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EXHIBIT 10.11
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the day of
, 2000, by and between Pentair, Inc., a Minnesota corporation (hereinafter
referred to as the "Company"), and (hereinafter referred to as the
"Executive").
W I T N E S S E T H
WHEREAS, the Executive is employed by the Company and/or a
subsidiary of the Company (hereinafter referred to collectively as the
"Employer") in a key executive capacity and the Executive's services are
valuable to the conduct of the business of the Company;
WHEREAS, the Company desires to continue to attract and retain
dedicated and skilled management employees in a period of industry
consolidation, consistent with achieving the best possible value for its
shareholders in any change in control of the Company;
WHEREAS, the Company recognizes that circumstances may arise
in which a change in control of the Company occurs, through acquisition or
otherwise, thereby causing a potential conflict of interest between the
Company's needs for the Executive to remain focused on the Company's business
and for the necessary continuity in management prior to and following a change
in control, and the Executive's reasonable personal concerns regarding future
employment with the Employer and economic protection in the event of loss of
employment as a consequence of a change in control;
WHEREAS, the Company and the Executive are desirous that any
proposal for a change in control or acquisition of the Company will be
considered by the Executive objectively and with reference only to the best
interests of the Company and its shareholders;
WHEREAS, the Executive will be in a better position to
consider the Company's best interests if the Executive is afforded reasonable
economic security, as provided in this Agreement, against altered conditions of
employment which could result from any such change in control or acquisition;
WHEREAS, the Executive possesses intimate knowledge of the
business and affairs of the Company and has acquired certain confidential
information and data with respect to the Company; and
WHEREAS, the Company desires to insure, insofar as possible,
that it will continue to have the benefit of the Executive's services and to
protect its confidential information and goodwill.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
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1. Definitions.
(a) Accrued Benefits. The Executive's "Accrued Benefits" shall
include the following amounts, payable as described herein: (i) all base salary
for the time period ending with the Termination Date; (ii) reimbursement for any
and all monies advanced in connection with the Executive's employment for
reasonable and necessary expenses incurred by the Executive on behalf of the
Employer for the time period ending with the Termination Date; (iii) any and all
other cash earned through the Termination Date and deferred at the election of
the Executive or pursuant to any deferred compensation plan then in effect; (iv)
notwithstanding any provision of any bonus or incentive compensation plan
applicable to the Executive, a lump sum amount, in cash, equal to the sum of (A)
any bonus or incentive compensation that has been allocated or awarded to the
Executive for a fiscal year or other measuring period under the plan that ends
prior to the Termination Date but has not yet been paid (pursuant to Section
5(f) or otherwise) and (B) a pro rata portion to the Termination Date of the
aggregate value of all contingent bonus or incentive compensation awards to the
Executive for all uncompleted periods under the plan calculated as to each such
award as if the Goals with respect to such bonus or incentive compensation award
had been attained reduced by any amounts paid to the Executive pursuant to
Section(b)(iii) and Section 3(b)(iv) under the plan for the fiscal year in which
the Termination Date occurs; and (v) all other payments and benefits to which
the Executive (or in the event of the Executive's death, the Executive's
surviving spouse or other beneficiary) may be entitled on the Termination Date
as compensatory fringe benefits or under the terms of any benefit plan of the
Employer, excluding severance payments under any Employer severance policy,
practice or agreement in effect on the Termination Date. Payment of Accrued
Benefits shall be made promptly in accordance with the Company's prevailing
practice with respect to clauses (i) and (ii) or, with respect to clauses (iii),
(iv) and (v), pursuant to the terms of the benefit plan or practice establishing
such benefits.
(b) Act. The term "Act" means the Securities Exchange Act of
1934, as amended.
(c) Affiliate and Associate. The terms "Affiliate" and
"Associate" shall have the respective meanings ascribed to such terms in Rule
l2b-2 of the General Rules and Regulations under the Act.
(d) Annual Cash Compensation. The term "Annual Cash
Compensation" shall mean the sum of (i) the Executive's Annual Base Salary
(determined as of the time of the Change in Control of the Company or, if
higher, immediately prior to the date the Notice of Termination is given) plus
(ii) an amount equal to the greater of the Executive's annual incentive target
bonus for the fiscal year in which the Termination Date occurs or the annual
incentive bonus the Executive received for the fiscal year prior to the Change
in Control of the Company (the aggregate amount set forth in clause (i) and
clause (ii) shall hereafter be referred to as the "Annual Cash Compensation"),
(e) Beneficial Owner. A Person shall be deemed to be the
"Beneficial Owner" of any securities:
(i) which such Person or any of such Person's Affiliates
or Associates has the right to acquire (whether such right is exercisable
immediately
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or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, (A) securities tendered pursuant to
a tender or exchange offer made by or on behalf of such Person or any
of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase, or (B) securities issuable upon
exercise of Rights issued pursuant to the terms of the Company's
Rights Agreement, dated as of July 21, 1995, between the Company and
Norwest Bank Minnesota, National Association, as amended from time to
time (or any successor to such Rights Agreement), at any time before
the issuance of such securities;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose
of or has "beneficial ownership" of (as determined pursuant to Rule
l3d-3 of the General Rules and Regulations under the Act), including
pursuant to any agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, any security under this clause (ii) as a result
of an agreement, arrangement or understanding to vote such security if
the agreement, arrangement or understanding: (A) arises solely from a
revocable proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations under the Act
and (B) is not also then reportable on a Schedule l3D under the Act
(or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring holding, voting (except
pursuant to a revocable proxy as described in clause (ii) above) or
disposing of any voting securities of the Company.
(f) Cause. "Cause" for termination by the Employer of the
Executive's employment in connection with a Change in Control of the Company
shall be limited to (i) the engaging by the Executive in intentional conduct
that the Company establishes, by clear and convincing evidence, has caused
demonstrable and serious financial injury to the Employer, as evidenced by a
determination in a binding and final judgment, order or decree of a court or
administrative agency of competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal, in an action, suit or proceeding, whether civil,
criminal, administrative or investigative; (ii) conviction of a felony (as
evidenced by binding and final judgment, order or decree of a court of competent
jurisdiction, in effect after exhaustion of all rights of appeal); or (iii)
continuing willful and unreasonable refusal by the Executive to perform the
Executive's duties or responsibilities (unless significantly changed without the
Executive's consent).
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(g) Change in Control of the Company. A "Change in Control of the
Company" shall be deemed to have occurred if an event set forth in any one of
the following paragraphs shall have occurred:
(i) any Person (other than (A) the Company or any of its
subsidiaries, (B) a trustee or other fiduciary holding securities
under any employee benefit plan of the Company or any of its
subsidiaries, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities or (D) a corporation owned,
directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock in the
Company ("Excluded Persons")) is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in
the securities beneficially owned by such Person any securities
acquired directly from the Company or its Affiliates after August 23,
2000, pursuant to express authorization by the Board that refers to
this exception) representing 20% or more of either the then
outstanding shares of common stock of the Company or the combined
voting power of the Company's then outstanding voting securities; or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors of the Company then
serving: (A) individuals who, on August 23, 2000 constituted the Board
and (B) any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A under the Act) whose
appointment or election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors
on August 23, 2000, or whose appointment, election or nomination for
election was previously so approved (collectively the "Continuing
Directors"); provided, however, that individuals who are appointed to
the Board pursuant to or in accordance with the terms of an agreement
relating to a merger, consolidation, or share exchange involving the
Company (or any direct or indirect subsidiary of the Company) shall
not be Continuing Directors for purposes of this Agreement until after
such individuals are first nominated for election by a vote of at
least two-thirds (2/3) of the then Continuing Directors and are
thereafter elected as directors by the shareholders of the Company at
a meeting of shareholders held following consummation of such merger,
consolidation, or share exchange; and, provided further, that in the
event the failure of any such persons appointed to the Board to be
Continuing Directors results in a Change in Control of the Company,
the subsequent qualification of such persons as Continuing Directors
shall not alter the fact that a Change in Control of the Company
occurred; or
(iii) the consummation of a merger, consolidation or share
exchange of the Company with any other corporation or the issuance of
voting securities of the Company in connection with a merger,
consolidation or share exchange of the Company (or any direct or
indirect subsidiary of the Company), in each case, which requires
approval of the shareholders of the Company, other than (A) a merger,
consolidation or share exchange which would result in the voting
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securities of the Company outstanding immediately prior to such
merger, consolidation or share exchange continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least 50%
of the combined voting power of the voting securities of the Company
or such surviving entity or any parent thereof outstanding immediately
after such merger, consolidation or share exchange, or (B) a merger,
consolidation or share exchange effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person (other than an Excluded Person) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates after
August 23, 2000, pursuant to express authorization by the Board that
refers to this exception) representing 20% or more of either the then
outstanding shares of common stock of the Company or the combined
voting power of the Company's then outstanding voting securities; or
(iv) the consummation of a plan of complete liquidation or
dissolution of the Company or a sale or disposition by the Company of
all or substantially all of the Company's assets (in one transaction
or a series of related transactions within any period of 24
consecutive months), in each case, which requires approval of the
shareholders of the Company, other than a sale or disposition by the
Company of all or substantially all of the Company's assets to an
entity at least 75% of the combined voting power of the voting
securities of which are owned by Persons in substantially the same
proportions as their ownership of the Company immediately prior to
such sale.
Notwithstanding the foregoing, no "Change in Control of the Company" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to own, directly or indirectly, in the same proportions as
their ownership in the Company, an entity that owns all or substantially all of
the assets or voting securities of the Company immediately following such
transaction or series of transactions.
(h) Code. The term "Code" means the Internal Revenue Code of 1986,
including any amendments thereto or successor tax codes thereof.
(i) Covered Termination. Subject to Section 2(b), the term "Covered
Termination" means any termination of the Executive's employment during the
Employment Period where the Termination Date or the date Notice of Termination
is delivered is any date prior to the end of the Employment Period.
(j) Employment Period. Subject to Section 2(b), the term "Employment
Period" means a period commencing on the date of a Change in Control of the
Company, and ending at 11:59 p.m. Central Time on the earlier of the third
anniversary of such date or the Executive's Normal Retirement Date.
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(k) Good Reason. The Executive shall have "Good Reason" for
termination of employment in connection with a Change in Control of the Company
in the event of:
(i) any breach of this Agreement by the Employer, including
specifically any breach by the Employer of the agreements contained in
Section 3, Section 4, Section 5, or Section 6, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith that
the Employer remedies promptly after receipt of notice thereof given
by the Executive;
(ii) any reduction in the Executive's base salary, percentage of
base salary available as incentive compensation or bonus opportunity
or benefits, in each case relative to those most favorable to the
Executive in effect at any time during the 180-day period prior to the
Change in Control of the Company or, to the extent more favorable to
the Executive, those in effect at any time during the Employment
Period;
(iii) the removal of the Executive from, or any failure to
reelect or reappoint the Executive to, any of the positions held with
the Employer on the date of the Change in Control of the Company or
any other positions with the Employer to which the Executive shall
thereafter be elected, appointed or assigned, except in the event that
such removal or failure to reelect or reappoint relates to the
termination by the Employer of the Executive's employment for Cause or
by reason of disability pursuant to Section 12;
(iv) a good faith determination by the Executive that there has
been a material adverse change, without the Executive's written
consent, in the Executive's working conditions or status with the
Employer relative to the most favorable working conditions or status
in effect during the 180-day period prior to the Change in Control of
the Company, or, to the extent more favorable to the Executive, those
in effect at any time during the Employment Period, including but not
limited to (A) a significant change in the nature or scope of the
Executive's authority, powers, functions, duties or responsibilities,
or (B) a significant reduction in the level of support services,
staff, secretarial and other assistance, office space and
accoutrements, but in each case excluding for this purpose an
isolated, insubstantial and inadvertent event not occurring in bad
faith that the Employer remedies within ten (10) days after receipt of
notice thereof given by the Executive;
(v) the relocation of the Executive's principal place of
employment to a location more than 50 miles from the Executive's
principal place of employment on the date 180 days prior to the Change
in Control of the Company;
(vi) the Employer requires the Executive to travel on Employer
business 20% in excess of the average number of days per month the
Executive was required to travel during the 180-day period prior to
the Change in Control of the Company;
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(vii) failure by the Company to obtain the Agreement referred
to in Section 17(a) as provided therein; or
(viii) any voluntary termination of employment by the
Executive where the Notice of Termination is delivered during the 30
days following the first anniversary of the Change in Control of the
Company.
(l) Normal Retirement Date. The term "Normal Retirement Date"
means "Normal Retirement Date" as defined in the primary qualified defined
benefit pension plan applicable to the Executive, or any successor plan, as in
effect on the date of the Change in Control of the Company.
(m) Person. The term "Person" shall mean any individual, firm,
partnership, corporation or other entity, including any successor (by merger or
otherwise) of such entity, or a group of any of the foregoing acting in concert.
(n) Termination Date. Except as otherwise provided in Section
2(b), Section 10(b), and Section 17(a), the term "Termination Date" means (i) if
the Executive's employment is terminated by the Executive's death, the date of
death; (ii) if the Executive's employment is terminated by reason of voluntary
early retirement, as agreed in writing by the Employer and the Executive, the
date of such early retirement which is set forth in such written agreement;
(iii) if the Executive's employment is terminated for purposes of this Agreement
by reason of disability pursuant to Section 12, the earlier of thirty days after
the Notice of Termination is given or one day prior to the end of the Employment
Period; (iv) if the Executive's employment is terminated by the Executive
voluntarily (other than for Good Reason), the date the Notice of Termination is
given; and (v) if the Executive's employment is terminated by the Employer
(other than by reason of disability pursuant to Section 12) or by the Executive
for Good Reason, the earlier of thirty days after the Notice of Termination is
given or one day prior to the end of the Employment Period. Notwithstanding the
foregoing,
(A) If termination is for Cause pursuant to Section 1(f)(iii)
and if the Executive has cured the conduct constituting such Cause as
described by the Employer in its Notice of Termination within such
thirty-day or shorter period, then the Executive's employment
hereunder shall continue as if the Employer had not delivered its
Notice of Termination.
(B) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Employer notifies the Executive
that a dispute exists concerning the termination within the
fifteen-day period following receipt thereof, then the Executive may
elect to continue his or her employment during such dispute and the
Termination Date shall be determined under this paragraph. If the
Executive so elects and it is thereafter determined that Good Reason
did exist, the Termination Date shall be the earliest of (1) the date
on which the dispute is finally determined, either (x) by mutual
written agreement of the parties or (y) in accordance with Section 22,
(2) the date of the Executive's death or (3) one day prior to the end
of the Employment Period. If the Executive so elects and it is
thereafter determined that Good Reason did not exist, then the
employment of the Executive hereunder shall continue after such
determination as
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if the Executive had not delivered the Notice of Termination asserting
Good Reason and there shall be no Termination Date arising out of such
Notice. In either case, this Agreement continues, until the
Termination Date, if any, as if the Executive had not delivered the
Notice of Termination except that, if it is finally determined that
Good Reason did exist, the Executive shall in no case be denied the
benefits described in Section 9 (including a Termination Payment)
based on events occurring after the Executive delivered his Notice of
Termination.
(C) Except as provided in Section 1(n)(B), if the party
receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the appropriate
period following receipt thereof and it is finally determined that the
reason asserted in such Notice of Termination did not exist, then (1)
if such Notice was delivered by the Executive, the Executive will be
deemed to have voluntarily terminated his employment and the
Termination Date shall be the earlier of the date fifteen days after
the Notice of Termination is given or one day prior to the end of the
Employment Period and (2) if delivered by the Company, the Company
will be deemed to have terminated the Executive other than by reason
of death, disability or Cause.
2. Termination or Cancellation Prior to Change in Control.
(a) Subject to Section 2(b), the Employer and the Executive
shall each retain the right to terminate the employment of the Executive at any
time prior to a Change in Control of the Company. Subject to Section 2(b), in
the event the Executive's employment is terminated prior to a Change in Control
of the Company, this Agreement shall be terminated and cancelled and of no
further force and effect, and any and all rights and obligations of the parties
hereunder shall cease.
(b) Anything in this Agreement to the contrary
notwithstanding, if a Change in Control of the Company occurs and if the
Executive's employment with the Employer is terminated (other than a termination
due to the Executive's death or as a result of the Executive's disability)
during the period of 180 days prior to the date on which the Change in Control
of the Company occurs, and if it is reasonably demonstrated by the Executive
that such termination of employment (i) was at the request of a third party who
has taken steps reasonably calculated to effect a Change in Control of the
Company or (ii) otherwise arose in connection with or in anticipation of a
Change in Control of the Company, then for all purposes of this Agreement such
termination of employment shall be deemed a "Covered Termination," "Notice of
Termination" shall be deemed to have been given, and the "Employment Period"
shall be deemed to have begun on the date of such termination which shall be
deemed to be the "Termination Date" and the date of the Change of Control of the
Company for purposes of this Agreement.
3. Employment Period; Vesting and Payment of Certain Benefits.
(a) If a Change in Control of the Company occurs when the
Executive is employed by the Employer, the Employer will continue thereafter to
employ the Executive during the Employment Period, and the Executive will remain
in the employ of the Employer in accordance with and subject to the terms and
provisions of this Agreement. Any termination of
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the Executive's employment during the Employment Period, whether by the Company
or the Employer, shall be deemed a termination by the Company for purposes of
this Agreement.
(b) If a Change in Control of the Company occurs when the
Executive is employed by the Employer, (i) the Company shall cause all
restrictions on restricted stock awards made to the Executive prior to the
Change in Control of the Company to lapse such that the Executive is fully and
immediately vested in the Executive's restricted stock upon such a Change in
Control of the Company; (ii) the Company shall cause all stock options granted
to the Executive prior to the Change in Control of the Company pursuant to the
Company's stock option plan(s) to be fully and immediately vested upon such a
Change in Control of the Company; (iii) the Company shall cause all incentive
compensation units and performance awards granted to the Executive pursuant to
any long-term incentive plan maintained by the Company to be paid to the
Executive within ten (10) business days after the Change in Control of the
Company (A) at one-third (1/3) of target, if the award cycle has been in effect
less than twelve (12) months, (B) at two thirds (2/3) of the then current value
pursuant to such plan, if the award cycle has been in effect twelve (12) or more
months but less than twenty-four (24) months, and (C) at the then current value
pursuant to such plan, if the award cycle has been in effect twenty-four (24) or
more months, in each case as if all performance or incentive requirements and
periods had been satisfied; and (iv) the Company shall pay to the Executive
within ten (10) business days after the Change in Control of the Company an
amount equal to the Executive's annual incentive target bonus for the fiscal
year in which the Change in Control of the Company occurs.
4. Duties. During the Employment Period, the Executive
shall, in the same capacities and positions held by the Executive at the time of
the Change in Control of the Company or in such other capacities and positions
as may be agreed to by the Employer and the Executive in writing, devote the
Executive's best efforts and all of the Executive's business time, attention and
skill to the business and affairs of the Employer, as such business and affairs
now exist and as they may hereafter be conducted.
5. Compensation. During the Employment Period, the Executive
shall be compensated as follows:
(a) The Executive shall receive, at reasonable intervals (but
not less often than monthly) and in accordance with such standard policies as
may be in effect immediately prior to the Change in Control of the Company, an
annual base salary in cash equivalent of not less than twelve times the
Executive's highest monthly base salary for the twelve-month period immediately
preceding the month in which the Change in Control of the Company occurs or, if
higher, annual base salary at the rate in effect immediately prior to the Change
in Control of the Company (which base salary shall, unless otherwise agreed in
writing by the Executive, include the current receipt by the Executive of any
amounts which, prior to the Change in Control of the Company, the Executive had
elected to defer, whether such compensation is deferred under Section 401(k) of
the Code or otherwise), subject to adjustment as hereinafter provided in Section
6 (such salary amount as adjusted upward from time to time is hereafter referred
to as the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least
equal in value to the highest value of such benefits provided for the Executive
at any time during the 180-day period immediately prior to the Change in Control
of the Company or, if more favorable to the Executive, those provided generally
at any time during the Employment Period to any executives
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of the Employer of comparable status and position to the Executive; and shall be
reimbursed, at such intervals and in accordance with such standard policies that
are most favorable to the Executive that were in effect at any time during the
180-day period immediately prior to the Change in Control of the Company, for
any and all monies advanced in connection with the Executive's employment for
reasonable and necessary expenses incurred by the Executive on behalf of the
Employer, including travel expenses.
(c) The Executive and/or the Executive's family, as the case
may be, shall be included, to the extent eligible thereunder (which eligibility
shall not be conditioned on the Executive's salary grade or on any other
requirement which excludes persons of comparable status to the Executive unless
such exclusion was in effect for such plan or an equivalent plan at any time
during the 180-day period immediately prior to the Change in Control of the
Company), in any and all plans providing benefits for the Employer's salaried
employees in general, including but not limited to group life insurance,
hospitalization, medical, dental, profit sharing and stock bonus plans;
provided, that, (i) in no event shall the aggregate level of benefits under such
plans in which the Executive is included be less than the aggregate level of
benefits under plans of the Employer of the type referred to in this Section
5(c) in which the Executive was participating at any time during the 180-day
period immediately prior to the Change in Control of the Company and (ii) in no
event shall the aggregate level of benefits under such plans be less than the
aggregate level of benefits under plans of the type referred to in this Section
5(c) provided at any time after the Change in Control of the Company to any
executive of the Employer of comparable status and position to the Executive.
(d) The Executive shall annually be entitled to not less than
the amount of paid vacation and not fewer than the highest number of paid
holidays to which the Executive was entitled annually at any time during the
180-day period immediately prior to the Change in Control of the Company or such
greater amount of paid vacation and number of paid holidays as may be made
available annually to other executives of the Employer of comparable status and
position to the Executive at any time during the Employment Period.
(e) The Executive shall be included in all plans providing
additional benefits to executives of the Employer of comparable status and
position to the Executive, including but not limited to deferred compensation,
split-dollar life insurance, supplemental retirement, stock option, stock
appreciation, stock bonus and similar or comparable plans; provided, that, (i)
in no event shall the aggregate level of benefits under such plans be less than
the highest aggregate level of benefits under plans of the Employer of the type
referred to in this Section 5(e) in which the Executive was participating at any
time during the 180-day period immediately prior to the Change in Control of the
Company; (ii) in no event shall the aggregate level of benefits under such plans
be less than the aggregate levels of benefits under plans of the type referred
to in this Section 5(e) provided at any time after the Change in Control of the
Company to any executive of the Employer comparable in status and position to
the Executive; and (iii) the Employer's obligation to include the Executive in
bonus or incentive compensation plans shall be determined by Section 5(f).
(f) To assure that the Executive will have an opportunity to
earn incentive compensation after a Change in Control of the Company, the
Executive shall be included in a bonus plan of the Employer which shall satisfy
the standards described below (such plan, the "Bonus Plan"). Bonuses under the
Bonus Plan shall be payable with respect to achieving such
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financial or other goals reasonably related to the business of the Employer as
the Employer shall establish (the "Goals"), all of which Goals shall be
attainable, prior to the end of the Employment Period, with approximately the
same degree of probability as the most attainable goals under the Employer's
bonus plan or plans as in effect at any time during the 180-day period
immediately prior to the Change in Control of the Company (whether one or more,
the "Company Bonus Plan") and in view of the Employer's existing and projected
financial and business circumstances applicable at the time. The amount of the
bonus (the "Bonus Amount") that the Executive is eligible to earn under the
Bonus Plan shall be no less than 200% of the Executive's target award provided
in such Company Bonus Plan (such bonus amount herein referred to as the
"Targeted Bonus"), and in the event the Goals are not achieved such that the
entire Targeted Bonus is not payable, the Bonus Plan shall provide for a payment
of a Bonus Amount equal to a portion of the Targeted Bonus reasonably related to
that portion of the Goals which were achieved. Payment of the Bonus Amount shall
not be affected by any circumstance occurring subsequent to the end of the
Employment Period, including termination of the Executive's employment.
6. Annual Compensation Adjustments. During the Employment
Period, the Board of Directors of the Company (or an appropriate committee
thereof) will consider and appraise, at least annually, the contributions of the
Executive to the Company, and in accordance with the Company's practice prior to
the Change in Control of the Company, due consideration shall be given to the
upward adjustment of the Executive's Annual Base Salary, at least annually, (a)
commensurate with increases generally given to other executives of the Company
of comparable status and position to the Executive, and (b) as the scope of the
Company's operations or the Executive's duties expand.
7. Termination For Cause or Without Good Reason. If there is a
Covered Termination for Cause or due to the Executive's voluntarily terminating
his or her employment other than for Good Reason (any such terminations to be
subject to the procedures set forth in Section 13), then the Executive shall be
entitled to receive only Accrued Benefits.
8. Termination Giving Rise to a Termination Payment. If there
is a Covered Termination by the Executive for Good Reason, or by the Company
other than by reason of (i) death, (ii) disability pursuant to Section 12, or
(iii) Cause (any such terminations to be subject to the procedures set forth in
Section 13), then the Executive shall be entitled to receive, and the Company
shall promptly pay, Accrued Benefits and, in lieu of further base salary for
periods following the Termination Date, as liquidated damages and additional
severance pay and in consideration of the covenant of the Executive set forth in
Section 14(a), the Termination Payment pursuant to Section 9(a).
9. Payments Upon Termination.
(a) Termination Payment. The "Termination Payment" shall be an
amount equal to the Annual Cash Compensation times three (3). The Termination
Payment shall be paid to the Executive in cash equivalent ten (10) business days
after the Termination Date. Such lump sum payment shall not be reduced by any
present value or similar factor, and the Executive shall not be required to
mitigate the amount of the Termination Payment by securing other employment or
otherwise, nor will such Termination Payment be reduced by reason of the
Executive securing other employment or for any other reason. The Termination
Payment shall be in lieu of, and acceptance by the Executive of the Termination
Payment shall constitute the Executive's release of
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any rights of the Executive to, any other cash severance payments under any
Company severance policy, practice or agreement.
(b) Certain Additional Payments by the Company.
(i) Notwithstanding any other provision of this Agreement, if any
portion of the Termination Payment or any other payment under this
Agreement, or under any other agreement with or plan of the Employer (in
the aggregate, "Total Payments"), would constitute an "excess parachute
payment" as defined in Section 280G of the Code (or any successor
provision), then the Company shall pay the Executive an additional amount
(the "Gross-Up Payment") such that the net amount retained by the Executive
after deduction of any excise tax imposed under Section 4999 of the Code
(or any successor provision) and any interest charges or penalties in
respect of the imposition of such excise tax (collectively, the "Excise
Tax") (but not any federal, state or local income tax, or employment tax)
on the Total Payments, and any federal, state and local income tax,
employment tax, and excise tax upon the payment provided for by this
Section 9(b)(i), shall be equal to the Total Payments. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be
deemed to pay federal income tax and employment taxes at the highest
marginal rate of federal income and employment taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of
the Executive's domicile for income tax purposes on the date the Gross-Up
Payment is made, net of the maximum reduction in federal income taxes that
may be obtained from the deduction of such state and local taxes.
Notwithstanding the foregoing, if it shall be determined that the Executive
is entitled to a Gross-Up Payment, but that the Total Payments would not be
subject to the Excise Tax if the Total Payments were reduced by an amount
that is less than 10% of the Total Payments that would be treated as
"parachute payments" under Section 280G of the Code (or any successor
provision), then the amounts payable to the Executive under this Agreement
shall be reduced (but not below zero) to the maximum amount that could be
paid to the Executive without giving rise to the Excise Tax (the "Safe
Harbor Cap"), and no Gross-Up Payment shall be made to the Executive. For
purposes of reducing the Total Payments to the Safe Harbor Cap, only
amounts payable under this Agreement (and no other Total Payments) shall be
reduced. If the reduction of the amounts payable hereunder would not result
in a reduction of the Total Payments to the Safe Harbor Cap, no amounts
payable under this Agreement shall be reduced pursuant to this provision.
(ii) For purposes of this Agreement, the terms "excess parachute
payment" and "parachute payments" shall have the meanings assigned to them
in Section 280G of the Code (or any successor provision) and such
"parachute payments" shall be valued as provided therein. Present value for
purposes of this Agreement shall be calculated in accordance with Section
1274(b)(2) of the Code (or any successor provision). Promptly following a
Covered Termination or notice by the Company to the Executive of its belief
that there is a payment or benefit due the Executive which will result in
an "excess parachute payment" as defined in Section 280G of the Code (or
any successor
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provision), the Executive and the Company, at the Company's expense,
shall obtain the opinion (which need not be unqualified) of nationally
recognized tax counsel ("National Tax Counsel") selected by the
Company's independent auditors and reasonably acceptable to the
Executive (which may be regular outside counsel to the Company), which
opinion sets forth (A) the amount of the Base Period Income, (B) the
amount and present value of Total Payments, (C) the amount and present
value of any excess parachute payments, and (D) the amount of any
Gross-Up Payment or the reduction of any Total Payments to the Safe
Harbor Cap, as the case may be. As used in this Agreement, the term
"Base Period Income" means an amount equal to the Executive's
"annualized includable compensation for the base period" as defined in
Section 280G(d)(1) of the Code. For purposes of such opinion, the value
of any noncash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with the
principles of Section 280G(d)(3) and (4) of the Code (or any successor
provisions), which determination shall be evidenced in a certificate of
such auditors addressed to the Company and the Executive. The opinion
of National Tax Counsel shall be addressed to the Company and the
Executive and shall be binding upon the Company and the Executive. If
such National Tax Counsel so requests in connection with the opinion
required by this Section 9(b), the Executive and the Company shall
obtain, at the Company's expense, and the National Tax Counsel may rely
on, the advice of a firm of recognized executive compensation
consultants as to the reasonableness of any item of compensation to be
received by the Executive solely with respect to its status under
Section 280G of the Code and the regulations thereunder. Within five
(5) days after the National Tax Counsel's opinion is received by the
Company and the Executive, the Company shall pay (or cause to be paid)
or distribute (or cause to be distributed) to or for the benefit of the
Executive such amounts as are then due to the Executive under this
Agreement.
(iii) In the event that upon any audit by the Internal
Revenue Service, or by a state or local taxing authority, of the Total
Payments or Gross-Up Payment, a change is finally determined to be
required in the amount of taxes paid by the Executive, appropriate
adjustments shall be made under this Agreement such that the net amount
which is payable to the Executive after taking into account the
provisions of Section 4999 of the Code (or any successor provision)
shall reflect the intent of the parties as expressed in this Section 9,
in the manner determined by the National Tax Counsel.
(iv) The Company agrees to bear all costs associated
with, and to indemnify and hold harmless, the National Tax Counsel of
and from any and all claims, damages, and expenses resulting from or
relating to its determinations pursuant to this Section 9(b), except
for claims, damages or expenses resulting from the gross negligence or
willful misconduct of such firm.
(b) Additional Benefits. If there is a Covered Termination
and the Executive is entitled to Accrued Benefits and the Termination Payment,
then the Company shall provide to the Executive the following additional
benefits:
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(i) The Executive shall receive, at the expense of
the Company, outplacement services, on an individualized basis at a
level of service commensurate with the Executive's status with the
Company immediately prior to the date of the Change in Control of the
Company (or, if higher, immediately prior to the termination of the
Executive's employment), provided by a nationally recognized executive
placement firm selected by the Company; provided that the cost to the
Company of such services shall not exceed 10% of the Executive's Annual
Base Salary.
(ii) Until the earlier of the end of the Employment
Period or such time as the Executive has obtained new employment and is
covered by benefits which in the aggregate are at least equal in value
to the following benefits, the Executive shall continue to be covered,
at the expense of the Company, by the same or equivalent life
insurance, hospitalization, medical and dental coverage as was required
hereunder with respect to the Executive immediately prior to the date
the Notice of Termination is given.
(iii) The Company shall bear up to $15,000 in the
aggregate of fees and expenses of consultants and/or legal or
accounting advisors engaged by the Executive to advise the Executive as
to matters relating to the computation of benefits due and payable
under this Section 9.
(iv) The Company shall cause the Executive to be
fully and immediately vested in his accrued benefit under the Pentair,
Inc. 1999 Supplemental Executive Retirement Plan ("SERP") and the
Pentair, Inc. Restoration Plan ("Restoration Plan") or any successor
plans thereto (the "Plans") (to the extent the Executive participates
in the Plans) and in any defined contribution retirement plan of the
Employer. The amount of Plan benefits shall be determined as if the
Executive had completed additional years of Benefit Service (as such
term is defined in the Plans) equal to the lesser of (A) three years or
(B) the greater of (x) seven minus the years of Benefit Service
credited to such Executive under the Plans, determined without regard
to the terms of this Agreement, as of the end of the calendar year
which includes the date of the Change in Control of the Company, or (y)
zero. In addition, if the Executive is described in Appendix A to the
SERP, the additional benefit therein provided for the Executive shall
be fully vested and the amount of such additional benefit shall be no
less than if the Executive had continued in qualified employment
through the end of the calendar year in which he would attain age
sixty-two. In addition, the Executive's accrued benefit under the
Restoration Plan shall be appropriately increased by the value of the
Executive's accrued benefit, if any, under the Company's tax-qualified
defined benefit plan which is forfeited due to the Executive's failure
to become fully vested thereunder.
10. Death.
(a) Except as provided in Section 10(b), in the event of
a Covered Termination due to the Executive's death, the Executive's estate,
heirs and beneficiaries shall receive all the Executive's Accrued Benefits
through the Termination Date.
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(b) In the event the Executive dies after a Notice of
Termination is given (i) by the Company or (ii) by the Executive for
Good Reason, the Executive's estate, heirs and beneficiaries shall be
entitled to the benefits described in Section 10(a) and, subject to the
provisions of this Agreement, to such Termination Payment as the
Executive would have been entitled to had the Executive lived. For
purposes of this Section 10(b), the Termination Date shall be the
earlier of thirty days following the giving of the Notice of
Termination, subject to extension pursuant to Section 1(n), or one day
prior to the end of the Employment Period.
11. Retirement. If, during the Employment Period, the
Executive and the Employer shall execute an agreement providing for the
early retirement of the Executive from the Employer, or the Executive
shall otherwise give notice that he is voluntarily choosing to retire
early from the Employer, the Executive shall receive Accrued Benefits
through the Termination Date; provided, that if the Executive's
employment is terminated by the Executive for Good Reason or by the
Company other than by reason of death, disability or Cause and the
Executive also, in connection with such termination, elects voluntary
early retirement, the Executive shall also be entitled to receive a
Termination Payment pursuant to Section 8.
12. Termination for Disability. If, during the
Employment Period, as a result of the Executive's disability due to
physical or mental illness or injury (regardless of whether such
illness or injury is job-related), the Executive shall have been absent
from the Executive's duties hereunder on a full-time basis for a period
of six consecutive months and, within thirty days after the Company
notifies the Executive in writing that it intends to terminate the
Executive's employment (which notice shall not constitute the Notice of
Termination contemplated below), the Executive shall not have returned
to the performance of the Executive's duties hereunder on a full-time
basis, the Company may terminate the Executive's employment for
purposes of this Agreement pursuant to a Notice of Termination given in
accordance with Section 13. If the Executive's employment is terminated
on account of the Executive's disability in accordance with this
Section, the Executive shall receive Accrued Benefits through the
Termination Date and shall remain eligible for all benefits provided by
any long term disability programs of the Company in effect at the time
of such termination.
13. Termination Notice and Procedure. Any Covered
Termination by the Company or the Executive (other than a termination
of the Executive's employment that is a Covered Termination by virtue
of Section 2(b)) shall be communicated by a written notice of
termination ("Notice of Termination") to the Executive, if such Notice
is given by the Company, and to the Company, if such Notice is given by
the Executive, all in accordance with the following procedures and
those set forth in Section 23:
(a) If such termination is for disability, Cause or
Good Reason, the Notice of Termination shall indicate in reasonable
detail the facts and circumstances alleged to provide a basis for such
termination.
(b) Any Notice of Termination by the Company shall
have been approved, prior to the giving thereof to the Executive, by a
resolution duly adopted by a majority of the directors of the Company
(or any successor corporation) then in office.
(c) If the Notice is given by the Executive for Good
Reason, the Executive may cease performing his duties hereunder on or
after the date fifteen days after the delivery of Notice
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of Termination and shall in any event cease employment on the Termination Date.
If the Notice is given by the Company, then the Executive may cease performing
his duties hereunder on the date of receipt of the Notice of Termination,
subject to the Executive's rights hereunder.
(d) The Executive shall have thirty days, or such longer
period as the Company may determine to be appropriate, to cure any conduct or
act, if curable, alleged to provide grounds for termination of the Executive's
employment for Cause under this Agreement pursuant to Section 1(f)(iii).
(e) The recipient of any Notice of Termination shall
personally deliver or mail in accordance with Section 23 written notice of any
dispute relating to such Notice of Termination to the party giving such Notice
within fifteen days after receipt thereof; provided, however, that if the
Executive's conduct or act alleged to provide grounds for termination by the
Company for Cause is curable, then such period shall be thirty days. After the
expiration of such period, the contents of the Notice of Termination shall
become final and not subject to dispute.
14. Further Obligations of the Executive.
(a) Competition. The Executive agrees that, in the event of
any Covered Termination where the Executive is entitled to Accrued Benefits and
the Termination Payment, the Executive shall not, for a period expiring one year
after the Termination Date, without the prior written approval of the Company's
Board of Directors, (i) solicit for employment an employee of the Company or its
subsidiaries or (ii) participate in the management of, be employed by or own any
business enterprise at a location within the United States that engages in
substantial competition with the Company or its subsidiaries, where such
enterprise's revenues from any competitive activities amount to 10% or more of
such enterprise's net revenues and sales for its most recently completed fiscal
year; provided, however, that nothing in this Section 14(a) shall prohibit the
Executive from owning stock or other securities of a competitor amounting to
less than five percent of the outstanding capital stock of such competitor.
(b) Confidentiality. During and following the Executive's
employment by the Company, the Executive shall hold in confidence and not
directly or indirectly disclose or use or copy or make lists of any confidential
information or proprietary data of the Company (including that of the Employer),
except to the extent authorized in writing by the Board of Directors of the
Company or required by any court or administrative agency, other than to an
employee of the Company or a person to whom disclosure is reasonably necessary
or appropriate in connection with the performance by the Executive of duties as
an executive of the Company. Confidential information shall not include any
information known generally to the public or any information of a type not
otherwise considered confidential by persons engaged in the same business or a
business similar to that of the Company. All records, files, documents and
materials, or copies thereof, relating to the business of the Company which the
Executive shall prepare, or use, or come into contact with, shall be and remain
the sole property of the Company and shall be promptly returned to the Company
upon termination of employment with the Company.
15. Expenses and Interest. If, after a Change in Control of
the Company, (a) a dispute arises with respect to the enforcement of the
Executive's rights under this Agreement or (b) any legal or arbitration
proceeding shall be brought to enforce or interpret any provision contained
herein or to recover damages for breach hereof, in either case so long as the
Executive
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is not acting in bad faith, then the Company shall reimburse the Executive for
any reasonable attorneys' fees and necessary costs and disbursements incurred as
a result of the dispute, legal or arbitration proceeding ("Expenses"), and
prejudgment interest on any money judgment or arbitration award obtained by the
Executive calculated at the rate of interest announced by U.S. Bank National
Association, Minneapolis, Minnesota, from time to time at its prime or base
lending rate from the date that payments to him or her should have been made
under this Agreement. Within ten days after the Executive's written request
therefor, the Company shall pay to the Executive, or such other person or entity
as the Executive may designate in writing to the Company, the Executive's
reasonable Expenses in advance of the final disposition or conclusion of any
such dispute, legal or arbitration proceeding.
16. Payment Obligations Absolute. The Company's obligation
during and after the Employment Period to pay the Executive the amounts and to
make the benefit and other arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Company may have against him or anyone else. Except as provided in Section
15, all amounts payable by the Company hereunder shall be paid without notice or
demand. Each and every payment made hereunder by the Company shall be final, and
the Company will not seek to recover all or any part of such payment from the
Executive, or from whomsoever may be entitled thereto, for any reason
whatsoever.
17. Successors.
(a) If the Company sells, assigns or transfers all or
substantially all of its business and assets to any Person or if the Company
merges into or consolidates or otherwise combines (where the Company does not
survive such combination) with any Person (any such event, a "Sale of
Business"), then the Company shall assign all of its right, title and interest
in this Agreement as of the date of such event to such Person, and the Company
shall cause such Person, by written agreement in form and substance reasonably
satisfactory to the Executive, to expressly assume and agree to perform from and
after the date of such assignment all of the terms, conditions and provisions
imposed by this Agreement upon the Company. Failure of the Company to obtain
such agreement prior to the effective date of such Sale of Business shall be a
breach of this Agreement constituting "Good Reason" hereunder, except that for
purposes of implementing the foregoing the date upon which such Sale of Business
becomes effective shall be deemed the Termination Date. In case of such
assignment by the Company and of assumption and agreement by such Person, as
used in this Agreement, "Company" shall thereafter mean such Person which
executes and delivers the agreement provided for in this Section 17 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law, and this Agreement shall inure to the benefit of, and be
enforceable by, such Person. The Executive shall, in his or her discretion, be
entitled to proceed against any or all of such Persons, any Person which
theretofore was such a successor to the Company and the Company (as so defined)
in any action to enforce any rights of the Executive hereunder. Except as
provided in this Section 17(a), this Agreement shall not be assignable by the
Company. This Agreement shall not be terminated by the voluntary or involuntary
dissolution of the Company.
(b) This Agreement and all rights of the Executive shall inure
to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All amounts
payable to the Executive under Sections 3, 7, 8, 9, 10, 11,
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12 and 15 if the Executive had lived shall be paid, in the event of the
Executive's death, to the Executive's estate, heirs and representatives;
provided, however, that the foregoing shall not be construed to modify any terms
of any benefit plan of the Employer, as such terms are in effect on the date of
the Change in Control of the Company, that expressly govern benefits under such
plan in the event of the Executive's death.
18. Severability. The provisions of this Agreement shall be
regarded as divisible, and if any of said provisions or any part hereof are
declared invalid or unenforceable by a court of competent jurisdiction, the
validity and enforceability of the remainder of such provisions or parts hereof
and the applicability thereof shall not be affected thereby.
19. Contents of Agreement; Waiver of Rights; Amendment. This
Agreement sets forth the entire understanding between the parties hereto with
respect to the subject matter hereof and shall supersede in all respects, and
the Executive hereby waives all rights under, any prior or other agreement or
understanding between the parties with respect to such subject matter,
including, but not limited to the Management Assurance Agreement between the
Company and the Executive. This Agreement may not be amended or modified at any
time except by written instrument executed by the Company and the Executive.
20. Withholding. The Company shall be entitled to withhold
from amounts to be paid to the Executive hereunder any federal, state or local
withholding or other taxes or charges which it is from time to time required to
withhold; provided, that the amount so withheld shall not exceed the minimum
amount required to be withheld by law. The Company shall be entitled to rely on
an opinion of the National Tax Counsel if any question as to the amount or
requirement of any such withholding shall arise.
21. Certain Rules of Construction. No party shall be
considered as being responsible for the drafting of this Agreement for the
purpose of applying any rule construing ambiguities against the drafter or
otherwise. No draft of this Agreement shall be taken into account in construing
this Agreement. Any provision of this Agreement which requires an agreement in
writing shall be deemed to require that the writing in question be signed by the
Executive and an authorized representative of the Company.
22. Governing Law; Resolution of Disputes. This Agreement and
the rights and obligations hereunder shall be governed by and construed in
accordance with the laws of the State of Minnesota. Any dispute arising out of
this Agreement shall, at the Executive's election, be determined by arbitration
under the rules of the American Arbitration Association then in effect (in which
case both parties shall be bound by the arbitration award) or by litigation.
Whether the dispute is to be settled by arbitration or litigation, the venue for
the arbitration or litigation shall be Minneapolis, Minnesota or, at the
Executive's election, if the Executive is not then residing or working in the
Minneapolis, Minnesota metropolitan area, in the judicial district encompassing
the city in which the Executive resides; provided, that, if the Executive is not
then residing in the United States, the election of the Executive with respect
to such venue shall be either Minneapolis, Minnesota or in the judicial district
encompassing that city in the United States among the thirty cities having the
largest population (as determined by the most recent United States Census data
available at the Termination Date) which is closest to the Executive's
residence. The parties consent to personal jurisdiction in each trial court in
the selected venue having subject matter
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jurisdiction notwithstanding their residence or situs, and each party
irrevocably consents to service of process in the manner provided hereunder for
the giving of notices.
23. Notice. Notices given pursuant to this Agreement shall be
in writing and, except as otherwise provided by Section 13(d), shall be deemed
given when actually received by the Executive or actually received by the
Company's Secretary or any officer of the Company other than the Executive. If
mailed, such notices shall be mailed by United States registered or certified
mail, return receipt requested, addressee only, postage prepaid, if to the
Company, to Pentair, Inc., Attention: Secretary (or President, if the Executive
is then Secretary), 00 Xxxxx 0xx Xxxxxx, Thirty Xxxxx Xxxxx, Xxxxxxxxxxx,
Xxxxxxxxx 00000, or if to the Executive, at the address set forth below the
Executive's signature to this Agreement, or to such other address as the party
to be notified shall have theretofore given to the other party in writing.
24. No Waiver. No waiver by either party at any time of any
breach by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by the other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
25. Headings. The headings herein contained are for reference
only and shall not affect the meaning or interpretation of any provision of this
Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
PENTAIR, INC.
By:
-------------------------------------
Its:
---------------------------------
Attest:
---------------------------------
Its:
--------------------------------
EXECUTIVE:
(SEAL)
---------------------------------
Address:
--------------------------------
--------------------------------
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