10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 26, 2009

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-04689

Pentair, Inc.

(Exact name of Registrant as specified in its charter)

Minnesota	41-0907434
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification number)
5500 Wayzata Blvd, Suite 800, Golden Valley, Minnesota	55416
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (763) 545-1730

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§223.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

On September 26, 2009, 98,340,837 shares of Registrant’s common stock were outstanding.

Pentair, Inc. and Subsidiaries

		Page(s)
PART I FINANCIAL INFORMATION
ITEM 1.	Financial Statements (unaudited)
	Condensed Consolidated Statements of Income for the three and nine months ended September 26, 2009 and September 27, 2008		3
	Condensed Consolidated Balance Sheets as of September 26, 2009, December 31, 2008 and September 27, 2008		4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 26, 2009 and September 27, 2008		5
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 26, 2009 and September 27, 2008		6
	Notes to Condensed Consolidated Financial Statements		7 - 14
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15 - 25
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk		25
ITEM 4.	Controls and Procedures		25
	Report of Independent Registered Public Accounting Firm		26
PART II OTHER INFORMATION
ITEM 1.	Legal Proceedings		27
ITEM 1A.	Risk Factors		27
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		28
ITEM 6.	Exhibits		29
	Signature		30

2

PART I FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)

	Three months ended						Nine months ended
	September 26			September 27			September 26			September 27
In thousands, except per-share data	2009			2008			2009			2008
Net sales	$	662,665		$	855,815		$	1,990,217		$	2,584,339
Cost of goods sold		455,698			599,862			1,417,539			1,799,282
Gross profit		206,967			255,953			572,678			785,057
Selling, general and administrative		125,578			154,118			361,957			437,831
Research and development		14,707			16,221			43,265			47,303
Legal settlement		—			—			—			20,435
Operating income		66,682			85,614			167,456			279,488
Other (income) expense:
Gain on sale of interest in subsidiaries		—			—			—			(109,648	)
Equity losses of unconsolidated subsidiary		135			669			691			2,433
Loss on early extinguishment of debt		—			4,611			4,804			4,611
Net interest expense		9,711			13,740			31,328			45,691
Income from continuing operations before income taxes and noncontrolling interest		56,836			66,594			130,633			336,401
Provision for income taxes		18,159			21,592			41,808			99,099
Income from continuing operations		38,677			45,002			88,825			237,302
Loss from discontinued operations, net of tax		—			(1,514	)		—			(3,652	)
Loss on disposal of discontinued operations, net of tax		(85	)		(268	)		(153	)		(7,405	)
Net income before noncontrolling interest		38,592			43,220			88,672			226,245
Noncontrolling interest		1,644			2,100			2,531			2,100
Net income attributable to Pentair, Inc.	$	36,948		$	41,120		$	86,141		$	224,145
Net income from continuing operations attributable to Pentair, Inc.	$	37,033		$	42,902		$	86,294		$	235,202
Earnings (loss) per common share attributable to Pentair, Inc.
Basic
Continuing operations	$	0.38		$	0.44		$	0.89		$	2.40
Discontinued operations		—			(0.02	)		—			(0.11	)
Basic earnings per common share	$	0.38		$	0.42		$	0.89		$	2.29
Diluted
Continuing operations	$	0.38		$	0.43		$	0.88		$	2.37
Discontinued operations		—			(0.02	)		—			(0.11	)
Diluted earnings per common share	$	0.38		$	0.41		$	0.88		$	2.26
Weighted average common shares outstanding
Basic		97,496			97,827			97,495			98,049
Diluted		98,641			99,319			98,329			99,372
Cash dividends declared per common share	$	0.18		$	0.17		$	0.54		$	0.51

See accompanying notes to condensed consolidated financial statements.

3

Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)

	September 26		December 31			September 27
In thousands, except share and per-share data	2009		2008			2008
Assets
Current assets
Cash and cash equivalents	$	50,214	$	39,344		$	93,544
Accounts and notes receivable, net		423,125		461,081			511,779
Inventories		366,416		417,287			417,525
Deferred tax assets		52,997		51,354			50,061
Prepaid expenses and other current assets		48,446		63,113			53,383
Current assets of discontinued operations		—		—			18,443
Total current assets		941,198		1,032,179			1,144,735
Property, plant and equipment, net		339,412		343,881			359,543
Other assets
Goodwill		2,127,082		2,101,851			2,128,430
Intangibles, net		506,837		515,508			534,898
Other		67,723		59,794			69,873
Non-current assets of discontinued operations		—		—			13,646
Total other assets		2,701,642		2,677,153			2,746,847
Total assets	$	3,982,252	$	4,053,213		$	4,251,125
Liabilities and Shareholders’ Equity
Current liabilities
Short-term borrowings	$	16	$	—		$	—
Current maturities of long-term debt		98		624			3,913
Accounts payable		199,002		217,898			224,646
Employee compensation and benefits		78,225		90,210			106,939
Current pension and post-retirement benefits		8,890		8,890			8,557
Accrued product claims and warranties		33,179		41,559			42,618
Income taxes		24,302		5,451			9,454
Accrued rebates and sales incentives		27,989		28,897			35,748
Other current liabilities		95,367		104,975			100,890
Current liabilities of discontinued operations		—		—			252
Total current liabilities		467,068		498,504			533,017
Other liabilities
Long-term debt		814,857		953,468			1,035,150
Pension and other retirement compensation		264,472		270,139			164,776
Post-retirement medical and other benefits		32,019		34,723			34,218
Long-term income taxes payable		27,792		28,139			25,356
Deferred tax liabilities		153,984		146,559			183,780
Other non-current liabilities		102,924		101,612			96,941
Non-current liabilities of discontinued operations		—		—			1,665
Total liabilities		1,863,116		2,033,144			2,074,903
Commitments and contingencies
Shareholders’ equity
Common shares par value $0.16 2/3; 98,340,837, 98,276,919 and 98,626,687 shares issued and outstanding, respectively		16,389		16,379			16,438
Additional paid-in capital		462,069		451,241			456,144
Retained earnings		1,490,655		1,457,676			1,469,830
Accumulated other comprehensive income (loss)		31,700		(26,615	)		113,581
Noncontrolling interest		118,323		121,388			120,229
Total shareholders’ equity		2,119,136		2,020,069			2,176,222
Total liabilities and shareholders’ equity	$	3,982,252	$	4,053,213		$	4,251,125

See accompanying notes to condensed consolidated financial statements.

4

Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)

	Nine months ended
	September 26			September 27
In thousands	2009			2008
Operating activities
Net income before noncontrolling interest	$	88,672		$	226,245
Adjustments to reconcile net income to net cash provided by (used for) operating activities
Loss from discontinued operations		—			3,652
Loss on disposal of discontinued operations		153			7,405
Equity losses of unconsolidated subsidiary		691			2,433
Depreciation		44,186			44,929
Amortization		22,054			20,220
Deferred income taxes		170			25,905
Stock compensation		13,092			15,948
Excess tax benefits from stock-based compensation		(754	)		(1,617	)
(Gain) loss on sale of assets		(177	)		87
Gain on sale of interest in subsidiaries		—			(109,648	)
Changes in assets and liabilities, net of effects of business acquisitions and dispositions
Accounts and notes receivable		46,718			(55,449	)
Inventories		56,459			(27,109	)
Prepaid expenses and other current assets		16,061			(15,785	)
Accounts payable		(18,659	)		2,230
Employee compensation and benefits		(17,883	)		(7,303	)
Accrued product claims and warranties		(8,565	)		(6,572	)
Income taxes		19,166			(6,224	)
Other current liabilities		(9,699	)		9,040
Pension and post-retirement benefits		(12,251	)		592
Other assets and liabilities		747			13,143
Net cash provided by (used for) continuing operations		240,181			142,122
Net cash provided by (used for) operating activities of discontinued operations		(1,531	)		(5,243	)
Net cash provided by (used for) operating activities		238,650			136,879
Investing activities
Capital expenditures		(39,306	)		(39,769	)
Proceeds from sale of property and equipment		817			4,304
Acquisitions, net of cash acquired		—			(1,609	)
Divestitures		1,506			29,526
Other		(3,272	)		(7	)
Net cash provided by (used for) investing activities		(40,255	)		(7,555	)
Financing activities
Net short-term borrowings (repayments)		(16	)		(14,180	)
Proceeds from long-term debt		490,000			479,405
Repayment of long-term debt		(628,776	)		(486,492	)
Debt issuance costs		(50	)		(114	)
Excess tax benefits from stock-based compensation		754			1,617
Proceeds from exercise of stock options		1,729			5,140
Repurchases of common stock		—			(37,342	)
Dividends paid		(53,162	)		(50,541	)
Net cash provided by (used for) financing activities		(189,521	)		(102,507	)
Effect of exchange rate changes on cash and cash equivalents		1,996			(4,068	)
Change in cash and cash equivalents		10,870			22,749
Cash and cash equivalents, beginning of period		39,344			70,795
Cash and cash equivalents, end of period	$	50,214		$	93,544

See accompanying notes to condensed consolidated financial statements.

5

Pentair Inc.
Condensed Consolidated Statements of Changes in Shareholders’ Equity

													Accumulated
							Additional						other												Comprehensive
In thousands, except share	Common shares						paid-in			Retained			comprehensive			Total			Noncontrolling						income attributable
and per-share data	Number			Amount			capital			earnings			income (loss)			Pentair, Inc.			interest			Total			to Pentair, Inc.
Balance — December 31, 2008		98,276,919		$	16,379		$	451,241		$	1,457,676		$	(26,615	)	$	1,898,681		$	121,388		$	2,020,069
Net income											86,141						86,141			2,531			88,672		$	86,141
Change in cumulative translation adjustment														55,883			55,883			(5,596	)		50,287			55,883
Changes in market value of derivative financial instruments														2,432			2,432						2,432			2,432
Comprehensive income																									$	144,456
Cash dividends — $0.54 per common share											(53,162	)					(53,162	)					(53,162	)
Exercise of stock options, net of 104,554 shares tendered for payment		110,612			18			1,295									1,313						1,313
Issuance of restricted shares, net of cancellations		28,987			4			509									513						513
Amortization of restricted shares								5,385									5,385						5,385
Shares surrendered by employees to pay taxes		(75,681	)		(12	)		(1,751	)								(1,763	)					(1,763	)
Stock compensation								5,390									5,390						5,390
Balance — September 26, 2009		98,340,837		$	16,389		$	462,069		$	1,490,655		$	31,700		$	2,000,813		$	118,323		$	2,119,136
													Accumulated
							Additional						other												Comprehensive
In thousands, except share	Common shares						paid-in			Retained			comprehensive			Total			Noncontrolling						income attributable
and per-share data	Number			Amount			capital			earnings			income (loss)			Pentair, Inc.			interest			Total			to Pentair, Inc.
Balance — December 31, 2007		99,221,831		$	16,537		$	476,242		$	1,296,226		$	121,866		$	1,910,871		$	—		$	1,910,871
Net income											224,145						224,145			2,100			226,245		$	224,145
Change in cumulative translation adjustment														(8,708	)		(8,708	)		(4,831	)		(13,539	)		(8,708	)
Changes in market value of derivative financial instruments														423			423						423			423
Comprehensive income																									$	215,860
Cash dividends — $0.51 per common share											(50,541	)					(50,541	)					(50,541	)
Share repurchases		(1,094,059	)		(182	)		(37,910	)								(38,092	)					(38,092	)
Exercise of stock options, net of 109,451 shares tendered for payment		298,375			50			4,502									4,552						4,552
Issuance of restricted shares, net of cancellations		276,661			46			391									437						437
Amortization of restricted shares								6,892									6,892						6,892
Shares surrendered by employees to pay taxes		(76,121	)		(13	)		(2,553	)								(2,566	)					(2,566	)
Stock compensation								8,580									8,580						8,580
PRF acquisition																				122,960			122,960
Balance — September 27, 2008		98,626,687		$	16,438		$	456,144		$	1,469,830		$	113,581		$	2,055,993		$	120,229		$	2,176,222

6

Pentair, Inc. and Subsidiaries
Notes to consolidated financial statements (unaudited)

1. Basis of Presentation and Responsibility for Interim Financial Statements

We prepared the unaudited condensed consolidated financial statements following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States can be condensed or omitted.

We are responsible for the unaudited financial statements included in this document. The financial statements include all normal recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. As these are condensed financial statements, one should also read our consolidated financial statements and notes thereto, which are included in our 2008 Annual Report on Form 10-K for the year ended December 31, 2008.

Revenues, expenses, cash flows, assets and liabilities can and do vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be indicative of those for a full year.

Our fiscal year ends on December 31. We report our interim quarterly periods on a 13-week basis ending on a Saturday.

In connection with preparing the unaudited condensed consolidated financial statements for the nine months ended September 26, 2009, we have evaluated subsequent events for potential recognition and disclosure through October 20, 2009.

2. New Accounting Standards

On January 1, 2009 we adopted new accounting guidance that changes the accounting and reporting for minority interests. Minority interests have been recharacterized as noncontrolling interests and are reported as a component of equity separate from the parent’s equity. Purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. We have classified noncontrolling interest (previously minority interest) as a component of equity for all periods presented.

No other new accounting pronouncements issued or effective during the first nine months of 2009 has had or is expected to have a material impact on the Consolidated Financial Statements.

3. Stock-based Compensation

Total stock-based compensation expense was $4.0 million and $4.1 million for the three months ended September 26, 2009 and September 27, 2008, respectively, and was $13.1 million and $16.0 million for the nine months ended September 26, 2009 and September 27, 2008, respectively.

During the first nine months of 2009, restricted shares and restricted stock units of our common stock were granted under the 2008 Omnibus Stock Incentive Plan to eligible employees with a vesting period of two to five years after issuance. Restricted share awards and restricted stock units are valued at market value on the date of grant and are typically expensed over the vesting period. Total compensation expense for restricted share awards was $2.4 million and $2.0 million for the three months ended September 26, 2009 and September 27, 2008, respectively, and was $7.7 million and $7.5 million for the nine months ended September 26, 2009 and September 27, 2008, respectively.

During the first nine months of 2009, option awards were granted under the 2008 Omnibus Stock Incentive Plan with an exercise price equal to the market price of our common stock on the effective date of grant and are typically expensed over the vesting period. Total compensation expense for stock option awards was $1.6 million and $2.1 million for the three months ended September 26, 2009 and September 27, 2008, respectively, and was $5.4 million and $8.5 million for the nine months ended September 26, 2009 and September 27, 2008, respectively.

We estimated the fair value of each stock option award on the date of grant using a Black-Scholes option pricing model, modified for dividends and using the following assumptions:

	September 26			September 27
	2009			2008
Expected stock price volatility		32.5	%		27.0	%
Expected life	5.2 yrs			4.8 yrs
Risk-free interest rate		2.47	%		3.11	%
Dividend yield		2.60	%		1.90	%

7

Pentair, Inc. and Subsidiaries
Notes to consolidated financial statements (unaudited)

There were no options granted during the third quarter of 2009. The weighted-average fair value of options granted during the third quarter of 2008 was $8.35 per share.

These estimates require us to make assumptions based on historical results, observance of trends in our stock price, changes in option exercise behavior, future expectations and other relevant factors. If other assumptions had been used, stock-based compensation expense, as calculated and recorded under the accounting guidance could have been affected.

We based the expected life assumption on historical experience as well as the terms and vesting periods of the options granted. For purposes of determining expected volatility, we considered a rolling average of historical volatility measured over a period approximately equal to the expected option term. The risk-free rate for periods that coincide with the expected life of the options is based on the U.S. Treasury Department yield curve in effect at the time of grant.

4. Earnings Per Common Share

Basic and diluted earnings per share were calculated using the following:

	Three months ended				Nine months ended
	September 26		September 27		September 26		September 27
In thousands	2009		2008		2009		2008
Weighted average common shares outstanding — basic		97,496		97,827		97,495		98,049
Dilutive impact of stock options and restricted stock		1,145		1,492		834		1,323
Weighted average common shares outstanding — diluted		98,641		99,319		98,329		99,372
Stock options excluded from the calculation of diluted earnings per share because the exercise price was greater than the average market price of the common shares		6,424		3,503		6,188		4,594

5. Restructuring

During 2008 and the first nine months of 2009, we announced and initiated certain business restructuring initiatives aimed at reducing our fixed cost structure and rationalizing our manufacturing footprint. These initiatives included the reduction in hourly and salaried headcount of approximately 2,400 employees, of which 1,700 were in the Water Group and 700 were in the Technical Products Group. We expect these restructuring actions to generally be completed by the end of 2009.

Restructuring related costs included in Selling, general and administrative expenses on the Condensed Consolidated Statements of Income include costs for severance and related benefits, asset impairment charges, and other restructuring costs as follows:

	Three months ended				Nine months ended
	September 26		September 27		September 26		September 27
In thousands	2009		2008		2009		2008
Severance and related benefits	$	4,595	$	10,607	$	10,363	$	13,193
Asset impairment		2,700		4,600		2,700		4,600
Total restructuring costs	$	7,295	$	15,207	$	13,063	$	17,793

Restructuring accrual activity recorded on the Condensed Consolidated Balance Sheets is summarized as follows for the nine months ended September 26, 2009 and September 27, 2008:

	September 26			September 27
In thousands	2009			2008
Beginning balance	$	34,174		$	—
Costs incurred		10,363			13,193
Cash payments and other		(27,808	)		(4,061	)
Ending balance	$	16,729		$	9,132

8

Pentair, Inc. and Subsidiaries
Notes to consolidated financial statements (unaudited)

6. Acquisitions

On June 28, 2008, we entered into a transaction with GE Water & Process Technologies (a unit of General Electric Company) (“GE”) that was accounted for as an acquisition of an 80.1 percent ownership interest in GE’s global water softener and residential water filtration business in exchange for a 19.9 percent interest in our global water softener and residential water filtration business. The acquisition was effected through the formation of two new entities (collectively, “Pentair Residential Filtration” or “PRF”), a U.S. entity and an international entity, into which we and GE contributed certain assets, properties, liabilities and operations representing our respective global water softener and residential water filtration businesses. We are an 80.1 percent owner of PRF and GE is a 19.9 percent owner.

The following pro forma condensed financial results of operations are presented as if the acquisitions described above had been completed at the beginning of the first quarter of 2008.

	Nine months ended
	September 27
In thousands, except share and per-share data	2008
Pro forma net sales from continuing operations	$	2,638,812
Pro forma net income from continuing operations		235,202
Income (loss) from discontinued operations, net of tax		(11,057	)
Pro forma net income		224,145
Pro forma earnings per common share — continuing operations
Basic	$	2.40
Diluted	$	2.37
Weighted average common shares outstanding
Basic		98,049
Diluted		99,372

These pro forma condensed consolidated financial results have been prepared for comparative purposes only and include certain adjustments, such as increased interest expense on acquisition debt. They do not reflect the effect of costs or synergies that would have been expected to result from the integration of these acquisitions. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combination occurred at the beginning of each period presented, or of future results of the consolidated entities.

7. Discontinued Operations

On December 15, 2008, we sold our Spa and Bath (“Spa/Bath”) business to Balboa Water Group in a cash transaction for $8.3 million including certain price adjustments based on working capital at closing. In the second and third quarters of 2009 we reported purchase price and tax adjustments relating to the disposal of Spa/Bath. The results of Spa/Bath have been reported as discontinued operations for all periods presented. The assets and liabilities of Spa/Bath have been reclassified as discontinued operations for all periods presented. Goodwill of $5.6 million was included in the assets of Spa/Bath.

On February 28, 2008, we sold our National Pool Tile (“NPT”) business to Pool Corporation in a cash transaction for approximately $30.0 million subject to certain price adjustments. The results of NPT have been reported as discontinued operations for all periods presented.

The assets and liabilities of NPT have been reclassified as discontinued operations for all periods presented. Goodwill of $16.8 million was included in the assets of NPT.

In 2004, we completed the sale of our former Tools Group to The Black & Decker Corporation. In the second quarter of 2009, we reported an additional loss from discontinued operations of $0.6 million related to a prior year tax item for the Tools Group.

Operating results of the discontinued operations for the three and nine months ended September 26, 2009 and September 27, 2008, respectively, are summarized below:

	Three months ended						Nine months ended
	September 26			September 27			September 26			September 27
In thousands	2009			2008			2009			2008
Net sales	$	—		$	8,352		$	—		$	37,075
Loss from discontinued operations before income taxes		—			(1,960	)		—			(5,977	)
Income tax benefit on operations		—			446			—			2,325
Loss from discontinued operations, net of income taxes		—			(1,514	)		—			(3,652	)
Gain (loss) on disposal of discontinued operations, before taxes		(894	)		(433	)		35			(7,021	)
Income tax (expense) benefit on gain		809			165			(188	)		(384	)
Loss on disposal of discontinued operations, net of tax	$	(85	)	$	(268	)	$	(153	)	$	(7,405	)

9

Pentair, Inc. and Subsidiaries
Notes to consolidated financial statements (unaudited)

Net assets and liabilities of discontinued operations consist of the following:

	September 27
In thousands	2008
Accounts and notes receivable, net	$	5,461
Inventories		12,861
Other current assets		121
Current assets of discontinued operations		18,443
Property, plant and equipment, net		3,810
Goodwill		5,601
Other non-current assets		4,235
Non-current assets of discontinued operations		13,646
Total assets	$	32,089
Accounts payable	$	1,282
Other current liabilities		(1,030	)
Current liabilities of discontinued operations		252
Deferred income tax		735
Other non-current liabilities		930
Non-current liabilities of discontinued operations		1,665
Total liabilities		1,917
Net assets of discontinued operations	$	30,172

8. Inventories

Inventories were comprised of:

	September 26		December 31		September 27
In thousands	2009		2008		2008
Raw materials and supplies	$	188,741	$	212,792	$	212,508
Work-in-process		42,380		53,241		50,434
Finished goods		135,295		151,254		154,583
Total inventories	$	366,416	$	417,287	$	417,525

9. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the nine months ended September 26, 2009 and September 27, 2008 by segment were as follows:

						Foreign Currency
In thousands	December 31, 2008		Acquisitions/Other			Translation			September 26, 2009
Water Group	$	1,818,470		$890		$	19,437		$	1,838,797
Technical Products Group		283,381		—			4,904			288,285
Consolidated Total	$	2,101,851		$890		$	24,341		$	2,127,082
						Foreign Currency
In thousands	December 31, 2007		Acquisitions/Other			Translation			September 27, 2008
Water Group	$	1,706,626	$	132,485		$	1,270		$	1,840,381
Technical Products Group		292,493		(46	)		(4,398	)		288,049
Consolidated Total	$	1,999,119	$	132,439		$	(3,128	)	$	2,128,430

In 2008, goodwill allocated to divested businesses was $22.4 million.

10

Pentair, Inc. and Subsidiaries
Notes to consolidated financial statements (unaudited)

Intangible assets, other than goodwill, were comprised of:

	September 26, 2009							December 31, 2008							September 27, 2008
	Gross							Gross							Gross
	carrying		Accumulated					carrying		Accumulated					carrying		Accumulated
In thousands	amount		amortization			Net		amount		amortization			Net		amount		amortization			Net
Finite-life intangibles
Patents	$	15,457	$	(11,205	)	$	4,252	$	15,427	$	(9,774	)	$	5,653	$	15,451	$	(9,319	)	$	6,132
Non-compete agreements		4,522		(4,522	)		—		4,722		(4,566	)		156		4,722		(4,454	)		268
Proprietary technology		73,325		(22,382	)		50,943		72,375		(17,652	)		54,723		73,462		(16,371	)		57,091
Customer relationships		289,490		(61,749	)		227,741		283,015		(46,841	)		236,174		289,872		(42,973	)		246,899
Brand names		1,574		(197	)		1,377		961		(77	)		884		1,602		(40	)		1,562
Total finite-life intangibles	$	384,368	$	(100,055	)	$	284,313	$	376,500	$	(78,910	)	$	297,590	$	385,109	$	(73,157	)	$	311,952
Indefinite-life intangibles
Brand names		222,524		—			222,524		217,918		—			217,918		222,946		—			222,946
Total intangibles, net	$	606,892	$	(100,055	)	$	506,837	$	594,418	$	(78,910	)	$	515,508	$	608,055	$	(73,157	)	$	534,898

Intangible asset amortization expense was approximately $7.7 million and $5.9 million for the three months ended September 26, 2009 and September 27, 2008, respectively, and was approximately $21.1 million and $18.3 million for the nine months ended September 26, 2009 and September 27, 2008, respectively.

The estimated future amortization expense for identifiable intangible assets during the remainder of 2009 and the next five years is as follows:

In thousands	2009 Q4		2010		2011		2012		2013		2014
Estimated amortization expense	$	6,310	$	25,040	$	24,949	$	24,036	$	23,763	$	23,439

10. Debt

Debt and the average interest rates on debt outstanding are summarized as follows:

	Average
	interest rate			Maturity		September 26			December 31			September 27
In thousands	September 26, 2009			(Year)		2009			2008			2008
Commercial paper		0.73	%		—	$	1,999		$	249		$	25,392
Revolving credit facilities		0.88	%		2012		207,800			214,200			267,900
Private placement — fixed rate		5.65	%		2013-2017		400,000			400,000			400,000
Private placement — floating rate		1.02	%		2012-2013		205,000			205,000			205,000
Senior notes		7.85	%		2009		—			133,900			133,900
Other		4.24	%		2009-2016		172			275			6,246
Total contractual debt obligations							814,971			953,624			1,038,438
Deferred income related to swaps							—			468			625
Total debt, including current portion per balance sheet							814,971			954,092			1,039,063
Less: Current maturities							(98	)		(624	)		(3,913	)
Short-term borrowings							(16	)		—			—
Long-term debt						$	814,857		$	953,468		$	1,035,150

We have a multi-currency revolving Credit Facility (“Credit Facility”). The Credit Facility creates an unsecured, committed revolving credit facility of up to $800 million, with multi-currency sub facilities to support investments outside the U.S. The Credit Facility expires on June 4, 2012. Borrowings under the Credit Facility bear interest at the rate of LIBOR plus 0.625%. Interest rates and fees on the Credit Facility vary based on our credit ratings.

Total availability under our existing Credit Facility was $590.2 million as of September 26, 2009.

We are authorized to sell short-term commercial paper notes to the extent availability exists under the Credit Facility. We use the Credit Facility as back-up liquidity to support 100% of commercial paper outstanding. Our use of commercial paper as a funding vehicle depends upon the relative interest rates for our paper compared to the cost of borrowing under our Credit Facility. As of September 26, 2009, we had $2.0 million of commercial paper outstanding.

11

Pentair, Inc. and Subsidiaries
Notes to consolidated financial statements (unaudited)

The commercial paper and Notes (as defined below) were classified as long-term as we had the intent to refinance and have as a practice refinanced such obligations on a long-term basis under the Credit Facility.

In addition to the Credit Facility, we have $25.0 million of uncommitted credit facilities, under which we had no borrowings as of September 26, 2009.

Our debt agreements contain certain financial covenants, the most restrictive of which is a leverage ratio (total consolidated indebtedness, as defined, over consolidated EBITDA, as defined) that may not exceed 3.5 to 1.0. We were in compliance with all covenants in our debt agreements as of September 26, 2009.

On July 8, 2008, we commenced a cash tender offer for all of our outstanding $250 million aggregate principal 7.85% Senior Notes due 2009 (the “Notes”). Upon expiration of the tender offer on August 4, 2008, we purchased $116.1 million aggregate principal amount of the Notes. As a result of this transaction, we recognized a loss of $4.6 million on early extinguishment of debt in the third quarter of 2008. The loss included the write off of $0.1 million in unamortized deferred financing fees in addition to recognition of $0.6 million in previously unrecognized swap gains, and cash paid of $5.1 million related to the tender premium and other costs associated with the purchase.

On March 16, 2009, we announced the redemption of all of our remaining outstanding $133.9 million aggregate principal of Notes. The Notes were redeemed on April 15, 2009 at a redemption price of $1,035.88 per $1,000 of principal outstanding plus accrued interest thereon. As a result of this transaction, we recognized a loss of $4.8 million on early extinguishment of debt in the second quarter of 2009. The loss included the write off of $0.1 million in unamortized deferred financing fees in addition to recognition of $0.3 million in previously unrecognized swap gains, and cash paid of $5.0 million related to the redemption and other costs associated with the purchase.

Debt outstanding at September 26, 2009 matures on a calendar year basis as follows:

In thousands	2009 Q4	2010	2011	2012	2013	2014	Thereafter	Total
Contractual debt obligation maturities	$42	$88	$6	$314,805	$200,007	$8	$300,015	$814,971

11. Derivatives and Financial Instruments

Fair Value of Financial Instruments

On January 1, 2008, we adopted new accounting guidance on fair value measurements. The new guidance defines fair value, established a framework for measuring fair value under U.S. generally accepted accounting principles, and expands disclosures about fair value measurements. The new guidance was effective for us beginning January 1, 2008 for certain financial assets and liabilities. The new guidance is effective for non-financial assets and liabilities recognized or disclosed at fair value on a nonrecurring basis beginning January 1, 2009.

The accounting guidance establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based upon our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.

Cash-flow Hedges

In August 2007, we entered into a $105 million interest rate swap agreement with a major financial institution to exchange variable rate interest payment obligations for a fixed rate obligation without the exchange of the underlying principal amounts in order to manage interest rate exposures on our private placement debt. The effective date of the swap was August 30, 2007. The swap agreement has a fixed interest rate of 4.89% and expires in May 2012. The fixed interest rate of 4.89% plus the 0.50% interest rate spread over LIBOR results in an effective fixed interest rate of 5.39%. The fair value of the swap was a liability of $9.0 million, $10.7 million and $4.0 million at September 26, 2009, December 31, 2008 and September 27, 2008, respectively, and was recorded in Other non-current liabilities.

In September 2005, we entered into a $100 million interest rate swap agreement with several major financial institutions to exchange variable rate interest payment obligations for fixed rate obligations without the exchange of the underlying principal amounts in order to manage interest rate exposures on our private placement debt. The effective date of the fixed rate swap was April 25, 2006. The swap agreement has a fixed interest rate of 4.68% and expires in July 2013. The fixed interest rate of 4.68% plus the 0.60% interest rate spread over LIBOR results in an effective fixed interest rate of 5.28%. The fair value of the swap was a liability of $9.3 million, $11.6 million and $3.1 million at September 26, 2009, December 31, 2008 and September 27, 2008, respectively, and was recorded in Other non-current liabilities.

The variable to fixed interest rate swaps are designated as and are effective as cash-flow hedges. The fair value of these swaps are recorded as assets or liabilities on the Consolidated Balance Sheets, with changes in their fair value included in Accumulated other comprehensive

12

Pentair, Inc. and Subsidiaries
Notes to consolidated financial statements (unaudited)

income (“OCI”). Derivative gains and losses included in OCI are reclassified into earnings at the time the related interest expense is recognized or the settlement of the related commitment occurs.

Failure of one or more of our swap counterparties would result in the loss of any benefit to us of the swap agreement. In this case, we would continue to be obligated to pay the variable interest payments per the underlying debt agreements which are at variable interest rates of 3 month LIBOR plus 0.50% for $105 million of debt and 3 month LIBOR plus 0.60% for $100 million of debt. Additionally, failure of one or all of our swap counterparties would not eliminate our obligation to continue to make payments under our existing swap agreements if we continue to be in a net pay position.

At September 26, 2009, our interest rate swaps are carried at fair value measured on a recurring basis. Fair values are determined through the use of models that consider various assumptions, including time value, yield curves, as well as other relevant economic measures, which are inputs that are classified as Level 2 in the valuation hierarchy.

12. Income Taxes

The provision for income taxes consists of provisions for federal, state and foreign income taxes. We operate in an international environment with operations in various locations outside the U.S. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable rates.

The effective income tax rate for the nine months ended September 26, 2009 was 32.0% compared to 29.5% for the nine months ended September 27, 2008. We expect the effective tax rate for the remainder of 2009 to be between 32% and 33%, resulting in a full year effective income tax rate of between 32% and 33%. We continue to actively pursue initiatives to reduce our effective tax rate. The tax rate in any quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution.

The total gross liability for uncertain tax positions at September 26, 2009 is estimated to be approximately $29.1 million. We record penalties and interest related to unrecognized tax benefits in Provision for income taxes and Net interest expense, respectively, which is consistent with our past practices.

13. Benefit Plans

Components of net periodic benefit cost for the three months and nine months ended September 26, 2009 and September 27, 2008 were as follows:

	Three months ended
	Pension benefits						Post-retirement
	September 26			September 27			September 26			September 27
In thousands	2009			2008			2009			2008
Service cost	$	3,067		$	3,527		$	54		$	65
Interest cost		8,115			8,175			594			634
Expected return on plan assets		(7,563	)		(7,475	)		—			—
Amortization of transition obligation		14			12			—			—
Amortization of prior year service cost (benefit)		6			45			(10	)		(34	)
Recognized net actuarial loss (gains)		18			68			(832	)		(825	)
Net periodic benefit cost	$	3,657		$	4,352		$	(194	)	$	(160	)

	Nine months ended
	Pension benefits						Post-retirement
	September 26			September 27			September 26			September 27
In thousands	2009			2008			2009			2008
Service cost	$	9,200		$	10,585		$	161		$	195
Interest cost		24,346			24,523			1,783			1,902
Expected return on plan assets		(22,689	)		(22,425	)		—			—
Amortization of transition obligation		42			36			—			—
Amortization of prior year service cost (benefit)		17			133			(31	)		(102	)
Recognized net actuarial loss (gains)		53			204			(2,494	)		(2,475	)
Net periodic benefit cost	$	10,969		$	13,056		$	(581	)	$	(480	)

13

Pentair, Inc. and Subsidiaries
Notes to consolidated financial statements (unaudited)

14. Business Segments

Financial information by reportable segment for the three and nine months ended September 26, 2009 and September 27, 2008 is shown below:

	Three months ended						Nine months ended
	September 26			September 27			September 26			September 27
In thousands	2009			2008			2009			2008
Net sales to external customers
Water Group	$	461,570		$	557,976		$	1,372,492		$	1,696,780
Technical Products Group		201,095			297,839			617,725			887,559
Consolidated	$	662,665		$	855,815		$	1,990,217		$	2,584,339
Intersegment sales
Water Group	$	284		$	305		$	771		$	816
Technical Products Group		544			765			1,377			2,937
Other		(828	)		(1,070	)		(2,148	)		(3,753	)
Consolidated	$	—		$	—		$	—		$	—
Operating income (loss)
Water Group	$	53,085		$	49,684		$	129,842		$	174,194
Technical Products Group		24,356			47,585			68,396			142,654
Other		(10,759	)		(11,655	)		(30,782	)		(37,360	)
Consolidated	$	66,682		$	85,614		$	167,456		$	279,488

Other sales and operating loss is primarily composed of unallocated corporate expenses, costs related to our captive insurance subsidiary and our intermediate finance companies, and intercompany eliminations.

15. Warranty

The changes in the carrying amount of service and product warranties for the nine months ended September 26, 2009 and September 27, 2008 and the year December 31, 2008 were as follows:

	September 26			December 31			September 27
In thousands	2009			2008			2008
Balance at beginning of the year	$	31,559		$	39,077		$	39,077
Service and product warranty provision		43,625			62,655			47,516
Payments		(52,190	)		(70,373	)		(54,088	)
Acquired		—			599			184
Translation		185			(399	)		(71	)
Balance at end of the period	$	23,179		$	31,559		$	32,618

16. Commitments and Contingencies

Environmental and Litigation

Horizon Litigation

The Horizon litigation against our subsidiary Essef Corporation and certain of its subsidiaries by Celebrity Cruise Lines, Inc. (“Celebrity”) was settled by payment of $35 million to Celebrity in August 2008, a portion of which was covered by insurance. As a result of the settlement, we recorded a charge of $20.4 million in the second quarter of 2008 which is shown on the line Legal settlement in the Condensed Consolidated Statements of Income.

There have been no further material developments from the disclosures contained in our 2008 Annual Report on Form 10-K.

14

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains statements that we believe to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “project,” or “continue,” or similar words or the negative thereof. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results. They can be affected by assumptions we might make or by known or unknown risks or uncertainties. Consequently, we cannot guarantee any forward-looking statements. Investors are cautioned not to place undue reliance on any forward-looking statements. Investors should also understand that it is not possible to predict or identify all risk factors and should not consider the following list to be a complete statement of all potential risks and uncertainties.

The following factors and those discussed in ITEM 1A, Risk Factors, included in our 2008 Annual Report on Form 10-K, may impact the achievement of forward-looking statements:

• general economic and political conditions, such as credit market uncertainty, inflation or deflation, the rate of economic growth or decline in our principal geographic or product markets, fluctuations in exchange rates or political instability;

• changes in general economic and industry conditions in markets in which we participate, such as:

• continued deterioration in or stabilization of the global economy;

• continued deterioration in or stabilization of the North American and Western European housing markets;

• the strength of product demand and the markets we serve;

• the intensity of competition, including that from foreign competitors;

• pricing pressures;

• the financial condition of our customers;

• the introduction of new products and enhancements by competitors;

• our ability to maintain and expand relationships with large customers;

• our ability to source raw material commodities from our suppliers without interruption and at reasonable prices; and

• our ability to source components from third parties, in particular from foreign manufacturers, without interruption and at reasonable prices;

• changes in statutory or regulatory matters, including proposed changes in tax, environmental and health-care mandates;

• our ability to access capital markets and obtain anticipated financing under favorable terms;

• our ability to identify, complete and integrate acquisitions successfully and to realize expected synergies on our anticipated timetable;

• changes in our business strategies, including acquisition, divestiture and restructuring activities;

• any impairment of goodwill and indefinite-lived intangible assets as a result of deterioration in our markets;

• domestic and foreign governmental and regulatory policies;

• changes in operating factors, such as manufacturing activities and the achievement of related efficiencies, inventory risks due to shifts in market demand and costs associated with moving production to lower-cost locations;

• our ability to generate savings from our excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices;

• our ability to generate savings from our restructuring and other cost reduction actions;

• our ability to commercialize new product introductions and enhancements successfully;

• unanticipated developments that could occur with respect to contingencies such as litigation, intellectual property matters, product liability exposures and environmental matters; and

• our ability to accurately evaluate the effects of contingent liabilities such as tax, product liability, environmental and other claims.

The foregoing factors are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that would impact our business. We assume no obligation, and disclaim any duty, to update the forward-looking statements in this report.

Overview

We are a focused diversified industrial manufacturing company comprised of two operating segments: Water and Technical Products. Our Water Group is a global leader in providing innovative products and systems used worldwide in the movement, storage, treatment and enjoyment of water. Our Technical Products Group is a leader in the global enclosures and thermal management markets, designing and manufacturing standard, modified and custom enclosures that house and protect sensitive electronics and electrical components; thermal management products; and accessories. In 2009, we expect our Water Group and Technical Products Group to generate approximately 2/3 and 1/3 of total revenues, respectively.

15

Our Water Group has progressively become a more important part of our business portfolio with sales increasing from approximately $125 million in 1995 to approximately $2.2 billion in 2008. We believe the water industry is structurally attractive as a result of a growing demand for clean water and the large global market size (of which we have identified a target market totaling $60 billion). Our vision is to be a leading global provider of innovative products and systems used in the movement, storage, treatment and enjoyment of water.

On February 28, 2008, we sold our National Pool Tile (“NPT”) business to Pool Corporation in a cash transaction. The results of NPT have been reported as discontinued operations for all periods presented. The assets and liabilities of NPT have been reclassified as discontinued operations for all periods presented.

On June 28, 2008, we entered into a transaction with GE Water & Process Technologies (a unit of General Electric Company) (“GE”) that was accounted for as an acquisition of an 80.1 percent ownership interest in GE’s global water softener and residential water filtration business in exchange for a 19.9 percent interest in our global water softener and residential water filtration business. The acquisition was effected through the formation of two new entities (collectively, “Pentair Residential Filtration” or “PRF”), a U.S. entity and an international entity, into which we and GE contributed certain assets, properties, liabilities and operations representing our respective global water softener and residential water filtration businesses. We are an 80.1 percent owner of PRF and GE is a 19.9 percent owner.

With the formation of Pentair Residential Filtration, we believe we are better positioned to serve residential customers with industry-leading technical applications in the areas of water conditioning, whole house filtration, point of use water management and water sustainability and expect to improve our revenue growth by selling GE’s existing residential water treatment products through our sales channels.

On December 15, 2008, we sold our Spa and Bath (“Spa/Bath”) business to Balboa Water Group in a cash transaction. The results of Spa/Bath have been reported as discontinued operations for all periods presented. The assets and liabilities of Spa/Bath have been reclassified as discontinued operations for all periods presented.

Our Technical Products Group operates in a large global market with significant potential for growth in industry segments such as defense, security, medical and networking. We believe we have the largest industrial and commercial distribution network in North America for enclosures and the highest brand recognition in the industry in North America. From mid-2001 through 2003, the Technical Products Group experienced significantly lower sales volumes as a result of severely reduced capital spending in the industrial and commercial markets and over-capacity and weak demand in the data communication and telecommunication markets. From 2004 through 2008, sales volumes increased due to the addition of new distributors, new products, price increases and higher demand in targeted markets.

Key Trends and Uncertainties

The following trends and uncertainties affected the first nine months of our financial performance in 2009 and will likely impact our results in the future:

• Many markets we serve have slowed dramatically as a result of rapidly deteriorating economic conditions. We have identified specific product and geographic markets we serve that we believe will stagnate, contract or continue contracting in 2009, as noted below. We have restructured our operations serving those markets in order to reduce or relocate capacity, to reduce labor and material costs, to optimize our manufacturing footprint and to simplify our business structure until our capacity is aligned with our anticipated volume prospects in these markets. If these markets continue to stagnate or shrink further, we may undertake additional restructuring activities. We have also identified specific markets in which we participate that we believe will continue to grow over this period and are selectively reinforcing our businesses in these markets. Because our businesses are significantly affected by general economic trends, further deterioration in our most important markets addressed below would likely have an adverse impact on our results of operations for 2009 and beyond.

• New home building and new pool starts have contracted for each of the past three years in the United States and have slowed significantly in Europe as well. Overall, we believe approximately 55% of sales by our water businesses (flow, filtration and pool equipment), are used in residential applications — for new construction, remodeling and repair, replacement and refurbishment. We expect the current recession to continue to adversely impact our sales in our Water Group for the balance of 2009. We have seen some stabilization of order rates in the third quarter of 2009 and anticipate continuing stability, but not significant volume increases, for the balance of 2009. If sales of products into these domestic residential end-markets were to slow appreciably, we would again be in a position to need to reduce our investments in businesses in those markets, and further restructure our operations by closing or downsizing facilities, reducing headcount and taking other market-related actions.

• Industrial, communications and commercial markets for all of our businesses, including commercial and industrial construction, also slowed significantly over the past year. We are uncertain about the course of the economy and hence the strength of many of these markets both in the United States and around the world for the balance of 2009 and beyond. Order rates over the second and third quarters in most of our businesses participating in these markets continued to decrease significantly on a year-over-year basis. Sales in these markets marginally decreased sequentially from the second to the third quarter. We believe that our commercial and industrial markets in most of our businesses will continue to be weak in the fourth quarter, reflecting the uncertainty in these markets. We have reduced investments in businesses in these markets, and further restructured our operations by closing or downsizing facilities, reducing headcount and taking other market-related actions.

• We experienced material cost and other inflation in a number of our businesses during 2008. To offset this inflation, we implemented productivity improvements and selective increases in selling prices to help mitigate inflationary cost increases we experienced in base materials such as carbon steel, copper and resins and other costs such as health care and other employee benefit costs. We expect the current economic environment will result in continued price volatility for many of our raw materials. Material costs have declined over the past year; and we are unsure whether and to what extent commodity prices and employment costs will increase as the economy recovers and employment mandates come into effect. We believe that we were realizing these cost decreases in our results of operations in the second and third quarters of 2009. We believe that the impact of lower commodity prices will continue to positively impact our results into 2010, although these benefits will likely be reduced somewhat by increasing costs as the economy recovers.

16

• As a result of the dramatic fall in securities and other investment markets over 2008, our unfunded pension liabilities increased from fiscal year end 2007 to fiscal year end 2008 from $147 million to $257 million, or an increase of $110 million, primarily reflecting our reduced investment return and significantly lower asset values in our U.S. defined benefit plans through the end of 2008. This will increase our 2009 contributions to the plans to approximately $20-$25 million, an increase of over $10 million from 2008. These amounts differ from the expected contribution amounts described in our 2008 Form 10-K due to regulatory changes enacted during the first quarter of 2009 that had the effect of reducing our required contributions.

• We have a long-term goal to consistently generate free cash flow that equals or exceeds 100% conversion of our net income. We define free cash flow as cash flow from continuing operating activities less capital expenditures plus proceeds from sale of property and equipment. In the current economic climate, we have focused in particular upon maximizing free cash flow by reducing working capital in order to maximize our repayment of indebtedness and maintain our investment grade credit rating. Free cash flow for the first nine months of 2009 approximated $202 million, or conversion of 234% of net income, compared to $106 million, or 45% conversion, in the first nine months of 2008, and $164 million, or 72% conversion of our net income for full year 2008. Our target for free cash flow in 2009 continues to be greater than $225 million. See our discussion of Other financial measures under the caption “Liquidity and Capital Resources” in this report.

• We experience seasonal demand in a number of markets within our Water Group. End-user demand for pool equipment follows warm weather trends and is normally at seasonal highs from April to August. The magnitude of the sales spike is partially mitigated by employing some advance sale “early buy” programs (generally including extended payment terms and/or additional discounts). Demand for residential and agricultural water systems is also impacted by economic conditions and weather patterns, particularly by heavy flooding and droughts. While we believe that this seasonality will continue in future years, due to the unknown impact of the current economic situation, this seasonality spike in 2009 was smaller than in prior years. While we experienced a seasonal increase in sales in the pool equipment business in the second and third quarters of 2009, the increase has not matched that of prior pool seasons. In addition, our primary geographic markets did not have unusual weather, which further limited seasonal impact in our residential and agricultural water systems.

• We experienced year over year favorable foreign currency effects on net sales and operating results in the first nine months of 2008, due to the weakening of the U.S. dollar in relation to other foreign currencies, which reversed in the fourth quarter of 2008 and first nine months of 2009. Our currency effect is primarily for the U.S. dollar against the euro, which may or may not trend favorably in the future.

• On June 28, 2008, we formed Pentair Residential Filtration in order to expand our product lines, accelerate opportunities to provide our customers complete water filtration systems, increase revenue growth and exploit cost synergy opportunities. The one-time gain on the transaction increased diluted earnings per share, on an after tax basis, by 86 cents in the second quarter of 2008. Integration and inventory step-up costs arising out of the formation of the PRF business amounted to approximately $7 million in 2008. We anticipate substantially all facility closures and related integration expenses to be completed by the end of the fourth quarter of 2009.

• The effective income tax rate for the nine months ended September 26, 2009 was 32.0% compared to 29.5% for the nine months ended September 27, 2008. We expect the effective tax rate for the remainder of 2009 to be between 32% and 33%, resulting in a full year effective income tax rate of between 32% and 33%. We continue to actively pursue initiatives to reduce our effective tax rate. The tax rate in any quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution.

Outlook

In 2009, our operating objectives include the following:

• Completing the restructuring of operations we started in late 2008 and 2009, while investing in more favorable markets and geographies;

• Increasing our vertical market focus within each of our Global Business Units to grow in those markets in which we have competitive advantages;

• Driving operating excellence through lean enterprise initiatives, with special focus on sourcing and supply management, cash flow management, and lean operations;

• Stressing proactive talent development, particularly in international management and other key functional areas; and

• Completing integration of the PRF business and prior acquisitions, and realizing identified synergistic opportunities.

Our sales revenue for the third quarter of 2009 was approximately $663 million, a decrease of 22.6% compared to sales revenue in the third quarter of 2008, and below our earlier estimates. Sales revenue for the first nine months of 2009 dropped from approximately $2.58 billion in 2008 to $1.99 billion in 2009, or 23.0%. Water Group sales declines moderated from 22% in the first quarter of 2009 to 18% in the second quarter and 17% in the third quarter, compared to the same periods in 2008, reflecting some stabilization of order rates. Our Technical Products Group saw a bigger decline in sales from 26% in the first quarter of 2009 to 32% in each of the second quarter and third quarters, compared to the same periods in 2008.

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In December 2008, we initiated earnings guidance for the year 2009 that anticipated our earnings to be $1.70 to $2.00 per share on a diluted basis. On April 21, 2009, we revised our full year guidance for 2009 to equal or exceed $1.40 per share on a diluted basis, due to the significantly lower volume of sales and order activity we saw in the first quarter, as well as the continued uncertainty about the economic performance trajectory for the calendar year both in the United States and globally. On October 20, 2009, we updated our full year adjusted earnings per share guidance to $1.40 to $1.44, on a fully-diluted basis. As noted above, significant deterioration in general economic conditions in our primary markets and geographies beyond what we have seen in the first nine months would adversely impact our revenues and financial performance.

This outlook is based on several variables. First, our guidance anticipates revenue declines in our businesses throughout 2009 of approximately 20% compared to 2008 as a result of overall market conditions, bringing our total revenue to approximately $2.6-$2.7 billion for the full year. Second, we expect to benefit in the second half of 2009 from restructuring and other market-related expense reduction efforts taken during 2008 and early in 2009. Third, we anticipate that our manufacturing productivity initiatives, in particular our materials sourcing programs, will improve through our lean enterprise initiatives and commodity price deflation for the next few quarters.

We believe that sales for the fourth quarter of 2009 will range from approximately $655 to $670 million, compared to $768 million achieved in the fourth quarter of 2008, or a decrease of approximately 14%. This drop would be a sequential improvement over the reduction in revenues realized in the first three quarters, as we expect our comparisons with prior year results will improve due to the impact of the global recession on our businesses beginning in the fourth quarter of 2008. While we have seen some improvements in certain markets and regions in the second and third quarters, we believe the order rates in most of our markets have only begun to stabilize somewhat in September 2009. We do not expect any significant strengthening of our end markets generally until sometime in 2010.

We have heightened our focus on increasing the conversion of our net income into free cash flow from that achieved in 2008. In addition, we are taking actions we believe will help maintain our liquidity, increase our capital resources, and repay indebtedness at a faster rate than would otherwise be the case. We did not implement our stock buyback program for 2009, as we have in the past, nor do we currently intend to make any significant cash acquisitions until business conditions stabilize.

We believe economic conditions will hold up in the fourth quarter of 2009 which would give us the flexibility to increase expenditures in our selling, marketing and R&D efforts to maximize organic sales growth in favorable markets in 2009 and to anticipate growth in 2010. Conversely, if economic conditions worsen in North America and Europe, then we expect that our sales, manufacturing productivity and cash flow would likely deteriorate from the current forecast. In that event, we would further reduce discretionary capital spending and selling, marketing and R&D costs as well as accelerate ongoing or undertake new restructuring actions in order to minimize the impact of these declines on our earnings per share.

Our guidance assumes an absence of significant acquisitions or divestitures in 2009. We are expanding our geographic reach internationally, expand our presence in our various channels to market and acquire technologies and products to broaden our businesses’ capabilities to serve additional markets. We may also consider the divestiture or closure of discrete business units to further focus our businesses on their most attractive markets.

The ability to achieve our operating objectives will depend, to a certain extent, on factors outside our control. See “Forward-looking statements” in this report and “Risk Factors” under ITEM 1A in our 2008 Annual Report on Form 10-K.

RESULTS OF OPERATIONS

Net sales

Consolidated net sales and the change from the prior year period were as follows:

	Three months ended										Nine months ended
	September 26		September 27								September 26		September 27
In thousands	2009		2008		$ change			%change			2009		2008		$ change			%change
Net sales	$	662,665	$	855,815	$	(193,150	)		(22.6	%)	$	1,990,217	$	2,584,339	$	(594,122	)		(23.0	%)

The components of the net sales change in 2009 from 2008 were as follows:

	% Change from 2008
Percentages	Three months			Nine months
Volume		(22.2	)		(22.1	)
Price		0.7			1.5
Currency		(1.1	)		(2.4	)
Total		(22.6	)		(23.0	)

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Consolidated net sales

The 22.6 percent and 23.0 percent decreases in consolidated net sales in the third quarter and first nine months, respectively, of 2009 from 2008 were primarily driven by:

• lower sales of certain pump, pool and filtration products primarily related to the downturn in the North American and Western European residential housing markets and other global markets;

• lower Technical Products Group sales in both the Electrical and Electronics businesses; and

• unfavorable foreign currency effects.

These decreases were partially offset by:

• selective increases in selling prices to mitigate inflationary cost increases; and

• an increase in sales volume due to the formation of PRF.

Net sales by segment and the change from the prior year period were as follows:

	Three months ended										Nine months ended
	September 26		September 27								September 26		September 27
In thousands	2009		2008		$ change			% change			2009		2008		$ change			% change
Water Group	$	461,570	$	557,976	$	(96,406	)		(17.3	%)	$	1,372,492	$	1,696,780	$	(324,288	)		(19.1	%)
Technical Products Group		201,095		297,839		(96,744	)		(32.5	%)		617,725		887,559		(269,834	)		(30.4	%)
Total	$	662,665	$	855,815	$	(193,150	)		(22.6	%)	$	1,990,217	$	2,584,339	$	(594,122	)		(23.0	%)

Water Group

The 17.3 percent and 19.1 percent decreases in Water Group net sales in the third quarter and first nine months, respectively, of 2009 from 2008 were primarily driven by:

• organic sales decline (excluding acquisitions and foreign currency exchange) primarily due to lower sales of certain pump, pool and filtration products primarily related to the downturn in the North American and Western European residential housing markets and other global markets; and

• unfavorable foreign currency effects.

These decreases were partially offset by:

• selective increases in selling prices to mitigate inflationary cost increases; and

• an increase in sales volume due to the formation of PRF.

Technical Products Group

The 32.5 percent and 30.4 percent decreases in Technical Product Group net sales in the third quarter and first nine months, respectively, of 2009 from 2008 were primarily driven by:

• a decrease in sales to electrical markets resulting from lower capital spending by customers in the industrial vertical market;

• a decrease in sales to electronics markets that was largely attributable to reduced spending in the data communication, general electronics, and telecommunication vertical markets; and

• unfavorable foreign currency effects.

These decreases were partially offset by:

• selective increases in selling prices to mitigate inflationary cost increases which favorably impacted the first two quarters of 2009 as compared to 2008.

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Gross profit

	Three months ended										Nine months ended
	September 26		%of			September 27		%of			September 26		%of			September 27		%of
In thousands	2009		sales			2008		sales			2009		sales			2008		sales
Gross Profit	$	206,967		31.2	%	$	255,953		29.9	%	$	572,678		28.8	%	$	785,057		30.4	%
Percentage point change				1.3	pts									(1.6	)pts

The 1.3 percent increase in gross profit as a percentage of sales in the third quarter of 2009 from 2008 was primarily the result of:

• savings generated from our Pentair Integrated Management System (“PIMS”) initiatives, including lean and supply management practices;

• lower material cost for key commodities such as carbon steel;

• cost savings from restructuring actions and other personnel reductions taken in response to the current economic downturn and resulting volume decline; and

• selective increases in selling prices in our Water Group to mitigate inflationary cost increases.

These increases were partially offset by:

• lower sales of certain pump, pool and filtration products primarily related to the downturn in the North American and Western European residential housing markets and other global market downturns; and

• lower sales volume in our Technical Products Group and lower fixed cost absorption resulting from that volume decline.

The 1.6 percent decrease in gross profit as a percentage of sales in the first nine months of 2009 from 2008 was primarily the result of:

• lower sales of certain pump, pool and filtration products primarily related to the downturn in the North American and Western European residential housing markets and other global market downturns;

• lower sales volume in our Technical Products Group and lower fixed cost absorption resulting from that volume decline; and

• inflationary increases related to raw materials for the first two quarters of 2009 and labor costs.

These decreases were partially offset by:

• cost savings from restructuring actions and other personnel reductions taken in response to the current economic downturn and resulting volume decline;

• selective increases in selling prices in our Water and Technical Products Groups to mitigate inflationary cost increases; and

• savings generated from our PIMS initiatives, including lean and supply management practices.

Selling, general and administrative (SG&A)

	Three months ended										Nine months ended
	September 26		%of			September 27		%of			September 26		%of			September 27		%of
In thousands	2009		sales			2008		sales			2009		sales			2008		sales
*SG&A	$	125,578		19.0	%	$	154,118		18.0	%	$	361,957		18.2	%	$	458,266		17.7	%
Percentage point change				1.0	pts									0.5	pts

* Includes litigation settlement in the nine months ended September 27, 2008 of $20.4 million, which is presented on a separate line in the Condensed Consolidated Statements of Income

The 1.0 and 0.5 percentage point increases in SG&A expense as a percentage of sales in the third quarter and first nine months, respectively, of 2009 from 2008 was primarily due to:

• lower sales volume and the resultant loss of leverage on the SG&A expense spending;

• expense associated with restructuring actions in both our Water and Technical Products Groups during the first nine months of 2009;

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• continued investments in future growth with emphasis on growth in international markets, including personnel and business infrastructure investments; and

• higher costs associated with the integration of and intangible amortization related to the June 2008 formation of PRF.

These increases were offset by:

• 2008 charges for the Horizon litigation settlement, which were non-recurring in 2009; and

• reduced costs related to productivity actions taken throughout 2008 and the first nine months of 2009 to consolidate facilities and streamline general and administrative costs.

Research and development (R&D)

	Three months ended										Nine months ended
	September 26		%of			September 27		%of			September 26		%of			September 27		%of
In thousands	2009		sales			2008		sales			2009		sales			2008		sales
R&D	$	14,707		2.2	%	$	16,221		1.9	%	$	43,265		2.2	%	$	47,303		1.8	%
Percentage point change			0.3		pts								0.4		pts

The 0.3 and 0.4 percentage point increases in R&D expense as a percentage of sales in the third

quarter and first nine months, respectively, of 2009 were primarily due to:

• lower sales volume and the resultant loss of leverage on the R&D expense spending.

Operating income

Water Group

	Three months ended										Nine months ended
	September 26		%of			September 27		%of			September 26			%of			September 27		%of
In thousands	2009		sales			2008		sales			2009			sales			2008		sales
Operating income	$	53,085		11.5	%	$	49,684		8.9	%	$	129,842			9.5	%	$	174,194		10.3	%
Percentage point change			2.6		pts								(0.8			)pts

The 2.6 percentage point increase in Water Group operating income as a percentage of net sales in the third quarter of 2009 as compared to 2008 was primarily the result of:

• selective increases in selling prices to mitigate inflationary cost increases;

• cost savings from restructuring actions and other personnel reductions taken in response to the current economic downturn and resulting volume decline; and

• savings generated from our PIMS initiatives, including lean and supply management practices.

These increases were offset by:

• lower sales of certain pump, pool and filtration products resulting from the downturn in the North American and Western European residential housing markets; and

• restructuring actions taken in the third quarter of 2009.

The 0.8 percentage point decrease in Water Group operating income as a percentage of net sales in the first nine months of 2009 as compared to 2008 was primarily the result of:

• lower sales of certain pump, pool and filtration products resulting from the downturn in the North American and Western European residential housing markets;

• inflationary increases related to raw materials and labor;

• restructuring actions taken in the first nine months of 2009; and

• higher costs associated with the integration of and intangible amortization related to the June 2008 formation of PRF.

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These decreases were partially offset by:

• selective increases in selling prices to mitigate inflationary cost increases;

• cost savings from restructuring actions and other personnel reductions taken in response to the current economic downturn and resulting volume decline;

• savings generated from our PIMS initiatives including lean and supply management practices, and

• 2008 charges for the Horizon litigation settlement, which were non-recurring in 2009.

Technical Products Group

	Three months ended										Nine months ended
	September 26		%of			September 27		%of			September 26		%of			September 27		%of
In thousands	2009		sales			2008		sales			2009		sales			2008		sales
Operating income	$	24,356		12.1	%	$	47,585		16.0	%	$	68,396		11.1	%	$	142,654		16.1	%
Percentage point change			(3.9		)pts								(5.0		)pts

The 3.9 and 5.0 percentage point decreases in Technical Products Group operating income as a percentage of sales in the third quarter and first nine months, respectively, of 2009 from 2008 were primarily the result of:

• a decrease in sales to electrical markets resulting from lower capital spending by customers in the industrial vertical market;

• a decrease in sales into electronics markets that was largely attributable to reduced spending in the general electronics, data communication and telecommunication vertical markets; and

• lower fixed cost absorption resulting from the sales volume declines.

These decreases were partially offset by:

• cost savings from restructuring actions and other personnel reductions taken in response to the current economic downturn and resulting volume decline;

• savings generated from our PIMS initiatives, including lean and supply management practices; and

• lower material cost for key commodities such as carbon steel.

Net interest expense

	Three months ended										Nine months ended
	September 26		September 27								September 26		September 27
In thousands	2009		2008		Difference			%change			2009		2008		Difference			%change
Net interest expense	$	9,711	$	13,740	$	(4,029	)		(29.3	%)	$	31,328	$	45,691	$	(14,363	)		(31.4	%)

The 29.3 and 31.4 percentage point decreases in interest expense in the third quarter and first nine months, respectively, of 2009 from 2008 were primarily the result of:

• favorable impact of lower interest rates and lower debt levels in part attributable to the redemption on April 15, 2009 of our 7.85% Senior Notes due 2009 (the “Notes”).

Provision for income taxes

	Three months ended						Nine months ended
	September 26			September 27			September 26			September 27
In thousands	2009			2008			2009			2008
Income before income taxes	$	56,836		$	66,594		$	130,633		$	336,401
Provision for income taxes		18,159			21,592			41,808			99,099
Effective tax rate		31.9	%		32.4	%		32.0	%		29.5	%

The 0.5 percentage point decrease in the third quarter of 2009 from 2008 was primarily the result of:

• favorable adjustments in the third quarter of 2009 related to prior years’ tax returns.

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The 2.5 percentage point increase in the effective tax rate in the first nine months of 2009 from 2008 was primarily the result of:

• a portion of the gain on the formation of PRF in 2008 being taxed at a rate of 0%.

This increase was partially offset by:

• favorable adjustments in 2009 related to prior years’ tax returns.

We estimate our effective income tax rate for the remaining quarters of this year will be between 32% and 33% resulting in a full year effective income tax rate of between 32% and 33%.

LIQUIDITY AND CAPITAL RESOURCES

We generally fund cash requirements for working capital, capital expenditures, equity investments, acquisitions, debt repayments, dividend payments and share repurchases from cash generated from operations, availability under existing committed revolving credit facilities, and in certain instances, public and private debt and equity offerings. We have grown our businesses in the past in significant part through acquisitions, financed by credit provided under our revolving credit facilities and, from time to time, by private or public debt issuance. Our primary revolving credit facilities have generally been adequate for these purposes, although we have negotiated additional credit facilities as needed to allow us to complete acquisitions; these are temporary loans that have in the past been repaid within less than a year.

In light of the current global economic situation, we do not currently plan to make any significant acquisitions in 2009, and we have not continued the annual share repurchase programs in 2009 that we have undertaken over the past few years. We are focusing on increasing our cash flow and maximizing debt repayment for the foreseeable future. Our intent is to maintain investment grade ratings and a solid liquidity position.

We experience seasonal cash flows primarily due to seasonal demand in a number of markets within our Water Group. We generally borrow in the first quarter of our fiscal year for operational purposes, which usage reverses in the second quarter as the seasonality of our businesses peaks. End-user demand for pool equipment follows warm weather trends and is at seasonal highs from April to August. The magnitude of the sales spike is partially mitigated by employing some advance sale “early buy” programs (generally including extended payment terms and/or additional discounts). Demand for residential and agricultural water systems is also impacted by weather patterns, particularly by heavy flooding and droughts.

Cash contribution requirements for our pension plans are either based upon the applicable country regulation (principally the U.S.) or are funded on a pay-as-you-go basis. We expect that our 2009 contributions to the plans will be $20 million to $25 million, an increase of over $10 million from 2008. The increase in 2009 expected contributions relates primarily to the impact of reduced investment return and significantly lower asset values for our U.S. qualified pension plans. Contribution requirements in the U.S. are governed by the Pension Protection Act of 2006. Our contribution requirements could continue or increase in years subsequent to 2009 unless there is an improvement in the funded status of our U.S. qualified pension plans.

Operating activities

Cash provided by operating activities was $238.7 million in the first nine months of 2009 compared with cash provided by operating activities of $136.9 million in the prior year comparable period. The increase in cash provided by operating activities was primarily due to cash generated from working capital reductions, primarily due to increased management of receivables and inventory balances in the first nine months of 2009, offset by a decrease in net income after adjusting for the $109.6 million gain in 2008, versus the same period of last year. In the future, we expect our working capital ratios to improve as sales stabilize and as we are able to further capitalize on our PIMS initiatives.

Investing activities

Capital expenditures in the first nine months of 2009 were $39.3 million compared with $39.8 million in the prior year period. We currently anticipate capital expenditures for fiscal 2009 will be approximately $45 million to $50 million, primarily for capacity expansions in our low cost country manufacturing facilities, new product development, and replacement equipment.

On December 15, 2008, we sold our Spa/Bath business to Balboa Water Group in a cash transaction for $8.3 million including certain price adjustments based on working capital at closing. The results of Spa/Bath have been reported as discontinued operations for all periods presented. The assets and liabilities of Spa/Bath have been reclassified as discontinued operations for all periods presented.

On February 28, 2008, we sold our NPT business to Pool Corporation in a cash transaction for approximately $30.0 million subject to certain price adjustments. The results of NPT have been reported as discontinued operations for all periods presented. The assets and liabilities of NPT have been reclassified as discontinued operations for all periods presented.

Financing activities

Net cash used for financing activities was $189.5 million in the first nine months of 2009 compared with $102.5 million used for financing activities in the prior year period. Financing activities included draw downs and repayments on our revolving credit facilities to fund our operations in the normal course of business, payments of dividends, cash used to repurchase company stock in 2008, cash received from stock option exercises, and tax benefits related to stock-based compensation.

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Our current $800 million multi-currency revolving credit facility (the “Credit Facility”) was entered into in the second quarter of 2007 and does not expire until June 4, 2012. The agent banks under the Credit Facility are J. P. Morgan, Bank of America, Wells Fargo, U. S. Bank and Bank of Tokyo-Mitsubishi. We had borrowing capacity of $590.2 million at September 26, 2009.

The Credit Facility creates an unsecured, committed revolving credit facility of up to $800 million, with multi-currency sub facilities to support investments outside the U.S. Borrowings under the Credit Facility bear interest at the rate of LIBOR plus 0.625%. Interest rates and fees on the Credit Facility vary based on our credit ratings. We believe that internally generated funds and funds available under our Credit Facility will be sufficient to support our normal operations, dividend payments, stock repurchases (if authorized) and debt maturities over the life of the Credit Facility.

We are authorized to sell short-term commercial paper notes to the extent availability exists under the Credit Facility. We use the Credit Facility as back-up liquidity to support 100% of commercial paper outstanding. Our use of commercial paper as a funding vehicle depends upon the relative interest rates for our commercial paper compared to the cost of borrowing under our Credit Facility. As of September 26, 2009, we had $2.0 million of commercial paper outstanding. We classify any outstanding commercial paper as long-term as we have the intent to refinance and have as a practice refinanced such obligations on a long-term basis under the Credit Facility.

Our debt agreements contain certain financial covenants, the most restrictive of which is a leverage ratio (total consolidated indebtedness, as defined, over consolidated EBITDA, as defined) that may not exceed 3.5 to 1.0. We were in compliance with all covenants under our debt agreements as of September 26, 2009.

In addition to the Credit Facility, we have $25.0 million of uncommitted credit facilities, under which we had no borrowings as of September 26, 2009.

On July 8, 2008, we commenced a cash tender offer for all of our outstanding $250 million aggregate principal of Notes. Upon expiration of the tender offer on August 4, 2008, we purchased $116.1 million aggregate principal amount of the Notes. As a result of this transaction, we recognized a loss of $4.6 million on early extinguishment of debt in the third quarter of 2008. The loss included the write off of $0.1 million in unamortized deferred financing fees in addition to recognition of $0.6 million in previously unrecognized swap gains, and cash paid of $5.1 million related to the tender premium and other costs associated with the purchase.

On March 16, 2009, we announced the redemption of all of our remaining outstanding $133.9 million aggregate principle of Notes to take advantage of lower interest rates available under the Credit Facility. The Notes were redeemed on April 15, 2009 at a redemption price of $1,035.88 per $1,000 of principal outstanding plus accrued interest thereon utilizing funds on hand and drawings under our Credit Facility. No other significant debt obligations mature until 2012. As a result of this transaction, we recognized a loss of $4.8 million on early extinguishment of debt in the second quarter of 2009. The loss included the write off of $0.1 million in unamortized deferred financing fees in addition to recognition of $0.3 million in previously unrecognized swap gains, and cash paid of $5.0 million related to the redemption and other costs associated with the purchase.

Our current credit ratings are as follows:

Rating Agency	Credit Rating	Current Rating Outlook
Standard & Poor’s	BBB-	Stable
Moody’s	Baa3	Negative

On March 6, 2009, Standard & Poor’s (“S&P”) lowered our credit rating from BBB to BBB- and changed the outlook from negative to stable. S&P’s rating action reflects their expectation that the difficult global economic environment will likely delay improvement in our credit metrics, resulting in metrics that are more consistent with a BBB- rating. On May 1, 2009, Moody’s Investors Service affirmed its Baa3 rating and changed the outlook from stable to negative. Our credit rating continues to be an investment grade rating, which is a credit rating of BBB- or higher by S&P and Baa3 or higher by Moody’s.

Borrowings under our Credit Facility are at interest rates that vary based upon our credit rating. As a result of the rating action by S&P, the borrowing rate increased from LIBOR plus 0.50% to LIBOR plus 0.625%.

In the event of a one rating downgrade, our flexibility to access the debt capital markets may be reduced and the pricing of new debt will be adversely impacted. Additionally, the cost of borrowings under our Credit Facility would increase by an additional 0.125%.

We expect to continue to have cash requirements to support working capital needs and capital expenditures, to pay interest and service debt, and to pay dividends to shareholders. In order to meet these cash requirements, we intend to use available cash and internally generated funds, and to borrow under our committed and uncommitted credit facilities.

Dividends paid in the first nine months of 2009 were $53.2 million, or $0.54 per common share, compared with $50.5 million, or $0.51 per common share, in the prior year period. We have increased dividends every year for the last 33 years and expect to continue paying dividends on a quarterly basis.

The total gross liability for uncertain tax positions at September 26, 2009 was approximately $29.1 million. We are not able to reasonably estimate the amount by which the estimate will increase or decrease over time; however, at this time, we do not expect a significant payment related to these obligations within the next twelve months.

24

There have been no material changes with respect to the contractual obligations, other than noted above, or off-balance sheet arrangements described in our 2008 Annual Report on Form 10-K.

Other financial measures

In addition to measuring our cash flow generation or usage based upon operating, investing, and financing classifications included in the Consolidated Statements of Cash Flows, we also measure our free cash flow and our conversion of net income. We have a long-term goal to consistently generate free cash flow that equals or exceeds 100% conversion of net income. Free cash flow and conversion of net income are non-GAAP financial measures that we use to assess our cash flow performance. We believe free cash flow and conversion of net income are important measures of operating performance because they provide us and our investors a measurement of cash generated from operations that is available to pay dividends and repay debt. In addition, free cash flow and conversion of net income are used as a criterion to measure and pay compensation-based incentives. Our measure of free cash flow and conversion of net income may not be comparable to similarly titled measures reported by other companies. The following table is a reconciliation of free cash flow and a calculation of the conversion of net income with cash flows from continuing operations:

	Nine months ended
	September 26			September 27
In thousands	2009			2008
Net cash provided by (used for) continuing operations	$	240,181		$	142,122
Capital expenditures		(39,306	)		(39,769	)
Proceeds from sale of property and equipment		817			4,304
Free cash flow		201,692			106,657
Net income from continuing operations attributable to Pentair, Inc.		86,294			235,202
Conversion of net income from continuing operations attributable to Pentair, Inc.		234	%		45	%

Our free cash flow target for 2009 is greater than $225 million.

NEW ACCOUNTING STANDARDS

See Note 2 (New Accounting Standards) of ITEM 1.

CRITICAL ACCOUNTING POLICIES

In our 2008 Annual Report on Form 10-K, we identified the critical accounting policies which affect our more significant estimates and assumptions used in preparing our consolidated financial statements. We have not changed these policies from those previously disclosed in our Annual Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk during the quarter ended September 26, 2009. For additional information, refer to Item 7A of our 2008 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

(a)	Evaluation of Disclosure Controls and Procedures
	We maintain a system of disclosure controls and procedures designed to provide reasonable assurance as to the reliability of our published financial statements and other disclosures included in this report. Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter ended September 26, 2009 pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon their evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the quarter ended September 26, 2009 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures.
(b)	Changes in Internal Controls
	There was no change in our internal control over financial reporting that occurred during the quarter ended September 26, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Pentair, Inc.:

We have reviewed the accompanying condensed consolidated balance sheets of Pentair, Inc. and subsidiaries (the “Company”) as of September 26, 2009 and September 27, 2008, and the related condensed consolidated statements of income for the three-month and nine-month periods ended September 26, 2009 and September 27, 2008, and of cash flows and shareholders’ equity for the nine-month periods ended September 26, 2009 and September 27, 2008. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Pentair, Inc. and subsidiaries as of December 31, 2008, and the related consolidated statements of income, shareholders’ equity, and cash flows for the year then ended prior to retrospective adjustment for the adoption of new guidance related to the accounting for noncontrolling interests; and in our report dated February 23, 2009, we expressed an unqualified opinion on those consolidated financial statements. We also audited the adjustments described in Note 2 that were applied to reclassify the December 31, 2008 consolidated balance sheet of Pentair, Inc. and subsidiaries (not presented herein) for the adoption. In our opinion, such adjustments are appropriate and have been properly applied to the previously issued consolidated balance sheet in deriving the accompanying retrospectively adjusted condensed consolidated balance sheet as of December 31, 2008.

Deloitte & Touche LLP

Minneapolis, MN
October 20, 2009

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PART II OTHER INFORMATION

ITEM 1. Legal Proceedings

Environmental and Litigation

There have been no further material developments from the disclosures contained in our 2008 Annual Report on Form 10-K.

ITEM 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in ITEM 1A. of our 2008 Annual Report on Form 10-K.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information with respect to purchases we made of our common stock during the third quarter of 2009:

					(c)		(d)
	(a)				Total Number of Shares		Dollar Value of Shares
	Total Number		(b)		Purchased as Part of		that May Yet Be
	of Shares		Average Price		Publicly Announced Plans		Purchased Under the
Period	Purchased		Paid per Share		or Programs		Plans or Programs
June 28 — July 25, 2009		7,644	$	25.82		—	$	0
July 26 — August 22, 2009		434	$	25.54		—	$	0
August 23 — September 26, 2009		9,592	$	28.70		—	$	0
Total		17,670				—

(a)	The purchases in this column reflect shares deemed surrendered to us by participants in our Omnibus Stock Incentive Plan and the Outside Directors Nonqualified Stock Option Plan (the “Plans”) to satisfy the exercise price or withholding of tax obligations related to the exercise of stock options and non-vested shares.
(b)	The average price paid in this column relects the per share value of shares deemed surrendered to us by participants in the Plans to satisfy the exercise price for the exercise price of stock options and withholding tax obligations due upon stock option exercises and vesting of restricted shares.
(c)	Our board of directors has not authorized a share repurchase plan for 2009.
(d)	Our board of directors has not authorized a share repurchase plan for 2009.

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ITEM 6. Exhibits

(a)	Exhibits
		10.1	Pentair, Inc. 2008 Omnibus Stock Incentive Plan, as amended and restated through July 28, 2009.
		10.2	Pentair, Inc. Non-Qualified Deferred Compensation Plan, as amended and restated through July 28, 2008.
		15	Letter Regarding Unaudited Interim Financial Information.
		31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		32.1	Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
		32.2	Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on October 20, 2009.

PENTAIR, INC. Registrant
By	/s/ John L. Stauch
	John L. Stauch
	Executive Vice President and Chief Financial Officer
By	/s/ Mark C. Borin
	Mark C. Borin
	Corporate Controller and Chief Accounting Officer

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Exhibit Index to Form 10-Q for the Period Ended September 26, 2009

10.1	Pentair, Inc. 2008 Omnibus Stock Incentive Plan, as amended and restated through July 28, 2009.
10.2	Pentair, Inc. Non-Qualified Deferred Compensation Plan, as amended and restated through July 28, 2008.
15	Letter Regarding Unaudited Interim Financial Information.
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-10.1

Exhibit 10.1

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

3

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.

     3. Administration.

     (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

5

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 certificates when making payment in Stock, so long as other satisfactory proof of ownership of the Stock tendered is provided (e.g., attestation of ownership of a sufficient number of shares of Stock to pay the exercise price). The Administrator shall have the discretion to authorize or accept payment by other forms or methods or to establish a cashless exercise program, all within such limitations as may be imposed by the Plan or any applicable law.

     8. Stock Appreciation Rights. Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each SAR, including but not limited to:

     (a) Whether the SAR is granted independently of an Option or relates to an Option;

     (b) The number of Shares to which the SAR relates;

     (c) The date of grant, which may not be prior to the date of the Administrator’s approval of the grant;

     (d) The grant price, provided that the grant price shall not be less than the Fair Market Value of the Shares subject to the SAR as determined on the date of grant;

     (e) The terms and conditions of exercise or maturity; provided that, subject to the provisions of Sections 12 and 16, one-third (1/3) of each SAR may not become exercisable or mature earlier than on each of the first three (3) anniversaries of the date of grant;

     (f) The term, provided that each SAR must terminate no later than ten (10) years after the date of grant; and

     (g) Whether the SAR will be settled in cash, Shares or a combination thereof.

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          If an SAR is granted in relation to an Option, then unless otherwise determined by the Administrator, the SAR shall be exercisable or shall mature at the same time or times, on the same conditions and to the extent and in the proportion, that the related Option is exercisable and may be exercised or mature for all or part of the Shares subject to the related Option. Upon exercise of any number of SAR, the number of Shares subject to the related Option shall be reduced accordingly and such Option may not be exercised with respect to that number of Shares. The exercise of any number of Options that relate to an SAR shall likewise result in an equivalent reduction in the number of Shares covered by the related SAR.

     9. Performance and Stock Awards. Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each award of Restricted Stock, Restricted Stock Units, Deferred Stock Rights, Performance Shares or Performance Units, including but not limited to:

     (a) The number of Shares and/or units to which such Award relates;

     (b) Whether, as a condition for the Participant to realize all or a portion of the benefit provided under the Award, one or more Performance Goals must be achieved during such period as the Administrator specifies;

     (c) The period of restriction with respect to Restricted Stock or Restricted Stock Units and the period of deferral for Deferred Stock Rights (which, subject to the provisions of Sections 12 and 16, in each case may not be less than three (3) years from the date of grant);

     (d) The performance period for Performance Awards (which, subject to the provisions of Sections 12 and 16, must be at least one year);

     (e) With respect to Performance Units, whether to measure the value of each unit in relation to a designated dollar value or the Fair Market Value of one or more Shares; and

     (f) With respect to Restricted Stock Units and Performance Units, whether to settle such Awards in cash, in Shares, or a combination thereof.

     During the time Restricted Stock is subject to the Period of Restriction, the Participant shall have all of the rights of a shareholder with respect to the Restricted Stock, including the right to vote such Stock and, unless the Administrator shall otherwise provide, the right to receive dividends paid with respect to such Stock.

     Except as otherwise provided in the Plan, at such time as all restrictions applicable to an Award of Restricted Stock, Deferred Stock Rights or Restricted Stock Units are met and the Restriction Period expires, ownership of the Stock subject to such restrictions shall be transferred to the Participant free of all restrictions except those that may be imposed by applicable law; provided that if Restricted Stock Units are paid in cash, said payment shall be made to the Participant after all applicable restrictions lapse and the Restriction Period expires.

     10. Dividend Equivalent Units. Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each award of Dividend Equivalent Units, including but not limited to whether: (a) such Award will be granted in tandem with another Award; (b) payment of the Award be made currently or credited to an account for the Participant which provides for the deferral of such amounts until a stated time; and (c) the Award will be settled in

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cash or Shares; provided that Dividend Equivalent Units may be granted only in connection with a “full value” Award as defined in Section 6(c).

     11. Other Stock-Based Awards. Subject to the terms of this Plan, the Administrator may grant to Participants other types of Awards, which shall be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, Shares, either alone or in addition to or in conjunction with other Awards, and payable in Stock or cash. Without limitation, such Award may include the issuance of shares of unrestricted Stock, which may be awarded in payment of director fees, in lieu of cash compensation, in exchange for cancellation of a compensation right, as a bonus, or upon the attainment of Performance Goals or otherwise, or rights to acquire Stock from the Company. The Administrator shall determine all terms and conditions of the Award, including but not limited to, the time or times at which such Awards shall be made, and the number of Shares to be granted pursuant to such Awards or to which such Award shall relate; provided that any Award that provides for purchase rights shall be priced at 100% of Fair Market Value on the date of the Award.

     12. Effect of Termination on Awards. Except as otherwise provided by the Administrator in an Award Agreement or, subject to Section 3(a), as determined by the Administrator at the time of termination of a Participant’s service:

     (a) Termination of Employment or Service. If a Participant’s service with the Company and its Affiliates as an employee or Director ends for any reason other than (i) a termination for Cause, (ii) Retirement, (iii) death or (iv) Disability, then:

     (i) Any outstanding Options or SARs, to the extent otherwise exercisable on the date such Participant’s service ends, shall be exercisable no later than ninety (90) days following the Participant’s termination date or, if earlier, the expiration date of the Option or SAR. At the conclusion of such ninety (90) day period, all such Options and SARs then unexercised shall be forfeited.

     (ii) All other Awards made to the Participant, to the extent not then earned or paid to the Participant, shall terminate no later than the Participant’s last day of employment, or service as a Director.

     (b) Retirement of Corporate Officer or Director. Upon Retirement of a Participant who is then a Board-appointed corporate officer or a Director:

     (i) Any outstanding Options or SARs shall remain outstanding (and shall continue to vest in accordance with the terms of the Award as if the Participant had continued in employment or service) until the earlier of the expiration date of the Award and the fifth anniversary of such Participant’s Retirement date; provided, however, that such extension shall result in the conversion of an incentive stock option to a nonqualified stock option to the extent required under the Code.

     (ii) All Restricted Stock, Restricted Stock Units and Deferred Stock Rights (that are not Performance Awards) outstanding on the Participant’s Retirement date shall be immediately vested, and any other terms and conditions applicable to such Awards shall be deemed to have lapsed or otherwise been satisfied. Payment for all such Awards shall be made to the Participant in either unrestricted shares of Stock or cash, depending on the payment terms applicable to such Award.

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     (iii) All Performance Awards outstanding on the Participant’s Retirement date shall be paid in either unrestricted shares of Stock or cash, as the case may be, following the end of the performance period and based on achievement of the Performance Goals established for such Awards, as if the Participant had not retired.

     (iv) Notwithstanding the provisions of Section 2(ff), effective for Awards granted on or after July 29, 2008, the provisions of subsections 12(b)(i), (ii) and (iii) shall apply only with respect to the termination of employment or service from the Company and its Affiliates (for other than Cause) of a Board-appointed corporate officer, on or after attainment of age sixty (60) and completion of ten (10) years of service with the Company and its Affiliates.

     (c) Retirement of Other Participants. Upon Retirement of a Participant not covered by Section 12(b):

     (i) Any Options and SARs exercisable on such Participant’s Retirement date shall be exercisable no later than ninety (90) days following such date or, if earlier, the expiration date of the Option or SAR. At the end of such ninety (90) day period, all Options and SARs then unexercised shall be forfeited.

     (ii) All Restricted Stock, Restricted Stock Units and Deferred Stock Rights (that are not Performance Awards) shall vest on a prorated basis, based on the portion of the restriction or deferral period, as applicable, which the Participant has completed at the time of Retirement and any other terms and conditions applicable to such Awards shall be deemed to have lapsed or otherwise been satisfied.

     (iii) All Performance Awards outstanding on the Participant’s Retirement date shall be paid in either unrestricted shares of Stock or cash, as the case may be, following the end of the performance period and based on achievement of the Performance Goals established for such Awards, as if the Participant had not retired, but prorated based on the portion of the performance period which the Participant has completed at the time of Retirement.

     (d) Death of Participant. If a Participant dies during employment with the Company and its Affiliates or while a Director:

     (i) All outstanding Options and SARS shall be exercisable by the Participant’s estate or the person who has acquired the right to exercise such Awards by bequest or inheritance. The Participant’s estate, or any person who succeeds to the Participant’s benefits under the Plan, shall have up to twelve (12) months following the date of the Participant’s death, or if earlier the expiration date of the Option or SAR, to exercise any outstanding Options or SARs to the same extent the Participant would have been entitled to exercise said Options or SARs on the date of death. At the end of said twelve (12) month period, all Options and SARs then unexercised shall be forfeited.

     (ii) All restrictions on all outstanding Awards of Restricted Stock or Restricted Units (that are not Performance Awards) shall be deemed to have lapsed on a prorated basis based on the portion of the Restriction Period which the Participant has completed on the date of death.

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     (iii) All outstanding Deferred Stock Rights (that are not Performance Awards) shall be vested on a prorated basis based on the portion of the deferral period which the Participant has completed on the date of death.

     (iv) All Performance Awards outstanding on the date of the Participant’s death shall be paid in either unrestricted shares of Stock or cash, as the case may be, following the end of the performance period and based on achievement of the Performance Goals established for such Awards, as if the Participant had not died, but prorated based on the portion of the performance period which the Participant has completed at the time of death.

     (e) Disability of Participant. If a Participant’s employment with the Company and its Affiliates or service as a Director ends due to a Disability, then:

     (i) The Participant shall have up to twelve (12) months, or if earlier the expiration date of the Option or SAR, to exercise any outstanding Options or SARs to the same extent the Participant would have been entitled to exercise said Options or SARs as of the date the Disability determination is effective. At the end of said twelve (12) month period all Options or SARs then unexercised shall be forfeited.

     (ii) All restrictions applicable to an outstanding Award of Restricted Stock or Restricted Units (that are not Performance Awards) shall be deemed to have lapsed on a prorated basis, based on the portion of the Restriction Period the Participant completed as of the date of Disability.

     (iii) All outstanding Deferred Stock Rights (that are not Performance Awards) shall be vested on a prorated basis based on the portion of the deferral period which the Participant completed on the date of Disability.

     (iv) All Performance Awards outstanding on the date of the Participant’s Disability shall be paid in either unrestricted shares of Stock or cash, as the case may be, based on the degree to which the Participant had attained the applicable Performance Goals as of the date of such Participant’s Disability.

     (f) Termination for Cause. If a Participant’s employment with the Company and its Affiliates or service as a Director is terminated for Cause, all Awards and grants of every type, whether or not then vested, shall terminate no later than the Participant’s last day of employment. The Committee shall have discretion to determine whether this Section 12(f) shall apply, whether the event or conduct at issue constitutes Cause for termination and the date on which Awards to a Participant shall terminate.

     (g) Consultants and Other Stock-Based Awards. The Committee shall have the discretion to determine, at the time an Award is made, the effect of the termination of service of a Consultant on Awards held by such individual, and the effect on Other Stock-Based Awards of the Participant’s termination of employment or service with the Company and its Affiliates.

     13. Transferability.

     (a) Restrictions on Transfer. Awards are not transferable other than by will or the laws of descent and distribution, unless and to the extent the Administrator allows a Participant

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to designate in writing a beneficiary to exercise the Award or receive payment under an Award after the Participant’s death or transfer an Award as provided in subsection (b).

     (b) Permitted Transfers. If allowed by the Administrator, a Participant may transfer the ownership of some or all of the vested or earned Awards granted to such Participant, other than incentive stock options to (i) the spouse, children or grandchildren of such Participant (the “Family Members”), (ii) a trust or trust established for the exclusive benefit of such Family Members, or (iii) a partnership in which such Family Members are the only partners. Any such transfer shall be without consideration and shall be irrevocable. No Award so transferred may be subsequently transferred, except by will or applicable laws of descent and distribution. The Administrator may create additional conditions and requirements applicable to the transfer of Awards. Following the allowable transfer of a vested Option, such Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately prior to the transfer. For purposes of settlement of the Award, delivery of Stock upon exercise of an Option and the Plan’s Change of Control provisions, however, any reference to a Participant shall be deemed to refer to the transferee.

     14. Termination and Amendment of Plan; Amendment, Modification or Cancellation of Awards.

     (a) Term of Plan. Unless the Board earlier terminates this Plan pursuant to Section 14(b), this Plan will terminate on the earlier of the date all Shares reserved for issuance have been issued or February 26, 2018.

     (b) Termination and Amendment. The Board or the Committee may amend, alter, suspend, discontinue or terminate this Plan at any time, subject to the following limitations:

     (i) the Board must approve any amendment of this Plan to the extent the Company determines such approval is required by: (A) action of the Board, (B) applicable corporate law, or (C) any other applicable law;

     (ii) shareholders must approve any amendment of this Plan to the extent the Company determines such approval is required by: (A) Section 16 of the Exchange Act, (B) the Code, (C) the listing requirements of any principal securities exchange or market on which the Shares are then traded, or (D) any other applicable law; and

     (iii) shareholders must approve any of the following Plan amendments: (A) an amendment to materially increase any number of Shares specified in Section 6(a), 6(b) or the limits set forth in Section 6(d) (except as permitted by Section 16), (B) an amendment to expand the group of individuals that may become Participants, or (C) an amendment that would diminish the protections afforded by Section 14(e) or that would materially change the minimum vesting and performance requirements of an Award as required in the Plan.

     (c) Amendment, Modification or Cancellation of Awards. Except as provided in Section 14(e) and subject to the requirements of this Plan, the Administrator may modify, amend or cancel any Award; or waive any restrictions or conditions applicable to any Award or the exercise of the Award, provided that any modification or amendment that materially diminishes the rights of the Participant, or the cancellation of the Award, shall be effective only if agreed to by the Participant or any other person(s) as may then have an interest in the Award, but the Administrator need not obtain Participant (or other interested party) consent for the

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adjustment or cancellation of an Award pursuant to the provisions of Section 16 or the modification of an Award to the extent deemed necessary to comply with any applicable law, the listing requirements of any principal securities exchange or market on which the Shares are then traded, or to preserve favorable accounting or tax treatment of any Award for the Company. Notwithstanding the foregoing, unless determined otherwise by the Administrator, any such amendment shall be made in a manner that will enable an Award intended to be exempt from Code Section 409A to continue to be so exempt, or to enable an Award intended to comply with Code Section 409A to continue to so comply.

     (d) Survival of Authority and Awards. Notwithstanding the foregoing, the authority of the Board and the Administrator under this Section 14 and to otherwise administer the Plan will extend beyond the date of this Plan’s termination. In addition, termination of this Plan will not affect the rights of Participants with respect to Awards previously granted to them, and all unexpired Awards will continue in force and effect after termination of this Plan except as they may lapse or be terminated by their own terms and conditions.

     (e) Repricing and Backdating Prohibited. Notwithstanding anything in this Plan to the contrary, and except for the adjustments provided in Section 16, neither the Administrator nor any other person may decrease the exercise price for any outstanding Option or SAR after the date of grant nor allow a Participant to surrender an outstanding Option or SAR to the Company as consideration for the grant of a new Option or SAR with a lower exercise price. In addition, the Administrator may not make a grant of an Option or SAR with a grant date that is effective prior to the date the Administrator takes action to approve such Award.

     (f) Foreign Participation. To assure the viability of Awards granted to Participants employed or residing in foreign countries, the Administrator may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Administrator may approve such supplements to, or amendments, restatements or alternative versions of, this Plan as it determines is necessary or appropriate for such purposes. Any such amendment, restatement or alternative versions that the Administrator approves for purposes of using this Plan in a foreign country will not affect the terms of this Plan for any other country. In addition, all such supplements, amendments, restatements or alternative versions must comply with the provisions of Section 14(b)(ii).

In addition, if an Award is held by a Participant who is employed or residing in a foreign country and the amount payable or Shares issuable under such Award would be taxable to the Participant under Code Section 457A in the year such Award is no longer subject to a substantial risk of forfeiture, then the amount payable or Shares issuable under such Award shall be paid or issued to the Participant as soon as practicable after such substantial risk of forfeiture lapses (or, for Awards that are not considered nonqualified deferred compensation subject to Code Section 409A, no later than the end of the short-term deferral period permitted by Code Section 457A) notwithstanding anything in this Plan or the Award Agreement to contrary.

     (g) Code Section 409A. The provisions of Code Section 409A are incorporated herein by reference to the extent necessary for any Award that is subject to Code Section 409A to comply therewith.

     15. Taxes.

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     (a) Withholding. In the event the Company or an Affiliate of the Company is required to withhold any Federal, state or local taxes or other amounts in respect of any income recognized by a Participant as a result of the grant, vesting, payment or settlement of an Award or disposition of any Shares acquired under an Award, the Company may deduct (or require an Affiliate to deduct) from any payments of any kind otherwise due the Participant cash, or with the consent of the Committee, Shares otherwise deliverable or vesting under an Award, to satisfy such tax obligations. Alternatively, the Company may require such Participant to pay to the Company, in cash, promptly on demand, or make other arrangements satisfactory to the Company regarding the payment to the Company of the aggregate amount of any such taxes and other amounts. If Shares are deliverable upon exercise or payment of an Award, the Committee may permit a Participant to satisfy all or a portion of the Federal, state and local withholding tax obligations arising in connection with such Award by electing to (a) have the Company withhold Shares otherwise issuable under the Award, (b) tender back Shares received in connection with such Award or (c) deliver other previously owned Shares; provided that the amount to be withheld may not exceed the total minimum federal, state and local tax withholding obligations associated with the transaction to the extent needed for the Company to avoid an accounting charge. If an election is provided, the election must be made on or before the date as of which the amount of tax to be withheld is determined and otherwise as the Committee requires. In any case, the Company may defer making payment or delivery under any Award if any such tax may be pending unless and until indemnified to its satisfaction.

     (b) No Guarantee of Tax Treatment. Notwithstanding any provisions of the Plan, the Company does not guarantee to any Participant or any other Person with an interest in an Award that (i) any Award intended to be exempt from Code Section 409A shall be so exempt, (ii) any Award intended to comply with Code Section 409A or Code Section 422 shall so comply, (iii) any Award shall otherwise receive a specific tax treatment under any other applicable tax law, nor in any such case will the Company or any Affiliate indemnify, defend or hold harmless any individual with respect to the tax consequences of any Award.

     (c) Participant Responsibilities. If a Participant shall dispose of Stock acquired through exercise of an ISO within either (i) two (2) years after the date the Option is granted or (ii) one (1) year after the date the Option is exercised (i.e., in a disqualifying disposition), such Participant shall notify the Company within seven (7) days of the date of such disqualifying disposition. In addition, if a Participant elects, under Code Section 83, to be taxed at the time an Award of Restricted Stock (or other property subject to such Code section) is made, rather than at the time the Award vests, such Participant shall notify the Company within seven (7) days of the date the Restricted Stock subject to the election is awarded.

     16. Adjustment Provisions; Change of Control.

     (a) Adjustment of Shares. If: (i) the Company shall at any time be involved in a merger or other transaction in which the Shares are changed or exchanged; (ii) the Company shall subdivide or combine the Shares or the Company shall declare a dividend payable in Shares, other securities or other property; (iii) the Company shall effect a cash dividend the amount of which, on a per Share basis, exceeds ten percent (10%) of the Fair Market Value of a Share at the time the dividend is declared, or the Company shall effect any other dividend or other distribution on the Shares in the form of cash, or a repurchase of Shares, that the Board determines by resolution is special or extraordinary in nature or that is in connection with a transaction that the Company characterizes publicly as a recapitalization or reorganization involving the Shares; or (iv) any other event shall occur, which, in the case of this clause (iv), in the judgment of the Board or Committee necessitates an adjustment to prevent dilution or

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enlargement of the benefits or potential benefits intended to be made available under this Plan, then the Administrator shall, in such manner as it may deem equitable to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, adjust as applicable: (A) the number and type of Shares subject to this Plan (including the number and type of Shares described in Sections 6(a), (b) and (d)) and which may after the event be made the subject of Awards; (B) the number and type of Shares subject to outstanding Awards; (C) the grant, purchase, or exercise price with respect to any Award; and (D) to the extent such discretion does not cause an Award that is intended to qualify as performance-based compensation under Code Section 162(m) to lose its status as such, the Performance Goals of an Award. In each case, with respect to Awards of incentive stock options, no such adjustment may be authorized to the extent that such authority would cause this Plan to violate Code Section 422(b).

          Without limitation, in the event of any reorganization, merger, consolidation, combination or other similar corporate transaction or event, whether or not constituting a Change of Control (other than any such transaction in which the Company is the continuing corporation and in which the outstanding Stock is not being converted into or exchanged for different securities, cash or other property, or any combination thereof), the Administrator may substitute, on an equitable basis as the Administrator determines, for each Share then subject to an Award and the Shares subject to this Plan (if the Plan will continue in effect), the number and kind of shares of stock, other securities, cash or other property to which holders of Stock are or will be entitled in respect of each Share pursuant to the transaction.

          Notwithstanding the foregoing, in the case of a stock dividend (other than a stock dividend declared in lieu of an ordinary cash dividend) or subdivision or combination of the Shares (including a reverse stock split), if no action is taken by the Administrator, adjustments contemplated by this subsection that are proportionate shall nevertheless automatically be made as of the date of such stock dividend or subdivision or combination of the Shares.

     (b) Issuance or Assumption. Notwithstanding any other provision of this Plan, and without affecting the number of Shares otherwise reserved or available under this Plan, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, the Administrator may authorize the issuance or assumption of awards under this Plan upon such terms and conditions as it may deem appropriate.

     (c) Change of Control. If the Participant has in effect an employment, retention, change of control, severance or similar agreement with the Company or any Affiliate that discusses the effect of a Change of Control on the Participant’s Awards, then such agreement shall control. In all other cases, unless provided otherwise in an Award agreement, in the event of a Change of Control:

     (i) Each Option or SAR that is then held by a Participant who is employed by or in the service of the Company or an Affiliate shall become immediately and fully vested, and, unless otherwise determined by the Board or Committee, all Options and SARs shall be cancelled on the date of the Change of Control in exchange for a cash payment equal to the excess of the Change of Control price of the Shares covered by the Option or SAR that is so cancelled over the purchase or grant price of such Shares under the Award;

     (ii) Restricted Stock, Restricted Stock Units and Deferred Stock Rights (that are not Performance Awards) that are not then vested shall vest;

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     (iii) All Performance Awards that are earned but not yet paid shall be paid, and all Performance Awards for which the performance period has not expired shall be cancelled in exchange for a cash payment equal to the amount that would have been due under such Award(s) if the Performance Goals (as measured at the time of the Change of Control) were to continue to be achieved at the same rate through the end of the performance period, or if higher, assuming the target Performance Goals had been met at the time of such Change of Control; and

     (iv) All Dividend Equivalent Units that are not vested shall vest and be paid in cash, and all other Awards that are not vested shall vest and if an amount is payable under such vested Award, such amount shall be paid in cash based on the value of the Award.

          If the value of an Award is based on the Fair Market Value of a Share, Fair Market Value shall be deemed to mean the per share Change of Control price. The Administrator shall determine the per share Change of Control price paid or deemed paid in the Change of Control transaction.

          Except as otherwise expressly provided in any agreement between a Participant and the Company or an Affiliate, if the receipt of any payment by a Participant under the circumstances described above would result in the payment by the Participant of any excise tax provided for in Section 280G and Section 4999 of the Code, then the amount of such payment shall be reduced to the extent required to prevent the imposition of such excise tax.

     17. Miscellaneous.

     (a) Other Terms and Conditions. The grant of any Award may also be subject to other provisions (whether or not applicable to the Award granted to any other Participant) as the Administrator determines appropriate, including, without limitation, provisions for:

     (i) the payment of the purchase price of Options by delivery of cash or other Shares or other securities of the Company (including by attestation) having a then Fair Market Value equal to the purchase price of such Shares, or by delivery (including by fax) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the Shares and deliver the sale or margin loan proceeds directly to the Company to pay for the exercise price;

     (ii) restrictions on resale or other disposition of Shares; and

     (iii) compliance with federal or state securities laws and stock exchange requirements.

     (b) Employment and Service. The issuance of an Award shall not confer upon a Participant any right with respect to continued employment or service with the Company or any Affiliate, or the right to continue as a Director. Unless determined otherwise by the Administrator, for purposes of the Plan and all Awards, the following rules shall apply:

     (i) a Participant who transfers employment between the Company and its Affiliates, or between Affiliates, will not be considered to have terminated employment;

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     (ii) a Participant who ceases to be a Non-Employee Director because he or she becomes an employee of the Company or an Affiliate shall not be considered to have ceased service as a Non-Employee Director with respect to any Award until such Participant’s termination of employment with the Company and its Affiliates;

     (iii) a Participant who ceases to be employed by the Company or an Affiliate and immediately thereafter becomes a Non-Employee Director, a non-employee director of an Affiliate, or a consultant to the Company or any Affiliate shall not be considered to have terminated employment until such Participant’s service as a director of, or consultant to, the Company and its Affiliates has ceased; and

     (iv) a Participant employed by an Affiliate will be considered to have terminated employment when such entity ceases to be an Affiliate.

          Notwithstanding the foregoing, for purposes of an Award that is subject to Code Section 409A, if a Participant’s termination of employment or service triggers the payment of compensation under such Award, then the Participant will be deemed to have terminated employment or service upon his or her “separation from service” within the meaning of Code Section 409A.

     (c) No Fractional Shares. No fractional Shares or other securities may be issued or delivered pursuant to this Plan, and the Administrator may determine whether cash, other securities or other property will be paid or transferred in lieu of any fractional Shares or other securities, or whether such fractional Shares or other securities or any rights to fractional Shares or other securities will be canceled, terminated or otherwise eliminated.

     (d) Unfunded Plan. This Plan is unfunded and does not create, and should not be construed to create, a trust or separate fund with respect to this Plan’s benefits. This Plan does not establish any fiduciary relationship between the Company and any Participant or other person. To the extent any person holds any rights by virtue of an Award granted under this Plan, such rights are no greater than the rights of the Company’s general unsecured creditors.

     (e) Requirements of Law and Securities Exchange. The granting of Awards and the issuance of Shares in connection with an Award are subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding any other provision of this Plan or any award agreement, the Company has no liability to deliver any Shares under this Plan or make any payment unless such delivery or payment would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity, and unless and until the Participant has taken all actions required by the Company in connection therewith. The Company may impose such restrictions on any Shares issued under the Plan as the Company determines necessary or desirable to comply with all applicable laws, rules and regulations or the requirements of any national securities exchanges.

     (f) Governing Law. This Plan, and all agreements under this Plan, will be construed in accordance with and governed by the laws of the State of Minnesota, without reference to any conflict of law principles. Any legal action or proceeding with respect to this Plan, any Award or any award agreement, or for recognition and enforcement of any judgment in respect of this Plan, any Award or any award agreement, may only be heard in a “bench” trial, and any party to such action or proceeding shall agree to waive its right to a jury trial.

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     (g) Limitations on Actions. Any legal action or proceeding with respect to this Plan, any Award or any award agreement, must be brought within one year (365 days) after the day the complaining party first knew or should have known of the events giving rise to the complaint.

     (h) Construction. Whenever any words are used herein in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are used in the singular or plural, they shall be construed as though they were used in the plural or singular, as the case may be, in all cases where they would so apply. Title of sections are for general information only, and this Plan is not to be construed with reference to such titles.

     (i) Severability. If any provision of this Plan or any award agreement or any Award (i) is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any person or Award, or (ii) would disqualify this Plan, any award agreement or any Award under any law the Administrator deems applicable, then such provision should be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Administrator, materially altering the intent of this Plan, award agreement or Award, then such provision should be stricken as to such jurisdiction, person or Award, and the remainder of this Plan, such award agreement and such Award will remain in full force and effect.

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EX-10.2

Exhibit 10.2

PENTAIR, INC.

NON-QUALIFIED DEFERRED COMPENSATION PLAN

As Amended and Restated Through July 29, 2009

TABLE OF CONTENTS

Article I HISTORY, PURPOSE AND EFFECTIVE DATE OF PLAN		1
Article II DEFINITIONS AND CONSTRUCTION		3
Section 2.1.	Definitions.	3
Section 2.2.	Eligibility to Participate.	7
Section 2.3.	Purpose.	8
Section 2.4.	Construction.	8
Article III PARTICIPANT DEFERRALS		9
Section 3.1.	Election to Participate.	9
Section 3.2.	Amount of Participant’s Deferrals.	10
Section 3.3.	Payment of Deposits to Trustee.	11
Article IV EMPLOYER CONTRIBUTIONS		12
Section 4.1.	Employer Discretionary Contribution.	12
Section 4.2.	Employer Matching Contribution.	12
Section 4.3.	Limit on Compensation for Purposes of Employer Contributions.	13
Section 4.4.	Payment of Deposits to Trustee.	13
Article V TRUSTEE AND TRUST AGREEMENT		14
Section 5.1.	Appointment.	14
Section 5.2.	Fees and Expenses.	14
Section 5.3.	Use of Trust.	14
Section 5.4.	Responsibility and Authority for Fund Management.	14
Section 5.5.	Trust Assets.	15
Article VI INVESTMENT; PARTICIPANT’S ACCOUNTS		16
Section 6.1.	Allocation and Reallocation of Before-Tax Deposits and Employer Contributions.	16
Section 6.2.	Allocation of Deferred Equity Awards.	16
Section 6.3.	Investment of Deposits and Employer Contributions.	17
Section 6.4.	Participant’s Accounts.	18
Section 6.5.	Beneficiaries.	18
Article VII PAYMENT OF ACCOUNTS		19
Section 7.1.	Time and Form of Payments.	19
Section 7.2.	Distribution Due to Death.	20
Section 7.3.	Payment of Employer Contributions.	20
Section 7.4.	Later Payment Deferral Elections.	21
Section 7.5.	Miscellaneous.	21
Article VIII EMERGENCY WITHDRAWALS		22
Section 8.1.	Restricted Withdrawals.	22

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Article IX PLAN ADMINISTRATION		23
Section 9.1.	Committee.	23
Section 9.2.	Organization and Procedure.	24
Section 9.3.	Delegation of Authority and Responsibility.	24
Section 9.4.	Use of Professional Services.	24
Section 9.5.	Fees and Expenses.	24
Section 9.6.	Communications.	24
Section 9.7.	Claims.	25
Article X PLAN AMENDMENTS, PLAN TERMINATION, AND MISCELLANEOUS		26
Section 10.1.	Amendments and Termination.	26
Section 10.2.	Non-Guarantee of Employment.	27
Section 10.3.	Rights to Trust Asset.	27
Section 10.4.	Suspension of Rules.	27
Section 10.5.	Requirement of Proof.	28
Section 10.6.	Indemnification.	28
Section 10.7.	Non-Alienation and Taxes.	28
Section 10.8.	Not Compensation Under Other Benefit Plans.	29
Section 10.9.	Savings Clause.	29
Section 10.10.	Facility of Payment.	30
Section 10.11.	Requirement of Releases.	30
Section 10.12.	Board Action.	30
Section 10.13.	Computational Errors.	30
Section 10.14.	Unclaimed Benefits.	30
Section 10.15.	Communications.	30
Article XI TRANSITIONAL RULES		31
Section 11.1.	Introduction.	31
Section 11.2.	Amounts Deferred Under Prior Plan.	31

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PENTAIR, INC.

NON-QUALIFIED DEFERRED COMPENSATION PLAN

ARTICLE I
HISTORY, PURPOSE AND EFFECTIVE DATE OF PLAN

          Effective January 1, 1993, Pentair, Inc. (“Pentair”) established a non-qualified deferred compensation plan (the “Plan”) for the benefit of certain management and highly compensated employees of Pentair and various companies in the Pentair controlled group. Under the Plan as so initially established, eligible participants could elect to defer receipt of base and bonus compensation in exchange for the unfunded, unsecured promise of the participant’s employing company to pay the amounts deferred, plus earnings, at the time and in the manner selected by the participant when making a deferral election. Until the time of payment, the amounts deferred under the Plan, adjusted for any earnings credited with respect to those amounts, remain subject to the claims of the general creditors of the participant’s employing company.

          Pentair amended and restated the Plan, effective January 1, 1996, January 1, 1999, and January 1, 2002. As so amended and restated, the Plan continued to permit eligible employees of Pentair and its affiliates to defer receipt of base and bonus compensation in exchange for the unsecured promise of the participant’s employing company to pay these amounts, as adjusted for earnings or losses by reference to deemed investment options selected by each participant, and commencing January 1, 1996 provided for the replacement of benefits no longer available to certain participants under the Pentair Retirement Savings and Stock Incentive Plan due to certain limitations imposed by the Internal Revenue Code of 1986.

          Pentair amended the Plan in 2005 to reflect the 2004 acquisition of the WICOR, Inc. group of companies, and the extension of the Plan in 2005 to eligible employees of such group, and to qualify generally the Plan, the elections made thereunder, and the Plan’s administration, for amounts deferred and contributed for periods after 2004, by the provisions of Section 409A of the Internal Revenue Code of 1986 and guidance thereunder issued by the Internal Revenue Service.

          Pentair now hereby amends and restates the Plan effective January 1, 2009. This document reflects changes made to the Plan to reflect final Treasury Regulations under Section 409A of the Internal Revenue Code of 1986, as well as certain other changes. This document governs amounts deferred on or after January 1, 2005. Amounts deferred prior to January 1, 2005, are governed by terms of the Plan as in effect on December 31, 2004, which are contained in a separate document.

          The Plan is for the benefit of a select group of management and highly compensated employees. Benefits under the Plan are unfunded and unsecured general obligations of Pentair and its participating affiliates. Plan participants have the status of unsecured general creditors of their employing company. Any assets acquired or set aside for purposes of providing or measuring, or both, this deferred compensation may be held in a grantor

trust as the property of the participant’s employing company and subject to the claims of its general creditors. To the extent any assets are held in a grantor trust, the terms and provisions of the trust document will control in all cases where it is in conflict with the Plan.

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ARTICLE II
DEFINITIONS AND CONSTRUCTION

     Section 2.1. Definitions. Unless the context clearly or necessarily indicates the contrary, when capitalized the following words and phrases shall have the meanings shown when used in this Article or other parts of the Plan.

          (1) “Accounts” are the accounts under the Plan to be maintained for each Participant or the Beneficiary of a deceased former Participant.

          (2) “Administrator” is the person assigned by the Company or Committee to handle the day-to-day administration of the Plan.

          (3) “Base Compensation” is remuneration from which an Employee may elect before-tax deposits under the RSIP, with such remuneration determined without regard to the dollar limit imposed under Code section 401(a)(17), but excluding amounts included in Bonus Compensation; plus, if not taken into account as such remuneration under the RSIP but without duplication of an amount described in the immediately preceding sentence, any Before-tax Deposits. If and during the period an Employee is not eligible to participate in the RSIP, his or her Base Compensation shall be determined as through he or she were eligible to participate in the RSIP.

          (4) “Before-tax Deposits” are compensation deferrals of Base Compensation and/or Bonus Compensation made under the Plan at the election of a Participant pursuant to Article III.

          (5) “Beneficiary” is the individual, trust or other entity designated as such in writing by a Participant in accordance with applicable Plan provisions, or such person as otherwise determined under the Plan, to receive benefits accumulated hereunder in the event of the Participant’s death. If a Participant is married at the time of death, the sole Beneficiary shall be the Participant’s Spouse at such time unless the Spouse has otherwise waived or released the right to be named as a beneficiary hereunder, or to be considered as the Participant’s surviving Spouse for such purposes (e.g., an enforceable prenuptial agreement), as determined in the discretion of the Committee, or the Spouse has consented in writing to the designation of a different Beneficiary and such consent is witnessed by an authorized Plan representative or a notary public.

          (6) “Bonus Compensation” is compensation awarded to an Employee pursuant to the Employer’s annual performance-based management bonus plan or plans, and may also include other bonuses or other non-periodic items or performance-based compensation for services rendered, as determined by the Committee. Bonus Compensation includes only items from which an Employee may elect before-tax deposits under the RSIP determined without regard to the dollar limit imposed under Code section 401(a)(17). Bonus Compensation shall not include Equity Awards.

          (7) “Change in Control” or “CIC” is any one of the following:

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(i)	When a person, or more than one person acting as a group, acquires more than fifty percent (50%) of the total fair market value or total voting power of the Company’s stock;
(ii)	When a person, or more than one person acting as a group, acquires within a twelve (12) month consecutive period, ending with the date of the most recent stock acquisition, stock of the Company possessing at least thirty percent (30%) of the total voting power of the Company’s stock;
(iii)	When a majority of the members of the Company’s board of directors is replaced within a twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of such board as constituted before such appointment or election; or
(iv)	When a person, or more than one person acting as a group, acquires within a twelve (12) month consecutive period assets from the Company or an entity controlled by the Company that have a total gross fair market value equal to seventy-five percent (75%) of the total fair market value of the assets of the Company and all such entities.

Once a person or group acquires stock meeting the thresholds set forth in paragraphs (i) and (ii) immediately preceding, additional acquisitions of such stock by that person or group shall be ignored in determining whether another CIC has occurred. Asset transfers between or among controlled entities as determined before such transfers shall not be considered in applying paragraph (iv) immediately preceding. This provision shall be interpreted and administered in a manner consistent with the definition of a “change of control” under Code section 409A.

          (8) “Code” is the Internal Revenue Code of 1986, as amended and in effect from time to time. Any reference to a specific provision of the Code shall be deemed to refer to successor provisions thereto and the regulations promulgated thereunder.

          (9) “Committee” is the Committee described in Article IX.

          (10) “Company” is Pentair, Inc., a Minnesota corporation, or any successor thereto.

          (11) “Disabled” or “Disability” is a physical or mental condition, resulting from physical or mental sickness or injury, which prevents the individual while an Employee from engaging in any substantial gainful activity, and which condition can be expected to last for a continuous period of not less than twelve (12) months. For purposes of applying Section 3.2(c), however, the immediately preceding sentence shall be applied by substituting “six (6) months” for “twelve (12) months.”

          (12) “Employee” is an individual who is (i) employed by a Participating Employer, (ii) a highly compensated or key management employee of a Participating Employer as determined by the Committee, (iii) in an employment position or salary grade classified by the Company as eligible to participate in the Plan, and (iv) eligible to participate in the RSIP. In the event an individual satisfies the foregoing requirements except he or she is not eligible to

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participate in the RSIP (e.g., an individual within an employee group to which the RSIP has not been extended), such individual may, in the discretion of the Committee, be considered an Employee solely for purposes of allowing such individual to elect Before-tax Deposits and not for purposes of being eligible for Employer Contributions.

          (13) “Employer” is the Company and, except as prescribed by the Committee, each other corporation or unincorporated business which is a member of a controlled group of corporations or a group of trades or businesses under common control (within the meaning of Code section 414(b) or (c)) which includes the Company, but with respect to other business entities during only the periods of such common control with the Company.

          (14) “Employer Contributions” are amounts contributed under the Plan by Participating Employers pursuant to Article IV, and includes Employer Discretionary Contributions described in Section 4.1 and Employer Matching Contributions described in Section 4.2.

          (15) “Equity Awards” are stock-related awards granted under the Omnibus Incentive Plan that are designated as eligible to be deferred under this Plan in the award letter or other document evidencing such award.

          (16) “ERISA” is the Employee Retirement Income Security Act of 1974, as amended. Any reference to a specific provision of the Code shall be deemed to refer to successor provisions thereto and the regulations promulgated thereunder.

          (17) “Fair Market Value” has the meaning ascribed in the Omnibus Incentive Plan.

          (18) “Investment Fund” is a deemed investment made available by the Committee and selected (or deemed selected) by a Participant for purposes of crediting investment earnings and losses to a Participant’s Account.

          (19) “Omnibus Incentive Plan” is the Pentair, Inc. 2008 Omnibus Stock Incentive Plan, or any successor thereto, as it may be amended from time to time.

          (20) “Participant” is an individual who has validly elected to participate hereunder and who has elected Before-tax Deposits, deferrals of Equity Awards or is entitled to receive Employer Contributions. An individual who has become a Participant shall continue as a Participant until the earlier of his or her death and the date the balance in his or her Account has been paid.

          (21) “Participating Employer” is the Company and each other Employer, except as otherwise prescribed by the Committee or the terms of any purchase agreement entered into with respect to the Company’s or an affiliates acquisition of such Employer.

          (22) “Performance-Based Compensation” is Bonus Compensation or Equity Awards the amount of which, or the entitlement to which, is contingent on the satisfaction of preestablished organizational or individual performance criteria relating to a performance period of at least twelve (12) months. Goals are considered preestablished if established in writing no

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later than ninety (90) days after the commencement of the performance period. Performance-Based Compensation does not include any amount or payment that will be paid either regardless of performance, or based upon a level of performance that is substantially certain to be met at the time the criteria is established. Notwithstanding the foregoing, Bonus Compensation or Equity Awards will be considered Performance-Based Compensation if the compensation will be paid regardless of satisfaction of the performance goals in the event of the Participant’s death, Disability or a CIC, provided that payment under such circumstances without regard to the satisfaction of the performance criteria will not constitute Performance-Based Compensation.

          (23) “Plan Year” is the calendar year.

          (24) “Pre-Deferral Compensation” is the combined amount of Base and Bonus Compensation which would have been paid in a Plan Year but for a Before-tax Deposit election hereunder or a before-tax deposit election under the RSIP, or both.

          (25) “Retirement” is an individual’s Separation from Service on or after the attainment of age fifty-five (55) and the completion of at least ten (10) years of service with one or more Employers.

          (26) “RSIP” is the Pentair, Inc. Retirement Savings and Stock Incentive Plan, as amended, or any successor plan thereto.

          (27) “Separation from Service” is the termination of employment as an employee, from all business entities that comprise the Employer, for reasons other than death or Disability. A Participant will be deemed to have incurred a Separation from Service when the level of bona fide services performed by the Participant for the Employer permanently decreases to a level equal to twenty percent (20%) or less of the average level of services performed by the Participant for the Employer during the immediately preceding thirty-six (36) month period (or such lesser period of service). Notwithstanding the foregoing, a Participant on a bona fide leave of absence from an Employer shall be considered to have incurred a Separation from Service no later than the six (6) month anniversary of the absence (or twenty-nine (29) months in the event of an absence due to a Disability described in the last sentence of Section 2.1(11)) or the end of such longer period during which the individual has the right by law or agreement to return to employment upon the expiration of the leave. Notwithstanding the foregoing, if following the Participant’s termination of employment from the Employer the Participant becomes a non-employee director or becomes or remains a consultant to the Employer, then the date of the Participant’s Separation from Service may be delayed until the Participant ceases to provide services in such capacity to the extent required by Code section 409A.

          (28) “Share” is a share of the Company’s Common Stock, par value of $0.16-2/3. No Shares have been authorized for issuance under this Plan. All Shares payable under this Plan are issued from the Omnibus Incentive Plan.

          (29) “Share Unit Fund” is the Investment Fund described in Section 6.2(b), which is deemed invested in Shares. The Share Unit Fund shall be used solely as a means to track deferrals of Equity Awards.

          (30) “Share Unit” is a unit that has a value equal to one Share.

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          (31) “Specified Employee” is a Participant who is a key employee for a Plan Year, with such status as to that period becoming effective as of April 1st next following such Plan Year and lasting until the following April 1st. A key employee is an employee of an Employer who (i) at any time during the Plan Year owns at least five percent (5%) of the stock (or capital or profits interest) of an Employer, (ii) owns one percent (1%) of the stock (or capital or profits interest) of an Employer and whose compensation exceeds the dollar limit for such period described in Code section 416(1)(iii), or (iii) is an officer of an Employer and whose compensation exceeds the dollar limit for such period described in Code section 416(1)(i), as adjusted. No more than the lesser of fifty (50) employees or ten percent (10%) of all employees shall be treated as officers for that period by reason of clause (iii) immediately preceding. In the event the number of officers exceeds such number, the employees included in such number will be those with the highest compensation for that period.

          (32) “Spouse” is an individual, of a sex opposite to that of a Participant, whose marriage to a Participant is recognized under the laws of the United States (or one of the United States) or any other generally recognized jurisdiction.

          (33) “Trust” is the Pentair, Inc. Non-Qualified Deferred Compensation Plan Trust.

          (34) “Trustee” is the person appointed as the trustee under the Trust.

          (35) “Unforeseeable Emergency” is a severe financial hardship to the Participant resulting from: an illness or accident to the Participant or his or her Spouse or tax-dependent; the loss of a home due to an uncompensated (by insurance or otherwise) casualty; and other similar extraordinary and unforeseeable circumstances beyond the control of the Participant.

          (36) “Valuation Date” is, with respect to Investment Funds which correspond to funds available under the RSIP, a date as of which such corresponding funds are valued under the RSIP; with respect to other Investment Funds, it is the last day of each Plan Year and such other dates as are prescribed by the Committee.

     Section 2.2. Eligibility to Participate.

          (a) Eligibility to Make Before-tax Deposits and Deferrals of Equity Awards. Subject to the provisions of Article III, all Employees are eligible to elect Before-tax Deposits and to defer Equity Awards.

          (b) Eligibility for Employer Contributions. Employees eligible to receive an Employer Discretionary Contribution for a Plan Year are described in Section 4.1(a), and Employees eligible to receive an Employer Matching Contribution for a Plan Year are described in Section 4.2(a).

          (c) Suspension of Eligibility. (1) Failure to Qualify as an Employee. Once an individual becomes an Employee, such individual shall remain an Employee, regardless of the identity of his or her Participating Employer, so long as he or she continues to be described in Section 2.1(12). In the event an individual becomes an Employee and thereafter remains

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employed by an Employer but not as an Employee or such Employer is not then a Participating Employer, except as directed by the Committee such individual’s eligibility to elect Before-tax Deposits or deferrals of Equity Awards shall be suspended at the end of the Plan Year in which such status change occurs and such individual’s eligibility to receive an allocation of Employer Contributions shall be suspended immediately on the date such status change occurs.

          (2) Resumption. Upon resuming status as an Employee, an individual whose eligibility to participate in the Plan has been suspended may again elect Before-tax Deposits or deferrals of Equity Awards under the Plan pursuant to the provisions of Article III.

     Section 2.3. Purpose. As a tax-qualified plan, the RSIP is subject to various Code provisions which limit artificially the contributions which can be made on behalf of participants. The Plan is designed to offer the same contribution formulas (without duplication) as are offered under the RSIP but without regard to such Code provisions, including Code sections 401(a)(17) (compensation cap), 401(k) and 401(m) (annual discrimination tests and related rules for elective and matching contributions), 402(g) and 414(v) (annual dollar limit on elective contributions), and 415(c) (limit on annual additions). In addition, the Plan is designed to offer participants the ability to defer certain items of compensation that would not be able to be deferred under the RSIP, such as equity awards granted under the Omnibus Incentive Plan. It is intended that all Accounts represent retirement income within the meaning of 4 USC § 114(b)(1)(I)(ii) if paid after termination of employment. The Plan is not solely intended to provide benefits in excess of the Code section 415 limits, however, and therefore it is not an “excess benefit plan” as defined in ERISA section 3(36).

     Section 2.4. Construction.

          (a) General. Wherever any words are used herein in the singular, masculine, feminine or neuter form, they shall be construed as though they were used in the plural, feminine, masculine or non-neuter form, respectively, in all cases where such interpretation is reasonable. The words “hereof ,” “herein,” “hereunder,” and other similar compounds of the word “here” shall mean and refer to this entire document and not to any particular Article or Section. Titles of Articles and Sections are for general information only, and the Plan is not to be construed by reference thereto.

          (b) Applicable Law. To the extent not preempted by ERISA or any other federal statute, the Plan shall be construed and its validity determined according to the substantive laws of the State of Minnesota, without reference to conflict of law principles thereof. In case any provision of the Plan shall be held illegal or invalid for any reason, the Plan shall be construed and enforced as if it did not include such provision.

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ARTICLE III
PARTICIPANT DEFERRALS

     Section 3.1. Election to Participate.

          (a) General. (1) Annual Election. Prior to January 1 of each Plan Year, an Employee may elect: (A) to make Before-tax Deposits from his or her Base Compensation that will be earned and paid in such Plan Year, (B) to make Before-tax Deposits from his or her Bonus Compensation that will be earned (or begin to be earned) in such Plan Year, (C) to defer all or a portion of his or her Equity Awards that will be granted in such Plan Year (for this purpose, an Equity Award shall be considered granted when the Company takes action to approve such grant), and (D) the form and time of distribution of the Account with respect to such Plan Year, as permitted by Section 7.1(b). Such election shall be made as of the times the Committee may prescribe and shall be irrevocable as of December 31 of the year immediately preceding the Plan Year for which such elections are effective.

          (2) Mid-Year Elections: Bonus Compensation or Equity Award. If and to the extent allowed by the Committee, an Employee also may elect Before-tax Deposits from his or her Bonus Compensation and may elect to defer all or a portion of his or her Equity Awards as follows:

(i)	If the Bonus Compensation or Equity Award qualifies as Performance-Based Compensation, the election may be made no later than six (6) months before the end of the performance period; or
(ii)	If the Bonus Compensation or Equity Award is subject to a substantial risk of forfeiture that will not lapse until at least thirteen (13) months after the date of award or grant (or earlier upon death, Disability or a CIC), the election may be made no later than the first thirty (30) days after the date of award or grant; provided that if the Bonus Compensation actually vests within the first thirteen (13) months by reason of the Employee’s death, Disability, or a CIC, then the deferral election shall be cancelled; or
(iii)	If the Bonus Compensation or Equity Award is subject to a substantial risk of forfeiture that will not lapse until at least one year after the date of grant, the election may be made at least one year prior to the date such award will vest, provided that the amount is deferred for a minimum of five (5) years from the date the Bonus Compensation or Equity Award vests.

          Such election shall be made as of the times the Committee may prescribe and shall be irrevocable as of the latest date permitted hereunder. If an Employee has not previously elected a time and form of distribution with respect to the Account to which the deferrals described herein will be credited, he or she may do so as part of his or her deferral election hereunder.

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          (b) Participation During Plan Year.

          (1) Initial Participation. An Employee who first becomes eligible to participate in the Plan during a Plan Year may elect, within the first thirty (30) days of becoming so eligible, (A) Before-tax Deposits from his or her Base Compensation for that Plan Year earned and paid after such election, and (B) the form and time of distribution of the Account with respect to such Plan Year, as permitted by Section 7.1(b). Such individual may also make the elections described in Section 3.1(a)(2), if applicable.

          (2) Resumption of Participation. An individual who has been eligible to participate in the Plan, who loses such eligibility by reason of a Separation from Service or otherwise, and who again becomes eligible to participate in the Plan, shall not be eligible to participate in the Plan for purposes of authorizing Before-tax Deposits or deferrals of Equity Awards, and shall not be eligible to receive an allocation of Employer Contributions, for the Plan Year in which he or she again becomes so eligible unless he or she (i) has not been eligible to make Before-tax Deposits or deferrals of Equity Awards for two (2) or more consecutive years or (ii) has previously incurred a Separation from Service and been paid all benefits under the Plan after such separation and before again becoming eligible for the Plan.

     Section 3.2. Amount of Participant’s Deferrals.

          (a) Deferral Elections. At the time an Employee elects to make Before-tax Deposits or defer an Equity Award for a Plan Year, he or she shall designate the percentage of Base Compensation, Bonus Compensation, or Equity Awards to be deferred. Except as described subsection (c), the percentage elected shall be irrevocable with respect to the compensation to which it relates. In the event a payroll period with respect to Base Compensation straddles the end of a Plan Year, the election, if any, to defer for the Plan Year in which the payroll period ends shall control the amount or rate to be deferred.

          (b) Maximum Deferrals and Coordination with the RSIP. The maximum deferrals which may be elected by a Participant for a Plan Year shall be established from time to time by the Committee and may be expressed as a maximum amount or percentage. Different maximums may be applied to deferrals of Base, Bonus Compensation, and Equity Awards or different items of Bonus Compensation and Equity Awards. Such maximums shall be established before a Plan Year and shall apply throughout that year, or shall apply to the award to which the maximum relates. Any such maximums on Base and Bonus Compensation shall be first absorbed by Before-tax Deposits and then, to the extent the maximum has not been reached, by before-tax deposits under the RSIP.

          (c) Intra-Year Cessation of Before-tax Deposits. In the event a Participant dies, becomes Disabled, or, as directed by the Committee, applies for and is granted a distribution pursuant to Article VIII, Before-tax Deposits on behalf of such Participant for the balance of the Plan Year shall be suspended. The suspension shall be effective no later than the second payroll period ending after the Participant’s death; two and one-half (2-1/2) months after the Participant becomes Disabled; or the second payroll period ending after the Committee approves the distribution and directs the suspension, whichever is applicable.

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     Section 3.3. Payment of Deposits to Trustee. Unless otherwise directed by the Committee, a Participating Employer shall remit amounts withheld as Before-tax Deposits to the Trustee as soon as administratively feasible after such amounts are withheld. In the event the Committee so otherwise directs or if the Trust (or some other funding arrangement) does not then exist, then the amounts so withheld shall be retained by the Participating Employer as part of its general assets and, in order to determine investment earnings and losses thereon, shall be allocated to one or more Investment Funds as determined by the Committee no later than the first day of the second calendar month immediately following the calendar month of such withholding.

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ARTICLE IV
EMPLOYER CONTRIBUTIONS

     Section 4.1. Employer Discretionary Contribution.

          (a) Eligibility for Employer Discretionary Contributions. Employees eligible to receive an Employer Discretionary Contributions for a Plan Year shall be those individuals

(i)	eligible to elect Before-tax Deposits for that year;
(ii)	who are eligible to receive an employer discretionary contribution under the RSIP for that year,
(iii)	whose covered compensation under the RSIP for that Plan Year is:

(1)	actually limited by the applicable dollar amount provided for under Code section 401(a)(17), or
(2)	reduced by reason of Before-tax Deposits; and

(iv) who are employed by an Employer as of the end of that Plan Year; provided, however, that such year-end employment shall not be required for the year in which employment ends due to death, Disability, or Retirement.

          (b) Amount of Discretionary Contribution. Participating Employers shall make an Employer Discretionary Contribution on behalf of their eligible Employees for a Plan Year in an amount equal to (i) the employer standard discretionary contribution rate in effect under the RSIP for the Plan Year (as determined by the Committee) multiplied by the eligible Employee’s Pre-Deferral Compensation for the Plan Year, up to the applicable dollar limit under Section 4.3, less (ii) the employer standard discretionary contribution (as determined by the Committee) made on behalf of such Employee to the RSIP for that year.

     Section 4.2. Employer Matching Contribution.

          (a) Eligibility for Employer Matching Contributions. Employees eligible to receive an Employer Matching Contribution for a Plan Year shall be those individuals

(i)	who are eligible to receive an employer matching contribution under the RSIP for such year,
(ii)	whose covered compensation under the RSIP for that Plan Year is:

(1)	actually limited by the applicable dollar amount provided for under Code section 401(a)(17), or
(2)	reduced by reason of Before-tax Deposits; and

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(iii) who are employed by an Employer as of the end of that Plan Year; provided, however, that such employment shall not be requested for the year in which such employment ends due to death, Disability, or Retirement.

          (b) Amount of Matching Contribution. With respect to each Employee eligible to receive an Employer Matching Contribution for a Plan Year, that Employee’s Participating Employer shall contribute a matching contribution equal to A — B, where A equals the matching contribution which would have been made on his or her behalf under the RSIP for that year assuming:

(i)	the covered compensation limit thereunder was the applicable dollar limit for that year under Section 4.3,
(ii)	the provisions of Code sections 401(k) and (m), 402(g), 414(v), and 415(c) (and any similar or analogous Code limits on the amount or rate of contributions under the RSIP) did not apply,
(iii)	all Before-tax Deposits for such year had been made for that year under the RSIP,
(iv)	covered compensation thereunder included Before-tax Deposits made with respect to that year, and

B equals the matching contributions made on his or her behalf under the RSIP for that year. In determining B, payment of the matching contribution to the Employee under the RSIP to satisfy Code section 401(m) shall be ignored but any forfeiture of such contribution shall, if in fact taken into account in determining B, reduce B.

     Section 4.3. Limit on Compensation for Purposes of Employer Contributions. The maximum amount of the aggregate of a Participant’s Base Compensation and Bonus Compensation that will be considered for purposes of determining Employer Contributions shall be established from time to time by the Committee and shall be communicated to the Participants. For the Plan Year beginning January 1, 2008, the maximum amount of the aggregate of a Participant’s Base Compensation and Bonus Compensation for purposes of determining Employer Contributions shall be $700,000.

     Section 4.4. Payment of Deposits to Trustee. Unless otherwise directed by the Committee, a Participating Employer shall pay its share of the Employer Contributions for a Plan Year as soon as administratively feasible after the entire Employer Contribution for such year has been determined. In the event the Committee so otherwise directs or if the Trust (or some other funding arrangement) does not then exist, then such share shall be retained by the Participating Employer as part of its general assets and, in order to determine investment earnings and losses thereon, shall be allocated to one or more Investment Funds as determined by the Committee no later than the first day of the calendar month immediately following the calendar month in which such entire Contribution has been determined.

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ARTICLE V
TRUSTEE AND TRUST AGREEMENT

     Section 5.1. Appointment.

          (a) General. The Plan is an unfunded deferred compensation arrangement. Neither the Company nor any Participating Employer shall be required to establish a trust or to in any way segregate assets for purposes of funding or otherwise providing benefits under the Plan. The Company may, however, in its sole discretion, establish and maintain an unfunded grantor trust with one or more persons selected by the Committee to act as Trustee. If a Trustee is so appointed, such Trustee shall hold, manage, administer and invest the assets of the Trust, reinvest any income, and make distributions in accordance with the directions of the Committee and the provisions of the Plan and Trust. The trust agreement shall be in such form and contain such provisions as the Committee deems necessary and appropriate to effectuate the purposes of the Plan. The terms and provisions of the trust agreement shall control in case of a conflict between the terms and provisions of such agreement and the terms and provisions of the Plan.

          (b) Removal and Resignation. Pursuant to the notice requirements and other procedures contained in the Trust agreement, and in accordance with the Trust agreement, the Committee may, at any time and from time to time, remove a Trustee or any successor Trustee and any such Trustee or any successor Trustee may resign. If the provisions of the Trust agreement remain in effect at the time of removal or resignation of the Trustee, the Committee shall appoint a successor Trustee.

     Section 5.2. Fees and Expenses. Except as directed by the Company, the Trustee’s fee, and related fees and expenses, shall be paid by the Company and Participating Employers. Brokerage fees, asset-based fees for custodial, investment and management services, and other investment expenses (e.g., participant record-keeping fees) which relate to Investment Funds, shall be paid out of the Trust and charged to the fund of the Trust and the Accounts of the Participant to which such fees and costs are attributable.

     Section 5.3. Use of Trust. To the extent any assets are held in the Trust, such assets shall at all times be the property of the Company or a Participating Employer and, as such, shall remain subject to the claims of general creditors of the Company or the Participating Employer, as the case may be, in the event of bankruptcy or insolvency. No Participant or Beneficiary shall by reason of the Plan and Trust have any rights to any assets of the Trust, the Company or a Participating Employer nor to Investment Funds or other property generally, and neither the existence of the Plan nor the establishment of a Trust shall be interpreted or construed as a guaranty that any funds which may be held in trust will be available or sufficient for the payment of benefits under the Plan.

     Section 5.4. Responsibility and Authority for Fund Management. The Company may, in its sole discretion, establish and maintain a funding policy, and may delegate to the Committee the following duties and authority:

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(i)	to establish Investment Funds for purposes of crediting investment earnings and losses to Accounts, including the authority to add to or change the number and nature of the Investment Funds from time to time;
(ii)	to direct the investment and reinvestment of all or any portion of the assets, if any, held by the Trustee under the Trust; and
(iii)	to periodically review the performance of the Investment Funds.

     Section 5.5. Trust Assets. Neither the Company, a Participating Employer nor the Trustee shall be obligated to purchase any asset or Investment Fund designated by a Participant pursuant to the provisions of Article VI for purposes of crediting investment earnings and losses to such Participant’s Accounts. To the extent the Company and Participating Employers remit Before-tax Deposits or Employer Contributions to the Trustee, however, and the Investment Fund designated by the Participant as a deemed investment for his or her Accounts consists of an asset which the Trustee cannot purchase or an investment which is not readily available on the open market, the Trustee shall, subject to the direction of the Committee, return any such amounts to the Company and Participating Employers in the form of cash. To the extent a Participant reallocates all or a portion of the balance in his or her Accounts into an Investment Fund which consists of an asset the Trustee cannot purchase, the Trustee shall withdraw from the Trust cash equal to the fair market value of such investment designation and return such cash to the Company or other Participating Employers.

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ARTICLE VI
INVESTMENT; PARTICIPANT’S ACCOUNTS

     Section 6.1. Allocation and Reallocation of Before-Tax Deposits and Employer Contributions.

          (a) Allocation. For purposes of crediting earnings to his or her Accounts, a Participant shall elect to allocate Before-tax Deposits and Employer Contributions to one or more of the Investment Funds. A Participant may elect to change the mix of such allocations in accordance with rules prescribed by the Committee. An election under this Section 6.1(a) shall remain in effect unless changed by the Participant; provided, however, that neither the Company, a Participating Employer, the Committee nor the Trustee shall be obligated to purchase any investment designated by a Participant. Investment Funds are selected by a Participant solely for purposes of determining the investment earnings and losses to be credited to a Participant’s Accounts.

          (b) Reallocation. In accordance with rules prescribed by the Committee, a Participant may reallocate the balance credited to his or her Accounts among the available Investment Funds. Any such reallocation shall apply to the entire balance of such Accounts attributable to participation in the Plan, and not just to Before-tax Deposits and Employer Contributions made subsequent to such reallocation.

          (c) Participant-Directed Investment. (1) General. The availability of Investment Funds for purposes of crediting earnings to Accounts is not a recommendation to designate a deemed investment in any one Investment Fund. The selection of deemed investments is solely the responsibility of each Participant. No officer, employee or other agent of an Employer or the Trustee is authorized to advise or make any recommendation concerning the selection of Investment Funds and no such person is responsible for determining the suitability or advisability of any such selection.

          (2) Participant Responsibility. Participants shall be solely responsible for selecting, monitoring, and changing the Investment Funds in or by which their Account balances are invested. Neither the Company, a Participating Employer, Committee member, nor the Administrator shall be responsible for such investment decisions. To the extent a Participant does not expressly exercise investment discretion over his or her Accounts, he or she shall be deemed to have elected to direct investments to or by the same Investment Fund used for such purposes under the RSIP, except as otherwise provided by the Committee.

     Section 6.2. Allocation of Deferred Equity Awards.

          (a) Allocation. Deferrals of Equity Awards shall be automatically allocated to the Share Unit Fund on the date of vesting, unless otherwise determined by the Committee. A Participant shall not have the right to re-allocate such deferrals out of the Share Unit Fund.

          (b) Share Unit Fund. A deferral of an Equity Awards shall be allocated, to the Share Unit Fund as follows: (i) if the deferral relates to Shares, or Equity Awards whose value equals the Fair Market Value of a Share, the Participant’s Account shall be credited with a number of Shares Units equal to the number of Shares (or Share-related Equity Awards)

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deferred, or (ii) if the deferral relates to cash (such as dividend equivalents), such amount shall be converted to whole and fractional Share Units, with fractional units calculated to three decimal places, by dividing the amount to be allocated by the Fair Market Value of a Share on the effective date of such allocation. If any dividends or distributions (other than in the form of Shares) are paid on Shares while a Participant has Share Units credited to his Account, such Participant shall be credited with additional Shares Units equal to the amount of the cash dividend paid or Fair Market Value of other property distributed on one Share, multiplied by the number of Share Units credited to the Participant’s Account on the date the dividend is declared. Any other provision of this Plan to the contrary notwithstanding, if a dividend is paid on Shares in the form of a right or rights to purchase shares of capital stock of the Company or any entity acquiring the Company, no additional Share Units shall be credited to the Participant’s Account with respect to such dividend, but each Share Unit credited to a Participant’s Account at the time such dividend is paid, and each Share Unit thereafter credited to the Participant’s Account at a time when such rights are attached to Shares, shall thereafter be valued as of any point in time on the basis of the aggregate of the then Fair Market Value of one Share plus the then Fair Market Value of such right or rights then attached to one Share.

          (c) Transactions Affecting Common Stock. In the event of any transaction affecting Shares that would cause an adjustment to be made under Section 16(a) of the Omnibus Incentive Plan, the Committee may make appropriate equitable adjustments with respect to the Share Units credited to the Account of each Participant, including without limitation, adjusting the date as of which such units are valued and/or distributed, as the Committee determines is necessary or desirable to prevent the dilution or enlargement of the benefits intended to be provided under the Plan.

          (d) No Shareholder Rights With Respect to Share Units. Participants shall have no rights as a stockholder pertaining to Share Units credited to their Accounts.

     Section 6.3. Investment of Deposits and Employer Contributions. The Committee may, in its discretion, direct the Trustee to invest a Participant’s Before-tax Deposits and Employer Contributions in the Investment Funds designated by the Participant, to the extent such investment is available on the open market and can be purchased by the Trustee and owned by the Trust. Regardless of whether any deposits or Employer Contributions are actually invested in the Investment Funds designated by Participants, however, the Committee shall maintain a bookkeeping account on behalf of each Participant to which shall be credited the investment results of each Investment Fund so designated to adjust the amounts in each Participant’s Accounts. At least each calendar quarter, the Committee shall make available or cause to be made available a report or other information indicating the increase or decrease in the value of each Participant’s Accounts. Any earnings of an Investment Fund shall be deemed to be reinvested in the same Investment Fund for purposes of maintaining a Participant’s Accounts.

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     Section 6.4. Participant’s Accounts.

          (a) Establishment of Accounts. Separate Accounts shall be established and maintained for each Participant by Plan Year and Investment Fund. To the extent necessary or appropriate to provide for proper administration of the Plan, including the tracking of payment date and form elections, a Participant’s Account for a Plan Year shall include separate balances or subaccounts for interests derived from Before-tax Deposits, deferred Equity Awards, Employer Contributions and such other separate balances as the Committee shall determine. The Committee shall also identify or otherwise maintain separate Accounts or subaccounts for Participants by reference to the identity of the Participant’s Employer, to the extent practicable.

          (b) Crediting of Accounts. The appropriate Accounts of each Participant shall be credited with the amounts of Before-tax Deposits, deferred Equity Awards and Employer Contributions made for each Plan Year. The reallocation of a Participant’s Accounts, if permitted, shall be appropriately credited as of the Valuation Date coincident with or next following the effective date of the reallocation. The maintenance of such Accounts shall not, however, entitle a Participant to any ownership, preferred claim or beneficial interest in any Investment Fund or in any specific asset of the Trust. Investment Funds are deemed investments and used solely for purposes of determining the earnings and losses to be credited to a Participant’s Accounts.

          (c) Vesting of Accounts. A Participant’s Account shall be fully vested, except that the portion of the Account arising from the deferral of an Equity Award shall vest in accordance with the terms of the Equity Award to which it relates.

     Section 6.5. Beneficiaries. The foregoing provisions of this Article VI shall be applied, to the extent relevant, with respect to Accounts payable under the Plan to a Beneficiary of a deceased former Participant.

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ARTICLE VII
PAYMENT OF ACCOUNTS

     Section 7.1. Time and Form of Payments.

          (a) General. Except as otherwise provided in the Plan, a Participant shall receive his or her entire vested Account balance allocable to a Plan Year in a lump sum within ninety (90) days of the first to occur of his or her (i) Separation from Service, (ii) Disability, or (iii) a CIC. In the event the payment event is due to a Separation from Service and as of the date of the Separation from Service the Participant is a Specified Employee, however, the lump sum shall be paid within thirty (30) days after the six (6) month anniversary of such date.

          (b) Election of Distribution. A Participant may elect, in accordance with Section 3.1 and subject to such limitations as may be prescribed by the Committee, to receive distribution of his or her vested Account balance allocable to a Plan Year:

          (1) Time of Payment. As of one specific future date, provided such date is at least two (2) years following the last date by which such an election can be made for that year (or with respect to the portion of the Account relating to an Equity Award, the date the award is fully vested, if later) and such date cannot be more than five (5) years after the earlier of the date the Participant becomes Disabled and the date he or she has a Separation from Service. In the event the date finally selected is less than two (2) years, the Participant shall be treated as having not made a specific date election for that year, or, by reason of subsequent event, is more than five (5) years after the relevant date, the Participant shall be treated as having selected the fifth (5th) anniversary of such date as the date of payment. Except as provided in Section 8.5, such an election once finally effective cannot be changed by the Participant.

          (2) Calculation of Payment. In annual installments over five (5) or ten (10) years. Each such installment shall be determined by using the vested Account balance for such year as of the most recent Valuation Date before the payment date and dividing such balance by the number of years left in the installment period and the final installment shall include the remaining vested Account balance. The second year and later installments shall be paid, as far as practicable, on the anniversary date of the first installment. Except as provided in Section 7.4, such an election once finally effective cannot be changed by the Participant. In the event the payment event is due to a Separation from Service, and as of the date of Separation from Service the Participant is a Specified Employee, however, the first installment payment may not be made until after the six (6) month anniversary of such date.

          (c) Form of Payment. All payments made under a Participant’s Account, other than from the Share Unit Fund, shall be made in cash. Payment from the Share Unit Fund shall be distributed in the form of Shares, with each whole Share Unit being paid in the form of one Share. Fractional Share Units shall be distributed in cash by multiplying the fractional Share Unit by the Fair Market Value of a Share immediately prior to the date of payment. All Shares payable under the Plan shall be issued from the Omnibus Incentive Plan.

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     Section 7.2. Distribution Due to Death.

          (a) Death Benefit. If a Participant dies before receiving payment of all of the vested amounts allocated to his or her Accounts, then notwithstanding the payment dates or forms of payment elected, and regardless of whether the Participant had Separated from Service before death or was a Specified Employee as of such separation, all such unpaid benefits shall be paid to his or her Beneficiary within ninety (90) days of the date of death. Notwithstanding the foregoing, the Employer shall not be obligated to make payment to a Beneficiary (and will not be liable for any failure to make distribution within ninety (90) days of the date of death) unless and until the Committee has verified the identity of the Beneficiary and the Beneficiary has established the right to receive payment of such benefits.

          (b) Default. If a Participant fails to make a valid Beneficiary designation, makes such a designation but is not survived by any named Beneficiary, or makes such a designation but the designation does not effectively dispose of all benefits payable after the Participant’s death, then, to the extent benefits are payable after the Participant’s death, all such benefits shall be paid to the Participant’s Spouse (if the Spouse survives the Participant), or if the Participant has no Spouse or such Spouse does not survive the Participant, the personal representative or equivalent of the Participant’s estate or, if no such person has been appointed, then in accordance with the laws of intestate succession of the jurisdiction in which the Participant was domiciled as of the date of death.

          (c) Form of Distribution. Distribution to a Beneficiary shall be made in a lump sum in cash or Shares in accordance with Section 7.1(c).

          (d) Death of Beneficiary. If a Beneficiary dies after the Participant but before receiving payment of all benefits under the Plan which would have been paid to such Beneficiary but for his or her death, then all such unpaid benefits shall be paid within ninety (90) days after such death to the personal representatives or equivalent of such beneficiary’s estate. Notwithstanding the foregoing, the Employer shall not be obligated to make payment to the beneficiary’s estate (and will not be liable for any failure to make distribution within ninety (90) days of the date of death) unless and until the Committee has verified the identity of such representative.

     Section 7.3. Payment of Employer Contributions. To the extent a Participant or Beneficiary, as the case may be, has received or commenced receiving benefits hereunder, and the Participant or former Participant is subsequently determined to be entitled to an allocation of Employer Contributions for the Plan Year in which the Participant’s active participation in the Plan ceased, then the Company or Participating Employer shall timely pay any such contribution to such person or, if such person is receiving an installment form of distribution, the Committee shall adjust the balance of the installments due to reflect the amount of such Employer Contribution effective with the due date of the next installment payment. Any such amount shall remain subject to all applicable provisions of the Plan until so paid.

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     Section 7.4. Later Payment Deferral Elections.

          (a) General. A Participant who elected a specific payment date pursuant to Section 7.1(b) may, in accordance with the provisions of this Section 7.4 and while an Employee, elect to change the date or form, or both, of payment of the vested Account balance allocable to a Plan Year. No more than two (2) such elections shall be allowed as to the Account balance for a Plan Year.

          (b) Election Rules. The later election must be otherwise valid pursuant to Section 7.2(b), as if an original election, and must be (i) made at least one (1) year before the then scheduled payment date and (ii) extend the then scheduled payment date by five (5) or more years.

          (c) Form of Payment. For purposes of applying this Section 7.4 and implementing the six (6) month delay rule for Specified Employees, each of the forms of payment awards under the Plan shall be treated as a single payment due to be made as of the first scheduled payment date.

     Section 7.5. Miscellaneous.

          (a) De Minimis Amount Payout. In the event a Participant who has a Separation from Service has a vested Account balance or portion thereof for all years which in the aggregate (under all such arrangements treated as the same plan for this purpose under Section 409A and Treasury Regulations thereunder) is $15,500 (or such higher amount described in Code section 402(g)(1)(B) as is then in effect) or less, then such vested balance or portion under all such plans so combined shall be immediately paid in a cash lump sum notwithstanding the other Plan provisions or the Participant’s payment elections.

          (b) Permissible Delay and Acceleration. The payment provisions of Article VII are subject to exceptions or overrides in the discretion of the Committee or other person, other than the Participant concerned, as otherwise provided in the Plan or as allowed under Code section 409A.

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ARTICLE VIII
EMERGENCY WITHDRAWALS

     Section 8.1. Restricted Withdrawals.

          (a) General. A Participant who is not otherwise then entitled to an immediate lump sum distribution may, upon a showing of an Unforeseeable Emergency which cannot be satisfied by other available liquid assets, request a withdrawal from the Participant’s vested Account balance, but excluding amounts allocated to the Share Unit Fund. An emergency withdrawal cannot be requested more frequently than once each Plan Year.

          (b) Determination. The Committee or its delegate shall determine whether the relevant facts and circumstances represent an Unforeseeable Emergency and the amount necessary to satisfy such need. The Committee may require such proof as it deems appropriate to evidence the existence of and the amount necessary to satisfy the emergency or extraordinary circumstances, including a certification that the need cannot be relieved (i) through reimbursement from insurance, (ii) by reasonable liquidation of other assets (but such available assets shall be determined without regard to the Participant’s account balances under the RSIP and the Plan, whether attributable to amounts deferred before 2005 or after 2004), or (iii) by cessation of Before-tax Deposits. If and to the extent the cessation of Before-tax Deposits can remedy such need, the Committee may direct such immediate cessation and suspend the Participant’s right, for such period of time as it deems appropriate, to elect Before-tax Deposits.

          (c) Time for Payment. Distributions pursuant to this Article shall be made in cash within ninety (90) days after the withdrawal is approved by the Committee. If a Participant should die after requesting an emergency withdrawal, but prior to the distribution thereof, the withdrawal election shall be deemed revoked.

          (d) Committee Discretion. Approval of an emergency withdrawal shall be in the sole discretion of the Committee, and no such approval shall be given if the Committee determines that allowing such withdrawal may have an adverse tax consequence to the Company, Participating Employers, the Plan or other Participants. In the Committee’s sole discretion, such approval may require the suspension of a Participant’s right to elect Before-tax Deposits for such period of time as the Committee directs.

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ARTICLE IX
PLAN ADMINISTRATION

     Section 9.1. Committee.

          (a) General. The Committee shall consist of the persons listed on Schedule A. The Committee shall have exclusive responsibility for the general administration and operation of the Plan and the power to take any action necessary or appropriate to carry out such responsibilities. In addition, the Committee shall provide generally for the operation of the Plan and be a liaison between Employers to assure uniform procedures as appropriate. The duties of the Committee shall include, but not be limited to, the following:

(i)	to prescribe, require and use appropriate forms;
(ii)	to formulate, issue and apply rules and regulations;
(iii)	to prepare and file reports, notices and any other documents relating to the Plan which may be required by law;
(iv)	to interpret and apply the provisions of the Plan;
(v)	to authorize and direct benefit payments.

In exercising such powers and duties, and other powers and duties granted under the Plan or Trust to the Committee, the Committee and each member thereof is granted such discretion as is appropriate or necessary to carry out the duties and powers so delegated. This discretion necessarily follows from the fact that the Plan, the Trust and related documents do not, and are not intended to, prescribe all rules necessary to administer the Plan or anticipate all circumstances or events which may arise in the course of such administration.

          (b) Code Section 409A. The Plan shall be administered, and the Committee, its delegate and the Administrator shall exercise their discretionary authority under the Plan, in a manner consistent with Code section 409A. Any permissible discretion to accelerate or defer a Plan payment under such Regulations, the power to exercise which is not otherwise described expressly in the Plan, shall be exercised by the Committee. In the event the matter over which such discretion may be exercised relates to a Committee member, or such member is otherwise unable to fairly exercise such discretion, such member shall not take part in the deliberations and decisions regarding that matter.

          (c) Allocation to Participating Employers. To the extent practicable, the Committee shall account for the Trust assets in such manner as will permit the accurate allocation of Accounts or parts thereof, including the investment earnings and losses attributable thereto, to the relevant Participating Employer. The Committee shall provide to each Participating Employer all information necessary to permit each such Employer to prepare any reports or tax filings which may be required by reason of its status as a Participating Employer.

          (d) Action by Compensation Committee of the Board. Notwithstanding the foregoing, if any action or determination of the Committee as set forth in the Plan is required to

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be taken by the Compensation Committee of the Board of Directors of the Company in order to comply with applicable law, the Company’s governance charters or the listing requirements of any exchange on which the Company’s common stock is then listed, then all references herein to the “Committee” shall include the Compensation Committee of the Board to the extent deemed necessary or advisable.

     Section 9.2. Organization and Procedure. The Committee may have a chairman, a secretary, and such other officers as it deems appropriate. Subject to Section 9.1, action on any matter shall be taken on the vote of at least a majority of all members of the Committee at any meeting or upon unanimous written consent of all members without a meeting. The Committee may adopt such bylaws, procedures and operating rules as it deems appropriate.

     Section 9.3. Delegation of Authority and Responsibility. The Committee may, in writing, delegate to any one or more of its members the authority to execute documents on behalf of the Committee and to represent the Committee in any matters or dealings involving such Committee.

     The Committee may delegate in writing certain of its powers to a person employed by an Employer under such terms and conditions as may be specified by the Committee. Employees of an Employer who are not members of the Committee or persons to whom powers are delegated, shall perform such duties and functions relating to the Plan as the Committee may direct and supervise. It is expressly provided, however, that the Committee shall retain full and exclusive authority and responsibility for and respecting any such activities by other employees, and nothing contained in this Section 9.3 shall be construed to confer upon any such employee any discretionary authority or control respecting the administration or operation of the Plan.

     Section 9.4. Use of Professional Services. The Committee may obtain the services of such attorneys, accountants, record keepers or other persons as it deems appropriate, any of whom may be the same persons who are providing services to an Employer. In any case in which the Committee utilizes such services, it shall retain exclusive discretionary authority and control over the administration and operation of the Plan.

     Section 9.5. Fees and Expenses. Committee members who are employees of the Company or a Participating Employer shall serve without compensation but shall be reimbursed for all reasonable expenses incurred in their capacity as Committee members. No employee members of the Committee or persons performing services pursuant to Section 9.4 shall receive greater than reasonable compensation for their services. All compensation for services and expenses shall be paid from the Trust unless the Company, in its sole discretion, elects to pay them. To the extent not paid by the Company, such compensation and expenses shall be paid out of the principal or income of the Trust and charged to Accounts.

     Section 9.6. Communications. Requests, claims, appeals, and other communications related to the Plan and directed to the Company or the Committee shall be in writing and shall be made by transmitting the same via the U.S. Mail, certified, return receipt requested, to the Sidekick Committee, c/o Senior Vice President of Human Resources, at the address listed in the latest summary description for the Plan.

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     Section 9.7. Claims.

          (a) Filing Claims. A Participant or Beneficiary (or a person who in good faith believes he or she is a Participant or Beneficiary, i.e., a “claimant”) who believes he or she has been wrongly denied benefits under the Plan may file a written claim for benefits with the Administrator. Although no particular form of written claim is required, no such claim shall be considered unless it provides a reasonably coherent explanation of the claimant’s position.

          (b) Decision on Claim. The Administrator shall in writing approve or deny the claim within sixty (60) days of receipt, provided that such sixty (60) day period may be extended for reasonable cause by notifying the claimant. If the claim is denied, in whole or in part, the Administrator shall provide notice in writing to the claimant, setting forth the following:

          (1) the specific reason or reasons for the denial;

          (2) a specific reference to the pertinent Plan provisions on which the denial is based;

          (3) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material is necessary; and

          (4) the steps to be taken if the claimant wishes to appeal the decision to the Committee.

          (c) Appeal of Denied Claim. (1) Filing Appeals. A claimant whose claim has been denied in whole or in part may appeal such denial to the Committee by filing a written appeal with the Administrator within sixty (60) days of the date of the denial. A decision of the Administrator which is not appealed within the time herein provided shall be final and conclusive as to any matter which was presented to the Administrator.

          (2) Rights on Appeal. A claimant (or a claimant’s duly authorized representative) who appeals the Administrator’s decision shall, for the purpose of preparing such appeal, have the right to review any pertinent Plan documents, and submit issues and comments in writing to the Committee.

          (d) Decision by Appeals Committee. The Committee shall make a final and full review of any properly appealed decision of the Administrator within sixty (60) days after receipt of the appeal, provided that such period may be extended for reasonable cause by notifying the claimant. The Committee’s decision shall be in writing and shall include specific reasons for its decisions and specific references to the pertinent Plan provisions on which its decision is based.

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ARTICLE X
PLAN AMENDMENTS, PLAN TERMINATION,
AND MISCELLANEOUS

     Section 10.1. Amendments and Termination.

          (a) General. While it is intended the Plan shall continue in effect indefinitely, the Company may from time to time modify, alter or amend the Plan or the Trust, provided that no amendment affecting the rights, duties or responsibilities of the Trustee may be made without the Trustee’s consent. Except as otherwise inconsistent with Section 9.1(b), the Company may at any time order the temporary suspension or complete discontinuance of Before-tax Deposits, deferrals of Equity Awards or Employer Contributions, or may terminate the Plan. Except as described in subsection (b) following, no such amendment shall reduce the balance in any Participant’s Accounts determined as of the later of the date the amendment is adopted or effective.

          (b) Amendments to Comply with Applicable Law. Nothing herein shall be construed to prevent any modification, alteration or amendment of the Plan or Trust which is required to comply with the provision of any applicable law or regulation relating to the establishment or maintenance of this Plan and Trust. Except as otherwise provided herein, or as necessary to comply with such law or regulation, no such amendment shall reduce the balance in any Participant’s Accounts determined as of the later of the date the amendment is adopted or effective.

          (c) Participating Employers. An Employer may become a Participating Employer by agreeing to withhold and make contributions for its Employees as provided for herein. An Employer which becomes a Participating Employer thereby agrees to pay or provide for the payment of benefits hereunder to those Participants (and their Beneficiaries) employed by it, but only to the extent such benefits are attributable to contributions, and investment earnings and losses credited thereon, related to the period of such employment. A Participating Employer shall have no discretionary authority or control over the administration of the Plan or the Fund.

          An Employer, other than the Company, which becomes a Participating Employer thereby agrees that any subsequent modifications, alterations and amendments to the Plan by the Company shall be deemed to have been adopted by the Participating Employer.

          An Employer, other than the Company, may cease to be a Participating Employer by adopting a written resolution of its board of directors and delivering such resolution to the Committee. No resolution ending participation in the Plan shall be effective until thirty (30) days after it is received by the Committee. Unless otherwise provided herein, ceasing to be a Participating Employer shall not relieve such Employer of its obligation hereunder to provide for the payment of benefits credited to Accounts on behalf of Participants during the time such Employer was a Participating Employer.

          (d) Plan Termination. If the Plan is terminated, the Committee may elect to either terminate or retain the Trust. Any decision to terminate the Plan or the Trust shall not reduce the balance of a Participant’s Accounts under the Plan as of the effective date of such

26

termination, nor shall it terminate, amend or otherwise change the liability of the Company or Participating Employer to pay or provide for the payment of benefits under the Plan.

     Section 10.2. Non-Guarantee of Employment. Nothing contained in this Plan shall be construed as a contract of employment between an Employer and a Participant, or as a right of any Participant to be continued in the employment of an Employer, or as a limitation on the right of an Employer to discharge any Participant with or without notice or with or without cause.

     Section 10.3. Rights to Trust Asset.

          (a) Rights of Participants. No Participant or any other person shall have any right to, or interest in, any part of the Trust assets upon termination of employment or otherwise, except as otherwise provided under the Plan. If the assets of the Trust are insufficient to pay the vested amounts credited to a Participant’s Accounts, the Participant’s Employer shall pay any such amounts from its other general assets. If such Employer does not timely pay such benefits, then, except as described in Section 10.2(b), the sole recourse of a claimant Participant or Beneficiary shall be against such Employer and neither the Company nor any other Employer shall be responsible to pay or provide for the payment of such benefits or liable for the nonpayment thereof.

          (b) Company Assumption of Liability. If the Participant’s employment is terminated due to the sale of the stock (or rights analogous to stock) or assets of his or her Employer by the Company, the Company shall assume and be responsible for the payment of benefits to such Participant as necessary pursuant to this Section 10.3 even though it may not have been such Participant’s Employer. The Company’s obligation under this Section 10.3(b) shall cease as of the earlier of the date all such benefits are paid to the affected Participant or the date the person who purchased such stock or assets, or a person who controls such person, agrees in writing to assume the liability for the benefits credited to the affected Participants by reason of their participation in the Plan.

     Section 10.4. Suspension of Rules.

          (a) Federal Securities and Other Laws. Notwithstanding anything in the Plan to the contrary, and to the extent and for the time reasonably necessary to comply with federal securities laws (or other applicable laws or regulations), elective deferrals, Participant investment-direction, and payment dates and forms under the Plan may be suspended, changed, or delayed as necessary to comply with such laws or regulations; provided, however, any payments so delayed shall be paid to the Participant or Beneficiary as of the earliest date the Committee determines that such payment will not cause a violation of any such laws or regulations.

          (b) Section 162(m). If the Committee reasonably determines that a scheduled payment of benefits under the Plan will not be deductible by an Employer by reason of Code section 162(m), it may, if and to the extent permitted by Code section 409A, suspend all such payments to the extent not so deductible. Payments so suspended shall be paid by the fifteenth (15th) day of the third month after the affected Participant dies, becomes Disabled, or incurs a Separation from Service, or if earlier, when such payment is deductible by the Company;

27

provided, however, if the Participant is a Specified Employee when he or she incurs a Separation from Service, payments suspended pursuant to this subsection shall be paid as described except the six (6) month anniversary of the actual Separation from Service shall be treated as the date the affected Participant Separated from Service.

          (c) Offset for Amounts Due. A Participant’s vested Account balance may be reduced by one or more offsets to repay any amounts then due and owing to an Employer, unless another means of repayment is agreed to by the Committee. Except for the right to immediate offset for an amount up to $5,000, or such higher amount as allowed under Treasury Regulations or other directives, the Account balance shall not be so offset before it is otherwise scheduled to be paid to the Participant or Beneficiary and the amount then offset shall not exceed the amount that would be otherwise so paid.

     Section 10.5. Requirement of Proof. In discharging their duties and responsibilities under the Plan, the Committee or other individual may require proof of any matter concerning this Plan, and no person shall acquire any rights or be entitled to receive any benefits under this Plan until such proof is furnished.

     Section 10.6. Indemnification. The Company shall indemnify each member of the Committee and hold each of them harmless from the consequences of acts or conduct when done in their capacity as Committee members. This provision shall apply only if the member acted in good faith and in a manner reasonably believed to be solely in the best interests of the Participants and Beneficiaries and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful. Such indemnification shall cover any and all reasonable attorneys’ fees and expenses, judgments, fines and amounts paid in settlement, but only to the extent such amounts are (i) actually and reasonably incurred, (ii) not otherwise paid or reimbursable under an applicable Employer paid insurance policy, and (iii) not duplicative of other payments made or reimbursements due by the Company or its affiliates under other indemnity agreements.

     In no event shall this Section 10.6 be construed to require the Company to indemnify third parties with whom it may contract to perform administrative or investment management duties or to indemnify the Trustee to any extent beyond what may be required under such contract or the Trust agreement, respectively.

     Section 10.7. Non-Alienation and Taxes.

          (a) General. Except as otherwise expressly provided herein or as otherwise required by law, no right or interest of any Participant or Beneficiary in the Plan and the Trust shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, attachment, garnishment, execution, levy, bankruptcy, or any other disposition of any kind, either voluntary or involuntary, prior to actual receipt of payment by the person entitled to such right or interest under the provisions hereof, and any such disposition or attempted disposition shall be void.

          (b) Tax Withholdings. (1) General. Benefits earned under the Plan and payment of such benefits shall be subject to tax reporting and withholding as required by law and

28

the amount of such withholding may be determined by treating such benefits as being in the nature of supplemental wages. If tax withholdings must be made before such benefits are paid to a Participant or Beneficiary (e.g., FICA taxes on Before-tax Deposits), they shall be made from other wages paid to such individual apart from the Plan to the extent reasonably possible; provided, however, if such other wages are insufficient for that purpose, the withholdings shall be made from and reduce Before-tax Deposits or Employer Contributions, as applicable, for the individual concerned or, if no such contributions are available, the relevant Employer shall advance the withholdings, the appropriate Account balance of the individual concerned shall be reduced in the same amount, and upon the direction of the Committee the Trustee shall remit to the Employer an amount equal to such reduction.

          (2) Tax Consequences. Neither the Company nor any other Employer represents or guarantees that any particular federal, foreign, state or local income, payroll, or other tax consequence will result from participation in this Plan or payment of benefits under the Plan.

          (c) Coordination with Code Section 457A. If a Participant is subject to Code Section 457A in a Plan Year, then to the extent required by Code Section 457A:

          (1) His or her Before-tax Deposits for such year shall be deducted from the Participant’s Base Compensation and/or Bonus Compensation on an after-tax basis, and as a result the Employer Matching and Discretionary Contributions shall be calculated by taking into considered that such deposits are includible in the Participant’s compensation for such year;

          (2) All allocations made during such Plan Year, including Employer Contributions and earnings credited on deferred amounts, shall be considered taxable income to the extent vested in such year;

          (3) All prior deferred amounts shall be considered taxable income in such year to the extent vested (and not previously included in income); provided that with regard to amounts deferred that are attributable to services performed prior to January 1, 2009, such amounts shall not be required to be included in taxable income until December 31, 2017.

Notwithstanding any provision of the Plan to the contrary, the Administrator may authorize the payment of amounts in the year such amounts are included in income under this subsection (c) unless payment at such time would violate Code Section 409A.

     Section 10.8. Not Compensation Under Other Benefit Plans. No amounts allocated to a Participant’s Account shall be deemed to be salary or compensation for purposes of the RSIP or any other employee benefit plan of the Company or any other Employer except as and to the extent otherwise specifically provided in such other plan.

     Section 10.9. Savings Clause. If any term, covenant, or condition of this Plan, or the application thereof to any person or circumstance, shall to any extent be held to be invalid or unenforceable, the remainder of this Plan, or the application of any such term, covenant, or condition to persons or circumstances other than those as to which it has been held to be invalid or unenforceable, shall not be affected thereby, and, except to the extent of any such invalidity or

29

unenforceability, this Plan and each term, covenant, and condition hereof shall be valid and shall be enforced to the fullest extent permitted by law.

     Section 10.10. Facility of Payment. If the Committee shall determine a Participant or Beneficiary entitled to a distribution hereunder is incapable of caring for his or her own affairs because of illness or otherwise, it may direct any distribution from such Participant’s Accounts be made, in such shares as it shall determine, to the Spouse, child, parent or other blood relative of such Participant or Beneficiary, or any of them, or to such other person or persons as the Committee may determine, until such date as it shall determine such incapacity no longer exists; provided, however, the exercise of this discretion shall not cause an acceleration or delay in the time of payment of Plan benefits except to the extent, and only for the duration of, the time reasonably necessary to resolve such matters or otherwise protect the interests of the Plan. The Committee shall be under no obligation to see to the proper application of the distributions so made to such person or persons and any such distribution shall be a complete discharge of any liability under the Plan to such Participant or Beneficiary, to the extent of such distribution.

     Section 10.11. Requirement of Releases. If in the opinion of the Committee, any present or former Spouse or dependent of a Participant or other person shall by reason of the law of any jurisdiction appear to have any bona fide interest in Plan benefits that may become payable to a Participant or with respect to a deceased Participant, or otherwise has asserted such a claim, the Committee may direct such benefits be withheld pending receipt of such written releases as it deems necessary to prevent or avoid any conflict or multiplicity of claims with respect to the payment of such benefits, but only to the extent and for the duration reasonably necessary to resolve such matters or otherwise protect the interests of the Plan.

     Section 10.12. Board Action. Any action which is required or permitted to be taken by the Board of Directors of the Company under the Plan may be taken by the Compensation Committee of such board or any other authorized committee of such board.

     Section 10.13. Computational Errors. In the event mathematical, accounting, or similar errors are made in processing or paying a benefit under the Plan, the Committee may make such equitable adjustments as it deems appropriate (which may be retroactive) to correct such errors.

     Section 10.14. Unclaimed Benefits. In the event any person who is entitled to benefits hereunder cannot be located despite reasonable and diligent efforts to do so, then such person’s benefits shall be automatically forfeited as of the last day of the Plan Year next following the year in which such benefits first became payable; provided, however, in the event such person subsequently makes a valid claim for such forfeited benefits prior to the termination of the Plan, such benefits shall be reinstated and immediately paid.

     Section 10.15. Communications. The Committee, or its delegate, or the Trustee, as to the function or authority concerned, shall prescribe such forms of communication, including forms for benefit application and the like, with respect to the Plan and Fund as it deems appropriate. Except as otherwise prescribed by such persons or otherwise provided by governing statute or regulation, any such communication and assent or consent thereto may be handled by electronic means.

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ARTICLE XI
TRANSITIONAL RULES

     Section 11.1. Introduction. This Plan document is effective on January 1, 2009 (i.e., the “effective date”) and, except as otherwise provided herein, shall apply only to those Participants who are eligible to actively participate in the Plan on or after the effective date. For the period that began on January 1, 2005 and ended December 31, 2008, the Plan as in effect on December 31, 2004 governed the rights and obligations of the Company and Participants, except as modified by the Company in its discretion so that the Plan and its operations were in good faith compliance with Code Section 409A.

     Section 11.2. Amounts Deferred Under Prior Plan. Account balances (including earnings and losses on such balances regardless of when incurred) attributable to deposits and contributions for periods before 2005 shall be accounted for separately from account balances attributed to deposits and contributions for periods after 2004 and such pre-2005 deferrals shall be governed by the terms and conditions of the Plan as in effect on December 31, 2004, which are contained in a separate plan document; provided that if any such amounts are includible in income under Code Section 457A, then payment of such amounts shall be subject to the provisions of Section 10.7(c) hereof .

     The undersigned, by the authority of the Board of Directors of Pentair, Inc., does hereby approve the form and content of this amended and restated Plan document.

Dated:

31

SCHEDULE A

COMMITTEE MEMBERS

1.	Senior Vice President of Human Resources
2.	Vice President of Compensation and Benefits
3.	Vice President of Treasury and Tax

32

EX-15

Exhibit 15

Pentair, Inc.
5500 Wayzata Boulevard

Suite 800
Golden Valley, MN

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of Pentair, Inc. and subsidiaries (the “Company”) for the periods ended September 26, 2009 and September 27, 2008, as indicated in our report dated October 20, 2009; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended September 26, 2009 is incorporated by reference in Registration Statements No. 333-12561, 333-62475, 333-75166, 333-115429, 333-115430, 333-115432, 333-126693, 333-152458 and 333-160925.

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

Deloitte & Touche LLP

Minneapolis, MN
October 20, 2009

EX-31.1

Exhibit 31.1

Certification

I, Randall J. Hogan, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Pentair, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 20, 2009	/s/ Randall J. Hogan
	Randall J. Hogan
	Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification

I, John L. Stauch, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Pentair, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 20, 2009	/s/ John L. Stauch
	John L. Stauch
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of CEO Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002

In connection with the Quarterly Report of Pentair, Inc. (the “Company”) on Form 10-Q for the period ended September 26, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Randall J. Hogan, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: October 20, 2009	/s/ Randall J. Hogan
	Randall J. Hogan
	Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of CFO Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002

In connection with the Quarterly Report of Pentair, Inc. (the “Company”) on Form 10-Q for the period ended September 26, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John L. Stauch, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: October 20, 2009	/s/ John L. Stauch
	John L. Stauch
	Executive Vice President and Chief Financial Officer