SCHEDULE 14A - Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by Registrant [ X ]
Filed by a Party other than Registrant [ ]
Check appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only
(as permitted by Rule 14a-6(e))2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11 (c) or
section 240.14a-12
Pentair, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
March 19, 1999
Dear Shareholder:
Please join us at 10 a.m. on Wednesday, April
28, 1999, for Pentair's Annual Shareholders
Meeting at the Northland Inn, Brooklyn Park,
Minnesota.
During the meeting, we will elect directors
to the Company's board, appoint auditors, and
conduct other business as described in the Proxy
Statement. In addition, Pentair officers will
provide a summary report on the Company's
operations and financial performance in 1998, as
well as expectations for 1999. There also will be
opportunities for shareholders to ask questions.
This year, we have included the detailed
financial information relating to our business and
operations during 1998 in an appendix to the Proxy
Statement instead of in a separate annual report
to shareholders. In our continuing effort to
improve communications with our shareholders, we
have prepared a new Summary Annual Report, which
is also enclosed.
We hope you will be able to attend the Annual
Meeting. Whether or not you expect to attend, you
are urged to vote your shares either by telephone
(via the toll free number indicated on the
accompanying proxy card), via the Internet, or by
mail. If you choose to vote by mail, please
complete, sign, date and return the accompanying
proxy card in the enclosed envelope in order to
ensure that your shares will be represented at the
Annual Meeting.
I look forward to discussing Pentair's
performance with our shareholders and hope you
will join us on April 28th.
Sincerely,
Winslow H. Buxton
Chairman, President and
Chief Executive Officer
<PAGE>
PENTAIR, INC.
1500 County Road B2 West
Saint Paul, Minnesota 55113
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 28, 1999
To our Shareholders:
The Annual Meeting of Shareholders of Pentair,
Inc. (the "Company") will be held at the Northland
Inn and Conference Center, 7025 Northland Drive,
Brooklyn Park, Minnesota, on Wednesday, April 28,
1999, at 10:00 a.m., for the following purposes:
1. To elect five directors.
2. To vote on a proposal to ratify the
selection of Deloitte & Touche LLP as
independent auditors of the Company for
1999.
3. To amend the Restated Articles of
Incorporation increasing the total number
of shares authorized to be issued from
125,000,000 to 250,000,000.
4. To amend the restated Articles of
Incorporation to increase from 15,000,000
to 30,000,000 the number of authorized
shares that may be designated as preferred
shares.
5. To amend the Restated Articles of
Incorporation to eliminate all currently
authorized series of preferred shares of
the Company.
6. To transact such other business as may
properly come before the meeting or any
adjournment thereof.
The Board of Directors has fixed the close of
business on March 1, 1999 as the record date for
determining the shareholders entitled to vote at
the Annual Meeting. Accordingly, only
shareholders of record at the close of business on
that date will be entitled to vote. The Company's
transfer books will not be closed.
By Order of the Board of Directors
Roy T. Rueb, Secretary
Saint Paul, Minnesota
March 19, 1999
IMPORTANT: For the Annual Meeting to be legally
held, there must be a quorum (50% plus 1 vote).
Accordingly, you are urged to SIGN AND RETURN THE
ENCLOSED PROXY PROMPTLY. This will not prevent
you from voting in person if you so desire.
<PAGE>
TABLE OF CONTENTS FOR PROXY STATEMENT
Page
Solicitation 1
Revocation and Voting of Proxy 1
Outstanding Shares and Voting Rights 1
Security Ownership of Management and Beneficial
Ownership 2
Proposals to be Acted Upon at the Annual Meeting
Election of Directors 3
Approval of Auditors 7
Approval of Amendment to Restated Articles
Increasing the Total Shares Authorized to be Issued 7
Approval of Amendment to Restated Articles to
Eliminate All Currently Authorized Series of
Preferred Shares 10
Executive Compensation 11
Future Proposals 20
Other Business 20
<PAGE>
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1999
PENTAIR, INC.
1500 County Road B2 West
Saint Paul, Minnesota 55113
March 19, 1999
The following statement is furnished in
connection with the solicitation of proxies by the
Board of Directors of Pentair, Inc. (the
"Company") to be voted at the Annual Meeting of
Shareholders of the Company to be held on
Wednesday, April 28, 1999, or at any adjournment
or adjournments of such meeting. Distribution of
this proxy statement and proxy to shareholders
began on or about March 19, 1999.
SOLICITATION
The cost of soliciting proxies and the notices
of the meeting, including the preparation,
assembly and mailing of proxies and this
statement, will be borne by the Company. In
addition to this mailing, proxies may be solicited
personally or by telephone by regular employees of
the Company. Assistance in the solicitation of
proxies is also being rendered by Morrow & Co.,
445 Park Avenue, New York, New York, at a cost to
the Company of $7,000 plus expenses. Furthermore,
arrangements may be made with brokers, banks and
similar organizations to send proxies and proxy
materials to beneficial owners for voting
instructions, for which the Company will reimburse
such organizations for their expense in so doing
and will pay all costs of soliciting the proxies.
REVOCATION AND VOTING OF PROXY
Any shareholder giving a proxy may revoke it
prior to its use at the meeting by (1) delivering
a written notice expressly revoking the proxy to
the Secretary at the Company's offices, (2)
signing and forwarding to the Company at its
offices a later dated proxy, or (3) attending the
Annual Meeting and casting his or her votes
personally.
A majority of the outstanding shares will
constitute a quorum at the Annual Meeting.
Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of
a quorum for the transaction of business.
Pursuant to Minnesota law and the Company's
Articles of Incorporation, abstentions are counted
in determining the total number of the votes cast
on proposals presented to shareholders, but will
not be treated as votes in favor of the proposals.
Broker non-votes are not counted for purposes of
determining the total number of votes cast on
proposals presented to shareholders.
Unless otherwise directed in the accompanying
proxy, the persons named therein will vote FOR the
directors and the other proposals set forth in
this Notice of Annual Meeting of Shareholders. As
to any other business which may properly come
before the meeting, they will vote in accordance
with their best judgment. The Company does not
presently know of any other business.
OUTSTANDING SHARES AND VOTING RIGHTS
At the close of business on March 1, 1999, the
record date, there were 42,700,179 shares of the
Company's Common Stock par value $.16 2/3 per share
(the "Common Stock") outstanding. Each share of
Common Stock entitles the holder to one vote.
There is no cumulative voting for directors.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND BENEFICIAL OWNERSHIP
The following table contains information
concerning the beneficial ownership of the
Company's Common Stock as of March 1, 1999 by each
director, by each executive officer listed in the
Summary Compensation Table, by all directors and
executive officers as a group and, as of December
31, 1998, by one person known to the Company to
"beneficially own" more than 5% of its Common
Stock.
<TABLE>
<CAPTION>
Name of Obtainable % of
Beneficial Common Share within Restricted ESOP Class
Owner Stock(a) Units(b) 60 days(c) Stock(d) Stock(e) Total (f)
<S> <C> <C> <C> <C> <C> <C> <C>
George N. 18,619 31,597 7,890 0 0 58,106
Butzow
Winslow H. 184,287 0 240,970 26,112 5,294 456,663 1.1%
Buxton
William J. 0 3,128 1,890 0 0 5,018
Cadogan
Richard J. 19,616 0 58,049 4,642 1,371 83,678
Cathcart
Joseph R. 85,194 0 71,549 5,850 4,940 167,533
Collins
Barbara B. 2,400 5,437 1,890 0 0 9,727
Grogan
Charles A. 4,000 9,757 7,890 0 0 21,647
Haggerty
Harold V. 7,980 4,949 2,890 0 0 15,819
Haverty
Quentin J. 21,069 13,369 6,890 0 0 41,328
Hietpas
Richard W. 34,012 0 40,271 1,149 4,634 80,066
Ingman
Walter 3,013 12,293 7,890 0 0 23,196
Kissling
Richard M. 2,000 7,651 7,890 0 0 17,541
Schulze
Karen E. 0 7,063 4,890 0 0 11,953
Welke
James A. 28,956 0 26,044 1,827 4,129 60,956
White
Directors
and executive
officers
as a group 485,919 95,244 565,453 50,420 33,076 1,230,112 2.8%
Brinson
Partners,
Inc.(g) 2,990,512 0 0 0 0 2,990,512 6.8%
209 South
LaSalle St.
Chicago, IL
60604-1295
</TABLE>
(a)Unless otherwise noted, all shares are held
either directly or indirectly by individuals
possessing sole voting and investment power
with respect to such shares. Beneficial
ownership has been disclaimed of certain
shares held by children which are not
material. Amounts listed do not include
891,570 shares held by the Pentair, Inc.
Master Trust for various pension plans of the
Company and it subsidiaries. The Trust
Investment Committee of such Master Trust
includes Winslow H. Buxton, Richard W. Ingman
and two other officers. Although these
individuals could be deemed under applicable
Securities and Exchange Commission rules to
"beneficially own" all of the shares held by
these Plans because of their shared voting and
investment power with respect to those shares,
they disclaim beneficial ownership of such
shares.
(b)Represents share units paid under the Fourth
Amended and Restated Compensation Plan for Non-
Employee Directors as to which the beneficial
owner has no voting or investment power.
(c)Represents stock options exercisable under the
Omnibus Plan within 60 days from March 1, 1999.
(d)Restricted shares issued pursuant to incentive
plans as to which the beneficial owner has
sole voting power but no investment power.
(e)Represents common shares owned as a
participant in the Pentair Employee Stock
Ownership Plan (Pentair ESOP) and, for one
officer, common shares owned as a participant
in the Federal-Hoffman Employee Stock
Ownership Plan (F-H ESOP). As of March 1,
1999, the Trustee of the Pentair ESOP held
3,265,266 common shares and the Trustee of the
F-H ESOP 754,691 common shares. The Pentair
ESOP and F-H ESOP participants have the right
to direct the Trustee to vote their shares
although participants have no investment power
over such shares.
(f)Less than 1% unless otherwise indicated.
(g)According to its 13G dated February 3, 1999,
as of December 31, 1998, Brinson Partners and
its affiliate UBS AG, as investment advisors,
have shared voting power and shared
dispositive power over all 2,990,512 shares.
They disclaim beneficial ownership of all
2,990,512 shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act
of 1934 requires the Company's directors and
executive officers to file with the Securities and
Exchange Commission ("SEC") initial reports of
ownership and reports of changes in ownership of
Common Stock and other equity securities of the
Company. Officers, directors, and greater than
ten-percent shareholders are required by SEC
regulations to furnish the Company with copies of
all Section 16(a) forms they file.
Based solely on its review of the copies of
such forms furnished to the Company and written
representations from the Company's officers and
directors, the Company believes all persons
subject to these reporting requirements filed the
required reports on a timely basis except Barbara
B. Grogan, a director of the Company, did not
timely file required Form 4, Statement of Changes
in Beneficial Ownership. A report has now been
filed.
PROPOSALS TO BE ACTED UPON AT THE ANNUAL MEETING
ITEM 1
ELECTION OF DIRECTORS
The Company's By-Laws provide for a Board of
Directors (sometimes referred to herein as the
"Board") of not fewer than three members and not
more than fifteen members. The Board is divided
into three classes with directors serving three-
year terms but with the beginning date for each
term staggered so that the term of only one class
expires in any particular year. Vacancies may be
filled by the Board of Directors or by election at
a special meeting of shareholders. Any director
elected to fill a vacancy by the remaining
directors is required to stand for election at the
next meeting of shareholders.
At the forthcoming Annual Meeting, five persons
are nominated to be elected to the Company's Board
of Directors. Two incumbent directors, Winslow H.
Buxton and Barbara B. Grogan, and two new
directors, Stuart "Chuck" Maitland and Augusto
Meozzi, have been nominated for three-year terms,
expiring at the 2002 Annual Meeting. In addition,
Joseph R. Collins has been nominated for a two-
year term expiring at the 2001 Annual Meeting.
Six other directors have terms of office that do
not expire at this time, and each will continue to
serve his or her full term. Proxies cannot be
voted for a greater number of directors than the
number nominated. Unless you direct otherwise,
proxies will be voted FOR the election of all
nominees listed below. Should any nominee decline
or be unable to accept such nomination or to serve
as director (an event management does not now
expect to occur), proxies will be voted FOR a
substitute nominee or nominees in accordance with
the best judgment of the person or persons acting
under them.
Information concerning the persons nominated
for election as directors, as well as those
continuing in office, is set forth on the
following pages.
DIRECTORS STANDING FOR ELECTION
(FOR A THREE-YEAR TERM EXPIRING AT THE 2002 ANNUAL
MEETING OF SHAREHOLDERS)
Winslow H. Buxton, director since 1990, age 59
Since January 1993, Mr. Buxton has been the
Chairman of the Board of Directors of Pentair,
Inc. Mr. Buxton has been President and Chief
Executive Officer of the Company since August
1992. Mr. Buxton was Chief Operating Officer of
the Company from August 1990 through August 1992.
Mr. Buxton was also Vice President - Paper Group
of the Company from January 1989 through August
1990. Mr. Buxton is also a director of Bemis
Company, Inc., The Toro Company and Willamette
Industries, Inc.
Barbara B. Grogan, director since 1996, age 51
Ms. Grogan is Chairman and President of Western
Industrial Contractors, Inc., a company
specializing in machinery erection and
installation. Ms. Grogan founded Western
Industrial Contractors, Inc. in September, 1982.
She was Chairman of the Board of Directors of the
Federal Reserve Bank of Kansas City, Denver
Branch, from 1989 to 1994, and at present is a
member of the Board of Directors of Deluxe
Corporation, Apogee, Inc., Committee for Economic
Development, New York City and Volunteers of
America, Colorado.
Stuart "Chuck" Maitland, nominee, age 53
Augusto Meozzi, nominee, age 59
Since January 1, 1998, Mr. Meozzi has been the
Chief Operating Officer of the German ISOLA Group,
a world-wide producer of base materials. From
November 1992 to January 1998, Mr. Meozzi was
Corporate Executive Vice President of the German
ISOLA Group.
(FOR A TWO-YEAR TERM EXPIRING AT THE 2001 ANNUAL
MEETING OF SHAREHOLDERS)
Joseph R. Collins, nominee, age 57
In November 1998, Mr. Collins was promoted to the
position of Vice Chairman of Pentair, Inc. As an
executive officer of the Company since August
1991, Mr. Collins has been responsible for the
Tools and Equipment businesses. From March 1995
to October 1998 he was Executive Vice President,
President, Professional Tools and Equipment Group
and from August 1991 to February 1995 he was
Senior Vice President - Specialty Products. He
also served as Acting Chief Financial Officer of
the Company from June 1993 to March 1994. Mr.
Collins is a director of Remmele Engineering Corp.
DIRECTORS CONTINUING IN OFFICE
(TERM EXPIRES AT THE 2000 ANNUAL MEETING OF SHAREHOLDERS)
William J. Cadogan, director since 1996, age 50
Since November 1993, Mr. Cadogan has been the
Chairman of the Board of Directors of ADC
Telecommunications, Inc., a designer and
manufacturer of products and systems for broadband
telecommunications networks. Mr. Cadogan has been
Chief Executive Officer of ADC Telecommunications
since November, 1991 and was President from June
1990 to November 1991. He is also a director of
Banta Corporation, Excel Switching Corporation,
Vice Chairman of the Telecommunications Industry
Association and serves on the Board of Governors
of the Electronics Industry Association.
Charles A. Haggerty, director since 1994, age 57
In June 1992, Mr. Haggerty was appointed President
and subsequently in July 1993 appointed Chairman
of the Board of Directors and Chief Executive
Officer of Western Digital Corporation, a
manufacturer of hard disk drives. Prior to that,
he held various positions with IBM Corporation
including Vice President-General Manager,
Worldwide OEM Storage Marketing (1991-1992); and
Vice President-General Manager, Low-end Storage
Products (1989-1990). Mr. Haggerty is also a
director of Sync Research, Inc. and Beckman
Instruments, Inc.
Harold V. Haverty, director since 1991, age 68
Mr. Haverty was Chairman Emeritus of the Board of
Directors of Deluxe Corporation, a manufacturer of
bank checks and internal bank forms, from 1996
until 1998 when he retired, and was Chairman of
Deluxe from 1992 until 1996 and Chief Executive
Officer and President of Deluxe from 1986 until
1995.
(TERM EXPIRES AT THE 2001 ANNUAL MEETING OF SHAREHOLDERS)
Quentin J. Hietpas, director since 1976, age 68
Since 1983, Mr. Hietpas has been the Senior Vice
President of External Affairs of the University of
St. Thomas, St. Paul, Minnesota.
Richard M. Schulze, director since 1994, age 58
Since 1983, Mr. Schulze has been Founder, Chairman
and Chief Executive Officer of Best Buy Company,
Inc. a consumer electronics, personal computer,
media software and major appliance chain.
Karen E. Welke, director since 1995, age 54
Since February 1995, Ms. Welke has been Group Vice
President, Medical Markets Group for Minnesota
Mining and Manufacturing Company (3M). Prior to
that, she held various positions with 3M including
Managing Director, 3M France (July 1991 to
February 1995); and Division Vice President,
Medical-Surgical Division (March 1989 to July
1991).
Directors' Attendance
The Board of Directors held seven meetings in
1998. All directors attended at least 73% of the
aggregate of all the meetings of the Board and its
committees on which they served.
Committees of the Board
The Audit Committee, which presently consists
of Richard M. Schulze (Chair), Barbara B. Grogan,
Charles A. Haggerty and Karen E. Welke, is
responsible for selecting auditors, ensuring the
fiscal integrity of the Company, and establishing
and reviewing internal controls. The Audit
Committee held two meetings in 1998.
The Compensation and Human Resource Committee,
which presently consists of Quentin J. Hietpas
(Chair), George N. Butzow, William J. Cadogan and
Harold V. Haverty, is responsible for developing a
broad plan of compensation for the Company that is
competitive and rewarding to the degree that it
will attract, hold, and inspire performance of
executive, managerial, and other key personnel.
The Compensation and Human Resource Committee held
five meetings during 1998.
The Nominating and Governance Committee, which
presently consists of George N. Butzow (Chair),
Winslow H. Buxton, William J. Cadogan and Quentin
J. Hietpas, is responsible for nominating
candidates for vacancies on the Board. The
Nominating and Governance Committee considers
nominees recommended by shareholders under the
procedures set forth in the Company's By-Laws.
The Nominating and Governance Committee held one
meeting in 1998.
Directors' Compensation
It is the Company's philosophy that a
significant portion of directors' compensation
should be tied to long-term growth in shareholder
value. In 1998, non-employee directors were paid
an annual retainer of $23,000, ($28,000 for the
Chair of the Compensation and Human Resource
Committee), $28,150 of deferred compensation in
the form of share units under the Fourth Amended
and Restated Compensation Plan for Non-Employee
Directors, $1,500 for attendance at each Board
meeting, $1,000 ($2,000 for committee chairs) for
attendance at each committee meeting, and $500 for
participation in a telephone conference in lieu of
a meeting. Under the Fourth Amended and Restated
Compensation Plan for Non-Employee Directors, non-
employee directors of the Company may elect to
defer payment of all or a portion of their annual
retainer and meeting fees in the form of share
units. The Plan provides for a Company
match of 25% on the first $750 per month deferred
in the form of share units. The value of a share
unit is equal to the market value of a share of
Common Stock. Share units carry no voting or
investment power. Participants and amounts
deferred under the Plan are shown below:
<TABLE>
<CAPTION>
$ Amount Deferred Share Units
1996 1997 1998 12/31/98
<S> <C> <C> <C> <C>
Butzow $43,550 $76,100 $69,400 31,376
Cadogan 9,104 40,913 39,400 3,067
Grogan 25,833 71,600 68,400 5,244
Haggerty 37,450 73,100 69,400 9,522
Haverty - 29,850 28,150 4,928
Hietpas 9,000 40,913 39,400 13,266
Kissling 32,750 69,600 65,900 12,083
Schulze 36,250 67,100 64,900 7,449
Welke 34,750 67,100 62,900 6,888
</TABLE>
The Outside Directors Nonqualified Stock Option
Plan provides for the granting of options to
purchase Common Stock to directors who are not
employees of the Company. The Plan provides for
automatic annual grants to the directors and
offers alternative forms of payment of the
exercise price including surrender of Common
Stock. The persons to receive options, the number
of options granted, and the terms of the options
are determined by the Plan. No option granted
under the Plan, however, may extend for a period
of more than ten years from the date of the grant
and no option exercise price may be less than the
current market price of Common Stock on the date
of award of such option. For stock options
granted in 1998, if the option holder exercises
the stock option during the first five years of
the option term by tendering to the Company common
shares owned by that person, the Company can
grant to such person, an option ("Reload Option")
to purchase common shares equal to the number of
shares tendered. The Reload Option may be
exercised during the remaining term of the
original stock option period. The Reload Option
exercise price is equal to the market price per
share on the date the shares are tendered.
<TABLE>
<CAPTION>
Options Granted
Name 1996 1997 1998
<S> <C> <C> <C>
George N. Butzow 3,000 2,200 1,275
William J. Cadogan - 2,200 1,275
Barbara B. Grogan - 2,200 1,275
Charles A. Haggerty 3,000 2,200 1,275
Harold V. Haverty 3,000 2,200 1,275
Quentin J. Hietpas 3,000 2,200 1,275
Walter Kissling 3,000 2,200 1,275
Richard M. Schulze 3,000 2,200 1,275
Karen E. Welke 3,000 2,200 1,275
</TABLE>
The exercise price and expiration dates for the
above options are: 1998, $40.4375 per share,
expiration date February 25, 2008; 1997, $31.375
per share, expiration date February 26, 2002;
1996, $25.00 per share, expiration date January
22, 2001.
One-third of the options granted to each
recipient become exercisable on each of the first
three anniversaries of the date of grant. The
options granted in 1996 and 1997 expire five years
after the date of grant. The options granted in
1998 expire ten years after the date of grant.
Three current directors exercised options during
1996-1998; the net value of shares (market value
less exercise price) realized from these exercises
was $460,582.
ITEM 2
APPROVAL OF AUDITORS
Deloitte & Touche LLP, independent certified
public accountants have been the auditors for the
Company since 1977. They have been retained by
the Board of Directors as the Company's auditors
for the current fiscal year, and shareholder
approval of such retention is requested.
Representatives of Deloitte & Touche LLP are
expected to attend the Annual Meeting with the
opportunity to make a statement if they so desire,
and they will be available to respond to
appropriate questions.
The Board of Directors recommends that the
shareholders vote "For" the proposal to approve
retention of Deloitte & Touche LLP, and the
enclosed proxy will be so voted unless a contrary
vote or abstention is indicated. If retention of
Deloitte & Touche LLP is not approved by the
shareholders, the Board of Directors will make
another appointment effective at the earliest
practicable date.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ITEM 2 TO APPROVE RETENTION OF DELOITTE & TOUCHE
LLP.
ITEMS 3 AND 4
AMENDMENT TO RESTATED ARTICLES
INCREASING THE TOTAL NUMBER OF SHARES AUTHORIZED TO BE ISSUED
FROM 125,000,000 TO 250,000,000 AND INCREASE FROM 15,000,000 TO
30,000,000 THE NUMBER OF AUTHORIZED SHARES THAT MAY BE DESIGNATED
AS PREFERRED SHARES
The Board of Directors of the Company has
approved and is requesting that the shareholders
adopt two amendments to the Company's Restated
Articles of Incorporation relating to increases in
the Company's authorized shares.
Background
Article VII of the Company's Restated Articles
of Incorporation currently authorizes the issuance
of up to 125,000,000 shares, not more than
15,000,000 of which may be preferred shares.
Adoption of Item 3 would increase from 125,000,000
to 250,000,000 the total number of authorized
shares of the Company. Adoption of Item 4, which
is conditional upon passage of Item 3, would
increase from 15,000,000 to 30,000,000 the total
number of shares that the Board of Directors could
designate as preferred shares. If both Item 3 and
Item 4 are adopted, Article VII of the Restated
Articles of Incorporation will read as follows:
The aggregate number of shares which this
Corporation shall have authority to issue is
250,000,000 shares, of which not more than
30,000,000 shares shall be preferred shares.
a.All classes of preferred and common
shares may be issued as and when and for
such consideration as the Board of
Directors shall determine, and, to the
full extent permitted by the Minnesota
Business Corporation Act, the Board of
Directors shall have the power to
establish any classes or series of
preferred shares or common shares, with
such par value, rights and priorities it
deems appropriate, and to fix or alter,
from time to time, in respect of any
preferred shares then unissued, the
rights and preferences of such shares,
including without limitation, any or all
of the following: dividend rate rights
and price; conversion rights and sinking
or purchase fund rights; or the number of
shares constituting any class or series.
The Board of Directors shall also have
the power to fix the terms and provisions
of options, rights and warrants to
purchase or subscribe for shares of any
class or classes and to authorize the
issuance thereof. Dividends payable in
shares of any class may be paid to
shareholders of any other class as and
when determined by the Board of
Directors.
b.The voting rights of the shares of this
Corporation shall be vested in the
holders of all shares presently
outstanding, with one vote per share.
The voting rights of unissued shares
shall be fixed by the Board of Directors,
but no such share shall be entitled to
more than one vote. No holder of any
shares shall be entitled to any
cumulative voting rights.
c.No shareholder of this Corporation shall
have any preemptive right to subscribe
for or purchase any shares of any class
or series of the Corporation, whether now
or hereafter established or authorized,
or any securities or obligations
convertible into any such shares, or any
options or warrants or rights to purchase
any such shares.
As of March 1, 1999, the Company had
outstanding 42,700,179 shares of Common Stock and
5,000,000 shares have been designated from time
to time as preferred shares of the Company. (See
Item 5 below.) In addition, 50,999,403 common
shares were reserved for future issuance upon
exercise of outstanding stock options granted
under various stock option plans, and under the
Company's Rights Agreement. As a result, a total
of 26,300,418 common shares were authorized but
unissued and not reserved for issuance as of March
1, 1999.
Purpose of Proposals
The purpose for increasing the total number of
authorized shares and the number that may be
designated as preferred shares is to provide
additional flexibility to the Company's authorized
capital structure (including its ability to effect
future stock splits and stock dividends). The
increase will give the Board additional
flexibility and efficiency in responding to future
investment and financing opportunities and needs
such as future acquisitions of other businesses,
employee benefit plans, equity financing, stock
dividends or splits, and other general corporate
purposes.
In 1995, the Company's shareholders approved
the increase in the number of authorized shares
from the former level of 75,000,000 common shares
and 10,000,000 preferred shares to the current
level of 125,000,000 shares, not more than
15,000,000 of which may be preferred shares.
Historically, increases in authorized shares have
been used principally to provide for stock
dividends. In 1993, the Company paid a 50% stock
dividend and in 1996 the Company paid a 100% stock
dividend. As discussed in Item 5, the Company has
utilized preferred shares for acquisition
financing and employee benefit programs.
Effect of Proposal
Adoption of Item 3 would increase the number of
authorized but unissued and unreserved shares by
125,000,000. Adoption of Item 4 would increase by
15,000,000 the number of shares that can be
designated by the Board as preferred shares. No
further action or authorization by the
shareholders would be necessary prior to the
issuance of the additional shares authorized
thereby, unless required for a particular
transaction by applicable law, regulatory
agencies, or the rules of any stock exchange on
which the Company's securities are then listed.
Any additional authorized shares that may be
issued following the adoption of Item 3 (if
not designated by the Board as either preferred
shares or as a different class of common shares)
would be shares identical to the existing Common
Stock and would have the same rights and
privileges as the existing Common Stock. The
shareholders of the Company do not, and will not
as a result of either of the proposed amendments,
have preemptive rights to subscribe for or
purchase any newly issued shares of stock.
New preferred shares, or a new class of common
shares, may be issued following adoption of these
proposals by the Board of Directors without
further action by the shareholders. The present
authority of the Board would not change in this
respect. At present, the terms of each series
could include, without limitation, the following:
(a) the designation and name of such series and
number of shares which shall constitute such
series; (b) the dividend rate and dividend
accumulation rights, payment dates, and the
participating or other special rights with respect
to payment of such dividends; (c) whether the
Company would have the right to redeem shares of
such series, and the terms of any such redemption;
(d) the terms of sinking fund or other retirement
provisions, if any, for the redemption or purchase
of shares of such series; (e) the amounts payable
for shares of such series, and the priority of
payment upon voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the
Company; (f) the terms and conditions of
conversion rights, if any; (g) the voting powers,
if any, of the shares of such series (subject to
the requirement that each share be entitled to no
more than one vote); and (h) any other relative
rights and preferences of the shares of such
series.
The proposed increase in the total number of
authorized shares and the number that may be
designated as preferred shares is not designed to
deter or to prevent a change in control of the
Company. Unissued shares, however, could be used
by the incumbent Board of Directors to make such a
change in control more difficult. In the event of
an unfriendly attempt to gain control of the
company, the Board could issue additional shares
or options to acquire additional shares in an
effort to dilute the stock ownership and voting
power of persons seeking to obtain control of the
Company, which might have the effect of
discouraging or making less likely such a change
in control. Such shares also could be privately
placed with purchasers who might be expected to
side with the Board in opposing a hostile takeover
bid. Shares also could be issued with rights and
preferences that might impede such a takeover
proposal by, for example, authorizing a class
vote, either separately or with the holders of
Common Stock, on any merger, sale or exchange of
assets by the Company, or any other extraordinary
corporate transaction. To the extent any such
actions could have the effect of making a hostile
takeover less likely, they also could assist
incumbent management in retaining their positions.
It should be noted, however, that the proposed
amendment would not enlarge the already existing
power of the Board of Directors to take any of the
foregoing actions, but would increase the number
of shares which could be used by the Board for
such purposes.
The amendments contained in Item 3 and Item 4
are not the first action taken by the Company that
could have the effect of deterring a hostile
takeover. Not only do the Company's Restated
Articles and By-Laws contain several provisions
that could make the consummation of a hostile
takeover more difficult, but the Company has taken
other actions, including adopting a Rights
Agreement and agreeing to certain contract
provisions, that may have such an effect.
Although the Board does not currently contemplate
adopting or proposing for shareholder approval any
further anti-takeover measures, it continues to
study such measures and reserves the
right to propose such further amendments or
actions in the future if, in its view,
circumstances should so warrant. The Board is not
now aware of any effort to effect a change in
control or takeover of the Company.
If either Item 3, or both Item 3 and Item 4,
are approved by the shareholders, the amendments
would become effective upon the filing with the
Secretary of State for the State of Minnesota of
the Articles of Amendment to the Company's
Restated Articles of Incorporation, which would
take place shortly after the Annual Meeting of
Shareholders.
Vote Required
Because Item 3 (increasing the number of
authorized shares from 125,000,000 to 250,000,000)
and Item 4 (increasing the number of shares which
may be designated as preferred shares by the Board
from 15,000,000 to 30,000,000) would amend the
Company's Restated Articles, adoption of these
proposals requires the affirmative vote of the
holders of 60% of the outstanding common shares,
provided that the proposal does not receive a
negative vote from holders of more than 25% of the
common shares. Abstentions and broker non-votes
will have the effect of votes against a proposal.
Adoption of Item 4 is conditioned upon approval by
the shareholders of Item 3. Therefore, unless the
proposal to increase the number of authorized
shares to 250,000,000 is approved by shareholders,
the proposal to increase the number of preferred
shares to 30,000,000 will not be adopted,
regardless of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ITEM 3 TO AMEND THE RESTATED ARTICLES OF
INCORPORATION TO INCREASE THE TOTAL NUMBER OF
SHARES AUTHORIZED TO BE ISSUED FROM 125,000,000 TO
250,000,000 AND ITEM 4 TO INCREASE FROM 15,000,000
TO 30,000,000 THE NUMBER OF AUTHORIZED SHARES THAT
MAY BE DESIGNATED AS PREFERRED SHARES.
ITEM 5
AMENDMENT TO RESTATED ARTICLES
ELIMINATING CURRENTLY AUTHORIZED SERIES OF
PREFERRED SHARES OF THE COMPANY
Background
The Board of Directors has approved and is
requesting that the shareholders adopt an
amendment to the Company's Restated Articles of
Incorporation eliminating the currently authorized
series of preferred shares. The Company
previously established three series of preferred
shares, in 1987, 1988 and 1990, respectively, in
accordance with the then existing provisions of
Article VII of the Company's Restated Articles of
Incorporation and in accordance with the Minnesota
Business Corporation Act ("MBCA").
The Board of Directors established a series of
$1.50 Cumulative Convertible Preferred Stock, $.10
par value, (the "1987 Preferred Stock"), which
consisted of 2,200,000 shares issued in a public
offering in March 1987. The 1987 Preferred Stock
was called for redemption in March 1993, at which
time all shares were either redeemed or converted
into shares of Common Stock. There are no shares
of 1987 Preferred Stock currently outstanding.
The Board of Directors established a series of
$7.50 Callable Cumulative Convertible Preferred
Stock, $.10 par value, (the "1988 Preferred
Stock"), which consisted of 300,000 shares issued
in connection with the acquisition by Pentair of
the Federal Cartridge and Hoffman Engineering
businesses in December 1988. The 1988 Preferred
Stock was called for redemption in January 1999,
at which time all shares were converted into
shares of Common Stock. There are no shares of
1988 Preferred Stock currently outstanding.
The Board of Directors established a series of
8% Callable Cumulative Voting Convertible
Preferred Stock, $.10 par value, with a
liquidation price of $30.25 per share (the "1990
Preferred Stock"), which consisted of 2,500,000
shares issued in connection with the
establishment of the Company's employee stock
ownership plan in March 1990. The 1990 Preferred
Stock was called for redemption in January 1999,
at which time all shares were converted into
shares of the Company's Common Stock. There are
no shares of 1990 Preferred Stock currently
outstanding.
Purpose of Proposal
The purpose for eliminating the three series of
preferred shares currently authorized is to
simplify the Company's capital structure by
removing outdated series of stock that are no
longer useful. Approval of Item 3 and Item 4
would provide additional flexibility in responding
to future financing opportunities by increasing
the number of preferred shares which can be issued
by the Board of Directors of the Company with
rights and preferences that can be determined at
the time of issuance.
Effect of Proposal
Adoption of Item 5 would eliminate all existing
series of preferred shares. Under the terms of
the Company's Restated Articles of Incorporation
and the MBCA, the 5,000,000 shares of preferred
stock currently authorized but not outstanding
would no longer be designated as specific series
of preferred shares. Instead, those shares would
revert to authorized but unissued shares and would
be available for future issuance as either common
or preferred shares as determined by the Board.
If Item 5 is adopted, up to 15,000,000
preferred shares (30,000,000 if Item 4 is also
adopted) may be issued in the future, having such
terms as the Board of Directors may deem
appropriate. The present authority of the Board
to issue preferred shares would not change as a
result of the adoption of this proposal, except
for the increase in the number of new preferred
shares which could be issued. If Item 5 is not
adopted, the Board would have the ability to issue
up to 10,000,000 new preferred shares (25,000,000
if Item 4 is adopted).
New preferred shares which could be issued by
the Board need not contain any particular term,
other than the requirement that no preferred share
may have more than one vote. This flexibility in
setting terms for new preferred shares allows the
Board to tailor the shares to achieve a particular
purpose for which they would be issued. The
authority of the Board to establish new series of
common and preferred shares is discussed in Items
3 and 4 above.
It is important to note that Item 5 would not
enlarge the already existing power of the Board of
Directors; the proposed amendment would simply
increase the number of shares of preferred stock
which could be issued by the Board for the
purposes described above.
If Item 5 is approved by the shareholders, the
amendment would become effective upon the filing
with the Secretary of State for the State of
Minnesota of the Articles of Amendment to the
Company's Restated Articles of Incorporation,
which is intended to take place promptly after the
Annual Meeting of Shareholders.
Vote Required
Because Item 5 would amend the Company's
Restated Articles of Incorporation, adoption of
this proposal requires the affirmative vote of the
holders of at least 60% of the outstanding shares
entitled to vote, provided that the proposal does
not receive a negative vote from holders of more
than 25% of the outstanding voting shares.
Abstentions and broker non-votes would have the
effect of votes against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ITEM 5 TO AMEND THE RESTATED ARTICLES OF
INCORPORATION TO ELIMINATE ALL CURRENTLY
DESIGNATED SERIES OF PREFERRED SHARES OF THE
COMPANY.
<PAGE>
EXECUTIVE COMPENSATION
Compensation and Human Resource Committee Interlocks
and Insider Participation
The Compensation and Human Resource Committee
of the Board of Directors was comprised of Quentin
J. Hietpas (Chair), George N. Butzow, William J.
Cadogan and Harold V. Haverty during 1998. None
of the members of the Committee were officers or
employees of the Company during 1998. There are
no interlock relationships.
Compensation and Human Resource Committee Report on Executive Compensation
Overview
The Compensation and Human Resource Committee
of the Board of Directors (the"Committee") is
responsible for supervising the development of,
and making recommendations to the Board with
respect to, the Company's executive compensation
policies. In addition, the Committee makes annual
recommendations to the Board concerning
compensation to be paid to the Chief Executive
Officer ("CEO") and each of the other executive
officers of the Company.
The Committee also oversees all aspects of the
Company's executive compensation program,
including many of the Company's employee benefit
plans. The Company currently maintains a variety
of compensation and benefit plans in which its
executive officers may participate including the
Omnibus Stock Incentive Plan, the Employee Stock
Purchase and Bonus Plan, the Retirement Savings
and Stock Incentive Plan, the RSIP Sidekick Plan,
the Supplemental Executive Retirement Plan, the
Executive Officer Performance Plan, and the
Management Incentive Plan. The Company also
maintains a defined benefit pension plan in which
substantially all non-bargaining employees,
including the Company's executive officers,
participate.
Pentair's Compensation Philosophy
The principles guiding the executive
compensation program are designed to ensure a
proper linkage between executive compensation and
creation of shareholder value. Goals of the
program are:
(a)to encourage innovation and growth;
(b)to reward executives for short-term top
performance and long-term shareholder value;
(c)to recognize outstanding performance;
(d)to attract and retain top quality
executives and key employees;
(e)to encourage executive stock ownership;
and thereby
(f)to align management and shareholder
interests.
The Company has maintained the philosophy that
compensation of the executive officers should be
directly and materially linked to operating
results and stock price performance. To achieve
this, compensation is heavily leveraged through
the annual bonuses and long-term equity
incentives. The mix of base salary, bonuses and
other benefits reflects the Company's goal of
providing average compensation for average
performance and above average compensation for
above average performance.
In order to make its recommendations to the
Board concerning executive officer compensation,
the Committee annually reviews and evaluates the
Company's corporate performance and the
compensation and equity ownership of its executive
officers. This is done by reviewing salary
practices for comparable positions at other major
industrial organizations as disclosed in the
Towers Perrin compensation database, as well as a
review of other nationally recognized pay surveys.
These major organizations include companies that
the Corporation competes with for business or
executive talent. Many of the companies which are
included in the Towers Perrin compensation
database and national pay surveys are also listed
in the S&P 500 Index and the S&P 400 MidCap Index
included in the Comparative Stock Performance
Graph. The Committee has retained Towers Perrin,
an independent compensation consulting firm, to
assist in the review of executive compensation.
Executive Compensation Program
The components of the Company's executive
compensation program, which are subject to the
discretion of the Committee on an individual
basis, include (a) base salaries, (b) annual cash
performance-based bonuses, (c) long-term
performance-based equity incentives, and (d)
miscellaneous fringe benefits. All components are
comparable to those of similar companies.
Base Salary
The CEO submits a performance appraisal and
recommendation to the Committee with respect to
annual salaries of the executive officers. The
Committee discusses and evaluates the salaries and
makes its recommendation to the Board.
Base salary targets for executive positions are
set at the 50th percentile of competitive
compensation. An individual performance and
experience factor is applied to the target
midpoint to determine each executive's actual base
salary, within a range of + or - 20% of midpoint. For
1998, the salaries of the named executive officers
identified in the Summary Compensation Table are
within the salary targets for each position.
Bonus
Bonuses are considered for payment to
executives and key employees following the end of
each year under the Executive Officer Performance
Plan (see pages 14 for discussion of Executive
Officer Performance Plan) and Management
Incentive Plan (MIP). MIP awards are determined
by applying the following three factors to base
salary: bonus opportunity category (45% for the
Vice Chairman; 40% for Executive Vice Presidents),
company performance factor and individual
performance factor.
The company performance factor is the result of
the multiplication of factors for earnings per
share (EPS) growth, return on invested capital
(ROIC) and return on sales (ROS). The use of
three multiplicative factors reinforces the
importance of balancing financial oriented goals
in terms of growth, earnings quality and an
acceptable return on investment. Under the MIP,
achievement of EPS growth of 12%, ROIC of 20% and
ROS of 10% results in a company performance factor
of 1.00. The maximum company performance factor
is 2.81 and the minimum company performance factor
is .32; however, there is no MIP bonus if the
Company has an operating loss. Performance
between the stated factors is interpolated. For
1998, EPS growth was 16.6%, ROIC was 19.5% and ROS
was 10.0%, resulting in a company performance
factor of 1.542.
The individual performance factor is determined
by the assignment of a numerical factor based on a
supervisor's judgement on attainment of
expectations relative to the employee's function.
The CEO submits a performance appraisal and
recommendation to the Committee for executive
officers with respect to the individual
performance factor.
Bonus awards that exceed an amount equal to
base salary are paid as a performance share award
under the Omnibus Stock Incentive Plan. The
performance share award is paid in restricted
stock, subject to any vesting condition the
Committee may impose. A special award may be
granted at the discretion of the Committee to any
person who has made an extraordinary contribution
to the welfare, reputation and earnings of the
Company. The Committee approves all MIP awards
and has the right to adjust awards that are not in
keeping with the objectives of the MIP Plan.
Long-Term Equity Incentives
Grants
Long-term incentive compensation is awarded in
the form of restricted shares, incentive
compensation units (ICUs), performance shares and
stock options under the Omnibus Stock Incentive
Plan (Omnibus Plan). All awards are proposed by
the CEO and approved by the Committee. Long-term
incentives are determined by using the average of
the 50th and 60th percentile of comparable grant
practices as compiled by the Towers Perrin
compensation database. Annual awards are granted
in the form of ICUs (10% for the CEO and 20% for
executive officers) and stock options (90% for the
CEO and 80% for executive officers).
Restricted stock may be awarded to such
individuals as described in the section entitled
"stock ownership guidelines"; as an award to a new
executive officer; as the form of payment of
performance shares; or in payment of the
Management Incentive Plan or Executive Officer
Performance Plan bonus in excess of annual base
salary.
The Committee is authorized to grant stock
options and performance share awards upon
attainment of certain performance criteria which
are based on the Company's long-term objectives.
The Black-Scholes Model is used to determine stock
option grant values.
Stock options can be granted for terms up to 10
years. For stock options granted in 1998, if the
option holder exercises the stock option during
the first five years of the option term by
tendering to the Company common shares owned by
that person, the Committee can grant to such
person, an option ("Reload Option") to purchase
common shares equal to the number of shares
tendered. The Reload Option may be exercised
during the remaining term of the original stock
option period. The Reload Option exercise price
is equal to the market price per share on the date
the shares are tendered.
The total Omnibus Plan awards for 1998 for all
executive officers as a group, including the CEO
and named executive officers, amounted to 841,297
incentive compensation units (ICUs), 286,250 stock
options, and 8,420 restricted shares of which
1,909 restricted shares were awarded for
achievement of stock ownership guidelines, 4,500
restricted shares were awarded to a new officer,
and 2,011 restricted shares were awarded under the
Executive Officer Performance Plan. Grants for
the named executive officers are shown in the
Summary Compensation Table (page 16) and the
Option/SAR grant table (page 17).
Payouts
Payouts on ICUs in 1998 which related to ICU
grants in 1995 were based upon growth in the
Company's net book value over the life of the
ICUs, as leveraged upward or downward depending on
the Company's return on equity and growth in
earnings per share over that period. Payouts in
1998 for named executive officers are shown in the
LTIP Payout column on the Summary Compensation
Table (page 16).
Compensation of the Chief Executive Officer
The base salary, annual bonus and long-term
equity incentives paid to Mr. Buxton are generally
determined in accordance with the guidelines
described above, and his compensation is
comprised of the same elements as for all
executive officers.
The Committee has a formal rating process for
evaluating Mr. Buxton's performance as the CEO.
The rating process includes a self evaluation
rating by the CEO, after which each Board member
completes an evaluation and rating with
commentary. The Chairman of the Committee
provides a consolidated rating report and chairs a
discussion with the Board members without the CEO
present. From that discussion, the performance
rating is finalized and the Committee Chairman is
instructed to review the final rating results and
commentary with the CEO. This then translates
into a personal development plan for the following
year.
Mr. Buxton's base salary was increased to
$683,250 in accordance with the Committee's
guideline of establishing the base salary at the
market compensation rate for the CEO at the 50th
percentile. This resulted in a 4% increase in Mr.
Buxton's base salary over 1997.
Mr. Buxton's bonus was determined under the
Executive Officers Performance Plan ("EOPP").
Currently, the CEO is the only participant in the
EOPP. EOPP awards are determined based on the
participant's bonus opportunity and a company
performance factor.
Under the EOPP, achievement of EPS growth of
12%, ROIC of 20% and ROS of 10% results in a
company performance factor of 1.00. The maximum
company performance factor is 2.81 and the minimum
company performance factor is .32; however, there
is no EOPP bonus if the Company has an operating
loss. Performance between the stated factors is
interpolated. The maximum individual bonus is
200% of the participant's annual base salary, but
in no event more than $1,500,000. In
administering the EOPP and in establishing bonus
awards thereunder, the Committee does not have the
discretion to pay participants more than the bonus
amount indicated by the preestablished goals. The
Committee has the discretion and flexibility,
however, based on its business judgment, to reduce
this amount.
Mr. Buxton's bonus was calculated using the
formula described above. The Committee used his
base salary of $683,250, his bonus opportunity
category rate of 71.5% and the company performance
factor of 1.542 to obtain his bonus amount. In
accordance with the terms of the EOPP, the cash
bonus was $683,250 and the bonus amount in excess
of one times base salary was paid in the form of
2,011 restricted shares which vest in equal
increments on the third, fourth and fifth
anniversaries of the grant.
Mr. Buxton's Omnibus Plan grants were computed
based on the average of the 50th and 60th
percentile of the Towers Perrin compensation
database for comparable grant practices. He was
granted 157,922 ICUs and 89,000 stock options in
1998.
Stock Ownership Guidelines
Stock ownership guidelines for top management
have been established to motivate individual
achievement and increase ownership of Pentair
Common Stock. The Committee determined that over
a period of five years, its top management should
accumulate and hold Company stock equal to the
following values: Chief Executive Officer --
three to five times base salary; Senior Corporate
Officers -- two to three times base salary; and
other corporate officers and subsidiary presidents
- -- one to two times base salary. In the opinion
of the Committee, the achievement of ownership
levels set forth will result in executive
management being significant shareholders and will
further encourage long-term performance and
Company growth.
The Committee will consider making incentive
grants of restricted stock based on the increase
in ownership during the preceding year. These
restricted stock grants (made under the Omnibus
Plan) vest in equal increments on the third,
fourth, and fifth anniversaries of the grant. The
size of the grant is equal to 10% of the increase
in common shares during the year if the annual
ownership target is met, limited to 10%
of the targeted ownership level if the targeted
ownership level has been achieved. In 1998,
restricted stock awards of 3,191 were granted
under these guidelines to all key employees.
Compliance with Internal Revenue Code Section
162(m)
Section 162(m) of the Internal Revenue Code
generally disallows a tax deduction to public
companies for compensation over $1 million paid to
each of the corporation's Chief Executive Officer
and the four other most highly compensated
officers. Qualifying performance-based
compensation is not subject to the deduction limit
if certain requirements are met. The Company's
policy is to maximize the deductibility of
executive compensation so long as the
deductibility is compatible with the more
important objective of maintaining competitive and
motivational performance-based compensation. In
1996, the shareholders approved the adoption of
the EOPP and approved amendments to the Omnibus
Plan to comply with Internal Revenue Code Section
162(m). Under current interpretations of Section
162(m), EOPP bonus awards and Omnibus Plan awards
of stock options, SARs, ICUs, performance shares
and performance units will not be subject to the
$1,000,000 deduction limit assuming compliance
with all other aspects of Section 162(m).
Quentin J. Hietpas, Chair
George N. Butzow
William J. Cadogan
Harold V. Haverty
Compensation and Human Resource Committee of Pentair, Inc.
<PAGE>
COMPARATIVE STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative
total shareholder return on the Company's Common
Stock for the last five fiscal years, assuming the
investment of $100 on December 31, 1993 and the
reinvestment of all dividends since that date to
December 31, 1998. The graph also contains for
comparison purposes the S&P 500 Index and the S&P
MidCap 400 Index.
By virtue of its market capitalization, Pentair
is a component of the S&P MidCap 400 Index. On
the basis of the Company's size and
diversification of businesses, a readily
identifiable peer group has not been found. It is
our opinion the S&P MidCap 400 Index is an
appropriate comparison. The Company has evaluated
other published indices, but the results are
skewed by one or two large companies included in
the indices. We believe such a comparison would
not be meaningful.
<TABLE>
<CAPTION>
POINTS 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
Pentair, Inc. 100 132.06 156.41 206.67 234.00 263.31
S&P 500 100 101.32 139.40 171.40 228.59 293.91
S&P MidCap 400 100 96.42 126.25 150.49 199.03 237.05
</TABLE>
Summary Compensation Table
The following table sets forth the cash and
noncash compensation awarded to or earned by the
Chief Executive Officer of the Company and the
four other highest paid executive officers of the
Company whose salary and bonus earned in 1998
exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payouts
Restricted Securities All Other
Name and Stock Underlying LTIP Compen-
Principal Salary Bonus(a) Awards(b) Options/ Payouts sation
Position Year ($) ($) ($) SARs(c) ($)(d) ($)(e)
<S> <C> <C> <C> <C> <C> <C> <C>
Winslow H. Buxton 1998 $683,250 $683,250 $103,903 89,000 $646,974 $ 7,940
Chairman, President 1997 656,250 656,250 196,315 76,731 607,931 11,074
& Chief Executive 1996 625,000 625,000 314,882 81,200 609,303 16,244
Officer
Joseph R. Collins 1998 $332,500 $323,010 $ 7,980 48,250 $175,983 $ 7,940
Vice Chairman 1997 294,000 284,494 8,680 32,124 165,815 12,668
1996 279,000 279,000 138,867 22,400 178,071 18,494
Richard J. Cathcart 1998 $290,000 $250,421 $ 10,535 25,000 $123,469 $ 10,190
Executive Vice 1997 268,054 214,358 12,307 21,924 3,355 13,324
President, President, 1996 235,000 235,000 107,843 22,400 4,349 17,744
Water and Fluid
Technologies Group
Richard W. Ingman 1998 $280,000 $215,880 $ 9,625 22,000 $72,208 $ 7,940
Executive Vice 1997 260,000 207,917 3,379 22,338 75,716 11,074
President, Chief 1996 211,656 227,568 19,028 8,694 83,732 10,155
Financial Officer
James A. White 1998 $262,500 $226,674 $ 3,255 21,000 $67,255 $ 8,440
Executive Vice 1997 220,334 217,448 20,615 8,505 74,442 12,289
President, President,
Professional Tools
& Equipment
</TABLE>
(a) Represents bonuses accrued by the Company
for the year even if paid after December 31.
The 1996 bonus amount for Mr. Ingman includes
$62,000 which was awarded based on achievement
of performance objectives related to the
integration of Schroff, Inc. which was acquired
by the Company in 1994.
(b) The restricted share grants reflected in the
table were made pursuant to the Company's
executive compensation programs. The
restricted stock awards are subject to vesting,
in three equal installments on the third,
fourth and fifth anniversaries of the grant,
based solely on the continued employment of the
recipient by the Company. The value of
restricted stock awards reflected in the table
is based on the closing market price of the
Common Stock on the date of grant. As of
December 31, 1998, the following restricted
stock awards were held by each of the named
executives (based on 12/31/98 closing price of
$39.8125): Buxton 31,149 shares or $1,240,120;
Collins 7,676 shares or $305,601; Cathcart
4,909 shares or $195,440; Ingman 1,446 shares
or $57,569; White 2,342 shares or $93,241.
(c) The share amounts for Mr. Collins include
23,250 stock options in 1998, and 10,200 stock
options in 1997, awarded based on achievement
of performance objectives pursuant to a special
incentive plan for the Professional Tools and
Equipment Group.
(d) Includes payouts for ICUs and dividends on
restricted shares.
(e) Includes Company contributions to the
Retirement Savings and Stock Incentive Plan,
RSIP Sidekick Plan and match contribution to
the Employee Stock Purchase and Bonus Plan.
Options and Stock Appreciation Rights
The following tables summarize option and SAR
grants and exercises during 1998 to or by the
Chief Executive Officer and the executive officers
named in the Summary Compensation Table above, and
the values of the options and SARs held by such
persons at the end of 1998. Option grants shown
in the table below include both incentive stock
options and non-qualified stock options. No SARs
have been granted since 1983 and no SARs were
exercised during 1998 or remain outstanding at the
end of 1998.
<TABLE>
Option and SAR Grants in 1998
<CAPTION>
Number % of Total Potential
of Options/ Realizable Value at
Securities SARs Assumed Annual
Underlying Granted to Rates of Stock Price
Options/ Employees Exercise Expira- Appreciation
SARs in Fiscal or Base tion for Option Term
Name Granted(a) 1998 Price Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Winslow H. Buxton 89,000 22.2% $35.00 1/22/08 $1,959,007 $4,964,508
Joseph R. Collins 25,000 6.2% $35.00 1/22/08 $550,283 $1,394,525
23,250 5.8% $39.625 1/14/04 $254,533 $562,451
Richard J. Cathcart 25,000 6.2% $35.00 1/22/08 $550,283 $1,394,525
Richard W. Ingman 22,000 5.5% $35.00 1/22/08 $484,249 $1,227,182
James A. White 21,000 5.2% $35.00 1/22/08 $462,238 $1,171,401
</TABLE>
(a) One-third of each grant becomes exercisable
on each of the first three anniversaries of the
date of grant. The exercise price for the
options granted was the closing market price of
the Common Stock as of the date of grant.
Aggregate Option and SAR Exercises in 1998 and Value at End of 1998
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares at End of 1998 at End of 1998
Acquired Value Exercisable E Exercisable E
Name on Exercise Realized Unexecisable U Unexercisable U
<S> <C> <C> <C> <C>
Winslow H. Buxton 81,718 $1,786,950 E158,659 E $2,472,999
U167,222 U $1,280,052
Joseph R. Collins 7,844 $166,685 E60,308 E $1,039,957
U80,534 U $413,183
Richard J. Cathcart 8,300 $155,106 E34,940 E $519,738
U47,084 U $359,736
Richard W. Ingman 10,732 $244,485 E30,694 E $501,436
U39,790 U $280,037
James A. White 12,550 $252,521 E13,527 E $202,007
U29,352 U $190,756
</TABLE>
Long-Term Incentive Plan Awards
The following table reflects incentive
compensation unit (ICU) awards made under the
Omnibus Plan during 1998 to the Chief Executive
Officer and the executive officers named in the
Summary Compensation Table above.
<TABLE>
Long-Term Incentive Plan Awards in 1998
<CAPTION>
Number of Performance or Estimated Future
Share, Units Other Period Payouts Under Non-
or Other Until Matur- Stock Based Plans
Name Rights ity or Payout Threshold Target Maximum
<S> <C> <C> <C> <C> <C>
Winslow H. Buxton 157,922 units 3 years $0 $273,205 $751,709
Joseph R. Collins 97,662 units 3 years $0 $168,955 $464,871
Richard J. Cathcart 97,662 units 3 years $0 $168,955 $464,871
Richard W. Ingman 88,571 units 3 years $0 $153,228 $421,598
James A. White 84,416 units 3 years $0 $146,040 $401,820
</TABLE>
The ultimate payout value of each ICU is
determined based on the Company's operating income
(OI) growth and return on invested capital (ROIC)
averaged over the three-year period. The target
payout shown in the table is based on annual OI
growth of 10% and annual ROIC of 20% which results
in a value per ICU of $1.73. If over the three-
year period there is no OI growth or ROIC is less
than 15%, the value per ICU will be $0. The
maximum value per ICU is $4.76. The following
matrix shows the ICU values based on the OI growth
and ROIC.
<TABLE>
<CAPTION>
Return on Invested Operating Income (OI) Growth
Capital (ROIC) 0% 2% 6% 10% 12% 20% 30%
<C> <C> <C> <C> <C> <C> <C> <C>
15% 0.13 0.14 0.18 0.22 0.24 0.33 0.46
16% 0.44 0.47 0.53 0.60 0.64 0.79 1.00
18% 0.96 1.01 1.12 1.23 1.29 1.54 1.89
19% 1.17 1.23 1.36 1.49 1.56 1.86 2.27
20% 1.37 1.44 1.58 1.73 1.81 2.15 2.61
30% 2.61 2.73 2.98 3.24 3.38 3.96 4.76
</TABLE>
Retirement Benefit Plans
The Company maintains a tax-qualified defined
benefit pension plan covering substantially all
nonbargaining U.S. employees and an excess benefit
plan covering highly-paid employees. Benefits
under each plan are based on a participant's high
five year average eligible earnings which generally
include salary and bonus.
The Company maintains an unfunded, nonqualified
Supplemental Executive Retirement Plan (SERP) for
corporate officers and subsidiary presidents. The
annual retirement benefit payable under the SERP
at age 65 is equal to 50% of the participant's
high three year average eligible earnings reduced by
100% of the annual primary Social Security benefit
and further reduced by age 65 benefits payable
under qualified pension plans sponsored by the
Company and previous employers of the participant.
Effective January 1, 1999 the Company has
amended the SERP to provide an annual retirement
benefit which, expressed as a lump sum, is equal
to the product of 15 percentage points for each
year of service times the high five year average
eligible earnings with no reductions for Social
Security or qualified pension benefits. SERP
benefits are payable as early as the attainment of
age 55 and completion of five years of service and
are converted into and received in the form of a
term certain or joint and survivor annuity. Five
SERP participants are grandfathered under the old
SERP formula (including named executive officers
Buxton and Collins).
The following estimated aggregate amounts are
payable, from the qualified pension, excess plan
and SERP, annually upon retirement to the named
executive officers over their lifetime: Buxton
$713,042; Cathcart $286,518; Collins $285,801;
Ingman $208,432 and White $205,210.
Change in Control Arrangements
Approximately 76 key corporate executives have
entered into agreements with the Company that
provide for contingent benefits if the executive
leaves the employ of the Company within one year
after an unfriendly change in control. Such
benefits include:
a. bonus awards for the year in question to be
made under the Management Incentive Plan;
b. termination of all restrictions on shares
issued under the Omnibus Plan, and payment
for ICU's and performance units without regard
to the plans' forfeiture provisions;
c. reimbursement of income taxes incurred in
connection with the exercise of certain
nonqualified options, as well as termination
of all restrictions on transfer and
termination of any right of the Company to
repurchase shares received upon exercise of
such options;
d. the cost of an executive search agency;
e. directors and officers liability insurance
coverage;
f. short-term replacement coverage for Company-
provided group medical, dental, and life
insurance policies;
g. amount of non-vested benefits under any of
the Company's tax-qualified deferred
compensation plans;
h. the accelerated accrual and vesting of
benefits under the Supplemental Executive
Retirement Plan (for those executives who
have been made participants of such plan);
and
i. severance pay equal to 300% of annual
compensation or, for employees other than
executive officers of the Company, such
amount reduced to the extent necessary to
avoid federal excise taxes under Section 280G
of the Internal Revenue Code.
In addition, the Omnibus Plan permits the
Compensation and Human Resource Committee, upon a
change in control of the Company, to cancel all
outstanding options granted under the plan,
whether or not exercisable, and authorize payment
of the "spread" between the exercise price of the
options and the then current market value of the
underlying stock.
Based upon compensation levels as of December
31, 1998, the dollar value of the benefits payable
upon an unfriendly change in control to the named
executive officers in the Summary Compensation
Table by virtue of the agreements and the Omnibus
Plan provision discussed above (excluding amounts
that otherwise would be payable upon a termination
of employment not involving an unfriendly change
in control) would be: Buxton, $8,877,610;
Collins, $5,176,044; Cathcart $3,243,709; Ingman,
$3,079,234; and White, $2,574,634.
<PAGE>
FUTURE PROPOSALS
The deadline for submitting a shareholder
proposal for inclusion in the Company's proxy
statement and form of proxy for the Company's 2000
Annual Meeting of Shareholders pursuant to Rule
14a-8 of the Securities and Exchange Commission is
November 20, 1999. Unless a shareholder who
wishes to bring a matter before the shareholders
at the Company's 2000 Annual Meeting notifies the
Company of such matter prior to January 24, 2000,
the persons named in the proxy for the 2000 Annual
Meeting will have discretionary authority to vote
for or against or to abstain from voting on such
proposal in accordance with their best judgment,
if the proposal is actually presented at the
meeting. Such proposals also must comply with the
requirements of the Securities and Exchange
Commission and the Company's bylaws. Any
shareholder proposal should be sent to the Company
at its principal executive offices: 1500 County
Road B2 West, Saint Paul, Minnesota 55113,
Attention: Secretary.
In addition, with respect to nomination of
directors, sections 9 through 12 of Article II of
the By-Laws provide that a candidate may not be
nominated for election as a director at the Annual
Meeting of Shareholders unless the nomination was
previously submitted to the Board or its
Nominating and Governance Committee. A
shareholder wishing to nominate a candidate for
director at an Annual Meeting of Shareholders must
do so no later than the sixtieth day after the end
of the fiscal year preceding the year in which
such Annual Meeting will be held. Nominations are
deemed made when the Secretary of the Company
receives all of the following: (1) all
information about the nominee that may be required
to be provided in any proxy statement pursuant to
the Securities Exchange Act of 1934 and
regulations promulgated thereunder; (2) an
executed directors' questionnaire provided by the
Company and completed by the nominee; (3) the
nominee's statement consenting to his or her
nomination and agreeing to serve, if elected; and
(4) evidence that the person making the nomination
is a shareholder. After reviewing the submission,
the Board or the appointed Nominating and
Governance Committee may, but need not, designate
one or more of the nominees to appear as an
alternate candidate on any proxy solicited by
management or any proxy statement furnished by
management. The number of such alternate
candidates may not exceed the number of directors
to be elected at that Annual Meeting. Exclusion
of any eligible candidate from a proxy solicited
by management does not affect the right of
shareholders to nominate, vote for, or elect such
candidate at any shareholders meeting held within
twelve months after submission of the nomination
material described above.
OTHER BUSINESS
Management does not know of any other business
that will be presented for consideration at the
Annual Meeting; however, if any other business does
properly come before the Annual Meeting, proxies will
be voted in accordance with the best judgment of the
person or persons acting under them.
<PAGE>
PENTAIR, INC.
PLEASE SIGN AND RETURN PROMPTLY
TO REDUCE SOLICITATION EXPENSES
PENTAIR, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
April 28, 1999
The undersigned hereby appoints Winslow H.
Buxton and Richard W. Ingman, or either of them,
as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to
represent and to vote, as designated below, all
the shares of Common Stock of Pentair, Inc. held
of record by the undersigned on March 1, 1999 at
the Annual Meeting of Shareholders of Pentair,
Inc. to be held at 10:00 a.m., Wednesday, April
28, 1999, at the Northland Inn and Conference
Center, 7025 Northland Drive, Brooklyn Park,
Minnesota, and any adjournment or adjournments
thereof.
Furthermore, if I am a participant in the
Pentair, Inc. Employee Stock Ownership Plan
(Pentair ESOP) or the Federal-Hoffman Employee
Stock Ownership Plan (F-H ESOP), as appropriate, I
hereby direct Fidelity Management Trust Company as
ESOP Trustee, or Norwest Bank Minnesota, N.A. as F-
H ESOP Trustee, to vote at the Annual Meeting of
Shareholders of Pentair, Inc. to be held at 10:00
a.m., Wednesday, April 28, 1999, at the Northland
Inn and Conference Center, 7025 Northland Drive,
Brooklyn Park, Minnesota, and any adjournment or
adjournments thereof, all shares of Common Stock
of Pentair, Inc. allocated to my account in the
Pentair ESOP or F-H ESOP as of March 1, 1999. I
understand that this card must be received by
Norwest Bank Minnesota, N.A., acting as tabulation
agent for the Pentair ESOP Trustee and F-H ESOP
Trustee, by April 21, 1999.
THE BOARD RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
1.ELECTION OF DIRECTORS:
FOR all nominees listed below except
those I have struck by a line through their
names.
WITHHOLD AUTHORITY to vote for all
nominees listed below.
Winslow H. Buxton Barbara B. Grogan Joseph R.Collins
Stuart Maitland Augusto Meozzi
2.PROPOSAL TO RATIFY the retention of Deloitte
& Touche LLP as independent public
accountants for the current fiscal year.
FOR AGAINST ABSTAIN
3.To amend the Restated Articles of
Incorporation increasing the total number of
shares authorized to be issued from
125,000,000 to 250,000,000.
FOR AGAINST ABSTAIN
4.To amend the Restated Articles of
Incorporation increasing from 15,000,000 to
30,000,000 the number of authorized shares
that may be designated as preferred shares.
FOR AGAINST ABSTAIN
5.To amend the Restated Articles of
Incorporation to eliminate all currently
authorized series of preferred shares of the
Company.
FOR AGAINST ABSTAIN
6.To transact such other business as may properly
come before the meeting or any adjournment thereof.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS
DIRECTED BY THIS PROXY, BUT IF THIS PROXY IS
RETURNED SIGNED WITH NO DIRECTION MADE, THEY WILL
BE VOTED "FOR" EACH OF THE DIRECTORS AND
PROPOSALS.
The undersigned hereby ratifies and confirms all
that the Proxies shall lawfully do or cause to be
done by virtue hereof and hereby revokes all
proxies heretofore given to vote such shares.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF PENTAIR, INC.
Signature
Signature if held jointly
Dated: ,1999
THIS CARD MUST BE DATED.
(Please sign exactly as your name appears to the left.
When shares are held by joint tenants, both should sign.
When signing as executor, administrator, attorney, trustee
or guardian, please give full title as such. If a corporation,
please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership
name by an authorized person.)
<PAGE>
PENTAIR, INC.
PLEASE SIGN AND RETURN PROMPTLY
TO REDUCE SOLICITATION EXPENSES
PENTAIR, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
April 28, 1999
The undersigned hereby appoints Winslow H.
Buxton and Richard W. Ingman, or either of them,
as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to
represent and to vote, as designated below, all
the shares of Common Stock of Pentair, Inc. held
of record by the undersigned on March 1, 1999 at
the Annual Meeting of Shareholders of Pentair,
Inc. to be held at 10:00 a.m., Wednesday, April
28, 1999, at the Northland Inn and Conference
Center, 7025 Northland Drive, Brooklyn Park,
Minnesota, and any adjournment or adjournments
thereof.
THE BOARD RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
1.ELECTION OF DIRECTORS:
FOR all nominees listed below except
those I have struck by a line through their
names.
WITHHOLD AUTHORITY to vote for all
nominees listed below.
Winslow H. Buxton Barbara B. Grogan Joseph R.Collins
Stuart Maitland Augusto Meozzi
2.PROPOSAL TO RATIFY the retention of Deloitte
& Touche LLP as independent public
accountants for the current fiscal year.
FOR AGAINST ABSTAIN
3.To amend the Restated Articles of
Incorporation increasing the total number of
shares authorized to be issued from
125,000,000 to 250,000,000.
FOR AGAINST ABSTAIN
4.To amend the Restated Articles of
Incorporation increasing from 15,000,000 to
30,000,000 the number of authorized shares
that may be designated as preferred shares.
FOR AGAINST ABSTAIN
5.To amend the Restated Articles of
Incorporation to eliminate all currently
authorized series of preferred shares of the
Company.
FOR AGAINST ABSTAIN
6.To transact such other business as may properly
come before the meeting or any adjournment thereof.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS
DIRECTED BY THIS PROXY, BUT IF THIS PROXY IS
RETURNED SIGNED WITH NO DIRECTION MADE, THEY WILL
BE VOTED "FOR" EACH OF THE DIRECTORS AND
PROPOSALS.
The undersigned hereby ratifies and confirms all
that the Proxies shall lawfully do or cause to be
done by virtue hereof and hereby revokes all
proxies heretofore given to vote such shares.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF PENTAIR, INC.
Signature
Signature if held jointly
Dated: , 1999
THIS CARD MUST BE DATED.
(Please sign exactly as your name appears to the left.
When shares are held by joint tenants, both should sign.
When signing as executor, administrator, attorney, trustee
or guardian, please give full title as such. If a corporation,
please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership
name by an authorized person.)
<PAGE>
PENTAIR, INC.
PLEASE SIGN AND RETURN PROMPTLY
TO REDUCE SOLICITATION EXPENSES
PENTAIR, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
April 28, 1999
The undersigned hereby appoints Winslow H.
Buxton and Richard W. Ingman, or either of them,
as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to
represent and to vote, as designated below, all
the shares of Common Stock of Pentair, Inc. held
of record by the undersigned on March 1, 1999 at
the Annual Meeting of Shareholders of Pentair,
Inc. to be held at 10:00 a.m., Wednesday, April
28, 1999, at the Northland Inn and Conference
Center, 7025 Northland Drive, Brooklyn Park,
Minnesota, and any adjournment or adjournments
thereof.
Furthermore, as a participant in the Pentair,
Inc. International Employee Stock Purchase and
Bonus Plan (Plan), I hereby direct ABN AMRO Trust
Company (Jersey) Limited as Trustee, to vote, as
designated below, at the Annual Meeting of
Shareholders of Pentair, Inc. to be held at 10:00
a.m., Wednesday, April 28, 1999, at the Northland
Inn and Conference Center, 7025 Northland Drive,
Brooklyn Park, Minnesota, and any adjournment or
adjournments thereof, all shares of Common Stock
of Pentair, Inc. allocated to my account in the
Plan as of March 1, 1999. I understand that this
card must be received by Norwest Bank Minnesota,
N.A., acting as tabulation agent for the Trustee,
by April 21, 1999.
THE BOARD RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
1.ELECTION OF DIRECTORS:
FOR all nominees listed below except
those I have struck by a line through their
names.
WITHHOLD AUTHORITY to vote for all
nominees listed below.
Winslow H. Buxton Barbara B. Grogan Joseph R.Collins
Stuart Maitland Augusto Meozzi
2.PROPOSAL TO RATIFY the retention of Deloitte
& Touche LLP as independent public
accountants for the current fiscal year.
FOR AGAINST ABSTAIN
3.To amend the Restated Articles of
Incorporation increasing the total number of
shares authorized to be issued from
125,000,000 to 250,000,000.
FOR AGAINST ABSTAIN
4.To amend the Restated Articles of
Incorporation increasing from 15,000,000 to
30,000,000 the number of authorized shares
that may be designated as preferred shares.
FOR AGAINST ABSTAIN
5.To amend the Restated Articles of
Incorporation to eliminate all currently
authorized series of preferred shares of the
Company.
FOR AGAINST ABSTAIN
6.To transact such other business as may properly
come before the meeting or any adjournment thereof.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS
DIRECTED BY THIS PROXY, BUT IF THIS PROXY IS
RETURNED SIGNED WITH NO DIRECTION MADE, THEY WILL
BE VOTED "FOR" EACH OF THE DIRECTORS AND
PROPOSALS.
The undersigned hereby ratifies and confirms all
that the Proxies shall lawfully do or cause to be
done by virtue hereof and hereby revokes all
proxies heretofore given to vote such shares.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF PENTAIR, INC.
Signature
Signature if held jointly
Dated: , 1999
THIS CARD MUST BE DATED.
(Please sign exactly as your name appears to the left. When
shares are held by joint tenants, both should sign. When
signing as executor, administrator, attorney, trustee or guardian,
please give full title as such. If a corporation please sign in
full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.)
