PENTAIR, INC.
2008 OMNIBUS STOCK INCENTIVE PLAN
As Amended and Restated Through
July 29, 2009
1. Purpose and Effective Date.
(a)
Purpose . The Pentair, Inc. 2008 Omnibus Stock Incentive
Plan has several complementary purposes: (i) to promote the
growth and success of the Company by linking a significant portion
of participant compensation to the increase in value of the
Company’s common stock; (ii) to attract and retain top
quality, experienced executives and key employees by offering a
competitive incentive compensation program; (iii) to reward
innovation and outstanding performance as important contributing
factors to the Company ‘s growth and progress; (iv) to
align the interests of executives, key employees, directors and
consultants with those of the Company’s shareholders by
reinforcing the relationship between participant rewards and
shareholder gains obtained through the achievement by plan
participants of short-term objectives and long-term goals; and
(iv) to encourage executives, key employees, directors and
consultants to obtain and maintain an equity interest in the
Company.
(b)
Effective Date . This Plan will become effective, and Awards
may be granted under this Plan: (1) with regard to
Non-Employee Directors, on and after February 26, 2008,
provided that any Awards made prior to the date that the Plan is
approved by the Company’s shareholders shall be contingent on
such shareholder approval, and (2) with regard to all other
eligible individuals, the date that the Plan is approved by the
Company’s shareholders. If the Company’s shareholders
approve this Plan, then the Pentair, Inc. Omnibus Stock Incentive
Plan (the “Prior Plan”) will terminate on the date of
such shareholder approval, and no new awards will be granted under
the Prior Plan after its termination date; provided that the
Prior Plan will continue to govern awards outstanding as of the
date of such plan’s termination and such awards shall
continue in force and effect until fully distributed or terminated
pursuant to their terms.
2. Definitions. Capitalized terms used in this Plan
have the following meanings:
(a) “10%
Stockholder” means an Eligible Employee who, as of the date
an ISO is granted to such individual, owns more than ten percent
(10%) of the total combined voting power of all classes of Stock
then issued by the Company or a Subsidiary corporation.
(b) “Administrator”
means (i) the Committee with respect to Participants who are
Eligible Employees and Consultants and (ii) the Non-Employee
Directors of the Board (or a committee of Non-Employee Directors
appointed by the Board) with respect to Participants who are
Directors.
(c) “Affiliate”
and “Associate” shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Exchange Act.
Notwithstanding the foregoing, for purposes of determining those
individuals to whom an Option or Stock Appreciation Right may be
granted, the term “Affiliate” means any entity that,
directly or through one or more intermediaries, is controlled by,
controls, or is under common control with the Company within the
meaning of Code Sections 414(b) or (c); provided that, in
applying such provisions, the phrase “at least
20 percent” shall be used in place of “at least
80 percent” each place it appears therein.
(d) “Award”
means a grant of Options, Stock Appreciation Rights, Performance
Shares, Performance Units, Restricted Stock, Restricted Stock
Units, Deferred Stock Rights, Dividend Equivalent Units, or any
other type of award permitted under the Plan.
(e) “Board”
means the Board of Directors of the Company.
(f) “Cause”
means, except as otherwise determined by the Administrator and set
forth in an Award agreement, such act or omission by a Participant
as is determined by the Administrator to constitute cause for
termination, including but not limited to any of the following:
(i) a material violation of any Company policy, including any
policy contained in the Company Code of Business Conduct;
(ii) embezzlement from, or theft of property belonging to the
Company or any Affiliate; (iii) willful failure to perform or
gross negligence in the performance of or failure to perform
assigned duties; or (iv) other intentional misconduct, whether
related to employment or otherwise, which has, or has the potential
to have, a material adverse effect on the business conducted by the
Company or its Affiliates.
(g) “Change
of Control” means a change of control of the Company, as that
term is defined in the KEESA. Notwithstanding the foregoing, with
respect to an Award that is considered deferred compensation
subject to Code Section 409A, the definition of “Change
of Control” shall be amended and interpreted in a manner that
allows the definition to satisfy the requirements of a change of
control under Code Section 409A solely for purposes of
determining the timing of payment of such Award.
(h) “Code”
means the Internal Revenue Code of 1986, as amended. Any reference
to a specific provision of the Code includes any successor
provision and the regulations promulgated under such
provision.
(i) “Committee”
means the Compensation Committee of the Board (or a successor
committee with the same or similar authority).
(j) “Company”
means Pentair, Inc., a Minnesota corporation, or any successor
thereto.
(k) “Consultant”
means a person or entity rendering services to the Company or an
Affiliate other than as an employee of any such entity or a
Director.
(l) “Deferred
Stock Right” means the right to receive Stock or Restricted
Stock at some future time.
(m) “Director”
means a member of the Board, and “Non-Employee
Director” means a Director who is not also an employee of the
Company or its Subsidiaries.
(n) “Disability”
means, except as otherwise determined by the Administrator and set
forth in an Award agreement: (i) with respect to an ISO, the
meaning given in Code Section 22(e)(3), and (ii) with
respect to all other Awards, a physical or mental incapacity which
qualifies an individual to collect a benefit under a long term
disability plan maintained by the Company, or such similar mental
or physical condition which the Administrator may determine to be a
disability, regardless of whether either the individual or the
condition is covered by any such long term disability plan. The
Administrator shall make the determination of Disability and may
request such evidence of disability as it reasonably
determines.
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(o) “Dividend
Equivalent Unit” means the right to receive a payment, in
cash or Shares, equal to the cash dividends or other distributions
paid with respect to a Share.
(p) “Eligible
Employee” means a key managerial, administrative or
professional employee of the Company or an Affiliate whose position
is evaluated at salary grade 40 or higher or who is in a position
to make a material contribution to the continued profitable growth
and long term success of the Company or an Affiliate.
(q) “Exchange
Act” means the Securities Exchange Act of 1934, as amended.
Any reference to a specific provision of the Exchange Act includes
any successor provision and the regulations and rules promulgated
under such provision.
(r) “Fair
Market Value” means, per Share on a particular date:
(i) the closing price on such date on the New York Stock
Exchange, as reported in The Wall Street Journal, or if no sales of
Stock occur on the date in question, on the last preceding date on
which there was a sale on such market; (ii) if the Shares are
not listed on the New York Stock Exchange, but are traded on
another national securities exchange or in an over-the-counter
market, the last sales price (or, if there is no last sales price
reported, the average of the closing bid and asked prices) for the
Shares on the particular date, or on the last preceding date on
which there was a sale of Shares on that exchange or market; or
(iii) if the Shares are neither listed on a national
securities exchange nor traded in an over-the-counter market, the
price determined by the Administrator.
(s) “Incentive
Stock Option” or “ISO” mean an Option that meets
the requirements of Code Section 422.
(t) “KEESA”
means the Key Executive Employment and Severance Agreement between
the Company and key executives, as approved by the Board and in
effect from time to time.
(u) “Option”
means the right to purchase Shares at a stated price for a
specified period of time.
(v) “Participant”
means an individual selected by the Administrator to receive an
Award.
(w) “Performance
Awards” means a Performance Share and Performance Unit, and
any Award of Restricted Stock, Restricted Stock Units, or Deferred
Stock Rights the payment or vesting of which is contingent on the
attainment of one or more Performance Goals.
(x)
“Performance Goals” means any goals the Administrator
establishes that relate to one or more of the following with
respect to the Company or any one or more of its Subsidiaries,
Affiliates or other business units: net income; income from
continuing operations; stockholder return; stock price
appreciation; earnings per share (including diluted earnings per
share); net operating profit (including after tax); revenue growth;
organic sales growth; return on equity; return on investment;
return on invested capital (including after-tax); earnings before
interest, taxes, depreciation and amortization; operating income;
operating margin; market share; return on sales; asset reduction;
cost reduction; return on equity; cash flow (including free cash
flow); and new product releases. As to each Performance Goal, the
relevant measurement of performance shall be computed in accordance
with generally accepted accounting principles, if applicable;
provided that, the Administrator may, at the time of
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establishing
the Performance Goal(s), exclude the effects of
(i) extraordinary, unusual and/or non-recurring items of gain
or loss, (ii) gains or losses on the disposition of a
business, (iii) changes in tax regulations or laws, or
(iv) the effect of a merger or acquisition. Notwithstanding
the foregoing, the calculation of any Performance Goal established
for purposes of an Award shall be made without regard to changes in
accounting methods used by the Company or in accounting standards
that may be required by the Financial Accounting Standards Board
after a Performance Goal relative to an Award is established and
prior to the time the compensation earned by reason of the
achievement of the relevant Performance Goal is paid to the
Participant. In the case of Awards that the Administrator
determines will not be considered “performance-based
compensation” under Code Section 162(m), the
Administrator may establish other Performance Goals not listed in
this Plan. Where applicable, the Performance Goals may be
expressed, without limitation, in terms of attaining a specified
level of the particular criterion or the attainment of an increase
or decrease (expressed as absolute numbers or a percentage) in the
particular criterion or achievement in relation to a peer group or
other index. The Performance Goals may include a threshold level of
performance below which no payment will be made (or no vesting will
occur), levels of performance at which specified payments will be
paid (or specified vesting will occur), and a maximum level of
performance above which no additional payment will be made (or at
which full vesting will occur).
(y) “Performance
Shares” means the right to receive Shares (including
Restricted Stock) to the extent Performance Goals are
achieved.
(z) “Performance
Unit” means the right to receive a payment valued in relation
to a unit that has a designated dollar value or the value of which
is equal to the Fair Market Value of one or more Shares, to the
extent Performance Goals are achieved.
(aa) “Person”
has the meaning given in Section 3(a)(9) of the Exchange Act,
as modified and used in Sections 13(d) and 14(d)
thereof.
(bb) “Plan”
means this Pentair, Inc. 2008 Omnibus Stock Incentive Plan, as may
be amended from time to time.
(cc) “Restriction
Period” means the length of time established relative to an
Award during which the Participant cannot sell, assign, transfer,
pledge or otherwise encumber the Stock or Stock Units subject to
such Award and at the end of which the Participant obtains an
unrestricted right to such Stock or Stock Units.
(dd) “Restricted
Stock” means a Share that is subject to a risk of forfeiture
or restrictions on transfer, or both a risk of forfeiture and
restrictions on transfer.
(ee) “Restricted
Stock Unit” means the right to receive a payment equal to the
Fair Market Value of one Share.
(ff) “Retirement”
means, except as otherwise determined by the Administrator and set
forth in an Award agreement, (i) with respect to Participants
who are Eligible Employees or Consultants, termination of
employment or service from the Company and its Affiliates (for
other than Cause) on or after attainment of age fifty-five
(55) and completion of ten (10) years of service with the
Company and its Affiliates, and (ii) with respect to Director
Participants, the Director’s removal (for other than Cause),
or resignation or failure to be re-elected (for other than Cause)
on or after “retirement” as defined in the
Company’s retirement policy for Non-Employee
Directors.
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(gg) “Section 16
Participants” means Participants who are subject to the
provisions of Section 16 of the Exchange Act.
(hh) “Share”
means a share of Stock.
(ii) “Stock”
means the Common Stock of the Company, par value of $0.16- 2/3 per
share.
(jj) “Stock
Appreciation Right” or “SAR” means the right to
receive a payment equal to the appreciation of the Fair Market
Value of a Share during a specified period of time.
(kk) “Subsidiary”
means any corporation or limited liability company (except that is
treated as a partnership for U.S. income tax purposes) in an
unbroken chain of entities beginning with the Company if each of
the entities (other than the last entity in the chain) owns stock
or equity interests possessing more than fifty percent (50%) of the
total combined voting power of all classes of stock or equity
interests in one of the other entities in the chain.
(a)
Administration . In addition to the authority specifically
granted to the Administrator in this Plan, the Administrator has
full discretionary authority to administer this Plan, including but
not limited to the authority to: (i) interpret the provisions
of this Plan; (ii) prescribe, amend and rescind rules and
regulations relating to this Plan; (iii) correct any defect,
supply any omission, or reconcile any inconsistency in any Award or
agreement covering an Award in the manner and to the extent it
deems desirable to carry this Plan into effect; and (iv) make
all other determinations necessary or advisable for the
administration of this Plan. All Administrator determinations shall
be made in the sole discretion of the Administrator and are final
and binding on all interested parties.
Notwithstanding
any provision of the Plan to the contrary, the Administrator shall
have the discretion to grant an Award with any vesting condition,
any Restriction Period or any performance period if the Award is
granted to a newly hired or promoted Participant, or accelerate the
vesting, Restriction Period or performance period of an Award, in
connection with a Participant’s death, disability, Retirement
or termination by the Company without Cause. Any action by the
Committee to accelerate or otherwise amend an Award for reasons
other than Retirement, death, Disability or a termination by the
Company without Cause, or in connection with a Change of Control,
shall include application of a commercially reasonable discount to
the compensation otherwise payable to reflect the value of the
accelerated payment
Notwithstanding
the above statement or any other provision of the Plan, once
established, the Committee shall have no discretion to increase the
amount of compensation payable under an Award that is intended to
be performance-based compensation under Code Section 162(m),
although the Committee may decrease the amount of compensation a
Participant may earn under such an Award.
(b) Delegation
to Other Committees or Officers . To the extent applicable law
permits, the Board may delegate to another committee of the Board
or to one or more officers of the Company, or the Committee may
delegate to one or more officers of the Company, any or all of
their respective authority and responsibility as an Administrator
of the Plan; provided that no such delegation is permitted
with respect to Stock-based Awards made to Section 16
Participants at the time any such delegated authority or
responsibility is exercised unless the
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delegation is
to another committee of the Board consisting entirely of
Non-Employee Directors. If the Board or the Committee has made such
a delegation, then all references to the Administrator in this Plan
include such other committee or one or more officers to the extent
of such delegation.
(c)
Indemnification . The Company will indemnify and hold
harmless each member of the Board and the Committee, and each
officer or member of any other committee to whom a delegation under
Section 3(b) has been made, as to any acts or omissions with
respect to this Plan or any Award to the maximum extent that the
law and the Company’s by-laws permit.
4. Eligibility. The Administrator may designate any of
the following as a Participant from time to time, to the extent of
the Administrator’s authority: any Eligible Employee, any
Consultant or any Director, including a Non-Employee Director. The
Administrator’s granting of an Award to a Participant will
not require the Administrator to grant an Award to such individual
at any future time. The Administrator’s granting of a
particular type of Award to a Participant will not require the
Administrator to grant any other type of Award to such
individual.
5. Types
of Awards. Subject to the terms of this Plan, the Administrator
may grant any type of Award to any Participant it selects, but only
employees of the Company or a Subsidiary may receive grants of
incentive stock options. Awards may be granted alone or in addition
to, in tandem with, or in substitution for any other Award (or any
other award granted under another plan of the Company or any
Affiliate).
6. Shares
Reserved under this Plan.
(a) Plan
Reserve . Subject to adjustment as provided in Section 16,
an aggregate of seven million five hundred thousand (7,500,000)
Shares are reserved for issuance under this Plan. The Shares
reserved for issuance may be either authorized and unissued Shares
or shares reacquired at any time and now or hereafter held as
treasury stock.
(b)
Incentive stock Option Award Limits . Subject to adjustment
as provided in Section 16, the Company may issue only an
aggregate of five million (5,000,000) Shares upon the exercise of
incentive stock options.
(c)
Replenishment of Shares Under this Plan . The aggregate
number of Shares reserved under Section 6(a) shall be depleted by
the number of Shares with respect to which an Award is granted;
provided that the aggregate number of Shares reserved under
Section 6(a) shall be depleted by three (3) Shares for each
Share subject to a full-value Award. For this purpose, a full-value
award includes Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units (valued in relation to a
Share), Deferred Stock Rights and any other similar Award under
which the value of the Award is measured as the full value of a
Share, rather than the increase in the value of a Share. If,
however, an Award lapses, expires, terminates or is cancelled
without the issuance of Shares or the payment of other compensation
under the Award, or if Shares are forfeited under an Award, or if
Shares are issued under any Award and the Company subsequently
reacquires them pursuant to rights reserved upon the issuance of
the Shares, then such Shares shall be recredited to the
Plan’s reserve (in the same number as they depleted the
reserve) and may again be used for new Awards under this Plan.
Notwithstanding the foregoing, in no event shall the following
Shares be recredited to the Plan’s reserve: Shares tendered
in payment of the exercise price of an Option; Shares withheld to
satisfy federal, state or local tax withholding obligations; and
Shares purchased by the Company using proceeds from Option
exercises.
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(d)
Participant Limitations . Subject to adjustment as provided
in Section 16, no Participant may be granted Awards that could
result in such Participant:
(i) receiving
Options for, and/or Stock Appreciation Rights with respect to, more
than 750,000 Shares during any fiscal year of the
Company;
(ii) receiving
Awards of Restricted Stock and/or Restricted Stock Units and/or
Deferred Stock Rights relating to more than 500,000 Shares during
any fiscal year of the Company;
(iii) receiving
Awards of Performance Shares, and/or Awards of Performance Units
the value of which is based on the Fair Market Value of Shares, for
more than 500,000 Shares during any fiscal year of the
Company;
(iv) receiving
Awards of Performance Units the value of which is not based on the
Fair Market Value of Shares, for more than $3,000,000 during any
fiscal year of the Company; or
(v) receiving
other Stock-based Awards pursuant to Section 11 relating to
more than 100,000 Shares during any fiscal year of the
Company.
In all cases,
determinations under this Section 6(d) should be made in a manner
that is consistent with the exemption for performance-based
compensation that Code Section 162(m) provides.
7. Options. Subject to the terms of this Plan, the
Administrator will determine all terms and conditions of each
Option, including but not limited to:
(a) Whether
the Option is an “incentive stock option” which meets
the requirements of Code Section 422, or a “nonqualified
stock option” which does not meet the requirements of Code
Section 422;
(b) The
number of Shares subject to the Option;
(c) The date
of grant, which may not be prior to the date of the
Administrator’s approval of the grant;
(d) The
exercise price, which may not be less than the Fair Market Value of
the Shares subject to the Option as determined on the date of
grant; provided that an incentive stock option granted to a 10%
Stockholder must have an exercise price at least equal to 110% of
the Fair Market Value of the Shares subject to the Option as
determined on the date of grant;
(e) The terms
and conditions of exercise; provided that, subject to the
provisions of Sections 12 and 16, one-third (1/3) of each Option
may not become exercisable earlier than on each of the first three
(3) anniversaries of the date of grant; and provided
further that if the aggregate Fair Market Value of the Shares
subject to the Option (as determined on the date of grant of such
Option) that become exercisable during a calendar year exceed
$100,000, then such Option shall be treated as a nonqualified stock
option to the extent such $100,000 limitation is
exceeded.
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(f) The term;
provided that each Option must terminate no later than ten
(10) years after the date of grant and each incentive stock
option granted to a 10% Stockholder must terminate no later than
five (5) years after the date of grant.
In
all other respects, the terms of any incentive stock option should
comply with the provisions of Code section 422 except to the extent
the Administrator determines otherwise. If an Option that is
intended to be an incentive stock option fails to meet the
requirements thereof, the Option shall automatically be treated as
a nonqualified stock option to the extent of such
failure.
Subject
to the terms and conditions of the Award, vested Options may be
exercised, in whole or in part, by giving notice of exercise to the
Company in such manner as the Company may prescribe. This notice
must be accompanied by payment in full of the exercise price in
cash or by use of such other instrument as the Administrator may
agree to accept.
Payment
of the exercise price, applicable withholding taxes due upon
exercise of the Option, or both may be made in the form of Stock
already owned by the Participant, which Stock shall be valued at
Fair Market Value on the date the Option is exercised. A
Participant who elects to make payment in Stock may not transfer
fractional shares or shares of Stock with an aggregate Fair Market
Value in excess of the Option exercise price plus applicable
withholding taxes. A Participant need not present Stock
certificat
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