
Executive Vice President
James H. Frank
Senior Vice President, Enclosures
Richard W. Ingman
Executive Vice President and Chief Financial Officer
Gerald C. Kitch
Executive Vice President and President, International
Business Development
Deb S. Knutson
Vice President, Human Resources
Roy T. Rueb
Vice President, Treasurer and Secretary
Subsidiary Presidents
G. Robert Gey
Vehicle Service Equipment businesses
Steven R. Bentson
Century Manufacturing
Nevin J. Craig
Delta International Machinery Corporation
Benno Gengenbach
Vincent J. Tomlinson
Schroff
John C. Hosler
Fleck Controls
Fred C. Lavender
F.E. Myers
Ronald V. Mason
Federal Cartridge
Delton D. Nickel
Hoffman Engineering
Mark T. Schroepfer
Lincoln Industrial
Barry J. Wetzel
Lincoln Automotive
James A. White
Porter-Cable Corporation
page 59
Board of Directors
GEORGE N. BUTZOW
WINSLOW H. BUXTON
WILLIAM J. CADOGAN
BARBARA B. GROGAN
CHARLES A. HAGGERTY
HAROLD V. HAVERTY
QUENTIN J. HIETPAS
WALTER KISSLING
D. EUGENE NUGENT
RICHARD M. SCHULZE
KAREN E. WELKE
This photo of our board of directors was taken at the
Porter-Cable plant in Jackson, Tennessee.
page 60
A Tribute to D. Eugene Nugent
Gene Nugent came on board as Vice President of
Operations in 1975 when Pentair was primarily a paper company.
In 1977, as President and Chief Operating Officer, Gene began
steering Pentair in a new direction. In partnership with Founder
Murray Harpole, Gene guided Pentair's diversification into
industrial manufacturing by acquiring the Porter-Cable and Delta
tool businesses. Then, from 1986 until 1992, while Gene was at
the helm as Chairman and Chief Executive Officer, Pentair added
Lincoln Industrial, Lincoln Automotive, F.E. Myers, Federal
Cartridge, and Hoffman Engineering to its fleet of businesses. By
1992, Pentair sales were 70 percent industrial and the Company
had achieved a new level of stability and success.
Gene is an advocate of autonomous operations, and
helped build the strong, effective organizational structure that
exists today. Though Gene is a driver of change, he is a man of
integrity who recognizes the importance of keeping an
organization true to its principles and values. He co-authored
Pentair's Code of Business Conduct, a document that reflects
his high personal and professional standards. Always, Gene has
taken seriously his role as a leader, exhibiting in his actions the
principles embodied in the Code. In recent years, he led the
initiative to codify governance standards for Pentair's board of
directors.
Gene taught us that respecting and valuing people for
who they are and what they contribute is important. Gene
Nugent's illustrious 22-year career with Pentair will conclude on
April 23, 1997, when he retires from Pentair's board of
directors, but his strength of character and wisdom in leadership
will forever be reflected in the fabric of Pentair.
inside back cover
Code of Business Conduct and Operating Guidelines
Pentair, Inc. chooses to be an independent, publicly
owned company, and this statement is to guide the development
of its organization and the conduct of its business affairs.
Our businesses are to be managed in keeping with the
highest business, ethical, moral and patriotic standards
applicable to a publicly owned corporation.
Our businesses are to be operated so that we are
respected for our actions by shareholders, employees, plant
communities, customers, suppliers, investors and all other
stakeholders.
Our approach to business is intended to make Pentair,
Inc. a top-performing company managed and operated to provide
long-term benefits to all constituents.
Balanced consideration will be given to the interests of
shareholders and employees in managing the corporation.
The corporate staff will be kept to minimum size, and
subsidiary operations will be as autonomous as practicable.
A strong work ethic is expected of all constituents. Good
performance will be freely recognized. Poor performance will not
be condoned.
We will strive to: operate with the highest regard for the
environment; eliminate environmental risks from the workplace;
and minimize emissions and waste.
The dignity and self-worth of all persons involved with the
Company will be respected.
Safety in the workplace and in work practices shall be
maximized.
We will encourage, aid and promote the physical and
mental health, and wellness of employees and their families.
Qualified employees will be given priority for internal
employment opportunities.
Standards of ethics, integrity and work practices shall
apply equally to all employees.
We will honor agreements, meet obligations timely,
maintain the spirit and intent of our commitments, and value good
relationships.
Hiring emphasis will recognize ability, compatibility and
integrity, and will not discriminate on the basis of sex, religion,
race or age.
We will promote open and candid communications with
emphasis on informality and on conversational exchanges.
back cover
(Pentair logo)
Pentair, Inc.
Waters Edge Plaza
1500 County Road B2 West
St. Paul, Minnesota 55113-3105
612_636_7920
www.pentair.com
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
As of December 31, 1996, the following are wholly-owned
subsidiaries of the Registrant except as noted:
State or Other
Jurisdiction of
Incorporation
Subsidiary or Organization
Specialty Products
Delta International Machinery Corp. Minnesota
Biesemeyer Manufacturing Corporation 1 Arizona
Porter-Cable Corporation Minnesota
Flex Elektrowerkzeuge GmbH 6 Germany
F. E. Myers Co., Division of
McNeil (Ohio) Corporation -
Aplex Industries, Inc. 3 Texas
Fleck Controls, Inc. Wisconsin
Fleck Europe, S.N.C. 8 France
SIATA S.p.A. 6 Italy
Fleckenstein Family France
Corporation Wisconsin
General Industrial Equipment
Lincoln Industrial, Division of
McNeil (Ohio) Corporation -
Lincoln Czech Republic 14 Czech Republic
Lincoln Automotive, Division of
McNeil (Ohio) Corporation -
APNO, S.A. de C.V. 3 Mexico
Telestack Company 3 Ohio
Century Manufacturing Co. Minnesota
Federal Cartridge Company, Division
of Federal-Hoffman, Inc. -
Hoffman Engineering Company,
Division of Federal-Hoffman, Inc. -
Hoffman Engineering, S.A. de C.V. 5 Mexico
Schroff Inc. 4 Rhode Island
Schroff Co. Ltd. 4 Taiwan
Schroff K.K. 4 Japan
Schroff, GmbH 6 Germany
Schroff U.K. Ltd. 6 United Kingdom
Hoffman Engineering Company
Limited 10 United Kingdom
Schroff S.A. 6 France
Transrack S.A. 9 France
Schroff S.r.L. 6 Italy
Schroff Scandinavia AB 6 Sweden
Lincoln GmbH 7 Germany
Hoffman-Schroff PTE Ltd. 12 Singapore
General Corporate
McNeil (Ohio) Corporation Minnesota
FC Holdings Inc. Delaware
Federal-Hoffman, Inc. 4 Minnesota
EuroPentair, GmbH Germany
Pentair FSC Corporation U.S. Virgin Islands
Penwald Insurance Company 11 Vermont
Pentair Canada, Inc. 2 Ontario, Canada
Pentair Asia, PTE Ltd. Singapore
Pentair Financial Services Corporation 13 Ireland
FOOTNOTES:
1 A wholly-owned subsidiary of Delta International Machinery Corp.
2 Wholly-owned by Delta International Machinery Corp. and McNeil
(Ohio) Corporation, having the following divisions: Delta
International Machinery, F. E. Myers Company, and Lincoln Canada.
3 A wholly-owned subsidiary of McNeil (Ohio) Corporation.
4 A wholly-owned subsidiary of FC Holdings Inc.
5 A wholly-owned subsidiary of Federal-Hoffman, Inc.
6 A wholly-owned subsidiary of EuroPentair, GmbH.
7 Wholly-owned by EuroPentair GmbH and Telestack Company,
a subsidiary of McNeil (Ohio) Corporation.
8 Wholly-owned by Fleck Controls, Inc. and Fleckenstein Family
France Corporation
9 Wholly-owned by Schroff France S.A.
10 Wholly-owned by Schroff U.K. Ltd.
11 Wholly-owned by Pentair, Inc and Pentair Canada, Inc.
12 Wholly-owned by Pentair Asia PTE Ltd.
13 Wholly-owned by Pentair Canada, Inc.
14 Wholly-owned by Lincoln Industrial, Division of McNeil (Ohio)
Corporation
EXHIBIT 23
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in Registration
Statements No. 33-36256, No. 33-38534, No. 33-42057, No. 33-42268, No. 33-45012,
and No. 333-12561 of Pentair, Inc. on Form
S-8 of our reports dated February 7, 1997, appearing in and
incorporated by reference in this Annual Report on Form 10-K of
Pentair, Inc. for the year ended December 31, 1996.
DELOITTE & TOUCHE,LLP
Minneapolis, Minnesota
March 25, 1997
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