10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Fiscal Year Ended December 31, 2008
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 Boulevard, Suite 800, Golden Valley, Minnesota	55416-1259 (Zip code)
(Address of principal executive offices)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Shares, $0.162/3 par value		New York Stock Exchange
Preferred Share Purchase Rights		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in PART III of this Form 10-K or any amendment to this Form 10-K. þ

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   Smaller reporting company o

                         (Do not check if a smaller reporting company)

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

Aggregate market value of voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of $33.87 per share as reported on the New York Stock Exchange on June 27, 2008 (the last business day of Registrant’s most recently completed second quarter): $3,177,008,897

The number of shares outstanding of Registrant’s only class of common stock on December 31, 2008 was 98,276,919

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the Registrant’s definitive proxy statement for its annual meeting to be held on April 30, 2009, are incorporated by reference in this Form 10-K in response to Part III, ITEM 10, 11, 12, 13 and 14.

Pentair, Inc.

Annual Report on Form 10-K

For the Year Ended December 31, 2008

		Page
PART I
ITEM 1.	Business		3
ITEM 1A.	Risk Factors		8
ITEM 1B.	Unresolved Staff Comments		12
ITEM 2.	Properties		12
ITEM 3.	Legal Proceedings		13
ITEM 4.	Submission of Matters to a Vote of Security Holders		14
PART II
ITEM 5.	Market for Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities		16
ITEM 6.	Selected Financial Data		19
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk		38
ITEM 8.	Financial Statements and Supplementary Data		40
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		88
ITEM 9A.	Controls and Procedures		88
ITEM 9B.	Other Information		88
PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance		89
ITEM 11.	Executive Compensation		89
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		89
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence		90
ITEM 14.	Principal Accounting Fees and Services		90
PART IV
ITEM 15.	Exhibits and Financial Statement Schedules		91
	Signatures		92
EX-10.2
EX-10.4
EX-10.8
EX-10.10
EX-10.11
EX-10.12
EX-21
EX-23
EX-24
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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PART I

ITEM 1.   BUSINESS

GENERAL

Pentair, Inc. is 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.

Pentair Strategy

Our strategy is to achieve benchmark Return on Invested Capital (“ROIC”) performance for diversified industrial manufacturing companies by:

•  building operational excellence through the Pentair Integrated Management System (“PIMS”) consisting of strategy deployment, lean enterprise, and IGNITE, which is our process to drive organic growth;

•  driving long-term growth in sales, income and cash flows, through internal growth initiatives and acquisitions;

•  developing new products and enhancing existing products;

•  penetrating attractive growth markets, particularly international;

•  expanding multi-channel distribution; and

•  proactively managing our business portfolio, including consideration of new business platforms.

Pentair Financial Objectives

Our long-term financial objectives are to:

•  Achieve 5%+ annual organic sales growth, plus acquisitions

•  Achieve benchmark financial performance:

• Earnings Before Interest and Taxes (“EBIT”) Margin	14%
• ROIC (after-tax)	15%
• Free Cash Flow (“FCF”)	100% conversion of net income
• Earnings Per Share (“EPS”) Growth	10%+ (sales growth plus margin expansion)

•  Achieve 5% annual productivity improvement on core business cost

Unless the context otherwise indicates, references herein to “Pentair”, the “Company,” and such words as “we,” “us,” and “our” include Pentair, Inc. and its subsidiaries. Pentair is a Minnesota corporation that was incorporated in 1966.

BUSINESS AND PRODUCTS

Business segment and geographical financial information is contained in ITEM 8, Note 15 of the Notes to Consolidated Financial Statements, included in this Form 10-K.

WATER GROUP

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 Water Group offers a broad array of products and systems to multiple markets and customers. The core competencies of our Water Group center around flow and filtration. We have identified a target market totaling $60 billion, with our current primary focus on three

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markets: Flow Technologies (approximately 40% of group sales), Filtration (approximately 30% of group sales), and Pool (approximately 30% of group sales).

Flow Technologies Market

Our Flow Technologies business is a global leader in residential, commercial and municipal water pump markets. Our primary markets are those serving residential well water installers and residential and commercial end-users; waste water dealers and distributors; commercial and industrial operations; and municipal water treatment facilities. We address these markets with products ranging from light duty diaphragm pumps to high-flow turbine pumps and solid handling pumps designed for water and wastewater applications, and agricultural spraying, as well as pressure tanks for residential applications. Applications for our broad range of products include pumps for residential and municipal wells, water treatment, wastewater solids handling, pressure boosting, engine cooling, fluid delivery, circulation, and transfer.

Brand names for the Flow Technologies market include STA-RITE^®, Myers^®, Aurora^®, Hydromatic^®, Fairbanks Morse^tm, Flotec^®, Hypro^®, Water Ace^®, Berkeley^®, Aermotor^tm, Simer^®, Verti-line^®, Diamond^®, FoamPro^®, Onga^tm, Nocchi^tm, SHURflo^®, Edwards^®, JUNG PUMPEN^®, oxynaut^®, and JUNG^®.

Filtration Market

Our Filtration business competes in residential and commercial water softening and filtration markets globally; in selected industrial markets for both water and other fluid filtration, largely in the United States; and for desalination and reverse osmosis projects globally. We address these markets with control valves, tanks, filter systems, filter cartridges, pressure vessels, and specialty dispensing pumps providing flow solutions for specific end-user market applications including residential, commercial, foodservice, industrial, recreation vehicles, marine, and aviation.

Filtration products are used in the manufacture of water softeners; filtration, deionization, and desalination systems; industrial, commercial and residential water filtration applications; and filtration and separation technologies for hydrocarbon, medical and hydraulic applications.

Brand names for the Filtration market include Everpure^®, SHURflo^®, Fleck^®, CodeLine^®, Structural^tm, Pentek^®, SIATA^tm, WellMate^tm, American Plumber^®, Armor^®, OMNIFILTER^®, Fibredyne^tm, and Porous Media^tm.

Pool Market

We address the Pool equipment market with a complete line of commercial and residential pool equipment and accessories including pumps, filters, heaters, lights, automatic controls, automatic pool cleaners, commercial deck equipment, maintenance equipment, and Pool accessories. Applications for our pool products include commercial and residential pool construction, maintenance, repair, and service.

Brand names for the Pool market include Pentair Pool Products^®, Pentair Water Pool and Spa^tm, STA-RITE^®, Paragon Aquatics^®, Kreepy Krauly^®, Compool^®, WhisperFlo^®, PoolShark^®, Legend^tm, Rainbow^tm, FIBERworks^®, IntelliTouch^tm, IntelliFlow^®, IntelliChlor^®, and Acu-Trol^®.

Customers

Our Water Group distributes its products through wholesale distributors, retail distributors, original equipment manufacturers, home centers and home and pool builders. Information regarding significant customers in our Water Group is contained in ITEM 8, Note 15 of the Notes to Consolidated Financial Statements, included in this Form 10-K.

Seasonality

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 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

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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.

Competition

Our Water Group faces numerous domestic and international competitors, some of which have substantially greater resources directed to the markets in which we compete. Consolidation, globalization, and outsourcing are continuing trends in the water industry. Competition in commercial and residential flow technologies markets focuses on brand names, product performance, quality, and price. While home center and national retailers are important for residential lines of water and wastewater pumps, they are not important for commercial pumps. For municipal pumps, competition focuses on performance to meet required specifications, service, and price. Competition in water treatment and filtration components focuses on product performance and design, quality, delivery, and price. For pool equipment, competition focuses on brand names, product performance, quality, and price. We compete by offering a wide variety of innovative and high-quality products, which are competitively priced. We believe our distribution channels and reputation for quality also contribute to our continuing market penetration.

TECHNICAL PRODUCTS GROUP

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. We have identified a target market of $30 billion. Our Technical Products Group focuses its business portfolio on four primary industries: Commercial and Industrial (55% of group sales), Telecom and Datacom (20% of group sales), Electronics (20% of group sales), and Networking (5% of group sales). The primary brand names for the Technical Products Group are: Hoffman^®, Schroff^®, Pentair Electronic Packaging^tm, Taunus^tm, McLean^®, Electronic Solutions^tm, Birtcher^®, Calmark^® and Aspen Motion^tm. Products and related accessories of the Technical Products Group include metallic and composite enclosures, cabinets, cases, subracks, backplanes, heat exchangers, and blowers. Applications served include industrial machinery, data communications, networking, telecommunications, test and measurement, automotive, medical, security, defense, and general electronics.

Customers

Our Technical Products Group distributes its products through electrical and data contractors, electrical and electronic components distributors, and original equipment manufacturers. Information regarding significant customers in our Technical Products Group is contained in ITEM 8, Note 15 of the Notes to Consolidated Financial Statements, included in this Form 10-K.

Seasonality

Our Technical Products Group is not significantly impacted by seasonal demand fluctuations.

Competition

Competition in the technical products markets can be intense, particularly in telecom and datacom markets, where product design, prototyping, global supply, price competition, and customer service are significant factors. Our Technical Products Group has continued to focus on cost control and improving profitability. Recent growth in the Technical Products Group is a result of new products development, overall market growth, continued channel penetration, growth in targeted market segments, geographic expansion, price increases and acquisitions. Consolidation, globalization, and outsourcing are visible trends in the technical products marketplace and typically play to the strengths of a large and globally positioned supplier. We believe our Technical Products Group has the broadest array of enclosures products available for commercial and industrial uses.

RECENT DEVELOPMENTS

Growth of our business

We continually look at each of our businesses to determine whether they fit with our strategic vision. Our primary focus is on businesses with strong fundamentals and growth opportunities, including international

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markets. We seek growth through product and service innovation, market expansion, and acquisitions. Acquisitions have played an important part in the growth of our business, and while we expect acquisitions to be an important part of our future growth, until economic and credit market conditions improve, we are not currently planning any significant acquisitions.

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 the new entities and GE is a 19.9 percent owner.

With the formation of this business, we believe PRF will be 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 accelerate revenue growth by selling GE’s existing residential conditioning products through our sales channels.

On May 7, 2007, we acquired as part of our Technical Products Group the assets of Calmark Corporation (“Calmark”), a privately held business. Calmark’s product portfolio includes enclosures, guides, card locks, retainers, extractors, card pullers and other products for the aerospace, medical, telecommunications and military market segments, among others.

On April 30, 2007, we acquired as part of our Water Group all of the capital interests in Porous Media Corporation and Porous Media, Ltd. (together, “Porous Media”), two privately held filtration and separation technologies businesses. Porous Media brings strong technical ability to our Water Group, including engineering, material science, media development and application capabilities. Porous Media’s product portfolio includes high-performance filter media, membranes and related filtration products and purification systems for liquids, gases and solids for the general industrial, petrochemical, refining and healthcare market segments, among others.

On February 2, 2007, we acquired as part of our Water Group all the outstanding shares of capital stock of Jung Pumpen GmbH (“Jung Pump”). Jung Pump is a leading German manufacturer of wastewater products for municipal and residential markets. Jung Pump brings us its strong application engineering expertise and a complementary product offering, including a new line of water re-use products, submersible wastewater and drainage pumps, wastewater disposal units and tanks. Jung Pump also brings to Pentair its well-established European presence, a state-of-the-art training facility in Germany and sales offices in Germany, Austria, France, Hungary, Poland and Slovakia.

Also refer to ITEM 7, Management’s Discussion and Analysis, and ITEM 8, Note 2 of the Notes to Consolidated Financial Statements, included in this Form 10-K.

Discontinued operations/divestitures

On December 15, 2008, we sold our Spa and Bath (“Spa/Bath”) business to Balboa Water Group in a cash transaction.

On February 28, 2008, we sold our National Pool Tile (“NPT”) business unit to Pool Corporation in a cash transaction. National Pool Tile is the leading wholesale distributor of pool tile and composite pool finishes serving professional contractors in the swimming pool refurbish and construction markets.

The results of Spa/Bath and NPT have been reported as discontinued operations for all periods presented. The assets and liabilities of Spa/Bath and NPT have been reclassified as discontinued operations for all periods presented.

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Also refer to ITEM 7, Management’s Discussion and Analysis, and ITEM 8, Note 3 of the Notes to Consolidated Financial Statements, included in this Form 10-K.

INFORMATION REGARDING ALL BUSINESS SEGMENTS

Backlog

Our backlog of orders as of December 31 by segment was:

In thousands	2008		2007		$ change			% change
Water	$	324,748	$	303,625	$	21,123			7.0	%
Technical Products		111,678		124,919		(13,241	)		(10.6	%)
Total	$	436,426	$	428,544	$	7,882			1.8	%

The $21.1 million increase in Water Group backlog was primarily due to increased backlog for pumps used in industrial and municipal market applications and growth in Asian markets, partially offset by declining market conditions in residential pool and pump markets. The $13.2 million decrease in Technical Products Group backlog reflected declining market conditions in both our electrical and electronic markets. Due to the relatively short manufacturing cycle and general industry practice for the majority of our businesses, backlog, which typically represents less than 60 days of shipments, is not deemed to be a significant item. A substantial portion of our revenues result from orders received and product sold in the same month. We expect that most of our backlog at December 31, 2008 will be filled in 2009.

Research and development

We conduct research and development activities in our own facilities, which consist primarily of the development of new products, product applications, and manufacturing processes. Research and development expenditures during 2008, 2007, and 2006 were $62.5 million, $56.8 million, and $56.5 million, respectively.

Environmental

Environmental matters are discussed in ITEM 3, ITEM 7, and in ITEM 8, Note 16 of the Notes to Consolidated Financial Statements, included in this Form 10-K.

Raw materials

The principal materials used in the manufacturing of our products are electric motors, mild steel, stainless steel, electronic components, plastics (resins, fiberglass, epoxies), and paint (powder and liquid). In addition to the purchase of raw materials, we purchase some finished goods for distribution through our sales channels.

The materials used in the various manufacturing processes are purchased on the open market, and the majority are available through multiple sources and are in adequate supply. We have not experienced any significant work stoppages to-date due to shortages of materials. We have certain long-term commitments, principally price commitments, for the purchase of various component parts and raw materials and believe that it is unlikely that any of these agreements would be terminated prematurely. Alternate sources of supply at competitive prices are available for most materials for which long-term commitments exist, and we believe that the termination of any of these commitments would not have a material adverse effect on operations.

Certain commodities, such as metals and resin, are subject to market and duty-driven price fluctuations. We manage these fluctuations through several mechanisms, including long-term agreements with escalator / de-escalator clauses. Prices for raw materials, such as metals and resins, may trend higher in the future.

Intellectual property

Patents, non-compete agreements, proprietary technologies, customer relationships, trade marks, trade names, and brand names are important to our business. However, we do not regard our business as being materially dependent upon any single patent, non-compete agreement, proprietary technology, customer relationship, trade mark, trade name, or brand name.

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Patents, patent applications, and license agreements will expire or terminate over time by operation of law, in accordance with their terms or otherwise. We do not expect the termination of patents, patent applications, and license agreements to have a material adverse effect on our financial position, results of operations or cash flows.

Employees

As of December 31, 2008, we employed approximately 14,700 people worldwide. Total employees in the United States were approximately 8,000, of whom approximately 850 are represented by five different trade unions having collective bargaining agreements. Generally, labor relations have been satisfactory.

Captive Insurance Subsidiary

We insure certain general and product liability, property, workers’ compensation, and automobile liability risks through our regulated wholly-owned captive insurance subsidiary, Penwald Insurance Company (“Penwald”). Reserves for policy claims are established based on actuarial projections of ultimate losses. Accruals with respect to liabilities insured by third parties, such as liabilities arising from acquired businesses, pre-Penwald liabilities and those of certain foreign operations are established without regard to the availability of insurance.

Matters pertaining to Penwald are discussed in ITEM 3 and ITEM 8, Note 1 of the Notes to Consolidated Financial Statements, included in this Form 10-K.

Available information

We make available free of charge (other than an investor’s own Internet access charges) through our Internet website (http://www.pentair.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. Reports of beneficial ownership filed by our directors and executive officers pursuant to Section 16(a) of the Securities Exchange Act of 1934 are also available on our website. We are not including the information contained on our website as part of, or incorporating it by reference into, this Annual Report on Form 10-K.

ITEM 1A.   RISK FACTORS

You should carefully consider the following risk factors and warnings before making an investment decision. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. If any of the risks described below actually occur, our business, financial condition, results of operations or prospects could be materially adversely affected. In that case, the price of our securities could decline and you could lose all or part of your investment. You should also refer to other information set forth in this document.

General economic conditions, including difficult credit and residential construction markets, affect demand for our products.

We compete around the world in various geographic regions and product markets. Among these, the most significant are global industrial and commercial markets (for both the Water and Technical Products Groups) and residential markets (for the Water Group). The global credit crisis and recession have adversely affected the robustness of our markets as exemplified in the fourth quarter of 2008. Important factors for our businesses include the overall strength of the economy and our customers’ confidence in the economy; industrial and governmental capital spending; the strength of the residential and commercial real estate markets; unemployment rates; availability of consumer and commercial financing for our customers and end-users; and interest rates. New construction for residential housing and home improvement activity fell dramatically in both 2007 and 2008, which reduced revenue growth in each of the businesses within our Water Group. We believe that weakness in this market and the recent dramatic slowdown in our industrial and commercial markets will

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likely continue to affect our revenues and margins throughout 2009. Any continuing weakness in these markets beyond 2009 will negatively affect our sales and financial performance in future periods.

Our inability to sustain consistent organic growth or limit revenue decreases could adversely affect our financial performance.

Over the past three years, our organic growth was generated in part from expanding international sales, entering new distribution channels, price increases and introducing new products. To grow more rapidly than our end markets, we would have to continue to expand our geographic reach, further diversify our distribution channels, continue to introduce new products, and increase sales of existing products to our customer base. Difficult economic and competitive factors adversely affected our ability to sustain consistent organic growth in 2008, as revenues contracted in the fourth quarter. As a result of these economic conditions, that adversely impacted our anticipated financial performance, we did not meet our stated revenue growth targets in the fourth quarter and for the year 2008. We believe that our revenues will continue to decline as our markets weaken. Rather than focus our efforts primarily on broad-based revenue growth, we have chosen to limit our growth initiatives to specific end markets and geographies. We cannot assure you that these growth initiatives will be sufficient to offset revenue declines in other markets.

Our businesses operate in highly competitive markets, so we may be forced to cut prices or to incur additional costs.

Our businesses generally face substantial competition in each of their respective markets. Competition may force us to cut prices or to incur additional costs to remain competitive. We compete on the basis of product design, quality, availability, performance, customer service and price. Present or future competitors may have greater financial, technical or other resources which could put us at a disadvantage in the affected business or businesses. We cannot assure you that these and other factors will not have a material adverse effect on our future results of operations.

Material cost and other inflation have adversely affected and could continue to affect our results of operations.

Over the past few years, we have experienced material cost and other inflation in a number of our businesses. We are striving for greater productivity improvements and implementing selective increases in selling prices to help mitigate cost increases in raw materials (especially metals and resins), energy and other costs such as pension, health care and insurance. While these inflationary pressures have begun to abate in late 2008 and early 2009 as a result of general economic conditions, we may not be able to recognize the full benefit from this moderating or reversal of material cost and other inflation. In addition, the recent reversal of material cost inflation may not be sustainable once the economy begins to strengthen. We also are continuing to implement our excellence in operations initiatives in order to continuously reduce our costs. We cannot assure you, however, that these actions will be successful in managing our costs or increasing our productivity. Continued cost inflation or failure of our initiatives to generate cost savings or improve productivity would likely negatively impact our results of operations.

Seasonality of sales and weather conditions may adversely affect our financial results.

We experience seasonal demand in a number of markets within our Water Group. End-user demand for pool equipment in our primary markets 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 or “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. We cannot assure you that seasonality and weather conditions will not have a material adverse effect on our results of operations.

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Intellectual property challenges may hinder product development and marketing.

Patents, non-compete agreements, proprietary technologies, customer relationships, trade marks, trade names, and brand names are important to our business. Intellectual property protection, however, may not preclude competitors from developing products similar to ours or from challenging our names or products. Over the past few years, we have noticed an increasing tendency for participants in our markets to use conflicts over and challenges to intellectual property as a means to compete. Patent and trademark challenges increase our costs to develop, engineer and market our products.

Our results of operations may be negatively impacted by litigation.

Our business exposes us to potential litigation, such as product liability claims relating to the design, manufacture, and sale of our products. While we currently maintain what we believe to be suitable product liability insurance, we cannot assure you that we will be able to maintain this insurance on acceptable terms or that this insurance will provide adequate protection against potential liabilities. In addition, we self-insure a portion of product liability claims. A series of successful claims against us for significant amounts could materially and adversely affect our product reputation, financial condition, results of operations, and cash flows.

Reductions in our acquisition activity will likely slow our revenue growth or otherwise adversely affect our financial performance.

Over the past four years, much of our growth has resulted from acquisitions of businesses within our current business segments. While we intend to continue to evaluate acquisitions in these segments, given the current financial and economic environment, we currently do not expect to make significant acquisitions until credit markets and business conditions stabilize. We cannot assure you that we would be able to continue to grow or to limit revenue declines without making acquisitions. Acquisitions we may undertake could have a material adverse effect on our operating results, particularly in the fiscal quarters immediately following the acquisitions, while we attempt to integrate operations of the acquired businesses into our operations. Once integrated, acquired operations may not achieve the levels of profitability originally anticipated.

The availability and cost of capital could have a negative impact on our financial performance.

Our plans to vigorously compete in our chosen markets will require additional capital for future acquisitions, capital expenditures, growth of working capital, and continued international and regional expansion. In the past, we have financed growth of our businesses primarily through cash from operations and debt financing. While we refinanced our primary credit agreements in the second quarter of 2007 on what we believe to be favorable terms, future acquisitions or other uses of funds may require us to expand our debt financing resources or to issue equity securities. Our financial results may be adversely affected if new financing is not available on favorable terms or if interest costs under our debt financings are higher than the income generated by acquisitions or other internal growth. In addition, future acquisitions could be dilutive to your equity investment if we issue additional stock as consideration. We cannot assure you that we will be able to issue equity securities or obtain future debt financing at favorable terms. Without sufficient financing, we will not be able to pursue our targeted growth strategy, and our acquisition program, which will limit our revenue growth and future financial performance.

We are exposed to political, economic and other risks that arise from operating a multinational business.

Sales outside of the United States, including export sales from our domestic businesses, accounted for approximately 35% of our gross sales in 2008, up from 32% in 2007. Further, most of our businesses obtain some products, components and raw materials from foreign suppliers. Accordingly, our business is subject to the political, economic and other risks that are inherent in operating in numerous countries. These risks include:

•  changes in general economic and political conditions in countries where we operate, particularly in emerging markets;

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•  relatively more severe economic conditions in some international markets than in the United States;

•  the difficulty of enforcing agreements and collecting receivables through foreign legal systems;

•  trade protection measures and import or export licensing requirements;

•  tax rates in certain foreign countries that exceed those in the U.S. and the imposition of withholding requirements on foreign earnings;

•  the possibility of terrorist action against us or our operations;

•  the imposition of tariffs, exchange controls or other trade restrictions;

•  difficulty in staffing and managing widespread operations in non-U.S. labor markets;

•  the difficulty of protecting intellectual property in foreign countries; and

•  required compliance with a variety of foreign laws and regulations.

Our business success depends in part on our ability to anticipate and effectively manage these and other risks. We cannot assure you that these and other factors will not have a material adverse effect on our international operations or on our business as a whole.

Our international operations are subject to foreign market and currency fluctuation risks.

We expect the percentage of our sales outside of North America to increase in the future. Over the past few years, the economies of some of the foreign countries in which we do business have had slower growth than the U.S. economy. The European Union currently accounts for the majority of our foreign sales and income, in which our most significant European market is Germany; each market area is currently experiencing similar economic difficulties to those in the United States, and sales in those markets slowed significantly by the end of 2008. In addition, we have a significant and growing business in the Asia-Pacific area, but the economic conditions in countries in this region are subject to different growth expectations, market weaknesses and business practices. We cannot predict how changing market conditions in these regions will impact our financial results.

We are also exposed to the risk of fluctuation of foreign currency exchange rates which may affect our financial results. In 2008, the weakness of the US dollar slightly benefited our financial results in foreign jurisdictions. We do not anticipate continuing US dollar weakness in foreign exchange markets in 2009 of a similar magnitude, which may hurt our financial results on a comparative basis. In addition, we source certain products, components and raw materials throughout the world, the import of which into the United States has raised the cost of these goods in US dollars and has impacted the results of our domestic businesses as well.

We have significant goodwill and intangible assets, and future impairment of our goodwill and intangible assets could have a material negative impact on our financial results.

We test goodwill and indefinite-lived intangible assets for impairment on an annual basis as required by Statement of Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS No. 142), by comparing the estimated fair value of each of our reporting units to their respective carrying values on our balance sheet. At December 31, 2008 our goodwill and intangible assets were approximately $2,617.4 million, and represented approximately 64.6% of our total assets. While our annual assessment in 2008 did not indicate an impairment of goodwill at that time, long-term declines in projected future cash flows could result in future goodwill and intangible asset impairments. Because of the significance of our goodwill and intangible assets, any future impairment of these assets could have a material adverse effect on our financial results.

We are exposed to potential environmental and other laws, liabilities and litigation.

We are subject to federal, state, local and foreign laws and regulations governing our environmental practices, public and worker health and safety and the indoor and outdoor environment. Compliance with these environmental, health and safety regulations could require us to satisfy environmental liabilities, increase the

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cost of manufacturing our products or otherwise adversely affect our business, financial condition and results of operations. Any violations of these laws by us could cause us to incur unanticipated liabilities that could harm our operating results and cause our business to suffer. We are also required to comply with various environmental laws and maintain permits, some of which are subject to discretionary renewal from time to time, for many of our businesses, and we could suffer if we are unable to renew existing permits or to obtain any additional permits that we may require.

We have been named as defendants, targets, or potentially responsible parties (“PRP”) in a number of environmental clean-ups relating to our current or former business units. We have disposed of a number of businesses in recent years and, in certain cases, we have retained responsibility and potential liability for certain environmental obligations. We have received claims for indemnification from certain purchasers. We may be named as a PRP at other sites in the future for existing business units, as well as both divested and acquired businesses. We have also made claims against third parties for indemnification against potential liabilities for environmental remediations or other obligations. We cannot assure you that we will be successful in obtaining indemnity or reimbursement for such costs.

We cannot ensure you that environmental requirements will not change or become more stringent over time or that our eventual environmental clean-up costs and liabilities will not exceed the amount of our current reserves.

Provisions of our Restated Articles of Incorporation, Bylaws and Minnesota law could deter takeover attempts.

Anti-takeover provisions in our charter documents, under Minnesota law, and in our shareholder rights plan could prevent or delay transactions that our shareholders may favor.

Our Restated Articles of Incorporation and Bylaws include provisions relating to the election, appointment and removal of directors, as well as shareholder notice and shareholder voting requirements which could delay, prevent or make more difficult a merger, tender offer, proxy contest or other change of control. In addition, our common share purchase rights could cause substantial dilution to a person or group that attempts to acquire us, which could deter some acquirers from making takeover proposals or tender offers. Also, the Minnesota Business Corporations Act contains control share acquisition and business combination provisions which could delay, prevent or make more difficult a merger, tender offer, proxy contest or other change of control. Our shareholders might view any such transaction as being in their best interests since the transaction could result in a higher stock price than the current market price for our common stock.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

None.

ITEM 2.   PROPERTIES

Our principal executive office is in leased premises located in Golden Valley, Minnesota. We carry out our Water Group manufacturing operations at 23 plants located throughout the United States and at 18 plants located in 10 other countries. In addition, our Water Group has 33 distribution facilities and 36 sales offices located in numerous countries throughout the world. We carry out our Technical Products Group manufacturing operations at 8 plants located throughout the United States and 10 plants located in 8 other countries. In addition, our Technical Products Group has 7 distribution facilities and 30 sales offices located in numerous countries throughout the world.

We believe that our production facilities are suitable for their purpose and are adequate to support our businesses.

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ITEM 3.   LEGAL PROCEEDINGS

We have been made parties to a number of actions filed or have been given notice of potential claims relating to the conduct of our business, including those pertaining to commercial disputes, product liability, environmental, safety and health, patent infringement, and employment matters.

We comply with the requirements of Statement of Financial Accounting Standards (“SFAS”) No. 5, Accounting for Contingencies, and related guidance, and record liabilities for an estimated loss from a loss contingency where the outcome of the matter is probable and can be reasonably estimated. Factors that are considered when determining whether the conditions for accrual have been met include the (a) nature of the litigation, claim, or assessment, (b) progress of the case, including progress after the date of the financial statements but before the issuance date of the financial statements, (c) opinions of legal counsel, and (d) management’s intended response to the litigation, claim, or assessment. Where the reasonable estimate of the probable loss is a range, we record the most likely estimate of the loss. When no amount within the range is a better estimate than any other amount, however, the minimum amount in the range is accrued. Gain contingencies are not recorded until realized.

While we believe that a material adverse impact on our consolidated financial position, results of operations, or cash flows from any such future charges is unlikely, given the inherent uncertainty of litigation, a remote possibility exists that a future adverse ruling or unfavorable development could result in future charges that could have a material adverse impact. We do and will continue to periodically reexamine our estimates of probable liabilities and any associated expenses and receivables and make appropriate adjustments to such estimates based on experience and developments in litigation. As a result, the current estimates of the potential impact on our consolidated financial position, results of operations, and cash flows for the proceedings and claims described in “Legal Proceedings” could change in the future.

Environmental

We have been named as defendants, targets, or PRP in a small number of environmental clean-ups, in which our current or former business units have generally been given de minimis status. To date, none of these claims have resulted in clean-up costs, fines, penalties, or damages in an amount material to our financial position or results of operations. We have disposed of a number of businesses in recent years and in certain cases, such as the disposition of the Cross Pointe Paper Corporation uncoated paper business in 1995, the disposition of the Federal Cartridge Company ammunition business in 1997, the disposition of Lincoln Industrial in 2001, and the disposition of the Tools Group in 2004, we have retained responsibility and potential liability for certain environmental obligations. We have received claims for indemnification from purchasers of these businesses and have established what we believe to be adequate accruals for potential liabilities arising out of retained responsibilities. We settled some of the claims in prior years; to date our recorded accruals have been adequate.

In addition, there are ongoing environmental issues at a limited number of sites, including one site acquired in the acquisition of Essef Corporation in 1999, which relate to operations no longer carried out at the sites. We have established what we believe to be adequate accruals for remediation costs at these sites. We do not believe that projected response costs will result in a material liability.

We may be named as a PRP at other sites in the future, for both divested and acquired businesses. When the outcome of the matter is probable and it is possible to provide reasonable estimates of our liability with respect to environmental sites, provisions have been made in accordance with generally accepted accounting principles in the United States. As of December 31, 2008 and 2007, our undiscounted reserves for such environmental liabilities were approximately $3.1 million and $3.5 million, respectively. We cannot ensure that environmental requirements will not change or become more stringent over time or that our eventual environmental clean-up costs and liabilities will not exceed the amount of our current reserves.

Product liability claims

We are subject to various product liability lawsuits and personal injury claims. A substantial number of these lawsuits and claims are insured and accrued for by Penwald, our captive insurance subsidiary. See discussion

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in ITEM 1 and ITEM 8, Note 1 of the Notes to Consolidated Financial Statements — Insurance subsidiary. Penwald records a liability for these claims based on actuarial projections of ultimate losses. For all other claims, accruals covering the claims are recorded, on an undiscounted basis, when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on existing information. The accruals are adjusted periodically as additional information becomes available. We have not experienced significant unfavorable trends in either the severity or frequency of product liability lawsuits or personal injury claims.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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EXECUTIVE OFFICERS OF THE REGISTRANT

Current executive officers of Pentair, their ages, current position, and their business experience during at least the past five years are as follows:

Name	Age	Current Position and Business Experience
Randall J. Hogan	53	Chief Executive Officer since January 2001 and Chairman of the Board effective May 1, 2002; President and Chief Operating Officer, December 1999 — December 2000; Executive Vice President and President of Pentair’s Electrical and Electronic Enclosures Group, March 1998 — December 1999; United Technologies Carrier Transicold President 1995 — 1997; Pratt & Whitney Industrial Turbines Vice President and General Manager 1994 — 1995; General Electric various executive positions 1988 — 1994; McKinsey & Company consultant 1981 — 1987.
Michael V. Schrock	56	President and Chief Operating Officer since September 2006; President and Chief Operating Officer of Filtration and Technical Products, October 2005 — September 2006; President and Chief Operating Officer of Enclosures October 2001 — September 2005; President, Pentair Water Technologies — Americas, January 2001 — October 2001; President, Pentair Pump and Pool Group, August 2000 — January 2001; President, Pentair Pump Group, January 1999 — August 2000; Vice President and General Manager, Aurora, Fairbanks Morse and Pentair Pump Group International, March 1998 — December 1998; Divisional Vice President and General Manager, Honeywell Inc., 1994 — 1998.
John L. Stauch	44	Executive Vice President and Chief Financial Officer since February 2007; Chief Financial Officer of the Automation and Control Systems unit of Honeywell International Inc., July 2005 — February 2007; Vice President, Finance and Chief Financial Officer of the Sensing and Controls unit of Honeywell International Inc., January 2004 — July 2005; Vice President, Finance and Chief Financial Officer of the Automation & Control Products unit of Honeywell International Inc., July 2002 — January 2004; Chief Financial Officer and IT Director of PerkinElmer Optoelectronics, a unit of PerkinElmer, Inc., April 2000 — April 2002; Various executive, investor relations and managerial finance positions with Honeywell International Inc. and its predecessor AlliedSignal Inc., 1994 — 2000.
Louis L. Ainsworth	61	Senior Vice President and General Counsel since July 1997 and Secretary since January 2002; Shareholder and Officer of the law firm of Henson & Efron, P.A., November 1985 — June 1997.
Frederick S. Koury	48	Senior Vice President, Human Resources, since August 2003; Vice President of Human Resources of the Victoria’s Secret unit of Limited Brands, September 2000 — August 2003; PepsiCo, Inc., various executive positions, June 1985 — September 2000.
Michael G. Meyer	50	Vice President of Treasury and Tax since April 2004; Treasurer, January 2002 — March 2004; Assistant Treasurer, September 1994 — December 2001; Various executive positions with Federal-Hoffman, Inc. (former subsidiary of Pentair), August 1985 — August 1994.
Mark C. Borin	41	Corporate Controller and Chief Accounting Officer since March 2008; Partner in the audit practice of the public accounting firm KPMG LLP, June 2000 — March 2008; Various positions in the audit practice of KPMG LLP, September 1989 — June 2000.

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PART II

ITEM 5.   MARKET FOR REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed for trading on the New York Stock Exchange and trades under the symbol “PNR.” As of December 31, 2008, there were 3,835 shareholders of record.

The high, low, and closing sales price for our common stock and the dividends declared for each of the quarterly periods for 2008 and 2007 were as follows:

	2008								2007
	First		Second		Third		Fourth		First		Second		Third		Fourth
High	$	34.98	$	38.76	$	41.00	$	38.50	$	33.22	$	39.37	$	39.67	$	36.59
Low	$	26.02	$	31.14	$	31.72	$	18.42	$	29.35	$	30.09	$	31.47	$	32.03
Close	$	31.48	$	33.87	$	38.52	$	23.67	$	31.16	$	38.57	$	33.18	$	34.81
Dividends declared	$	0.17	$	0.17	$	0.17	$	0.17	$	0.15	$	0.15	$	0.15	$	0.15

Pentair has paid 132 consecutive quarterly dividends and has increased dividends each year for 32 consecutive years.

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Stock Performance Graph

The following information under the caption “Stock Performance Graph” in this ITEM 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate it by reference into such a filing.

The following graph sets forth the cumulative total shareholder return on our common stock for the last five years, assuming the investment of $100 on December 31, 2003 and the reinvestment of all dividends since that date to December 31, 2008. The graph also contains for comparison purposes the S&P 500 Index and the S&P MidCap 400 Index, assuming the same investment level and reinvestment of dividends.

By virtue of our market capitalization, we are a component of the S&P MidCap 400 Index. On the basis of our size and diversity of businesses, we have not found a readily identifiable peer group. We believe the S&P MidCap 400 Index is an appropriate comparison. We have evaluated other published indices, but have determined that the results are skewed by significantly larger companies included in the indices. We believe such a comparison would not be meaningful.

	Base Period		INDEXED RETURNS
	December		Years Ending December 31:
Company / Index	2003		2004		2005		2006		2007		2008
PENTAIR INC		100		193.43		155.37		143.66		162.12		112.58
S&P 500 INDEX		100		110.88		116.33		134.70		142.10		89.53
S&P MIDCAP 400 INDEX		100		116.48		131.11		144.64		156.18		99.59

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Purchases of Equity Securities

The following table provides information with respect to purchases made by Pentair of common stock during the fourth quarter of 2008:

	(a)		(b)		(c)		(d)
					Total Number of		Dollar Value of
					Shares Purchased		Shares that
	Total Number				as Part of Publicly		May Yet Be
	of Shares		Average Price		Announced Plans		Purchased Under the
Period	Purchased		Paid per Share		or Programs		Plans or Programs
September 28 — October 25, 2008		168,549	$	29.77		168,058	$	6,908,012
October 26 — November 22, 2008		204,996	$	24.53		203,787	$	1,908,261
November 23 — December 31, 2008		97,807	$	23.03		83,989	$	0
Total		471,352				455,834

(a)	The purchases in this column include shares repurchased as part of our publicly announced programs and, in addition, 491 shares for the period September 28 — October 25, 2008, 1,209 shares for the period October 26 — November 22, 2008, and 13,818 shares for the period November 23 — December 31, 2008 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 includes shares repurchased as part of our publicly announced programs and shares deemed surrendered to us by participants in the Plans to satisfy the exercise price or withholding of tax obligations related to the exercise price of stock options and non-vested shares.
(c)	The number of shares in this column represents the number of shares repurchased as part of a publicly announced program to repurchase up to $50 million of our common stock during 2008.
(d)	In December 2007, the Board of Directors authorized the repurchase of shares of our common stock during 2008 up to a maximum dollar limit of $50 million. As of December 31, 2008, we had purchased 1,549,893 shares for $50.0 million pursuant to this authorization. This authorization expired on December 31, 2008. There is currently no repurchase authorization for 2009.

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ITEM 6.   SELECTED FINANCIAL DATA

The following table sets forth our selected historical financial data from continuing operations for the five years ended December 31.

	Years ended December 31,
	2008(1)		2007(1)		2006(1)		2005(1)		2004
Statement of Operations Data:
Net sales	$	3,351,976	$	3,280,903	$	3,022,602	$	2,801,715	$	2,221,909
Operating income		324,685		379,049		312,943		313,320		239,834
Income from continuing operations		256,363		212,118		186,251		179,183		133,233
Per Share Data:(2)
Basic:
EPS from continuing operations	$	2.62	$	2.15	$	1.87	$	1.78	$	1.34
Weighted average shares		97,887		98,762		99,784		100,665		99,316
Diluted
EPS from continuing operations	$	2.59	$	2.12	$	1.84	$	1.75	$	1.31
Weighted average shares		99,068		100,205		101,371		102,618		101,706
Cash dividends declared per common share	$	0.68	$	0.60	$	0.56	$	0.52	$	0.43
Balance Sheet Data:
Total assets	$	4,053,213	$	4,000,614	$	3,364,979	$	3,253,755	$	3,120,575
Total debt		954,092		1,060,586		743,552		752,614		736,105
Total shareholders’ equity		1,898,681		1,910,871		1,669,999		1,555,610		1,447,794

(1)	In 2005 we early adopted SFAS 123R retroactively to January 1, 2005. The incrementatl impact of the adoption of SFAS 123R to the results of operations for 2008, 2007, 2006 and 2005 include after tax expense of $7.5 million, $9.2 million, $9.9 million and $12.0 million, respectively, or ($0.08), ($0.09), ($0.10) and ($0.12) diluted EPS, respectively.
(2)	All share and per share information presented in this Annual Report on Form 10-K has been retroactively restated to reflect the effect of a 100% stock dividend in 2004.
	In July 2004, we acquired as part of our Water Group all of the capital stock of WICOR, Inc. In December 2005, we acquired as part of our Technical Products Group the McLean Thermal Management, Aspen Motion Technologies and Electonic Solutions businesses. In February and April 2007, we acquired the outstanding shares of capital stock of Jung Pump and all of the capital interests of Porous Media, respectively, as part of our Water Group. In May 2007, we acquired as part of our Technical Products Group the assets of Calmark. In June 2008, we entered into a transaction with 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.

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ITEM 7.   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 such 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, of this Form 10-K may impact the achievement of forward-looking statements:

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

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

•  continued deterioration in the global economy;

•  continued deterioration in or stabilization of the North America housing market;

•  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;

•  market acceptance of new product introductions and enhancements;

•  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;

•  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 continued improvement in manufacturing activities and the achievement of related efficiencies, cost reductions and inventory risks due to shifts in market demand and costs associated with moving production overseas;

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•  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 actions;

•  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.

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 the new entities and GE is a 19.9 percent owner.

With the formation of Pentair Residential Filtration, we believe we will be 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 accelerate revenue growth by selling GE’s existing residential conditioning 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

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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 our financial performance in 2008 and will likely impact our results in 2009 and beyond:

•  Many markets we serve have slowed dramatically as a result of the tumultuous credit markets and the resulting recession. 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 begun and expect to continue to restructure our operations serving those markets to close facilities in order to reduce or relocate capacity, to reduce labor and material costs, to optimize our manufacturing footprint and to simplify our business structure. 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 operation 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 started to slow significantly in Europe as well. We believe that construction of new homes and new pool starts in North America affect approximately 10% - 15% of sales of our water businesses, while repair, replacement and refurbishment accounts for approximately 15% - 20% of sales in these businesses. We expect the current recession to continue to adversely impact our sales for all or a significant portion of 2009. As sales of products into domestic residential end-markets in our Water Group business continued to slow appreciably, we have reduced our investments in businesses in those markets, and further restructured 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, have also slowed significantly during the fourth quarter of 2008, especially in December, and this weakness has continued throughout the early part of the first quarter of 2009. We have a high level of uncertainty over the course of the economy and hence the strength of many of our significant markets both in the United States and around the world for the balance of the year and beyond. We have reduced our 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 price volatility for many of our raw materials; material costs have declined in the fourth quarter of 2008 and the first quarter of 2009, and we believe they will continue to decline so long as general economic conditions remain weak. We believe that these cost decreases we are experiencing will not begin to be fully realized in our results of operations until the second quarter of 2009.

•  As a result of the dramatic fall in securities and other investment markets over 2008, our unfunded pension liability 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 US defined benefit plans during 2008. We believe that this will increase our pension expense in 2009 over year-earlier levels, and more significantly, require an increase in our 2009 contributions to the plans to approximately $40-$45 million, an increase of over $30 million in the year.

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•  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. Free cash flow for the full year 2008 was approximately $164 million, or 72% of our net income. Our target for free cash flow in 2009 remains at 100% of net income, and we have instituted several measures internally to maintain our strong collection experience and to decrease our working capital. 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 the second and third quarters of 2009, due to the unknown impact of the current economic situation, we are uncertain of the size and impact of the seasonal spike for the year, and contemplate that any seasonal impact will likely be less than in prior years.

•  We experienced year over year favorable foreign currency effects on net sales and operating results in 2007 and the first nine months of 2008, due to the weakening of the U.S. dollar in relation to other foreign currencies. 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 believe we will continue to incur integration costs as we combine facilities in this business throughout most of 2009.

•  The effective income tax rate for 2008 was 29.5%. We estimate our effective tax rate for the full year 2009 to be 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:

•  Restructuring our operations in challenging markets 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 newly formed PRF business and prior acquisitions, and realizing identified synergistic opportunities.

On February 3, 2009, we announced our results of operations for fiscal year 2008 and modified our earnings guidance for the first quarter of 2009 to a range of $0.20 to $0.30 per share on a diluted basis. Our prior guidance for the first quarter of 2009, given in December 2008, was a range of $0.30 to $0.35 per share. Our

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revised outlook for the quarter is based on what we believe will be a continuation of the order rates and level of economic activity realized in December and January lasting throughout the first quarter.

In December 2008, we also initiated earnings guidance for the year 2009 that anticipated our earnings to be approximately $1.70 to $2.00 per share on a diluted basis. This guidance has not been withdrawn or modified because we do not have sufficient certainty at this time to support any revision. We do caution, however, that we are uncertain of the economic performance trajectory, both in the United States and globally, for the calendar year. As noted above, significant deterioration in general economic conditions in our primary markets and geographies beyond what we have seen to date in the first quarter 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 10% as a result of overall market conditions, bringing our total revenue to approximately $3.0 billion for the full year. Second, we expect to get the benefit in the second, third and fourth quarters of 2009 of 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 deflation.

We have heightened our focus on increasing the conversion of our net income into free cash flow from that achieved in 2008. In addition, in response to continuing turbulence in the credit markets, we are taking actions we believe will help maintain our liquidity and increase our capital resources by allowing us to repay indebtedness at a faster rate than would otherwise be the case. We do not intend to 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 credit markets and business conditions stabilize.

If economic conditions worsen in North America and Europe, then we expect that our sales, manufacturing productivity and cash flow may 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 our restructuring actions in order to minimize the impact of these declines on our earnings per share. Conversely, if economic conditions hold up and improve over the year we would then have 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.

Our guidance assumes an absence of significant acquisitions or divestitures in 2009. In 2009, we may seek to expand 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 and 2009 guidance will depend, to a certain extent, on factors outside our control. See “Risk Factors” under Part I of this report.

RESULTS OF OPERATIONS

Net sales

The components of the net sales change were:

Percentages	2008 vs. 2007			2007 vs. 2006
Volume		(1.6	)		4.3
Price		2.3			2.6
Currency		1.5			1.6
Total		2.2			8.5

The 2.2 percent increase in consolidated net sales in 2008 from 2007 was primarily the result of:

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

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•  an increase in sales volume due to the formation of PRF and our 2007 acquisitions of Jung Pumpen GmbH (“Jung Pump”) Porous Media Corporation and Porous Media, Ltd. (together “Porous Media”);

•  favorable foreign currency effects; and

•  higher Technical Products Group sales.

These increases were partially offset by:

•  lower sales of certain pump, pool and filtration products primarily related to the downturn in the North American residential housing market throughout 2008 and other global markets in the fourth quarter.

The 8.5 percent increase in consolidated net sales in 2007 from 2006 was primarily the result of:

•  an increase in sales volume due to our February 2, 2007 acquisition of Jung Pump and our April 30, 2007 acquisition of Porous Media;

•  organic sales growth of approximately 2 percent for the full year 2007 (excluding acquisitions and foreign currency exchange), which included selective increases in selling prices to mitigate inflationary cost increases due to:

•  growth in the Europe and Asia-Pacific markets;

•  higher Technical Product sales into electrical markets;

•  higher second quarter sales of municipal pumps related to a large flood control project; and

•  growth in commercial and industrial water markets.

These increases were partially offset by:

•  lower Technical Products sales into North American electronics markets driven by contraction and consolidation in the telecommunication equipment industry which have delayed buying activity and by datacommunication projects reaching end-of-life;

•  lower sales of certain pump, pool and filtration products related to the downturn in the North American residential housing market and softness in residential pool construction markets; and

•  favorable foreign currency effects.

Sales by segment and the year-over-year changes were as follows:

							2008 vs. 2007						2007 vs. 2006
In thousands	2008		2007		2006		$ change			% change			$ change		% change
Water	$	2,206,142	$	2,230,770	$	2,023,358	$	(24,628	)		(1.1	%)	$	207,412		10.3	%
Technical Products		1,145,834		1,050,133		999,244		95,701			9.1	%		50,889		5.1	%
Total	$	3,351,976	$	3,280,903	$	3,022,602	$	71,073			2.2	%	$	258,301		8.5	%

Water

The 1.1 percent decrease in Water segment sales in 2008 from 2007 was primarily the result of:

•  organic sales decline (excluding acquisitions and foreign currency exchange) of 5.1 percent for the full year 2008, which included:

•  lower sales of certain pump, pool and filtration products into North American and Western European residential housing markets; and

•  second quarter 2007 sales of municipal pumps related to a large flood control project that did not recur in 2008.

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These decreases were partially offset by:

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

•  continued growth in China and in other markets in Asia-Pacific as well as continued success in penetrating markets in Europe and the Middle East.

These decreases were further offset by:

•  an increase in sales volume driven by the formation of PRF and our 2007 acquisitions of Jung Pump and Porous Media; and

•  favorable foreign currency effects.

The 10.3 percent increase in Water segment sales in 2007 from 2006 was primarily the result of:

•  an increase in sales volume driven by our February 2, 2007 acquisition of Jung Pump and our April 30, 2007 acquisition of Porous Media;

•  organic sales growth of 2 percent for the full year 2007 (excluding acquisitions and foreign currency exchange), which included selective increases in selling prices to mitigate inflationary cost increases:

•  continued growth in China and in other markets in Asia-Pacific as well as continued success in penetrating markets in Europe and the Middle East;

•  higher second quarter sales of municipal pumps related to a large flood control project; and

•  growth in commercial and industrial water markets.

These increases were partially offset by:

•  a decline in sales of certain pump, pool and filtration products into North American residential markets and softness in residential pool construction markets; and

•  favorable foreign currency effects.

Technical Products

The 9.1 percent increase in Technical Products segment sales in 2008 from 2007 was primarily the result of:

•  an increase in sales into electrical markets, which includes new products and selective increases in selling prices to mitigate inflationary cost increases;

•  an increase in sales into electronics markets as sales to our datacommunication and telecommunications customers rebounded and we expanded into other vertical markets;

•  strong sales performance in Asia and Europe; and

•  favorable foreign currency effects.

These increases were partially offset by:

•  an organic sales decline in our North American electronics markets.

The 5.1 percent increase in Technical Products segment sales in 2007 from 2006 was primarily the result of:

•  organic sales (excluding acquisitions and foreign currency exchange) which were up approximately 2 percent for the full year 2007 ,which included selective increases in selling prices to mitigate inflationary cost increases;

•  strong sales performance in Asia; and

•  increased sales into electrical markets.

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These increases were partially offset by:

•  lower sales into North American electronics markets driven by contraction and consolidation in the telecommunication equipment industry which have delayed buying activity and by datacommunication projects reaching end-of-life; and

•  favorable foreign currency effects.

Gross profit

In thousands	2008		% of sales	2007		% of sales	2006		% of sales
Gross profit	$	1,014,550	30.3%	$	1,012,698	30.9%	$	896,056		29.6	%
Percentage point change			(0.6) pts			1.3 pts

The 0.6 percentage point decrease in gross profit as a percent of sales in 2008 from 2007 was primarily the result of:

•  inflationary increases related to raw materials and labor costs;

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

•  higher cost of goods sold in 2008 as a result of a fair market value inventory step-up related to the formation of PRF; and

•  operating inefficiencies related to product moves and plant consolidations.

These decreases were partially offset by:

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

•  the gross margin impact from increased sales volume in our Technical Products Group and the resulting improved fixed cost leverage;

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

•  lower comparative cost in 2008 for our Jung Pump and Porous Media businesses due to the absence of a fair market value inventory step-up that was recorded in connection with those acquisitions.

The 1.3 percentage point increase in gross profit as a percent of sales in 2007 from 2006 was primarily the result of:

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

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

•  a decrease in costs related to capacity rationalization and market-related actions in 2007 compared to 2006.

These increases were partially offset by:

•  inflationary increases related to raw materials and labor; and

•  higher cost as a result of a fair market value inventory step-up related to the Jung Pump and Porous Media acquisitions.

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Selling, general and administrative (SG&A)

In thousands	2008		% of sales	2007		% of sales	2006		% of sales
*SG&A	$	627,415	18.7%	$	576,828	17.6%	$	526,568		17.4	%
Percentage point change			1.1 pts			0.2 pts

* Includes Legal settlement, which is presented on a separate line in the Consolidated Statements of Income

The 1.1 percentage point increase in SG&A expense as a percent of sales in 2008 from 2007 was primarily the result of:

•  restructuring actions in both our Water and Technical Products Groups during the second half of 2008;

•  higher selling and general expense to fund investments in future growth with emphasis on growth in the international markets, including personnel and business infrastructure investments; and

•  expenses related to the settlement of the Horizon litigation.

These increases were partially offset by:

•  reduced costs related to productivity actions taken in the second half of 2007 and throughout 2008; and

•  reduced costs related to the completion of the European SAP implementation in 2007.

The 0.2 percentage point increase in SG&A expense as a percent of sales in 2007 from 2006 was primarily the result of:

•  higher selling and general expense to fund investments in future growth with emphasis on growth in the international markets, including personnel and business infrastructure investments;

•  proportionately higher SG&A expenses in the acquired Jung Pump and Porous Media businesses caused in part by amortization expense related to the intangible assets from those acquisitions; and

•  exit costs incurred in 2007 related to a previously announced 2001 French facility closure.

These increases were partially offset by:

•  a decrease in costs related to capacity rationalization and market-related actions in 2007 compared to 2006.

Research and development (R&D)

In thousands	2008		% of sales	2007		% of sales	2006		% of sales
R&D	$	62,450	1.9%	$	56,821	1.7%	$	56,545		1.9	%
Percentage point change			0.2 pts			(0.2) pts

The 0.2 percentage point increase in R&D expense as a percent of sales in 2008 from 2007 was primarily the result of:

•  increased R&D spending with emphasis on new product development and value engineering.

The 0.2 percentage point decrease in R&D expense as a percent of sales in 2007 from 2006 was primarily the result of:

•  relatively flat R&D expense spending on higher volume.

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Operating income

Water

In thousands	2008		% of sales	2007		% of sales	2006		% of sales
Operating income	$	206,357	9.4%	$	273,677	12.3%	$	219,611		10.9	%
Percentage point change			(2.9) pts			1.4 pts

The 2.9 percentage point decrease in Water segment operating income as a percent of net sales in 2008 from 2007 was primarily the result of:

•  inflationary increases related to raw materials and labor;

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

•  restructuring actions taken throughout 2008;

•  expenses related to the settlement of the Horizon litigation;

•  second quarter 2007 sales of municipal pumps related to a large flood control project, which did not recur in 2008; and

•  higher cost in 2008 as a result of a fair market value inventory step-up and intangible amortization related to the June 2008 formation of PRF.

These increases were partially offset by:

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

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

•  an increase in sales volume driven by our February 2, 2007 acquisition of Jung Pump, our April 30, 2007 acquisition of Porous Media, and the June 2008 formation of PRF;

•  curtailment of long-term defined benefit pension and retiree medical plans in 2007; and

•  lower comparative cost in 2008 for our Jung Pump and Porous Media businesses due to the absence of a fair market value inventory step-up that was recorded in connection with those acquisitions.

The 1.4 percentage point increase in Water segment operating income as a percent of net sales in 2007 from 2006 was primarily the result of:

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

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

•  income generated by our February 2, 2007 acquisition of Jung Pump and our April 30, 2007 acquisition of Porous Media;

•  curtailment of long-term defined benefit pension and retiree medical plans; and

•  a decrease in costs related to capacity rationalization and market-related actions in 2007 compared to 2006.

These increases were partially offset by:

•  inflationary increases related to raw materials and labor;

•  a decline in sales of certain pump, pool and filtration products into North American residential markets;

•  amortization expense related to the intangible assets from the Jung Pump and Porous Media acquisitions; and

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•  higher cost as a result of fair market value market step-up related to the Jung Pump and Porous Media acquisitions.

Technical Products

In thousands	2008		% of sales	2007		% of sales	2006		% of sales
Operating income	$	169,315	14.8%	$	153,586	14.6%	$	148,905		14.9	%
Percentage point change			0.2 pts			(0.3) pts

The 0.2 percentage point increase in Technical Products segment operating income as a percent of net sales in 2008 from 2007 was primarily the result of:

•  an increase in sales to electrical and electronics markets, which includes selective increases in selling prices to mitigate inflationary cost increases;

•  savings realized from the continued success of PIMS, including lean and supply management activities.

These increases were partially offset by:

•  inflationary increases related to raw materials such as carbon steel and labor costs; and

•  expenses associated with restructuring actions taken during the second half of 2008.

The 0.3 percentage point decrease in Technical Products segment operating income as a percent of net sales in 2007 from 2006 was primarily the result of:

•  inflationary increases related to raw materials such as stainless steel and labor costs;

•  lower sales into North American electronics markets driven by contraction and consolidation in the telecommunication equipment industry which have delayed buying activity and by datacommunication projects reaching end-of-life; and

•  exit costs incurred in 2007 related to a previously announced 2001 French facility closure.

These decreases were partially offset by:

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

•  savings realized from the continued success of PIMS, including lean and supply management activities; and

•  increased sales in our electrical markets.

Net interest expense

In thousands	2008		2007		Difference			% change			2007		2006		Difference		% change
Net interest expense	$	59,435	$	68,393	$	(8,958	)		(13.1	%)	$	68,393	$	50,300	$	18,093		36.0	%

The 13.1 percent decrease in interest expense from continuing operations in 2008 from 2007 was primarily the result of:

•  a decrease in outstanding debt; and

•  favorable impact of lower interest rates.

The 36.0 percent increase in interest expense from continuing operations in 2007 from 2006 was primarily the result of:

•  an increase in outstanding debt primarily related to the Jung Pump and Porous Media acquisitions.

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Loss on early extinguishment of debt

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. 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.

Provision for income taxes from continuing operations

In thousands	2008			2007			2006
Income from continuing operations before income taxes and minority interest	$	367,140		$	306,561		$	259,675
Provision for income taxes		108,344			94,443			73,424
Effective tax rate		29.5	%		30.8	%		28.3	%

The 1.3 percentage point decrease in the tax rate in 2008 from 2007 was primarily the result of:

•  higher earnings in lower-tax rate jurisdictions during 2008; and

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

These decreases were partially offset by:

•  the impact in 2007 of a favorable adjustment related to the measurement of deferred tax assets and liabilities to account for changes in German tax law enacted on August 17, 2007.

The 2.5 percentage point increase in the tax rate in 2007 from 2006 was primarily the result of:

•  higher utilization of foreign tax credits in 2006; and

•  the favorable settlement in 2006 of prior years’ federal tax returns.

These increases were partially offset by:

•  a favorable adjustment in 2007 related to the measurement of deferred tax assets and liabilities to account for changes in German tax law enacted on August 17, 2007.

We expect our full year effective tax rate in 2009 to be between 32% and 33%. We will continue to pursue tax rate reduction opportunities.

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 significant part over the past few years through acquisitions, such as Jung Pump and Porous Media in 2007, 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 and the state of credit markets generally, we have instituted a more conservative financial policy. We do not currently plan to make any significant acquisitions in 2009, and we do not plan to continue in 2009 the annual share repurchase programs that we have undertaken over the

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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 previously had a targeted debt-to-total-capital ratio of 40%, which could and had been exceeded from time to time as needed for operational purposes and, especially, acquisitions. Our capital structure as of December 31, 2008 consisted of $954.1 million in total indebtedness and $1,898.7 million in shareholders’ equity. The ratio of debt-to-total capital was 33.4 percent, compared with 35.7 percent at year-end 2007 and 30.8 percent in 2006. In line with our new financial policy, we no longer target a particular debt-to-total-capital ratio, but we will strive to maintain our investment grade ratings.

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 have borrowing capacity of over $580 million at December 31, 2008, and the only significant required debt repayment before 2012 is for the retirement in October 2009 of the remaining 7.85% Senior Notes originally issued in 1999, of which approximately $134 million are currently outstanding.

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.

Operating activities

Cash provided by operating activities was $204.2 million in 2008, or $137.1 million lower compared with the same period in 2007. The decrease in cash provided by operating activities was due primarily to an increase in working capital, higher prepaid expenses (particularly prepaid taxes) and lower income from continuing operations, excluding the gain from the formation of PRF.

Cash provided by operating activities was $341.3 million in 2007, or $109.8 million higher compared with the same period in 2006. The increase in cash provided by operating activities was due primarily to working capital reductions during 2007 versus 2006 and higher net income.

In December 2008 and 2007, we sold approximately $44 million and $50 million, respectively, of a customer’s account receivable to a third-party financial institution to mitigate accounts receivable concentration risk. In compliance with Statement of Financial Accounting Standards (“SFAS’) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, sales of accounts receivable are reflected as a reduction of accounts receivable in our Consolidated Balance Sheets and the proceeds are included in the cash flows from operating activities in our Consolidated Statements of Cash Flows. In 2008 and 2007, a loss in the amount of $0.5 million and $1.2 million related to the sale of accounts receivable is included in the line item Other in our Consolidated Statements of Income.

Investing activities

Capital expenditures in 2008, 2007, and 2006 were $53.1 million, $61.5 million and $50.9 million, respectively. We anticipate capital expenditures for fiscal 2009 to be approximately $45 to $50 million, primarily for capacity expansions in our low cost country manufacturing facilities, new product development, and general maintenance capital.

On May 7, 2007, we acquired as part of our Technical Products Group the assets of Calmark Corporation (“Calmark”), a privately held business, for $28.4 million, including a cash payment of $29.2 million and transaction costs of $0.2 million, less cash acquired of $1.0 million.

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On April 30, 2007, we acquired as part of our Water Group all of the capital interests in Porous Media, two privately held filtration and separation technologies businesses, for $224.9 million, including a cash payment of $225.0 million and transaction costs of $0.4 million, less cash acquired of $0.5 million.

On February 2, 2007, we acquired as part of our Water Group all the outstanding shares of capital stock of Jung Pump for $229.5 million, including a cash payment of $239.6 million and transaction costs of $1.3 million, less cash acquired of $11.4 million.

On December 15, 2008, we sold our Spa/Bath business to Balboa Water Group in a cash transaction for approximately $8.3 million subject to 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.

Cash proceeds from the sale of property and equipment of $4.7 million in 2008 was primarily related to the sale of a facility in our Water Group. Cash proceeds from the sale of property and equipment of $5.2 million in 2007 was primarily related to the sale of a facility used by our Technical Products Group.

Financing activities

Net cash used for financing activities was $217.2 million in 2008 versus net cash provided by financing activities of $222.7 in 2007. The difference in cash usage between the two years is primarily attributable to the three acquisitions in 2007. Other 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, cash received from stock option exercises, and tax benefits related to stock-based compensation.

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 0.50%. 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 December 31, 2008, we had $0.2 million of commercial paper outstanding that matures within 41 days. All of the commercial paper was classified as long-term as we have the intent and the ability to refinance such obligations on a long-term basis under the Credit Facility.

In May 2007, we entered into a Note Purchase Agreement with various institutional investors (the “Agreement”) for the sale of $300 million aggregate principal amount of our 5.87% Senior Notes (“Fixed Notes”) and $105 million aggregate principal amount of our Floating Rate Senior Notes (“Floating Notes” and with the Fixed Notes, the “Notes”). The Fixed Notes are due in May 2017. The Floating Notes are due in May 2012 and bear interest equal to the 3 month LIBOR plus 0.50%. The Agreement contains customary events of default.

We used $250 million of the proceeds from the sale of the Notes to retire a $250 million 364-day Term Loan Agreement that we entered into in April 2007, which we used in part to pay the cash purchase price of our Porous Media acquisition which closed in April 2007.

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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 December 31, 2008.

In addition to the Credit Facility, we have $25.0 million of uncommitted credit facilities, under which we had no borrowings as of December 31, 2008.

Our current credit ratings are as follows:

	Long-Term Debt		Current Rating
Rating Agency	Rating		Outlook
Standard & Poor’s		BBB		Negative
Moody’s		Baa3		Stable

Our long-term debt rating is an investment grade rating. Investment grade is a credit rating of BBB- or higher by Standard & Poor’s or Baa3 or higher by Moody’s.

On March 7, 2007, Standard & Poor’s Ratings Services revised its current rating outlook on us from stable to negative. At the same time, Standard & Poor’s affirmed its long-term debt rating of ‘BBB’. Standard & Poor’s stated that the outlook revision reflects the additional leverage and stress on credit metrics that would result from the acquisition of Porous Media. The negative outlook indicates the rating could be lowered if financial policies become more aggressive or if operating results are weaker than expected.

We believe the potential impact of a downgrade in our financial outlook is currently not material to our liquidity exposure or cost of debt. A credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program. The credit rating takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The ratings outlook also highlights the potential direction of a short or long-term rating. It focuses on identifiable events and short-term trends that cause ratings to be placed under observation by the respective rating agencies. A change in rating outlook does not mean a rating change is inevitable. Prior changes in our ratings outlook have had no immediate impact on our liquidity exposure or on our cost of debt.

We issue short-term commercial paper notes that are currently not rated by Standard & Poor’s or Moody’s. Even though our short-term commercial paper is unrated, we believe a downgrade in our long-term debt rating could have a negative impact on our ability to continue to issue unrated commercial paper.

We do not expect that a one rating downgrade of our long-term debt by either Standard & Poor’s or Moody’s would substantially affect our ability to access the long-term debt capital markets. However, depending upon market conditions, the amount, timing and pricing of new borrowings could be adversely affected. If both of our long-term debt ratings were downgraded to below BBB-/Baa3, our flexibility to access the term debt capital markets would be reduced.

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.

We paid dividends in 2008 of $67.3 million, compared with $59.9 million in 2007 and $56.6 million in 2006. We recently announced an increase in our dividend rate for 2009 from $0.68 per share in 2008 to $0.72 per share in 2009, which is the 33^rd consecutive year in which we have increased our dividend.

In December 2007, the Board of Directors authorized the repurchase of shares of our common stock during 2008 up to a maximum dollar limit of $50 million. As of December 31, 2008, we had purchased 1,549,893 shares for $50 million pursuant to this authorization. This authorization expired on December 31, 2008. No authorization for the repurchase of shares of our common stock has been granted for 2009.

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The following summarizes our significant contractual obligations that impact our liquidity:

	Payments Due by Period
											More than
In thousands	2009		2010		2011		2012		2013		5 Years		Total
Long-term debt obligations	$	134,773	$	78	$	6	$	319,206	$	200,007	$	300,022	$	954,092
Interest obligations on fixed-rate debt		41,811		33,524		33,524		29,990		24,095		59,264		222,208
Operating lease obligations, net of sublease rentals		25,952		19,790		17,773		13,310		9,121		11,952		97,898
Pension and post-retirement plan contributions		50,200		35,200		30,200		30,100		30,100		78,000		253,800
Other long-term liabilities		948		546		229		229		114		—		2,066
Total contractual cash obligations, net	$	253,684	$	89,138	$	81,732	$	392,835	$	263,437	$	449,238	$	1,530,064

Our long-term debt obligations that are due in 2009 include $134.1 million that has been classified as long-term in our Consolidated Balance Sheets as we have the intent and the ability to refinance such obligations on a long-term basis under the Credit Facility.

In addition to the summary of significant contractual obligations, we will incur annual interest expense on outstanding variable rate debt. As of December 31, 2008, variable interest rate debt, including the effects of derivative financial instruments, was $214.4 million at a weighted average interest rate of 1.21%.

Pension and post-retirement plan contributions are based on an assumed discount rate of 6.5% for all periods and an expected rate of return on plan assets ranging from 6.5% to 8.5%.

As of December 31, 2008, the gross liability for uncertain tax positions under FIN 48 is $28.1 million. We do not expect a significant payment related to these obligations to be made within the next twelve months. We are not able to provide a reasonably reliable estimate of the timing of future payments relating to the non-current FIN 48 obligations.

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:

	Twelve Months Ended December 31
In thousands	2008			2007			2006
Cash flow provided by (used for) continuing operations	$	212,612		$	336,990		$	229,399
Capital expenditures		(53,089	)		(61,516	)		(50,894	)
Proceeds from sale of property and equipment		4,741			5,198			654
Free cash flow		164,264			280,672			179,159
Net income		228,734			210,927			183,731
Conversion of net income		72	%		133	%		98	%

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In 2009, our objective is to generate free cash flow that equals or exceeds 100% of net income.

Off-balance sheet arrangements

At December 31, 2008, we had no off-balance sheet financing arrangements.

COMMITMENTS AND CONTINGENCIES

Environmental

We have been named as defendants, targets, or PRP in a small number of environmental clean-ups, in which our current or former business units have generally been given de minimis status. To date, none of these claims have resulted in clean-up costs, fines, penalties, or damages in an amount material to our financial position or results of operations. We have disposed of a number of businesses in recent years and in certain cases, such as the disposition of the Cross Pointe Paper Corporation uncoated paper business in 1995, the disposition of the Federal Cartridge Company ammunition business in 1997, the disposition of Lincoln Industrial in 2001, and the disposition of the Tools Group in 2004, we have retained responsibility and potential liability for certain environmental obligations. We have received claims for indemnification from purchasers of these businesses and have established what we believe to be adequate accruals for potential liabilities arising out of retained responsibilities. We settled some of the claims in prior years; to date our recorded accruals have been adequate.

In addition, there are ongoing environmental issues at a limited number of sites, including one site acquired in the acquisition of Essef Corporation in 1999, which relate to operations no longer carried out at the sites. We have established what we believe to be adequate accruals for remediation costs at these sites. We do not believe that projected response costs will result in a material liability.

We may be named as a PRP at other sites in the future, for both divested and acquired businesses. When the outcome of the matter is probable and it is possible to provide reasonable estimates of our liability with respect to environmental sites, provisions have been made in accordance with GAAP in the United States. As of December 31, 2008 and 2007, our undiscounted reserves for such environmental liabilities were approximately $3.1 million and $3.5 million, respectively. We cannot ensure that environmental requirements will not change or become more stringent over time or that our eventual environmental clean-up costs and liabilities will not exceed the amount of our current reserves.

Stand-by letters of credit

In the ordinary course of business, we are required to commit to bonds that require payments to our customers for any non-performance. The outstanding face value of the bonds fluctuates with the value of our projects in process and in our backlog. In addition, we issue financial stand-by letters of credit primarily to secure our performance to third parties under self-insurance programs and certain legal matters. As of December 31, 2008 and 2007, the outstanding value of these instruments totaled $64.5 million and $58.5 million, respectively.

NEW ACCOUNTING STANDARDS

See ITEM 8, Note 1 of the Notes to Consolidated Financial Statements for information pertaining to recently adopted accounting standards or accounting standards to be adopted in the future.

CRITICAL ACCOUNTING POLICIES

We have adopted various accounting policies to prepare the consolidated financial statements in accordance with accounting principles generally accepted in the United States. Our significant accounting policies are more fully described in ITEM 8, Note 1 of the Notes to Consolidated Financial Statements. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, terms of existing contracts, our

36

observance of trends in the industry, and information available from other outside sources, as appropriate. We consider an accounting estimate to be critical if:

•  it requires us to make assumptions about matters that were uncertain at the time we were making the estimate; and

•  changes in the estimate or different estimates that we could have selected would have had a material impact on our financial condition or results of operations.

Our critical accounting estimates include the following:

Impairment of Goodwill

Goodwill represents the excess of the cost of acquired businesses over the fair value of identifiable tangible net assets and identifiable intangible assets purchased.

Goodwill is tested at least annually for impairment, and is tested for impairment more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test is performed using a two-step process. In the first step, the fair value of each reporting unit is compared with the carrying amount of the reporting unit, including goodwill. If the estimated fair value is less than the carrying amount of the reporting unit, an indication that goodwill impairment exists and a second step must be completed in order to determine the amount of the goodwill impairment, if any, that should be recorded. In the second step, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The fair value of each reporting unit is determined using a discounted cash flow analysis. Projecting discounted future cash flows requires is to make significant estimates regarding future revenues and expenses, projected capital expenditures, changes in working capital and the appropriate discount rate. The projections also take into account several factors including current and estimated economic trends and outlook, costs of raw materials, consideration of our market capitalization in comparison to the estimated fair values of our reporting units determined using discounted cash flow analyses and other factors which are beyond our control.

At December 31, 2008 our goodwill and intangible assets were approximately $2,617.4 million, and represented approximately 64.6% of our total assets. Declines in projected future cash flows could result in future goodwill and intangible impairments. Because of the significance of our goodwill and intangible assets, any future impairment of these assets could have a material adverse effect on our financial statements.

We completed step one of our annual goodwill impairment evaluation during the fourth quarter with each reporting unit’s fair value exceeding its carrying value. Accordingly, step two of the impairment analysis was not required.

Our primary identifiable intangible assets include trade marks and trade names, brand names, patents, non-compete agreements, proprietary technology, and customer relationships. Under the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, identifiable intangibles with finite lives are amortized and those identifiable intangibles with indefinite lives are not amortized. Identifiable intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Identifiable intangible assets not subject to amortization are tested for impairment annually or more frequently if events warrant. The impairment test consists of a comparison of the fair value of the intangible asset with its carrying amount. During the fourth quarter of 2008, we completed our annual impairment test for those identifiable assets not subject to amortization and recorded an impairment charge of $1.0 million. The charge was recorded in Selling, general and administrative in our Consolidated Statements of Income.

Impairment of Long-lived Assets

We review the recoverability of long-lived assets to be held and used, such as property, plant and equipment, when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying

37

value of the asset or asset group from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced for the cost to dispose of the assets. The measurement of impairment requires us to estimate future cash flows and the fair value of long-lived assets.

Pension

We sponsor domestic and foreign defined-benefit pension and other post-retirement plans. The amounts recognized in our consolidated financial statements related to our defined-benefit pension and other post-retirement plans are determined from actuarial valuations. Inherent in these valuations are assumptions including expected return on plan assets, discount rates, rate of increase in future compensation levels, and health care cost trend rates. These assumptions are updated annually and are disclosed in ITEM 8, Note 12 to the Notes to Consolidated Financial Statements. Changes to these assumptions will affect pension expense, pension contributions and the funded status of our pension plans.

In December 2006, we adopted SFAS No. 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS 158”). SFAS 158 requires that we recognize the overfunded or underfunded status of our defined benefit and retiree medical plans as an asset or liability in our 2006 year-end balance sheet, with changes in the funded status recognized through comprehensive income in the year in which they occur.

Discount rate

The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year based on our December 31 measurement date. The discount rate was determined by matching our expected benefit payments to payments from a stream of AA or higher bonds available in the marketplace, adjusted to eliminate the effects of call provisions. This produced a discount rate for our U.S. plans of 6.50% in 2008 and 2007 and 6.00% in 2006. The discount rates on our foreign plans ranged from 2.00% to 6.25% in 2008, 2.00% to 5.25% in 2007 and 2.00% to 5.15% in 2006. There are no other known or anticipated changes in our discount rate assumption that will impact our pension expense in 2009.

Expected rate of return

Our expected rate of return on plan assets in 2008 equaled 8.5%, which remained unchanged from 2007 and 2006. The expected rate of return is designed to be a long-term assumption that may be subject to considerable year-to-year variance from actual returns. In developing the expected long-term rate of return, we considered our historical returns, with consideration given to forecasted economic conditions, our asset allocations, input from external consultants and broader longer-term market indices.

We base our determination of pension expense or income on a market-related valuation of assets which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets. Since the market-related value of assets recognizes gains or losses over a five-year-period, the future value of assets will be impacted as previously deferred gains or losses are recorded.

See ITEM 8, Note 12 of the Notes to Consolidated Financial Statements for further information regarding pension plans.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk

Market risk is the potential economic loss that may result from adverse changes in the fair value of financial instruments. We are exposed to various market risks, including changes in interest rates and foreign currency rates. We use derivative financial instruments to manage or reduce the impact of some of these risks.

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Counterparties to all derivative contracts are major financial institutions. All instruments are entered into for other than trading purposes. The major accounting policies and utilization of these instruments is described more fully in ITEM 8, Note 1 of the Notes to Consolidated Financial Statements.

Our derivatives and other financial instruments consist of long-term debt (including current portion), short-term borrowing and interest rate swaps. The net market value of these financial instruments combined is referred to below as the net financial instrument position. As of December 31, 2008 and December 31, 2007, the net financial instrument position was a liability of $923.9 million and $1,076.5 million, respectively.

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 .50% for $105 million of debt and 3 month LIBOR plus .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.

Interest rate risk

Our debt portfolio, including swap agreements, as of December 31, 2008 was comprised of debt predominantly denominated in U.S. dollars. This debt portfolio is comprised of 56% fixed-rate debt and 44% variable-rate debt, not considering the effects of our interest rate swaps. Taking into account the variable to fixed rate swap agreement we entered with an effective date of April 2006 and August 2007, our debt portfolio is comprised of 78% fixed-rate debt and 22% variable-rate debt. Changes in interest rates have different impacts on the fixed and variable-rate portions of our debt portfolio. A change in interest rates on the fixed portion of the debt portfolio impacts the net financial instrument position but has no impact on interest incurred or cash flows. A change in interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows but does not impact the net financial instrument position.

Based on the variable-rate debt included in our debt portfolio, including the interest rate swap agreements, as of December 31, 2008, a 100 basis point increase or decrease in interest rates would result in a $2.1 million increase or decrease in interest incurred.

Foreign currency risk

We conduct business in various locations throughout the world and are subject to market risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. dollar. We generally do not use derivative financial instruments to manage these risks. The functional currencies of our foreign operating locations are the local currency in the country of domicile. We manage these operating activities at the local level and revenues, costs, assets, and liabilities are generally denominated in local currencies, thereby mitigating the risk associated with changes in foreign exchange. However, our results of operations and assets and liabilities are reported in U.S. dollars and thus will fluctuate with changes in exchange rates between such local currencies and the U.S. dollar.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Pentair, Inc. and its subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed 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. The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria for effective internal control over financial reporting described in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2008, the Company’s internal control over financial reporting was effective based on those criteria.

Our independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on the Company’s internal control over financial reporting as of year ended December 31, 2008. That attestation report is set forth immediately following this management report.

Randall J. Hogan
Chairman and Chief Executive Officer John L. Stauch
Executive Vice President and Chief Financial Officer

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Pentair, Inc.:

We have audited the internal control over financial reporting of Pentair, Inc. and subsidiaries (the “Company”) as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule listed in the Index at ITEM 15 as of and for the year ended December 31, 2008, of the Company, and our report dated February 23, 2009, expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.

Minneapolis, Minnesota

February 23, 2009

41

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Pentair, Inc.:

We have audited the accompanying consolidated balance sheets of Pentair, Inc. and subsidiaries (the “Company”) as of December 31, 2008 and 2007, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Notes 1 and 11 to the consolidated financial statements, the Company changed its method of accounting for uncertain tax benefits in 2007 and as discussed in Notes 1 and 12 to the consolidated financial statements, the Company changed its method of accounting for defined benefit pension and postretirement benefit plans in 2006.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2009, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Minneapolis, Minnesota

February 23, 2009

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Pentair, Inc. and Subsidiaries

Consolidated Statements of Income

	Years ended December 31
In thousands, except per-share data	2008			2007			2006
Net sales	$	3,351,976		$	3,280,903		$	3,022,602
Cost of goods sold		2,337,426			2,268,205			2,126,546
Gross profit		1,014,550			1,012,698			896,056
Selling, general and administrative		606,980			576,828			526,568
Research and development		62,450			56,821			56,545
Legal settlement		20,435			—			—
Operating income		324,685			379,049			312,943
Other (income) expense:
Gain on sale of interest in subsidiaries		(109,648	)		—			—
Equity losses of unconsolidated subsidiary		3,041			2,865			3,332
Loss on early extinquishment of debt		4,611			—			—
Interest income		(2,029	)		(1,510	)		(744	)
Interest expense		61,464			69,903			51,044
Other		106			1,230			(364	)
Income from continuing operations before income taxes and minority interest		367,140			306,561			259,675
Provision for income taxes		108,344			94,443			73,424
Minority interest		2,433			—			—
Income from continuing operations		256,363			212,118			186,251
Loss from discontinued operations, net of tax		(5,783	)		(1,629	)		(2,484	)
Gain (loss) on disposal of discontinued operations, net of tax		(21,846	)		438			(36	)
Net income	$	228,734		$	210,927		$	183,731
Earnings per common share
Basic
Continuing operations	$	2.62		$	2.15		$	1.87
Discontinued operations		(0.28	)		(0.01	)		(0.03	)
Basic earnings per common share	$	2.34		$	2.14		$	1.84
Diluted
Continuing operations	$	2.59		$	2.12		$	1.84
Discontinued operations		(0.28	)		(0.01	)		(0.03	)
Diluted earnings per common share	$	2.31		$	2.11		$	1.81
Weighted average common shares outstanding
Basic		97,887			98,762			99,784
Diluted		99,068			100,205			101,371

See accompanying notes to consolidated financial statements.

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Pentair, Inc. and Subsidiaries

Consolidated Balance Sheets

	December 31
In thousands, except share and per-share data	2008			2007
ASSETS
Current assets
Cash and cash equivalents	$	39,344		$	70,795
Accounts and notes receivable, net of allowances of $25,156 and $27,471, respectively		461,081			461,408
Inventories		417,287			379,018
Deferred tax assets		51,354			50,511
Prepaid expenses and other current assets		63,113			35,799
Current assets of discontinued operations		—			40,490
Total current assets		1,032,179			1,038,021
Property, plant and equipment, net		343,881			361,690
Other assets
Goodwill		2,101,851			1,999,119
Intangibles, net		515,508			487,028
Other		59,794			82,238
Non-current assets of discontinued operations		—			32,518
Total other assets		2,677,153			2,600,903
Total assets	$	4,053,213		$	4,000,614
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	—		$	13,586
Current maturities of long-term debt		624			5,075
Accounts payable		217,898			227,786
Employee compensation and benefits		90,210			111,082
Current pension and post-retirement benefits		8,890			8,557
Accrued product claims and warranties		41,559			49,077
Income taxes		5,451			14,999
Accrued rebates and sales incentives		28,897			36,430
Other current liabilities		104,975			90,021
Current liabilities of discontinued operations		—			3,704
Total current liabilities		498,504			560,317
Other liabilities
Long-term debt		953,468			1,041,925
Pension and other retirement compensation		270,139			161,042
Post-retirement medical and other benefits		34,723			37,147
Long-term income taxes payable		28,139			21,306
Deferred tax liabilities		146,559			166,917
Other non-current liabilities		101,612			97,085
Non-current liabilities of discontinued operations		—			4,004
Total liabilities		2,033,144			2,089,743
Commitments and contingencies
Minority interest		121,388			—
Shareholders’ equity
Common shares par value $0.162/3; 98,276,919 and 99,221,831 shares issued and outstanding, respectively		16,379			16,537
Additional paid-in capital		451,241			476,242
Retained earnings		1,457,676			1,296,226
Accumulated other comprehensive income (loss)		(26,615	)		121,866
Total shareholders’ equity		1,898,681			1,910,871
Total liabilities and shareholders’ equity	$	4,053,213		$	4,000,614

See accompanying notes to consolidated financial statements.

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Pentair, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

	Years Ended December 31
In thousands	2008			2007			2006
Operating activities
Net income	$	228,734		$	210,927		$	183,731
Adjustments to reconcile net income to net cash provided by (used for) operating activities
Loss from discontinued operations		5,783			1,629			2,484
(Gain) loss on disposal of discontinued operations		21,846			(438	)		36
Equity losses of unconsolidated subsidiary		3,041			2,865			3,332
Minority interest		2,433			—			—
Depreciation		59,673			57,603			55,682
Amortization		27,608			25,561			18,177
Deferred income taxes		40,754			(16,652	)		(10,611	)
Stock compensation		20,572			22,913			25,377
Excess tax benefits from stock-based compensation		(1,617	)		(4,204	)		(3,043	)
Gain (loss) on sale of assets		510			(1,929	)		(364	)
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		(18,247	)		(19,068	)		15,470
Inventories		(33,311	)		14,714			(45,769	)
Prepaid expenses and other current assets		(27,394	)		2,175			(5,008	)
Accounts payable		(1,973	)		19,482			(18,409	)
Employee compensation and benefits		(21,919	)		3,995			(12,688	)
Accrued product claims and warranties		(7,286	)		4,763			1,196
Income taxes		(4,409	)		2,849			10,353
Other current liabilities		8,987			(3,218	)		(13,291	)
Pension and post-retirement benefits		301			6			19,397
Other assets and liabilities		18,174			13,017			3,347
Net cash provided by (used for) continuing operations		212,612			336,990			229,399
Net cash provided by (used for) operating activities of discontinued operations		(8,397	)		4,288			2,058
Net cash provided by (used for) operating activities		204,215			341,278			231,457
Investing activities
Capital expenditures		(53,089	)		(61,516	)		(50,894	)
Proceeds from sale of property and equipment		4,741			5,198			654
Acquisitions, net of cash acquired		(2,027	)		(487,561	)		(29,286	)
Divestitures		37,907			—			(24,007	)
Other		(12	)		(5,544	)		(6,370	)
Net cash provided by (used for) investing activities		(12,480	)		(549,423	)		(109,903	)
Financing activities
Net short-term borrowings		(16,994	)		(1,830	)		13,831
Proceeds from long-term debt		715,000			1,269,428			608,975
Repayment of long-term debt		(805,016	)		(954,077	)		(631,755	)
Debt issuance costs		(114	)		(1,876	)		—
Excess tax benefits from stock-based compensation		1,617			4,204			3,043
Proceeds from exercise of stock options		5,590			7,388			4,066
Repurchases of common stock		(50,000	)		(40,641	)		(59,359	)
Dividends paid		(67,284	)		(59,910	)		(56,583	)
Net cash provided by (used for) financing activities		(217,201	)		222,686			(117,782	)
Effect of exchange rate changes on cash and cash equivalents		(5,985	)		1,434			2,548
Change in cash and cash equivalents		(31,451	)		15,975			6,320
Cash and cash equivalents, beginning of period		70,795			54,820			48,500
Cash and cash equivalents, end of period	$	39,344		$	70,795		$	54,820

See accompanying notes to consolidated financial statements.

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Pentair, Inc. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

													Accumulated
							Additional						other
	Common shares						paid-in			Retained			comprehensive						Comprehensive
In thousands, except share and per-share data	Number			Amount			capital			earnings			income (loss)			Total			income
Balance — December 31, 2005		101,202,237		$	16,867		$	518,751		$	1,020,978		$	(986	)	$	1,555,610
Net income											183,731						183,731		$	183,731
Change in cumulative translation adjustment														28,471			28,471			28,471
Adjustment in minimum pension liability, net of $7,313 tax benefit														1,513			1,513			1,513
Changes in market value of derivative financial instruments														657			657			657
Comprehensive income																			$	214,372
Adjustment to initially apply SFAS 158, net of $8,280 tax benefit														(12,951	)		(12,951	)
Tax benefit of stock compensation								3,338									3,338
Cash dividends — $0.56 per common share											(56,583	)					(56,583	)
Share repurchases		(1,986,026	)		(332	)		(59,027	)								( 59,359	)
Exercise of stock options, net of 183,866 shares tendered for payment		310,963			52			2,846									2,898
Issuance of restricted shares, net of cancellations		324,219			54			304									358
Amortization of restricted shares								10,677									10,677
Shares surrendered by employees to pay taxes		(74,228	)		(12	)		(2,589	)								(2,601	)
Stock compensation								14,240									14,240
Balance — December 31, 2006		99,777,165		$	16,629		$	488,540		$	1,148,126		$	16,704		$	1,669,999
Net income											210,927						210,927		$	210,927
Change in cumulative translation adjustment														72,901			72,901			72,901
Adjustment in minimum pension liability, net of $23,784 tax														37,201			37,201			37,201
Changes in market value of derivative financial instruments														(4,940	)		(4,940	)		(4,940	)
Comprehensive income																			$	316,089
Adjustment to initially apply FIN 48											(2,917	)					(2,917	)
Tax benefit of stock compensation								5,654									5,654
Cash dividends — $0.60 per common share											(59,910	)					(59,910	)
Share repurchases		(1,209,257	)		(202	)		(40,439	)								(40,641	)
Exercise of stock options, net of 342,870 shares tendered for payment		491,618			83			4,348									4,431
Issuance of restricted shares, net of cancellations		313,160			52			530									582
Amortization of restricted shares								9,256									9,256
Shares surrendered by employees to pay taxes		(150,855	)		(25	)		(4,820	)								(4,845	)
Stock compensation								13,173									13,173
Balance — December 31, 2007		99,221,831		$	16,537		$	476,242		$	1,296,226		$	121,866		$	1,910,871
Net income											228,734						228,734		$	228,734
Change in cumulative translation adjustment														(72,117	)		(72,117	)		(72,117	)
Adjustment in minimum pension liability, net of $42,793 tax														(66,933	)		(66,933	)		(66,933	)
Changes in market value of derivative financial instruments, net of $6,284 tax														(9,431	)		(9,431	)		(9,431	)
Comprehensive income																			$	80,253
Tax benefit of stock compensation								2,247									2,247
Cash dividends — $0.68 per common share											(67,284	)					(67,284	)
Share repurchases		(1,549,893	)		(258	)		(49,742	)								(50,000	)
Exercise of stock options, net of 121,638 shares tendered for payment		322,574			53			4,948									5,001
Issuance of restricted shares, net of cancellations		366,005			61			388									449
Amortization of restricted shares								9,378									9,378
Shares surrendered by employees to pay taxes		(83,598	)		(14	)		(2,730	)								(2,744	)
Stock compensation								10,510									10,510
Balance — December 31, 2008		98,276,919		$	16,379		$	451,241		$	1,457,676		$	(26,615	)	$	1,898,681

See accompanying notes to consolidated financial statements.

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Pentair, Inc. and Subsidiaries

Notes to consolidated financial statements

1.  Summary of Significant Accounting Policies

Fiscal year

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

Principles of consolidation

The accompanying consolidated financial statements include the accounts of Pentair and all subsidiaries, both U.S. and non-U.S., that we control. Intercompany accounts and transactions have been eliminated. Investments in companies of which we own 20% to 50% of the voting stock or have the ability to exercise significant influence over operating and financial policies of the investee are accounted for using the equity method of accounting and, as a result, our share of the earnings or losses of such equity affiliates is included in the statement of income. The cost method of accounting is used for investments in which Pentair has less than a 20% ownership interest and we do not have the ability to exercise significant influence. These investments are carried at cost and are adjusted only for other-than-temporary declines in fair value.

Use of estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that could differ from those estimates. The critical accounting policies that require our most significant estimates and judgments include:

•  the assessment of recoverability of long-lived assets, including goodwill; and

•  accounting for pension benefits, because of the importance in making the estimates necessary to apply these policies.

Revenue recognition

We recognize revenue when it is realized or realizable and has been earned. Revenue is recognized when persuasive evidence of an arrangement exists; shipment or delivery has occurred (depending on the terms of the sale); the seller’s price to the buyer is fixed or determinable; and collectibility is reasonably assured.

Generally, there is no post-shipment obligation on product sold other than warranty obligations in the normal, ordinary course of business. In the event significant post-shipment obligations were to exist, revenue recognition would be deferred until substantially all obligations were satisfied.

Sales returns

The right of return may exist explicitly or implicitly with our customers. Our return policy allows for customer returns only upon our authorization. Goods returned must be product we continue to market and must be in salable condition. Returns of custom or modified goods are normally not allowed. At the time of sale, we reduce revenue for the estimated effect of returns. Estimated sales returns include consideration of historical sales levels, the timing and magnitude of historical sales return levels as a percent of sales, type of product, type of customer, and a projection of this experience into the future.

Pricing and sales incentives

We record estimated reductions to revenue for customer programs and incentive offerings including pricing arrangements, promotions, and other volume-based incentives at the later of the date revenue is recognized or the incentive is offered. Sales incentives given to our customers are recorded as a reduction of revenue unless we (1) receive an identifiable benefit for the goods or services in exchange for the consideration and (2) we

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Notes to consolidated financial statements — (continued)

can reasonably estimate the fair value of the benefit received. The following represents a description of our pricing arrangements, promotions, and other volume-based incentives:

Pricing arrangements

Pricing is established up front with our customers, and we record sales at the agreed upon net selling price. However, one of our businesses allows customers to apply for a refund of a percentage of the original purchase price if they can demonstrate sales to a qualifying OEM customer. At the time of sale, we estimate the anticipated refund to be paid based on historical experience and reduce sales for the probable cost of the discount. The cost of these refunds is recorded as a reduction in gross sales.

Promotions

Our primary promotional activity is what we refer to as cooperative advertising. Under our cooperative advertising programs, we agree to pay the customer a fixed percentage of sales as an allowance that may be used to advertise and promote our products. The customer is generally not required to provide evidence of the advertisement or promotion. We recognize the cost of this cooperative advertising at the time of sale. The cost of this program is recorded as a reduction in gross sales.

Volume-based incentives

These incentives involve rebates that are negotiated up front with the customer and are redeemable only if the customer achieves a specified cumulative level of sales or sales increase. Under these incentive programs, at the time of sale, we reforecast the anticipated rebate to be paid based on forecasted sales levels. These forecasts are updated at least quarterly, for each customer and sales are reduced for the anticipated cost of the rebate. If the forecasted sales for a customer changes, the accrual for rebates is adjusted to reflect the new amount of rebates expected to be earned by the customer.

Shipping and handling costs

Amounts billed to customers for shipping and handling are recorded in Net sales in the accompanying Consolidated Statements of Income. Shipping and handling costs incurred by Pentair for the delivery of goods to customers are included in Cost of goods sold in the accompanying Consolidated Statements of Income.

Cash equivalents

We consider highly liquid investments with original maturities of three months or less to be cash equivalents.

Trade receivables and concentration of credit risk

We record an allowance for doubtful accounts; reducing our receivables balance to an amount we estimate is collectible from our customers. Estimates used in determining the allowance for doubtful accounts are based on historical collection experience, current trends, aging of accounts receivable, and periodic credit evaluations of our customers’ financial condition. We generally do not require collateral. No customer receivable balances exceeded 10% of total net receivable balances as of December 31, 2008 and 2007, respectively.

In December 2008 and 2007, we sold approximately $44 million and $50 million, respectively, of one customer’s accounts receivable to a third-party financial institution to mitigate accounts receivable concentration risk. In compliance with Statement of Financial Accounting Standards (“SFAS’) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, sales of accounts receivable are reflected as a reduction of accounts receivable in our Consolidated Balance Sheets and the proceeds are included in the cash flows from operating activities in our Consolidated Statements of Cash Flows. In 2008 and 2007, a loss in the amount of $0.5 million and $1.2 million related to the sale of accounts receivable is included in the line item Other in our Consolidated Statements of Income.

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Notes to consolidated financial statements — (continued)

Inventories

Inventories are stated at the lower of cost or market with substantially all costed using the first-in, first-out (“FIFO”) method and with an insignificant amount of inventories located outside the United States costed using a moving average method which approximates FIFO.

Property, plant, and equipment

Property, plant, and equipment is stated at historical cost. We compute depreciation by the straight-line method based on the following estimated useful lives:

	Years
Land improvements		5 to 20
Buildings and leasehold improvements		5 to 50
Machinery and equipment		3 to 15

Significant improvements that add to productive capacity or extend the lives of properties are capitalized. Costs for repairs and maintenance are charged to expense as incurred. When property is retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any related gains or losses are included in income.

We review the recoverability of long-lived assets to be held and used, such as property, plant and equipment, when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset or asset group, an impairment loss is recognized for the difference between estimated fair value and carrying value. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced for the cost to dispose of the assets. The measurement of impairment requires us to estimate future cash flows and the fair value of long-lived assets.

Goodwill and identifiable intangible assets

Goodwill represents the excess of the cost of acquired businesses over the fair value of identifiable tangible net assets and identifiable intangible assets purchased.

Goodwill is tested at least annually for impairment, and is tested for impairment more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test is performed using a two-step process. In the first step, the fair value of each reporting unit is compared with the carrying amount of the reporting unit, including goodwill. If the estimated fair value is less than the carrying amount of the reporting unit, an indication that goodwill impairment exists and a second step must be completed in order to determine the amount of the goodwill impairment, if any, that should be recorded. In the second step, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The fair value of each reporting unit is determined using a discounted cash flow analysis. Projecting discounted future cash flows requires is to make significant estimates regarding future revenues and expenses, projected capital expenditures, changes in working capital and the appropriate discount rate. The projections also take into account several factors including current and estimated economic trends and outlook, costs of raw materials, consideration of our market capitalization in comparison to the estimated fair values of our reporting units determined using discounted cash flow analyses and other factors which are beyond our control.

At December 31, 2008 our goodwill and intangible assets were approximately $2,617.4 million, and represented approximately 64.6% of our total assets. Declines in projected future cash flows could result in

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Pentair, Inc. and Subsidiaries

Notes to consolidated financial statements — (continued)

future goodwill and intangible impairments. Because of the significance of our goodwill and intangible assets, any future impairment of these assets could have a material adverse effect on our financial statements.

We completed step one of our annual goodwill impairment evaluation during the fourth quarter with each reporting unit’s fair value exceeding its carrying value. Accordingly, step two of the impairment analysis was not required.

Our primary identifiable intangible assets include trade marks and trade names, brand names, patents, non-compete agreements, proprietary technology, and customer relationships. Under the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, identifiable intangibles with finite lives are amortized and those identifiable intangibles with indefinite lives are not amortized. Identifiable intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Identifiable intangible assets not subject to amortization are tested for impairment annually or more frequently if events warrant. The impairment test consists of a comparison of the fair value of the intangible asset with its carrying amount. During the fourth quarter of 2008, we completed our annual impairment test for those identifiable assets not subject to amortization and recorded an impairment charge of $1.0 million. The charge was recorded in Selling, general and administrative in our Consolidated Statements of Income.

Cost and equity method investments

We have investments that are accounted for at historical cost or, if we have significant influence over the investee, using the equity method. Our proportionate share of income or losses from investments accounted for under the equity method is recorded in the Consolidated Statements of Income. We write down or write off an investment and recognize a loss when events or circumstances indicate there is impairment in the investment that is other-than-temporary. This requires significant judgment, including assessment of the investees’ financial condition and in certain cases the possibility of subsequent rounds of financing, as well as the investees’ historical and projected results of operations and cash flows. If the actual outcomes for the investees are significantly different from projections, we may incur future charges for the impairment of these investments.

Income taxes

In accordance with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, the Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

We use the asset and liability approach to account for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in our tax provision in the period of change.

Environmental

In accordance with SOP 96-1, Environmental Remediation Liabilities, we recognize environmental clean-up liabilities on an undiscounted basis when a loss is probable and can be reasonably estimated. Such liabilities generally are not subject to insurance coverage. The cost of each environmental clean-up is estimated by engineering, financial, and legal specialists based on current law. Such estimates are based primarily upon the

50

Pentair, Inc. and Subsidiaries

Notes to consolidated financial statements — (continued)

estimated cost of investigation and remediation required and the likelihood that, where applicable, other potentially responsible parties (“PRPs”) will be able to fulfill their commitments at the sites where Pentair may be jointly and severally liable. The process of estimating environmental clean-up liabilities is complex and dependent primarily on the nature and extent of historical information and physical data relating to a contaminated site, the complexity of the site, the uncertainty as to what remedy and technology will be required, and the outcome of discussions with regulatory agencies and other PRPs at multi-party sites. In future periods, new laws or regulations, advances in clean-up technologies, and additional information about the ultimate clean-up remedy that is used could significantly change our estimates. Accruals for environmental liabilities are included in Other current liabilities and Other non-current liabilities in the Consolidated Balance Sheets.

Insurance subsidiary

We insure certain general and product liability, property, workers’ compensation, and automobile liability risks through our regulated wholly-owned captive insurance subsidiary, Penwald Insurance Company (“Penwald”). Reserves for policy claims are established based on actuarial projections of ultimate losses. As of December 31, 2008 and 2007, reserves for policy claims were $59.2 million ($10.0 million included in Accrued product claims and warranties and $49.2 million included in Other non-current liabilities) and $61.4 million ($10.0 million included in Accrued product claims and warranties and $51.4 million included in Other non-current liabilities), respectively.

Stock-based compensation

We account for the fair value recognition provisions of SFAS No. 123R (revised 2004), Share Based Payment, (“SFAS 123R”) which revised SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”) and supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”) requiring us to recognize expense related to the fair value of our stock-based compensation awards.

In accordance with SFAS 123R, the estimated grant date fair value of each stock-based award is recognized in income on an accelerated basis over the requisite service period (generally the vesting period). The estimated fair value of each option is calculated using the Black-Scholes option-pricing model. From time to time, we have elected to modify the terms of the original grant. These modified grants are accounted for as a new award and measured using the fair value method under SFAS 123R, resulting in the inclusion of additional compensation expense in our Consolidated Statements of Income. Non-vested share awards are recorded as compensation cost over the requisite service periods based on the market value on the date of grant.

Earnings per common share

Basic earnings per share are computed by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per share are computed by dividing net income by the weighted average number of common shares outstanding including the dilutive effects of common stock equivalents. The dilutive effects of stock options and non-vested shares increased weighted average common shares outstanding by 1,181 thousand, 1,443 thousand and 1,587 thousand in 2008, 2007 and 2006, respectively.

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 were 5,268 thousand, 2,841 thousand, and 3,089 thousand in 2008, 2007 and 2006, respectively.

Derivative financial instruments

We recognize all derivatives, including those embedded in other contracts, as either assets or liabilities at fair value in our Consolidated Balance Sheets. If the derivative is designated as a fair-value hedge, the changes in the fair value of the derivative and the hedged item are recognized in earnings. If the derivative is designated and is effective as a cash-flow hedge, changes in the fair value of the derivative are recorded in other

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Pentair, Inc. and Subsidiaries

Notes to consolidated financial statements — (continued)

comprehensive income (“OCI”) and are recognized in the Consolidated Statements of Income when the hedged item affects earnings. If the underlying hedged transaction ceases to exist or if the hedge becomes ineffective, all changes in fair value of the related derivatives that have not been settled are recognized in current earnings. For a derivative that is not designated as or does not qualify as a hedge, changes in fair value are reported in earnings immediately.

We use derivative instruments for the purpose of hedging interest rate and currency exposures, which exist as part of ongoing business operations. All hedging instruments are designated and effective as hedges, in accordance with the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedge Activities, as amended. We do not hold or issue derivative financial instruments for trading or speculative purposes. All other contracts that contain provisions meeting the definition of a derivative also meet the requirements of, and have been designated as, normal purchases or sales. Our policy is not to enter into contracts with terms that cannot be designated as normal purchases or sales.

Foreign currency translation

The financial statements of subsidiaries located outside of the United States are measured using the local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the rates of exchange at the balance sheet date. Income and expense items are translated at average monthly rates of exchange. The resultant translation adjustments are included in accumulated other comprehensive income, a separate component of shareholders’ equity.

New accounting standards

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 (adopted by Pentair as of January 1, 2008), with the exception of the application of the statement to the determination of fair value of nonfinancial assets and liabilities that are recognized or disclosed on a nonrecurring basis, which is effective for fiscal years beginning after November 15, 2008.

SFAS 157 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.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value (“the Fair Value Option”). SFAS 159 is effective for fiscal years beginning after November 15, 2007. We have not chosen the Fair Value Option; therefore, the adoption of SFAS 159 did not have any impact on our consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R replaces SFAS No. 141. SFAS 141R retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. SFAS 141R also changes the recognition of assets acquired and liabilities assumed

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Pentair, Inc. and Subsidiaries

Notes to consolidated financial statements — (continued)

arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We will apply SFAS 141R prospectively to business combinations completed on or after that date. We do not expect adoption to have a significant impact to our current consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51 (“SFAS 160”). SFAS 160 changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent’s equity, and 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. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, except for the presentation and disclosure requirements, which will apply retrospectively. Upon adoption, we will classify minority interest as a component of equity for all periods presented.

In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB statement No. 133 (“SFAS 161”). SFAS 161 expands the disclosure requirements in Statement 133 about an entity’s derivative instruments and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The adoption of SFAS 161 will not have a material impact on our consolidated results of operations and financial condition.

2.  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 fair value of the acquisition was $229.2 million, which includes approximately $3.3 million of acquisition related costs. The acquisition and related sale of our 19.9 percent interest resulted in a gain of $109.6 million ($85.8 million after tax), representing the difference between the carrying amount and the fair value of the 19.9 percent interest sold.

With the formation of Pentair Residential Filtration, we believe we will be 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 accelerate revenue growth by selling GE’s existing residential conditioning products through our sales channels.

The fair value of the 80.1% interest in the global water softener and residential water filtration business of GE Water and Process Technologies acquired was determined using both an income approach and a market approach. The income approach utilizes a discounted cash flow analysis based on certain key assumptions including a discount rate based on a computed weighted average cost of capital and expected long-term revenue and expense growth rates. The market approach indicates the fair value of a business based on a comparison of the business to guideline publicly traded companies and transactions in its industry.

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Notes to consolidated financial statements — (continued)

The fair value of the business acquired was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value acquired over the identifiable assets acquired and liabilities assumed is reflected as goodwill. Goodwill recorded as part of the purchase price allocation was approximately $137.9 million, none of which is tax deductible. Identifiable intangible assets acquired as part of the acquisition were $66.5 million, including definite-lived intangibles, such as customer relationships, proprietary technology and trade names with a weighted average amortization period of approximately 15 years. We continue to evaluate the purchase price allocation, including tangible and intangible assets, which primarily consist of trademarks, proprietary technology and customer relationships, contingent liabilities and liabilities associated with exit or disposal activities, and expect to revise the purchase price allocation in future periods as these estimates are finalized. The following table represents the preliminary purchase price allocation:

In thousands	December 31, 2008
Inventory	$	12,188
Property, plant & equipment		12,934
Goodwill		137,868
Identifiable intangible assets		66,483
Current liabilities		(234	)
	$	229,239

On May 7, 2007, we acquired as part of our Technical Products Group the assets of Calmark Corporation (“Calmark”), a privately held business, for $28.4 million, including a cash payment of $29.2 million and transaction costs of $0.2 million, less cash acquired of $1.0 million. Calmark’s results of operations have been included in our consolidated financial statements since the date of acquisition. Calmark’s product portfolio includes enclosures, guides, card locks, retainers, extractors, card pullers and other products for the aerospace, medical, telecommunications and military market segments, among others. Goodwill recorded as part of the purchase price allocation was $11.7 million, all of which is tax deductible. Identifiable intangible assets acquired as part of the acquisition were $14.0 million, including definite-lived intangibles, such as non-compete agreements, customer relationships and proprietary technology of $10.5 million with a weighted average amortization period of approximately 8 years.

On April 30, 2007, we acquired as part of our Water Group all of the capital interests in Porous Media Corporation and Porous Media, Ltd. (together, “Porous Media”), two privately held filtration and separation technologies businesses, for $224.9 million, including a cash payment of $225.0 million and transaction costs of $0.4 million, less cash acquired of $0.5 million. Porous Media’s results of operations have been included in our consolidated financial statements since the date of acquisition. Porous Media brings strong technical ability to our Water Group, including engineering, material science, media development and application capabilities. Porous Media’s product portfolio includes high-performance filter media, membranes and related filtration products and purification systems for liquids, gases and solids for the general industrial, petrochemical, refining and healthcare market segments, among others. Goodwill recorded as part of the purchase price allocation was $128.1 million, all of which is tax deductible. Identifiable intangible assets acquired as part of the acquisition were $73.8 million, including definite-lived intangibles, such as proprietary technology and customer relationships of $60.6 million with a weighted average amortization period of approximately 11 years.

On February 2, 2007, we acquired as part of our Water Group all the outstanding shares of capital stock of Jung Pumpen GmbH (“Jung Pump”) for $229.5 million, including a cash payment of $239.6 million and transaction costs of $1.3 million, less cash acquired of $11.4 million. Jung Pump’s results of operations have been included in our consolidated financial statements since the date of acquisition. Jung Pump is a leading German manufacturer of wastewater products for municipal and residential markets. Jung Pump brings us its

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Notes to consolidated financial statements — (continued)

strong application engineering expertise and a complementary product offering, including a new line of water re-use products, submersible wastewater and drainage pumps, wastewater disposal units and tanks. Jung Pump also brings to Pentair its well-established European presence, a state-of-the-art training facility in Germany and sales offices in Germany, Austria, France, Hungary, Poland and Slovakia. Goodwill recorded as part of the purchase price allocation was $123.4 million, of which approximately $53 million is tax deductible. Identifiable intangible assets acquired as part of the acquisition were $135.7 million, including definite-lived intangibles, primarily customer relationships of $71.6 million with a weighted average amortization period of approximately 15 years.

The following pro forma consolidated condensed financial results of operations for the years ended December 31, 2008, and 2007 are presented as if the acquisitions had been completed at the beginning of each period presented:

	Years Ended December 31
In thousands, except per-share data	2008		2007
Pro forma net sales from continuing operations	$	3,406,449	$	3,390,975
Pro forma net income from continuing operations		256,363		211,932
Pro forma net income		228,734		210,741
Pro forma earnings per common share — continuing operations
Basic	$	2.62	$	2.15
Diluted	$	2.59	$	2.11
Weighted average common shares outstanding
Basic		97,887		98,762
Diluted		99,068		100,205

These pro forma consolidated condensed financial results have been prepared for comparative purposes only and include certain adjustments, such as increased interest expense on acquisition debt. The adjustments do not reflect the effect of 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 on January 1 of each year presented, or of future results of the consolidated entities.

3.   Discontinued Operations/Divestitures

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. 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.

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Notes to consolidated financial statements — (continued)

Operating results of the discontinued operations are summarized below.

In thousands	2008			2007			2006
Net sales	$	43,346		$	117,795		$	131,867
Loss from discontinued operations before income taxes		(9,392	)		(2,917	)		(4,206	)
Income tax benefit		3,609			1,288			1,722
Loss from discontinued operations, net of income taxes		(5,783	)		(1,629	)		(2,484	)
Gain (loss) on disposal of discontinued operations, before taxes		(28,692	)		762			(3,621	)
Income tax (expense) benefit		6,846			(324	)		3,585
Gain (loss) on disposal of discontinued operations, net of tax	$	(21,846	)	$	438		$	(36	)

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

	December 31
In thousands	2007
Accounts and notes receivable, net	$	10,814
Inventories		28,109
Other current assets		1,567
Current assets of discontinued operations		40,490
Property, plant and equipment, net		5,736
Goodwill		22,407
Other non-current assets		4,375
Non-current assets of discontinued operations		32,518
Total assets	$	73,008
Accounts payable	$	3,857
Other current liabilities		(153	)
Current liabilities of discontinued operations		3,704
Deferred income tax		3,116
Other non-current liabilities		888
Non-current liabilities of discontinued operations		4,004
Total liabilities		7,708
Net assets (liabilities) of discontinued operations	$	65,300

4.  Restructuring

During 2008, we announced and initiated certain business restructuring initiatives aimed at reducing our fixed cost structure and rationalizing our manufacturing footprint. These initiatives included the announcement of the closure of certain manufacturing facilities as well as the reduction in hourly and salaried headcount of approximately 1,700 employees, 1,300 in the Water Group and 400 in the Technical Products Group. We expect these actions to generally be completed by the end of 2009.

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Notes to consolidated financial statements — (continued)

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

	Year ended
	December 31
In thousands	2008
Severance and related costs	$	34,615
Asset impairment		5,282
Contract termination costs		5,309
Total restructuring costs	$	45,206

Restructuring accrual activity recorded on the Consolidated Balance Sheets is summarized as follows:

Balance at January 1, 2008	$	—
Costs incurred		39,924
Cash payments & other		(5,750	)
Balance at December 31, 2008	$	34,174

5.   Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill for the years ended December 31, 2008 and 2007 by segment are as follows:

					Foreign Currency
In thousands	December 31, 2007		Acqusitions		Translation			December 31, 2008
Water	$	1,706,626	$	132,720	$	(20,876	)	$	1,818,470
Technical Products		292,493		106		(9,218	)		283,381
Consolidated Total	$	1,999,119	$	132,826	$	(30,094	)	$	2,101,851

					Foreign Currency
In thousands	December 31, 2006		Acqusitions		Translation		December 31, 2007
Water	$	1,427,053	$	253,380	$	26,193	$	1,706,626
Technical Products		269,311		11,634		11,548		292,493
Consolidated Total	$	1,696,364	$	265,014	$	37,741	$	1,999,119

In 2008, the acquired goodwill in the Water Group is related primarily to the formation of PRF and Jung Pump and in 2007, it related primarily to Jung Pump and Porous Media. The acquired goodwill in the Technical Products Group is related primarily to our acquisition of Calmark during 2007. In 2008, goodwill allocated to divested businesses was $22.4 million.

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Notes to consolidated financial statements — (continued)

The detail of acquired intangible assets consisted of the following:

	2008							2007
	Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated
In thousands	Amount		Amortization			Net		Amount		Amortization			Net
Finite-life intangible assets
Patents	$	15,427	$	(9,774	)	$	5,653	$	15,457	$	(7,904	)	$	7,553
Non-compete agreements		4,722		(4,566	)		156		4,722		(4,050	)		672
Proprietary technology		72,375		(17,652	)		54,723		59,944		(12,564	)		47,380
Customer relationships		283,015		(46,841	)		236,174		238,712		(30,378	)		208,334
Brand names		961		(77	)		884		—		—			—
Total finite-life intangible assets	$	376,500	$	(78,910	)	$	297,590	$	318,835	$	(54,896	)	$	263,939
Indefinite-life intangible assets
Brand names	$	217,918	$	—		$	217,918	$	223,089	$	—		$	223,089
Total intangibles, net	$	594,418	$	(78,910	)	$	515,508	$	541,924	$	(54,896	)	$	487,028

Intangible asset amortization expense in 2008, 2007, and 2006 was $24.0 million, $21.8 million, and $13.2 million, respectively.

Additionally, in 2008 we recorded an impairment charge to write-off a brand name intangible assets of $1.0 million in the Technical Products Group. The charge was recorded in Selling, general and administrative in our Consolidated Statement of Income.

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

In thousands	2009		2010		2011		2012		2013
Estimated amortization expense	$	26,015	$	25,331	$	25,327	$	24,214	$	24,053

6.   Supplemental Balance Sheet Information

In thousands	2008		2007
Inventories
Raw materials and supplies	$	212,792	$	194,090
Work-in-process		53,241		50,785
Finished goods		151,254		134,143
Total inventories	$	417,287	$	379,018
Property, plant and equipment
Land and land improvements	$	32,949	$	35,038
Buildings and leasehold improvements		204,757		210,412
Machinery and equipment		580,632		548,042
Construction in progress		24,376		30,166
Total property, plant and equipment		842,714		823,658
Less accumulated depreciation and amortization		498,833		461,968
Property, plant and equipment, net	$	343,881	$	361,690

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Notes to consolidated financial statements — (continued)

Cost method investments

As part of the sale of Lincoln Industrial in 2001, we received 37,500 shares of 5% Series C Junior Convertible Redeemable Preferred Stock convertible into a 15% equity interest in the new organization — LN Holdings Corporation. During the second quarter of 2005 we sold our interest in the stock of LN Holdings Corporation for cash consideration of $23.6 million, resulting in a pre-tax gain of $5.2 million or an after-tax gain of $3.5 million. The terms of the sale agreement established two escrow accounts totaling $14 million. We received payments from an escrow of $0.2 million during the fourth quarter of 2005, increasing our gain. During 2006 we received $1.2 million from the escrow accounts which also increased our gain from the sale. Remaining escrow balances are to be distributed to former shareholders in accordance with their ownership percentages. Any funds received from settlement of escrows in future periods will be accounted for as additional gain on sale of this interest.

Equity method investments

We have a 50% investment in FARADYNE Motors LLC (“FARADYNE”), a joint venture with ITT Water Technologies, Inc. that began design, development, and manufacturing of submersible pump motors in 2005. We do not consolidate the investment in our financial statements as we do not have a controlling interest over the investment. There were no investments in or loans to FARADYNE in 2008. There were investments in and loans to FARADYNE of $5.0 million and $8.7 million at December 31, 2008 and December 31, 2007, respectively, which is net of our proportionate share of the results of their operations.

7.   Supplemental Cash Flow Information

The following table summarizes supplemental cash flow information:

In thousands	2008		2007		2006
Interest payments	$	63,851	$	66,044	$	51,375
Income tax payments		80,765		98,798		77,225

On June 28, 2008, we entered into a transaction with 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 transaction is more fully described in Note 2. Acquisitions.

8.   Accumulated Other Comprehensive Income (Loss)

Components of accumulated other comprehensive income (loss) consist of the following:

In thousands	2008			2007
Retirement liability adjustments, net of tax	$	(58,704	)	$	8,229
Foreign currency translation adjustments		45,300			117,417
Market value of derivative financial instruments, net of tax		(13,211	)		(3,780	)
Accumulated other comprehensive income (loss)	$	(26,615	)	$	121,866

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Notes to consolidated financial statements — (continued)

9.  Debt

Debt and the average interest rates on debt outstanding as of December 31 are summarized as follows:

	Average
	interest rate
	December 31,			Maturity		December 31			December 31
In thousands	2008			(Year)		2008			2007
Commercial paper		2.61	%			$	249		$	105,990
Revolving credit facilities		1.21	%		2012		214,200			76,722
Private placement — fixed rate		5.65	%		2013-17		400,000			400,000
Private placement — floating rate		3.37	%		2012-13		205,000			205,000
Senior notes		7.85	%		2009		133,900			250,000
Other		4.44	%		2008-16		275			20,387
Total contractual debt obligations							953,624			1,058,099
Deferred income related to swaps							468			2,487
Total debt, including current portion per balance sheet							954,092			1,060,586
Less: Current maturities							(624	)		(5,075	)
Short-term borrowings							—			(13,586	)
Long-term debt						$	953,468		$	1,041,925

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 will bear interest at the rate of LIBOR plus 0.50%. Interest rates and fees on the Credit Facility vary based on our credit ratings.

Total availability under our existing Credit Facility was $585.6 million at December 31, 2008.

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 December 31, 2008, we had $0.2 million of commercial paper outstanding that matures within 41 days.

All of the commercial paper and Senior Notes were classified as long-term as we have the intent and the ability to refinance 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 December 31, 2008.

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 December 31, 2008.

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. 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.

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Notes to consolidated financial statements — (continued)

Debt outstanding at December 31, 2008, matures on a calendar year basis as follows:

In thousands	2009		2010		2011		2012		2013		Thereafter		Total
Contractual debt obligation maturities	$	134,305	$	78	$	6	$	319,206	$	200,007	$	300,022	$	953,624
Other maturities		468		—		—		—		—		—		468
Total maturities	$	134,773	$	78	$	6	$	319,206	$	200,007	$	300,022	$	954,092

10.  Derivative and Financial Instruments

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. 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 .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 $10.7 million and $3.7 million at December 31, 2008 and December 31, 2007, 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. 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 .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 $11.6 million and $2.5 million at December 31, 2008 and December 31, 2007, 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 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 .50% for $105 million of debt and 3 month LIBOR plus .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 December 31, 2008, 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 defined by SFAS 157.

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Notes to consolidated financial statements — (continued)

Fair value of financial instruments

The recorded amounts and estimated fair values of long-term debt, excluding the effects of derivative financial instruments, and the recorded amounts and estimated fair value of those derivative financial instruments were as follows:

	2008						2007
	Recorded			Fair			Recorded			Fair
In thousands	amount			value			amount			value
Total debt, including current portion
Variable rate	$	419,449		$	419,449		$	407,398		$	407,398
Fixed rate		534,175			482,148			650,701			662,906
Total	$	953,624		$	901,597		$	1,058,099		$	1,070,304
Derivative financial instruments
Market value of variable to fixed interest rate swap (liability) asset	$	(22,309	)	$	(22,309	)	$	(6,198	)	$	(6,198	)

The following methods were used to estimate the fair values of each class of financial instrument:

•  short-term financial instruments (cash and cash equivalents, accounts and notes receivable, accounts and notes payable, and variable rate debt) — recorded amount approximates fair value because of the short maturity period;

•  long-term fixed rate debt, including current maturities — fair value is based on market quotes available for issuance of debt with similar terms, which are inputs that are classified as Level 2 in the valuation hierarchy defined by SFAS 157; and

•  interest rate swap agreements — 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 defined by SFAS 157.

11.   Income Taxes

Income from continuing operations before income taxes and minority interest consisted of the following:

In thousands	2008		2007		2006
United States	$	220,294	$	229,012	$	211,908
International		146,846		77,549		47,767
Income from continuing operations before taxes and minority interest	$	367,140	$	306,561	$	259,675

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Notes to consolidated financial statements — (continued)

The provision for income taxes for continuing operations consisted of the following:

In thousands	2008			2007			2006
Currently payable
Federal	$	41,985		$	70,610		$	54,319
State		5,140			9,851			10,168
International		25,735			19,250			13,390
Total current taxes		72,860			99,711			77,877
Deferred
Federal and state		35,535			3,405			(8,113	)
International		(51	)		(8,673	)		3,660
Total deferred taxes		35,484			(5,268	)		(4,453	)
Total provision for income taxes	$	108,344		$	94,443		$	73,424

Reconciliation of the U.S. statutory income tax rate to our effective tax rate for continuing operations follows:

Percentages	2008			2007			2006
U.S. statutory income tax rate		35.0			35.0			35.0
State income taxes, net of federal tax benefit		1.6			2.6			2.5
Tax effect of stock-based compensation		0.2			0.3			0.4
Tax effect of international operations		(6.1	)		(5.1	)		(8.1	)
Tax credits		(1.0	)		(0.8	)		(1.1	)
Domestic manufacturing deduction		(0.7	)		(1.3	)		(0.8	)
ESOP dividend benefit		(0.2	)		(0.2	)		(0.3	)
All other, net		0.7			0.3			0.7
Effective tax rate on continuing operations		29.5			30.8			28.3

Reconciliation of the beginning and ending gross unrecognized tax benefits follows:

In thousands	2008			2007
Gross unrecognized tax benefits — beginning balance	$	23,879		$	16,923
Gross increases for tax positions in prior periods		3,526			4,476
Gross decreases for tax positions in prior periods		(411	)		(305	)
Gross increases based on tax positions related to the current year		2,666			3,617
Reductions due to statute expiration		(1,521	)		(832	)
Gross unrecognized tax benefits at December 31	$	28,139		$	23,879

Included in the $28.1 million of total gross unrecognized tax benefits as of December 31, 2008 was $25.2 million of tax benefits that, if recognized, would impact the effective tax rate. It is reasonably possible that the gross unrecognized tax benefits as of December 31, 2008 may decrease by a range of $0 to $14.5 million during the next twelve months primarily as a result of the resolution of federal, state and foreign examinations and the expiration of various statutes of limitations.

The determination of annual income tax expense takes into consideration amounts which may be needed to cover exposures for open tax years. The Internal Revenue Service (“IRS”) has examined our U.S. federal income tax returns through 2003 with no material adjustments. The IRS has also completed a survey of our 2004 U.S. federal income tax return with no material findings. In connection with the completion of the 2002 to 2003 federal income tax audit and the 2004 survey, we recognized benefits of $8.0 million and $1.8 million in our second and third quarter 2006 income statements, respectively. The IRS is currently examining our

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Notes to consolidated financial statements — (continued)

2005 and 2006 federal tax returns. No adjustments have been proposed; however, actual settlements may differ from amounts accrued.

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. As of December 31, 2008, we had recorded approximately $0.6 million for the possible payment of penalties and $4.6 million related to the possible payment of interest.

United States income taxes have not been provided on undistributed earnings of international subsidiaries. It is our intention to reinvest these earnings permanently or to repatriate the earnings only when it is tax effective to do so. As of December 31, 2008, approximately $145.1 million of unremitted earnings attributable to international subsidiaries were considered to be indefinitely invested. It is not practicable to estimate the amount of tax that might be payable if such earnings were to be remitted.

Deferred taxes arise because of different treatment between financial statement accounting and tax accounting, known as “temporary differences.” We record the tax effect of these temporary differences as “deferred tax assets” (generally items that can be used as a tax deduction or credit in future periods) and “deferred tax liabilities” (generally items for which we received a tax deduction but the tax impact has not yet been recorded in the Consolidated Statements of Income).

The tax effects of the major items recorded as deferred tax assets and liabilities are as follows:

	2008 Deferred tax					2007 Deferred tax
In thousands	Assets		Liabilities			Assets		Liabilities
Accounts receivable allowances	$	2,684	$	—		$	3,508	$	—
Inventory valuation		7,064		—			2,954		—
Accelerated depreciation/amortization		—		13,190			—		16,205
Accrued product claims and warranties		30,779		—			38,736		—
Employee benefit accruals		131,493		—			87,645		—
Goodwill and other intangibles		—		191,313			—		177,611
Other, net		—		54,637			—		46,819
Total deferred taxes	$	172,020	$	259,140		$	132,843	$	240,635
Net deferred tax liability			$	(87,120	)			$	(107,792	)

Included in Other, net in the table above is a deferred tax asset of $8.1 million and $10.7 million as of December 31, 2008 and December 31, 2007, respectively, related to a foreign tax credit carryover from the tax period ended December 31, 2006. This foreign tax credit is eligible for carryforward until the tax period ending December 31, 2016. The deferred tax asset is included in the Other line in our Consolidated Balance Sheets.

Non-U.S. tax losses of $19.8 million and $27.0 million were available for carryforward at December 31, 2008 and 2007, respectively. A valuation allowance reflected above in other, of $3.3 million and $2.4 million exists for deferred income tax benefits related to the non-U.S. loss carryforwards available as of December 31, 2008 and 2007, respectively that may not be realized. We believe that sufficient taxable income will be generated in the respective countries to allow us to fully recover the remainder of the tax losses. The non-U.S. operating losses are subject to varying expiration periods and will begin to expire in 2009. State tax losses of $73.0 million and $69.0 million were available for carryforward at December 31, 2008 and 2007, respectively. A valuation allowance reflected above in other, of $2.0 million and $2.4 million exists for deferred income tax benefits related to the carryforwards available at December 31, 2008 and December 31, 2007, respectively. Certain state tax losses will expire in 2009, while others are subject to carryforward periods of up to twenty years.

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Notes to consolidated financial statements — (continued)

12.   Benefit Plans

Pension and post-retirement benefits

We sponsor domestic and foreign defined-benefit pension and other post-retirement plans. Pension benefits are based principally on an employee’s years of service and/or compensation levels near retirement. In addition, we also provide certain post-retirement health care and life insurance benefits. Generally, the post-retirement health care and life insurance plans require contributions from retirees. We use a December 31 measurement date each year.

In 2007, under the requirements of SFAS No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, we recognized a pension curtailment gain of $5.5 million related to the announcement that we will be freezing certain pension plans as of December 31, 2017. Also, we recognized a curtailment gain of $4.1 million related to the termination of certain post-retirement health care benefits.

Obligations and Funded Status

The following tables present reconciliations of the benefit obligation of the plans, the plan assets of the pension plans, and the funded status of the plans:

	Pension benefits						Post-retirement
In thousands	2008			2007			2008			2007
Change in benefit obligation
Benefit obligation beginning of year	$	534,648		$	563,895		$	40,836		$	51,577
Service cost		14,104			17,457			263			585
Interest cost		32,383			31,584			2,534			2,983
Amendments		(207	)		76			—			—
Benefits curtailed		—			(16,323	)		—			(4,126	)
Actuarial gain		(26,978	)		(44,069	)		(1,624	)		(6,639	)
Translation (gain) loss		(5,446	)		7,700			—			—
Benefits paid		(26,806	)		(25,672	)		(3,592	)		(3,544	)
Benefit obligation end of year	$	521,698		$	534,648		$	38,417		$	40,836
Change in plan assets
Fair value of plan assets beginning of year	$	388,037		$	373,229		$	—		$	—
Actual (loss)return on plan assets		(106,546	)		27,286			—			—
Company contributions		12,815			13,000			3,592			3,544
Translation (loss) gain		(2,388	)		194			—			—
Benefits paid		(26,806	)		(25,672	)		(3,592	)		(3,544	)
Fair value of plan assets end of year	$	265,112		$	388,037		$	—		$	—
Funded status
Plan assets less than benefit obligation	$	(256,586	)	$	(146,611	)	$	(38,417	)	$	(40,836	)
Net amount recognized	$	(256,586	)	$	(146,611	)	$	(38,417	)	$	(40,836	)

Of the $256.6 million underfunding at December 31, 2008, $102.8 million relates to foreign pension plans and our supplemental executive retirement plans which are not commonly funded.

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Notes to consolidated financial statements — (continued)

Amounts recognized in the Consolidated Balance Sheets are as follows:

	Pension benefits						Post-retirement
In thousands	2008			2007			2008			2007
Noncurrent assets	$	—		$	154		$	—		$	—
Current liabilities		(5,197	)		(4,578	)		(3,693	)		(3,689	)
Noncurrent liabilities		(251,389	)		(142,187	)		(34,724	)		(37,147	)
Net amount recognized	$	(256,586	)	$	(146,611	)	$	(38,417	)	$	(40,836	)

The accumulated benefit obligation for all defined benefit plans was $489.3 million and $482.7 million at December 31, 2008, and 2007, respectively.

Information for pension plans with an accumulated benefit obligation or projected benefit obligation in excess of plan assets are as follows:

In thousands	2008		2007
Pension plans with an accumulated benefit obligation in excess of plan assets:
Fair value of plan assets	$	265,112	$	90,449
Accumulated benefit obligation		489,258		198,108
Pension plans with a projected benefit obligation in excess of plan assets:
Fair value of plan assets	$	265,112	$	371,297
Accumulated benefit obligation		521,698		518,062

Components of net periodic benefit cost are as follows:

	Pension benefits									Post-retirement
In thousands	2008			2007			2006			2008			2007			2006
Service cost	$	14,104		$	17,457		$	18,411		$	263		$	585		$	735
Interest cost		32,383			31,584			29,676			2,534			2,983			3,195
Expected return on plan assets		(29,762	)		(28,539	)		(27,977	)		—			—			—
Amortization of transition obligation		25			20			20			—			—			—
Amortization of prior year service cost (benefit)		179			160			289			(136	)		(245	)		(236	)
Recognized net actuarial (gain) loss		121			3,195			4,119			(3,301	)		(1,423	)		(846	)
Curtailment gain		—			(5,533	)		—			—			(4,126	)		—
Net periodic benefit cost	$	17,050		$	18,344		$	24,538		$	(640	)	$	(2,226	)	$	2,848

Amounts not yet recognized in net periodic benefit cost and included in accumulated other comprehensive income (pre-tax):

	Pension benefits				Post-retirement
In thousands	2008		2007		2008			2007
Net transition obligation	$	37	$	50	$	—		$	—
Prior service cost (benefit)		170		404		357			222
Net actuarial (gain) loss		120,910		12,753		(25,238	)		(26,915	)
Accumulated other comprehensive income (loss)	$	121,117	$	13,207	$	(24,881	)	$	(26,693	)

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Notes to consolidated financial statements — (continued)

The estimated amount that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2009 is as follows:

	Pension		Post-
In thousands	benefits		retirement
Net actuarial loss	$	67	$	—
Prior service cost		61		(41	)
Transition obligation		25		(3,060	)
Total estimated 2009 amortization	$	153	$	(3,101	)

Additional Information

Change in accumulated other comprehensive income, net of tax:

In thousands	2008			2007
Beginning of the year	$	8,229		$	(28,972	)
Additional prior service cost incurred during the year		126			(46	)
Actuarial (losses) gains incurred during the year		(65,755	)		42,995
Translation gains (losses) incurred during the year		594			(900	)
Amortization during the year:
Transition obligation		15			12
Unrecognized prior service cost		27			(52	)
Actuarial gains		(1,940	)		(4,808	)
End of the year	$	(58,704	)	$	8,229

Assumptions

Weighted-average assumptions used to determine domestic benefit obligations at December 31 are as follows:

	Pension benefits						Post-retirement
Percentages	2008		2007		2006		2008		2007		2006
Discount rate		6.50		6.50		6.00		6.50		6.50		6.00
Rate of compensation increase		4.00		5.00		5.00

Weighted-average assumptions used to determine the domestic net periodic benefit cost for years ending December 31 are as follows:

	Pension benefits						Post-retirement
Percentages	2008		2007		2006		2008		2007		2006
Discount rate		6.50		6.00		5.75		6.50		6.00		5.75
Expected long-term return on plan assets		8.50		8.50		8.50
Rate of compensation increase		4.00		5.00		5.00

Discount rate

The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year based on our December 31 measurement date. The discount rate was determined by matching our expected benefit payments to payments from a stream of AA or higher bonds available in the marketplace, adjusted to eliminate the effects of call provisions. This produced a discount rate for our U.S. plans of 6.50% in 2008, 6.50% in 2007 and 6.00% in 2006. The discount rates on our foreign plans ranged from 2.00% to 6.25% in 2008, 2.00% to 5.25% in 2007 and 2.00% to 5.15% in 2006. There are no other known or anticipated changes in our discount rate assumption that will impact our pension expense in 2009.

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Notes to consolidated financial statements — (continued)

Expected rate of return

Our expected rate of return on plan assets in 2008 equaled 8.5%, which remained unchanged from 2007 and 2006. The expected rate of return is designed to be a long-term assumption that may be subject to considerable year-to-year variance from actual returns. In developing the expected long-term rate of return, we considered our historical returns, with consideration given to forecasted economic conditions, our asset allocations, input from external consultants and broader longer-term market indices. In 2008, the pension plan assets yielded a loss of 28.8 %, compared to returns of 7.8% in 2007 and 12.3% in 2006.

We base our determination of pension expense or income on a market-related valuation of assets which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets. Since the market-related value of assets recognizes gains or losses over a five-year-period, the future value of assets will be impacted as previously deferred gains or losses are recorded.

Unrecognized pension and post-retirement losses

As of our December 31, 2008 measurement date, our plans have $95.7 million of cumulative unrecognized losses. To the extent the unrecognized losses, when adjusted for the difference between market and market related values of assets, exceeds 10% of the projected benefit obligation, it will be amortized into expense each year on a straight-line basis over the remaining expected future-working lifetime of active participants (currently approximating 12 years).

The assumed health care cost trend rates at December 31 are as follows:

	2008			2007
Health care cost trend rate assumed for next year		9.50	%		10.00	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		5.00	%		5.00	%
Year that the rate reaches the ultimate trend rate		2018			2018

The assumed health care cost trend rates can have a significant effect on the amounts reported for health care plans. A one-percentage-point change in the assumed health care cost trend rates would have the following effects:

	1-Percentage-Point		1-Percentage-Point
In thousands	Increase		Decrease
Effect on total annual service and interest cost	$	38	$	(34	)
Effect on post-retirement benefit obligation		476		(427	)

Plan Assets

Objective

The primary objective of our investment strategy is to meet the pension obligation to our employees at a reasonable cost to the company. This is primarily accomplished through growth of capital and safety of the funds invested. The plans will therefore be actively invested to achieve real growth of capital over inflation through appreciation of securities held and through the accumulation and reinvestment of dividend and interest income.

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Notes to consolidated financial statements — (continued)

Asset allocation

Our actual overall asset allocation for the plans as compared to our investment policy goals is as follows:

	Percentage of
	Plan Assets						Target Allocation
Asset Class	2008			2007			2008			2007
Equity Securities		59	%		66	%		60	%		70	%
Fixed Income Investments		10	%		9	%		30	%		10	%
Alternative Investments		24	%		22	%		10	%		20	%
Cash		7	%		3	%		0	%		0	%

During 2008, as part of our regular practice of reviewing asset allocations and assessing target allocations, we increased the targeted fixed income allocation from 10% to 30% and reduced the equity securities allocation and alternative investment allocation by 10% each. The transition to these new target allocations will be conducted in an orderly manner. We plan to increase our allocation to long duration fixed income securities in future years as the funded status of our U.S. pension plans improve.

While the target allocations do not have a percentage allocated to cash, the plan assets will always include some cash due to cash flow.

Equity securities include Pentair common stock in the amount of $22.3 million and $32.8 million at December 31, 2008 and 2007, respectively.

Cash Flows

Contributions

Pension contributions totaled $12.8 million and $13.0 million in 2008 and 2007, respectively. Our 2009 pension contributions are expected to be in the range of $40 million to $45 million. The increase in the 2009 expected contribution relates primarily to the enactment of the Pension Protection Act of 2006. The 2009 expected contributions will equal or exceed our minimum funding requirements.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the plans as follows:

In millions	Pension benefits		Post-retirement
2009	$	30.1	$	3.7
2010		26.1		3.7
2011		26.6		3.7
2012		27.9		3.6
2013		28.9		3.6
2014-2018		165.7		16.5

Savings plan

We have a 401(k) plan (“the plan”) with an employee stock ownership (“ESOP”) bonus component, which covers certain union and nearly all non-union U.S. employees who meet certain age requirements. Under the plan, eligible U.S. employees may voluntarily contribute a percentage of their eligible compensation. The company matches contributions made by employees who meet certain eligibility and service requirements. Our matching contribution is 100% of eligible employee contributions for the first 1% of eligible compensation, and 50% of the next 5% of eligible compensation.

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Notes to consolidated financial statements — (continued)

In addition to the matching contribution, all employees who meet certain service requirements receive a discretionary ESOP contribution equal to 1.5% of annual eligible compensation.

Our combined expense for the plan and ESOP was approximately $17.0 million, $11.9 million, and $12.3 million, in 2008, 2007, and 2006, respectively.

Other retirement compensation

Total other accrued retirement compensation was $13.6 million and $14.4 million in 2008 and 2007, respectively, and is included in the pension and other retirement compensation line of our Consolidated Balance Sheets.

13.  Shareholders’ Equity

Authorized shares

We may issue up to 250 million shares of common stock. Our Board of Directors may designate up to 15 million of those shares as preferred stock. On December 10, 2004, the Board of Directors designated a new series of preferred stock with authorization to issue up to 2.5 million shares, Series A Junior Participating Preferred Stock, par value $0.10 per share. No shares of preferred stock were issued or outstanding as of December 31, 2008 or December 31, 2007.

Purchase rights

On December 10, 2004, our Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of common stock. The dividend was payable upon the close of business on January 28, 2005 to the shareholders of record upon the close of business on January 28, 2005. Each Right entitles the registered holder to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock, at a price of $240.00 per one one-hundredth of a share, subject to adjustment. However, the Rights are not exercisable unless certain change in control events occur, such as a person acquiring or obtaining the right to acquire beneficial ownership of 15% or more of our outstanding common stock. The description and terms of the Rights are set forth in a Rights Agreement, dated December 10, 2004. The Rights will expire on January 28, 2015, unless the Rights are earlier redeemed or exchanged in accordance with the terms of the Rights Agreement. On January 28, 2005, the common share purchase rights issued pursuant to the Rights Agreement dated July 31, 1995 were redeemed in their entirety for an amount equal to $0.0025 per right.

Share repurchases

In December 2007, the Board of Directors authorized the repurchase of shares of our common stock during 2008 up to a maximum dollar limit of $50 million. As of December 31, 2008, we had purchased 1,549,893 shares for $50.0 million pursuant to this authorization. This authorization expired on December 31, 2008.

14.  Stock Plans

Total stock-based compensation expense in 2008, 2007, and 2006 was $20.6 million, $22.9 million, and $25.3 million, respectively.

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Notes to consolidated financial statements — (continued)

We estimated the fair values using the Black-Scholes option-pricing model, modified for dividends and using the following assumptions:

	2008			2007			2006
Risk-free interest rate		2.78	%		4.58	%		4.57	%
Expected dividend yield		2.12	%		1.92	%		1.45	%
Expected stock price volatility		27.00	%		28.50	%		31.50	%
Expected lives		4.8 yrs			4.8 yrs			4.5 yrs

Omnibus stock incentive plans

In May 2008, the 2008 Omnibus Stock Incentive Plan as Amended and Restated (the “2008 Plan”) was approved by shareholders. The 2008 Plan authorizes the issuance of additional shares of our common stock and extends through February 2018. The 2008 Plan allows for the granting of:

•  nonqualified stock options;

•  incentive stock options;

•  restricted shares;

•  restricted stock units;

•  dividend equivalent units;

•  stock appreciation rights;

•  performance shares;

•  performance units; and

•  other stock based awards.

The Plan is administered by our Compensation Committee (the “Committee”), which is made up of independent members of our Board of Directors. Employees eligible to receive awards under the Plans are managerial, administrative, or other key employees who are in a position to make a material contribution to the continued profitable growth and long-term success of Pentair. The Committee has the authority to select the recipients of awards, determine the type and size of awards, establish certain terms and conditions of award grants, and take certain other actions as permitted under the Plan. The Plan restricts the Committee’s authority to reprice awards or to cancel and reissue awards at lower prices.

Non-qualified and incentive stock options

Under the Plan, we may grant stock options to any eligible employee with an exercise price equal to the market value of the shares on the dates the options were granted. Options generally vest over a three-year period commencing on the grant date and expire ten years after the grant date. Prior to 2006, option grants typically had a reload feature when shares are retired to pay the exercise price, allowing individuals to receive additional options upon exercise equal to the number of shares retired. Option awards granted after 2005 under the 2004 Plan and under the 2008 Plan do not have a reload feature attached to the option. Annual expense for the value of stock options was $10.5 million in 2008, $13.6 million in 2007 and $14.3 million in 2006.

Restricted shares and restricted stock units

Under the Plan, eligible employees are awarded restricted shares or restricted stock units (awards) of our common stock. Share awards generally vest from two to five years after issuance, subject to continuous employment and certain other conditions. Restricted share awards are valued at market value on the date

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Notes to consolidated financial statements — (continued)

of grant and are expensed over the vesting period. Annual expense for the value of restricted shares and restricted stock units was $10.1 million in 2008, $9.3 million in 2007, and $11.1 million in 2006.

Stock appreciation rights, performance shares, and performance units

Under the Plan, the Committee is permitted to issue these awards; however, there have been no issuances of these awards.

Outside directors nonqualified stock option plan

Nonqualified stock options were granted to outside directors under the Outside Directors Nonqualified Stock Option Plan (the “Directors Plan”) with an exercise price equal to the market value of the shares on the option grant dates. Options generally vest over a three-year period commencing on the grant date and expire ten years after the grant date. The Directors Plan expired in January 2008. Prior grants remain outstanding on the terms in effect at the time of grant.

Non-employee Directors are also eligible to receive awards under the 2008 Plan. Director awards are made by our Governance Committee, which is made up of independent members of our Board of Directors.

The Omnibus Stock Incentive Plan approved by the shareholders in 2004 (the “2004 Plan”) expired upon approval of the 2008 Plan by shareholders. Prior grants made under the 2004 Plan and earlier stock incentive plans remained outstanding on the terms in effect at the time of grant.

Stock options

The following table summarizes stock option activity under all plans:

						Weighted Average
				Weighted Average		Remaining		Aggregate
Options Outstanding	Shares			Exercise Price		Contractual Life		Intrinsic Value
Balance January 1, 2008		6,857,966		$	30.54
Granted		1,501,601			33.62
Exercised		(444,212	)		21.08
Forfeited		(102,082	)		33.74
Expired		(84,226	)		39.63
Balance December 31, 2008		7,729,047		$	31.54		6.0	$	7,625,417
Options exercisable December 31, 2008		5,158,679		$	30.75		4.5	$	7,624,052
Shares available for grant December 31, 2008		7,001,600

The weighted-average grant date fair value of options granted in 2008, 2007, and 2006 was estimated to be $7.41, $8.44, and $10.90 per share, respectively. The total intrinsic value of options that were exercised during 2008, 2007, and 2006 was $6.3 million, $12.6 million, and $8.5 million, respectively. At December 31, 2008, the total unrecognized compensation cost related to stock options was $5.2 million. This cost is expected to be recognized over a weighted average period of 1.4 years.

Cash received from option exercises for the years ended December 31, 2008, 2007, and 2006 was $5.6 million, $7.4 million, and $4.1 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $2.0 million, $4.1 million, and $2.4 million for the years ended December 31, 2008, 2007, and 2006, respectively.

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Notes to consolidated financial statements — (continued)

Restricted Share Awards

The following table summarizes restricted share award activity under all plans:

				Weighted Average
				Grant Date
Restricted Shares Outstanding	Shares			Fair Value
Balance January 1, 2008		944,279		$	34.23
Granted		462,553			30.81
Vested		(235,765	)		30.95
Forfeited		(40,720	)		34.78
Balance December 31, 2008		1,130,347		$	33.49

As of December 31, 2008, there was $14.1 million of unrecognized compensation cost related to restricted share compensation arrangements granted under the 2004 Plan and the 2008 Plan. That cost is expected to be recognized over a weighted average period of 2.2 years. The total fair value of shares vested during the years ended December 31, 2008, 2007 and 2006, was $7.7 million, $13.5 million, and $8.2 million, respectively.

The actual tax benefit realized for the tax deductions from restricted share compensation arrangements totaled $3.0 million, $4.2 million, and $2.6 million for the years ended December 31, 2008, 2007, and 2006, respectively.

During 2007, we increased the contractual term of options for certain individuals resulting in additional compensation expense of $0.9 million under SFAS 123R.

15.  Business Segments

We classify our continuing operations into the following business segments based primarily on types of products offered and markets served:

•  Water — manufactures and markets essential products and systems used in the movement, storage, treatment, and enjoyment of water. Water segment products include water and wastewater pumps; filtration and purification components and systems; storage tanks and pressure vessels; and pool and spa equipment and accessories.

•  Technical Products — designs, manufactures, and markets standard, modified and custom enclosures that house and protect sensitive electronics and electrical components; thermal management products; and accessories. Applications served include industrial machinery, data communications, networking, telecommunications, test and measurement, automotive, medical, security, defense, and general electronics. Products include metallic and composite enclosures, cabinets, cases, subracks, backplanes, and associated thermal management systems.

•  Other — is primarily composed of unallocated corporate expenses, our captive insurance subsidiary, intermediate finance companies, divested operations, and intercompany eliminations.

The accounting policies of our operating segments are the same as those described in the summary of significant accounting policies. We evaluate performance based on the sales and operating income of the segments and use a variety of ratios to measure performance. These results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented.

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Notes to consolidated financial statements — (continued)

Financial information by reportable business segment is included in the following summary:

In thousands	2008		2007		2006		2008			2007			2006
	Net sales to external customers						Operating income (loss)
Water	$	2,206,142	$	2,230,770	$	2,023,358	$	206,357		$	273,677		$	219,611
Technical Products		1,145,834		1,050,133		999,244		169,315			153,586			148,905
Other		—		—		—		(50,987	)		(48,214	)		(55,573	)
Consolidated	$	3,351,976	$	3,280,903	$	3,022,602	$	324,685		$	379,049		$	312,943
	Identifiable assets(1)						Depreciation
Water	$	3,271,039	$	3,191,830	$	2,605,103	$	39,237		$	36,711		$	34,761
Technical Products		697,577		724,466		681,257		19,131			19,696			19,617
Other(1)		84,597		84,318		78,619		1,305			1,196			1,304
Consolidated	$	4,053,213	$	4,000,614	$	3,364,979	$	59,673		$	57,603		$	55,682
	Amortization						Capital expenditures
Water	$	22,062	$	18,877	$	11,272	$	32,916		$	35,984		$	29,549
Technical Products		2,980		2,515		1,931		15,995			23,956			20,959
Other		2,566		4,169		4,974		4,178			1,576			386
Consolidated	$	27,608	$	25,561	$	18,177	$	53,089		$	61,516		$	50,894

The following table presents certain geographic information:

In thousands	2008		2007		2006		2008		2007		2006
	Net sales to external customers						Long-lived assets
U.S	$	2,467,698	$	2,484,758	$	2,405,336	$	219,013	$	220,191	$	213,813
Europe		571,164		527,375		405,751		89,300		104,226		77,291
Asia and other		313,114		268,770		211,515		35,568		37,273		33,205
Consolidated	$	3,351,976	$	3,280,903	$	3,022,602	$	343,881	$	361,690	$	324,309

⁽¹⁾ All cash and cash equivalents are included in Other.

Net sales are based on the location in which the sale originated. Long-lived assets represent property, plant, and equipment, net of related depreciation.

We offer a broad array of products and systems to multiple markets and customers for which we do not have the information systems to track revenues by primary product category. However, our net sales by segment are representative of our sales by major product category.

We sell our products through various distribution channels including wholesale and retail distributors, original equipment manufacturers, and home centers. In our Water segment, one customer accounted for just over 10% of segment sales in 2008, one customer accounted for just over 11% of segment sales in 2007 and one customer accounted for just over 10% of segment sales in 2006. In our Technical Products segment, no single customer accounted for more than 10% of segment sales in 2008, 2007, or 2006.

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Notes to consolidated financial statements — (continued)

16.  Commitments and Contingencies

Operating lease commitments

Net rental expense under operating leases are as follows:

In thousands	2008			2007			2006
Gross rental expense	$	37,519		$	34,690		$	35,992
Sublease rental income		(172	)		(78	)		(264	)
Net rental expense	$	37,347		$	34,612		$	35,728

Future minimum lease commitments under non-cancelable operating leases, principally related to facilities, vehicles, and machinery and equipment are as follows:

In thousands	2009			2010			2011			2012			2013		Thereafter		Total
Minimum lease payments	$	26,409		$	20,267		$	18,271		$	13,359		$	9,121	$	11,952	$	99,379
Minimum sublease rentals		(457	)		(477	)		(498	)		(49	)		—		—		(1,481	)
Net future minimum lease commitments	$	25,952		$	19,790		$	17,773		$	13,310		$	9,121	$	11,952	$	97,898

Environmental

We have been named as defendants, targets, or PRP in a small number of environmental clean-ups, in which our current or former business units have generally been given de minimis status. To date, none of these claims have resulted in clean-up costs, fines, penalties, or damages in an amount material to our financial position or results of operations. We have disposed of a number of businesses in recent years and in certain cases, such as the disposition of the Cross Pointe Paper Corporation uncoated paper business in 1995, the disposition of the Federal Cartridge Company ammunition business in 1997, the disposition of Lincoln Industrial in 2001, and the disposition of the Tools Group in 2004, we have retained responsibility and potential liability for certain environmental obligations. We have received claims for indemnification from purchasers of these businesses and have established what we believe to be adequate accruals for potential liabilities arising out of retained responsibilities. We settled some of the claims in prior years; to date our recorded accruals have been adequate.

In addition, there are ongoing environmental issues at a limited number of sites, including one site acquired in the acquisition of Essef Corporation in 1999, which relate to operations no longer carried out at the sites. We have established what we believe to be adequate accruals for remediation costs at these sites. We do not believe that projected response costs will result in a material liability.

We may be named as a PRP at other sites in the future, for both divested and acquired businesses. When the outcome of the matter is probable and it is possible to provide reasonable estimates of our liability with respect to environmental sites, provisions have been made in accordance with generally accepted accounting principles in the United States. As of December 31, 2008 and 2007, our undiscounted reserves for such environmental liabilities were approximately $3.1 million and $3.5 million, respectively. We cannot ensure that environmental requirements will not change or become more stringent over time or that our eventual environmental clean-up costs and liabilities will not exceed the amount of our current reserves.

Litigation

We have been made parties to a number of actions filed or have been given notice of potential claims relating to the conduct of our business, including those pertaining to commercial disputes, product liability, environmental, safety and health, patent infringement, and employment matters.

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Notes to consolidated financial statements — (continued)

We comply with the requirements of SFAS No. 5, Accounting for Contingencies, and related guidance, and record liabilities for an estimated loss from a loss contingency where the outcome of the matter is probable and can be reasonably estimated. Factors that are considered when determining whether the conditions for accrual have been met include the (a) nature of the litigation, claim, or assessment, (b) progress of the case, including progress after the date of the financial statements but before the issuance date of the financial statements, (c) opinions of legal counsel, and (d) management’s intended response to the litigation, claim, or assessment. Where the reasonable estimate of the probable loss is a range, we record the most likely estimate of the loss. When no amount within the range is a better estimate than any other amount, however, the minimum amount in the range is accrued. Gain contingencies are not recorded until realized.

While we believe that a material adverse impact on our consolidated financial position, results of operations, or cash flows from any such future charges is unlikely, given the inherent uncertainty of litigation, a remote possibility exists that a future adverse ruling or unfavorable development could result in future charges that could have a material adverse impact. We do and will continue to periodically reexamine our estimates of probable liabilities and any associated expenses and receivables and make appropriate adjustments to such estimates based on experience and developments in litigation. As a result, the current estimates of the potential impact on our consolidated financial position, results of operations, and cash flows for the proceedings and claims could change in the future.

Product liability claims

We are subject to various product liability lawsuits and personal injury claims. A substantial number of these lawsuits and claims are insured and accrued for by Penwald our captive insurance subsidiary. Penwald records a liability for these claims based on actuarial projections of ultimate losses. For all other claims, accruals covering the claims are recorded, on an undiscounted basis, when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on existing information. The accruals are adjusted periodically as additional information becomes available. We have not experienced significant unfavorable trends in either the severity or frequency of product liability lawsuits or personal injury claims.

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 2008 which is shown on the line Legal settlement in the Consolidated Statements of Income.

Warranties and guarantees

In connection with the disposition of our businesses or product lines, we may agree to indemnify purchasers for various potential liabilities relating to the sold business, such as pre-closing tax, product liability, warranty, environmental, or other obligations. The subject matter, amounts, and duration of any such indemnification obligations vary for each type of liability indemnified and may vary widely from transaction to transaction. Generally, the maximum obligation under such indemnifications is not explicitly stated and as a result, the overall amount of these obligations cannot be reasonably estimated. Historically, we have not made significant payments for these indemnifications. We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our financial condition or results of operations.

In accordance with FASB Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Others, we recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.

76

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Notes to consolidated financial statements — (continued)

We provide service and warranty policies on our products. Liability under service and warranty policies is based upon a review of historical warranty and service claim experience. Adjustments are made to accruals as claim data and historical experience warrant.

The changes in the carrying amount of service and product warranties for the year ended December 31, 2008 and 2007 are as follows:

In thousands	2008			2007
Balance at beginning of the year	$	39,077		$	33,764
Service and product warranty provision		62,655			68,257
Payments		(70,373	)		(64,474	)
Acquired		599			1,116
Foreign currency translation		(399	)		414
Balance at end of the year	$	31,559		$	39,077

Stand-by letters of credit

In the ordinary course of business, we are required to commit to bonds that require payments to our customers for any non-performance. The outstanding face value of the bonds fluctuates with the value of our projects in process and in our backlog. In addition, we issue financial stand-by letters of credit primarily to secure our performance to third parties under self-insurance programs and certain legal matters. As of December 31, 2008 and December 31, 2007, the outstanding value of these instruments totaled $64.5 million and $58.5 million, respectively.

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Notes to consolidated financial statements — (continued)

17.   Selected Quarterly Financial Data (Unaudited)

The following table represents the 2008 quarterly financial information:

	2008
In thousands, except per-share data	First			Second			Third			Fourth			Year
Net sales	$	830,146		$	898,378		$	855,815		$	767,637		$	3,351,976
Gross profit		250,694			278,410			255,953			229,493			1,014,550
Operating income		97,327			96,547			85,614			45,197			324,685
Income from continuing operations		52,463			139,837			42,902			21,161			256,363
Gain (loss) from discontinued operations, net of tax		(1,036	)		(1,102	)		(1,514	)		(2,131	)		(5,783	)
Gain (loss) on disposal of discontinued operations, net of tax		(7,137	)		—			(268	)		(14,441	)		(21,846	)
Net income		44,290			138,735			41,120			4,589			228,734
Earnings per common share(1)
Basic
Continuing operations	$	0.53		$	1.43		$	0.44		$	0.22		$	2.62
Discontinued operations		(0.08	)		(0.01	)		(0.02	)		(0.17	)		(0.28	)
Basic earnings per common share	$	0.45		$	1.42		$	0.42		$	0.05		$	2.34
Diluted
Continuing operations	$	0.53		$	1.41		$	0.43		$	0.22		$	2.59
Discontinued operations		(0.08	)		(0.01	)		(0.02	)		(0.17	)		(0.28	)
Diluted earnings per common share	$	0.45		$	1.40		$	0.41		$	0.05		$	2.31

⁽¹⁾ Amounts may not total to annual earnings because each quarter and year are calculated separately based on basic and diluted weighted-average common shares outstanding during that period.

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Notes to consolidated financial statements — (continued)

The following table represents the 2007 quarterly financial information:

	2007
In thousands, except per-share data	First			Second		Third			Fourth			Year
Net sales	$	780,286		$	884,570	$	809,377		$	806,670		$	3,280,903
Gross profit		235,779			278,451		242,921			255,547			1,012,698
Operating income		82,501			112,952		92,596			91,000			379,049
Income from continuing operations		43,197			60,976		58,867			49,078			212,118
Gain (loss) from discontinued operations, net of tax		(1,067	)		1,025		(823	)		(764	)		(1,629	)
Gain (loss) on disposal of discontinued operations, net of tax		143			64		—			231			438
Net income		42,273			62,065		58,044			48,545			210,927
Earnings per common share(1)
Basic
Continuing operations	$	0.44		$	0.62	$	0.60		$	0.50		$	2.15
Discontinued operations		(0.01	)		0.01		(0.01	)		(0.01	)		(0.01	)
Basic earnings per common share	$	0.43		$	0.63	$	0.59		$	0.49		$	2.14
Diluted
Continuing operations	$	0.43		$	0.61	$	0.59		$	0.49		$	2.12
Discontinued operations		(0.01	)		0.01		(0.01	)		(0.01	)		(0.01	)
Diluted earnings per common share	$	0.42		$	0.62	$	0.58		$	0.48		$	2.11

⁽¹⁾ Amounts may not total to annual earnings because each quarter and year are calculated separately based on basic and diluted weighted-average common shares outstanding during that period.

79

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Notes to consolidated financial statements — (continued)

18.   Financial Statements of Subsidiary Guarantors

The Senior Notes due 2009 are jointly and severally guaranteed by domestic subsidiaries (the “Guarantor Subsidiaries”), each of which is directly or indirectly wholly-owned by Pentair (the “Parent Company”). The following supplemental financial information sets forth the condensed consolidated balance sheets as of December 31, 2008 and 2007, the related condensed consolidated statements of income and statements of cash flows for each of the three years in the period ended December 31, 2008, for the Parent Company, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries, and total consolidated Pentair and subsidiaries.

Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
For the year ended December 31, 2008

	Parent			Guarantor			Non-Guarantor
In thousands	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	2,560,930		$	1,021,096		$	(230,050	)	$	3,351,976
Cost of goods sold		40			1,847,160			719,534			(229,308	)		2,337,426
Gross profit		(40	)		713,770			301,562			(742	)		1,014,550
Selling, general and administrative		3,536			419,013			185,172			(741	)		606,980
Research and development		269			47,186			14,995			—			62,450
Legal settlement		20,435			—			—			—			20,435
Operating (loss) income		(24,280	)		247,571			101,395			(1	)		324,685
Other (income) expense:
Earnings from investment in subsidiary		(194,295	)		—			—			194,295			—
Gain on sale of interest in subsidiaries		—			(109,648	)		—			—			(109,648	)
Equity losses of unconsolidated subsidiary		—			3,041			—			—			3,041
Loss on early extinguishment of debt		4,611			—			—			—			4,611
Net interest (income) expense		(88,407	)		153,910			(6,068	)		—			59,435
Other		—			106			—			—			106
Income (loss) from continuing operations before income taxes and minority interest		253,811			200,162			107,463			(194,296	)		367,140
Minority interest		—			2,482			(49	)		—			2,433
Provision for income taxes		25,320			53,386			29,638			—			108,344
Income (loss) from continuing operations		228,491			144,294			77,874			(194,296	)		256,363
Income (loss) from discontinued operations, net of tax		—			(6,597	)		814			—			(5,783	)
Gain (loss) on disposal of discontinued operations, net of tax		243			(17,570	)		(4,519	)		—			(21,846	)
Net income (loss)	$	228,734		$	120,127		$	74,169		$	(194,296	)	$	228,734

80

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Notes to consolidated financial statements — (continued)

Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, 2008

	Parent			Guarantor			Non-Guarantor
In thousands	Company			Subsidiaries			Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	2,720		$	3,345		$	33,279	$	—		$	39,344
Accounts and notes receivable, net		454			338,134			133,640		(11,147	)		461,081
Inventories		—			291,264			126,023		—			417,287
Deferred tax assets		131,984			38,712			4,445		(123,787	)		51,354
Prepaid expenses and other current assets		36,331			10,522			32,305		(16,045	)		63,113
Total current assets		171,489			681,977			329,692		(150,979	)		1,032,179
Property, plant and equipment, net		8,012			210,901			124,968		—			343,881
Other assets
Investments in/advances to subsidiaries		2,731,908			87,642			891,512		(3,711,062	)		—
Goodwill		—			1,643,123			458,728		—			2,101,851
Intangibles, net		—			349,670			165,838		—			515,508
Other		63,737			8,848			15,784		(28,575	)		59,794
Total other assets		2,795,645			2,089,283			1,531,862		(3,739,637	)		2,677,153
Total assets	$	2,975,146		$	2,982,161		$	1,986,522	$	(3,890,616	)	$	4,053,213
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	—		$	—		$	—	$	—		$	—
Current maturities of long-term debt		113,070			139			147,500		(260,085	)		624
Accounts payable		1,963			160,700			114,380		(59,145	)		217,898
Employee compensation and benefits		13,075			42,663			34,472		—			90,210
Current pension and post-retirement benefits		8,890			—			—		—			8,890
Accrued product claims and warranties		—			27,421			14,138		—			41,559
Income taxes		40,106			(35,825	)		1,170		—			5,451
Accrued rebates and sales incentives		—			20,232			8,665		—			28,897
Other current liabilities		18,899			62,055			40,043		(16,022	)		104,975
Total current liabilities		196,003			277,385			360,368		(335,252	)		498,504
Other liabilities
Long-term debt		953,349			1,947,518			315,089		(2,262,488	)		953,468
Pension and other retirement compensation		181,695			18,135			70,309		—			270,139
Post-retirement medical and other benefits		20,703			42,594			—		(28,574	)		34,723
Long-term income taxes payable		28,139			—			—		—			28,139
Deferred tax liabilities		2,052			211,920			56,374		(123,787	)		146,559
Due to / (from) affiliates		(350,948	)		141,853			815,295		(606,200	)		—
Other non-current liabilities		45,472			(84,853	)		140,993		—			101,612
Total liabilities		1,076,465			2,554,552			1,758,428		(3,356,301	)		2,033,144
Minority Interest		—			119,623			1,765		—			121,388
Shareholders’ equity		1,898,681			307,986			226,329		(534,315	)		1,898,681
Total liabilities and shareholder’s equity	$	2,975,146		$	2,982,161		$	1,986,522	$	(3,890,616	)	$	4,053,213

81

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Notes to consolidated financial statements — (continued)

Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the year ended December 31, 2008

	Parent			Guarantor			Non-Guarantor
In thousands	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Operating activities
Net income (loss)	$	228,734		$	120,127		$	74,169		$	(194,296	)	$	228,734
Adjustments to reconcile net income to net cash provided by operating activities:
(Income) loss from discontinued operations		—			6,597			(814	)		—			5,783
(Gain) loss on disposal of discontinued operations		(243	)		21,292			797			—			21,846
Equity losses of unconsolidated subsidiary		—			3,041			—			—			3,041
Minority interest		—			2,295			138			—			2,433
Depreciation		1,305			38,338			20,030			—			59,673
Amortization		2,567			18,384			6,657			—			27,608
Earnings from investments in subsidiaries		(194,296	)		—			—			194,296			—
Deferred income taxes		(10,925	)		45,449			6,230			—			40,754
Stock compensation		20,572			—			—			—			20,572
Excess tax benefits from stock-based compensation		(1,617	)		—			—			—			(1,617	)
Other		510			—			—			—			510
Gain on sale of interest in subsidiaries		—			(109,648	)		—			—			(109,648	)
Changes in assets and liabilities, net of effects of business acquisitions and dispositions
Accounts and notes receivable		1,895			(16,784	)		36,884			(40,242	)		(18,247	)
Inventories		—			(23,930	)		(9,381	)		—			(33,311	)
Prepaid expenses and other current assets		(51,789	)		285			30,913			(6,803	)		(27,394	)
Accounts payable		(4,813	)		(6,296	)		17,626			(8,490	)		(1,973	)
Employee compensation and benefits		(6,435	)		(15,616	)		132			—			(21,919	)
Accrued product claims and warranties		—			(6,812	)		(474	)		—			(7,286	)
Income taxes		43,567			(37,278	)		(10,698	)		—			(4,409	)
Other current liabilities		27,240			2			(25,085	)		6,830			8,987
Pension and post-retirement benefits		5,135			(7,746	)		2,912			—			301
Other assets and liabilities		39,526			8,842			(30,194	)		—			18,174
Net cash provided by (used for) continuing operations		100,933			40,542			119,842			(48,705	)		212,612
Net cash provided by (used for) discontinued operations		—			(10,239	)		1,842			—			(8,397	)
Net cash provided by operating activities		100,933			30,303			121,684			(48,705	)		204,215
Investing activities
Capital expenditures		(4,177	)		(34,371	)		(14,541	)		—			(53,089	)
Proceeds from sale of property and equipment		—			288			4,453			—			4,741
Acquisitions, net of cash acquired or received		(2,046	)		—			19			—			(2,027	)
Divestitures		—			36,574			1,333			—			37,907
Other		(12	)		—			—			—			(12	)
Net cash provided by (used for ) investing activities of continuing operations		(6,235	)		2,491			(8,736	)		—			(12,480	)
Financing activities
Net short-term borrowings (repayments)		(16,994	)		—			—			—			(16,994	)
Proceeds from long-term debt		715,000			—			—			—			715,000
Repayment of long-term debt		(805,016	)		—			—			—			(805,016	)
Debt issuance costs		(114	)		—			—			—			(114	)
Net change in advances to subsidiaries		107,951			(76,635	)		(80,024	)		48,708			—
Excess tax benefit from stock-based compensation		1,617			—			—			—			1,617
Proceeds from exercise of stock options		5,590			—			—			—			5,590
Repurchases of common stock		(50,000	)		—			—			—			(50,000	)
Dividends paid		(56,631	)		39,193			(49,846	)		—			(67,284	)
Net cash provided by financing activities of continuing operations		(98,597	)		(37,442	)		(129,870	)		48,708			(217,201	)
Effect of exchange rate changes on cash		154			(2,858	)		(3,281	)		—			(5,985	)
Change in cash and cash equivalents		(3,745	)		(7,506	)		(20,203	)		3			(31,451	)
Cash and cash equivalents, beginning of period		6,465			10,848			53,482			—			70,795
Cash and cash equivalents, end of period	$	2,720		$	3,342		$	33,279		$	3		$	39,344

82

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Notes to consolidated financial statements — (continued)

Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
For the year ended December 31, 2007

	Parent			Guarantor			Non-Guarantor
In thousands	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	2,567,531		$	908,515		$	(195,143	)	$	3,280,903
Cost of goods sold		—			1,812,310			650,522			(194,627	)		2,268,205
Gross profit		—			755,221			257,993			(516	)		1,012,698
Selling, general and administrative		16,686			395,909			164,749			(516	)		576,828
Research and development		—			42,314			14,507			—			56,821
Legal settlement		—			—			—			—			—
Operating (loss) income		(16,686	)		316,998			78,737			—			379,049
Other (income) expense:
Earnings from investment in subsidiary		(172,717	)		—			—			172,717			—
Gain on sale of interest in subsidiaries		—			—			—			—			—
Equity losses of unconsolidated subsidiary		—			2,865			—			—			2,865
Loss on early extinguishment of debt		—			—			—			—			—
Net interest (income) expense		(76,516	)		147,900			(2,991	)		—			68,393
Other		—			1,230			—			—			1,230
Income (loss) from continuing operations before income taxes and minority interest		232,547			165,003			81,728			(172,717	)		306,561
Minority interest		—			—			—			—			—
Provision for income taxes		21,728			57,958			14,757			—			94,443
Income (loss) from continuing operations		210,819			107,045			66,971			(172,717	)		212,118
Income (loss) from discontinued operations, net of tax		(330	)		(2,871	)		1,572			—			(1,629	)
Gain (loss) on disposal of discontinued operations, net of tax		438			—			—			—			438
Net income (loss)	$	210,927		$	104,174		$	68,543		$	(172,717	)	$	210,927

83

Pentair, Inc. and Subsidiaries

Notes to consolidated financial statements — (continued)

Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, 2007

	Parent			Guarantor			Non-Guarantor
In thousands	Company			Subsidiaries			Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	6,465		$	10,848		$	53,482	$	—		$	70,795
Accounts and notes receivable, net		522			325,718			186,558		(51,390	)		461,408
Inventories		—			257,527			121,491		—			379,018
Deferred tax assets		70,494			35,152			7,947		(63,082	)		50,511
Prepaid expenses and other current assets		12,119			9,283			37,246		(22,849	)		35,799
Current assets of discontinued operations		—			35,554			4,936		—			40,490
Total current assets		89,600			674,082			411,660		(137,321	)		1,038,021
Property, plant and equipment, net		5,139			214,969			141,582		—			361,690
Other assets
Investments in/advances to subsidiaries		2,434,414			90,210			575,240		(3,099,864	)		—
Goodwill		—			1,582,395			416,724		—			1,999,119
Intangibles, net		—			324,821			162,207		—			487,028
Other		80,575			14,990			17,055		(30,382	)		82,238
Non-current assets of discontinued operations		—			32,238			280		—			32,518
Total other assets		2,514,989			2,044,654			1,171,506		(3,130,246	)		2,600,903
Total assets	$	2,609,728		$	2,933,705		$	1,724,748	$	(3,267,567	)	$	4,000,614
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	—		$	—		$	13,586	$	—		$	13,586
Current maturities of long-term debt		20,114			157			338,828		(354,024	)		5,075
Accounts payable		1,582			172,671			104,188		(50,655	)		227,786
Employee compensation and benefits		15,935			58,397			36,750		—			111,082
Current pension and post-retirement benefits		8,557			—			—		—			8,557
Accrued product claims and warranties		—			34,073			15,004		—			49,077
Income taxes		2,501			(3,547	)		16,045		—			14,999
Accrued rebates and sales incentives		—			27,976			8,454		—			36,430
Other current liabilities		19,509			52,585			40,779		(22,852	)		90,021
Current liabilities of discontinued operations		—			3,553			151		—			3,704
Total current liabilities		68,198			345,865			573,785		(427,531	)		560,317
Other liabilities
Long-term debt		1,021,463			1,972,655			34,140		(1,986,333	)		1,041,925
Pension and other retirement compensation		67,872			22,905			70,265		—			161,042
Post-retirement medical and other benefits		21,959			45,570			—		(30,382	)		37,147
Long-term income taxes payable		21,306			—			—		—			21,306
Deferred tax liabilities		3,429			168,098			58,472		(63,082	)		166,917
Due to / (from) affiliates		(542,056	)		199,609			688,652		(346,205	)		—
Other non-current liabilities		36,686			7,084			53,315		—			97,085
Non-current liabilities of discontinued operations		—			4,004			—		—			4,004
Total liabilities		698,857			2,765,790			1,478,629		(2,853,533	)		2,089,743
Minority Interest		—			—			—		—			—
Shareholders’ equity		1,910,871			167,915			246,119		(414,034	)		1,910,871
Total liabilities and shareholder’s equity	$	2,609,728		$	2,933,705		$	1,724,748	$	(3,267,567	)	$	4,000,614

84

Pentair, Inc. and Subsidiaries

Notes to consolidated financial statements — (continued)

Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the year ended December 31, 2007

	Parent			Guarantor			Non-Guarantor
In thousands	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Operating activities
Net income (loss)	$	210,927		$	104,174		$	68,543		$	(172,717	)	$	210,927
Adjustments to reconcile net income to net
cash provided by operating activities:
(Income) loss from discontinued operations		330			2,870			(1,571	)		—			1,629
(Gain) loss on disposal of discontinued operations		(438	)		—			—			—			(438	)
Equity losses of unconsolidated subsidiary		—			2,865			—			—			2,865
Minority interest		—			—			—			—			—
Depreciation		1,197			38,031			18,375			—			57,603
Amortization		4,168			16,300			5,093			—			25,561
Earnings from investments in subsidiaries		(172,717	)		—			—			172,717			—
Deferred income taxes		(4,829	)		8,344			(20,167	)		—			(16,652	)
Stock compensation		22,913			—			—			—			22,913
Excess tax benefits from stock-based compensation		(4,204	)		—			—			—			(4,204	)
Other		(1,929	)		—			—			—			(1,929	)
Gain on sale of interest in subsidiaries		—			—			—			—			—
Changes in assets and liabilities, net of effects of
business acquisitions and dispositions
Accounts and notes receivable		3,927			(10,789	)		(19,280	)		7,074			(19,068	)
Inventories		—			5,344			9,370			—			14,714
Prepaid expenses and other current assets		(7,650	)		12,080			(8,708	)		6,453			2,175
Accounts payable		(174	)		15,756			10,967			(7,067	)		19,482
Employee compensation and benefits		(3,984	)		9,656			(1,677	)		—			3,995
Accrued product claims and warranties		—			5,447			(684	)		—			4,763
Income taxes		5,934			(6,667	)		3,582			—			2,849
Other current liabilities		11,264			(7,670	)		(355	)		(6,457	)		(3,218	)
Pension and post-retirement benefits		3,933			(9,074	)		5,147			—			6
Other assets and liabilities		7,454			5,060			503			—			13,017
Net cash provided by (used for) continuing operations		76,122			191,727			69,138			3			336,990
Net cash provided by (used for) discontinued operations		(330	)		3,757			861			—			4,288
Net cash provided by operating activities		75,792			195,484			69,999			3			341,278
Investing activities
Capital expenditures		(1,577	)		(33,564	)		(26,375	)		—			(61,516	)
Proceeds from sale of property and equipment		—			933			4,265			—			5,198
Acquisitions, net of cash acquired or received		(487,211	)		—			(350	)		—			(487,561	)
Divestitures		—			—			—			—			—
Other		2,994			(4,038	)		(4,500	)		—			(5,544	)
Net cash provided by (used for ) investing activities of continuing operations		(485,794	)		(36,669	)		(26,960	)		—			(549,423	)
Financing activities
Net short-term borrowings (repayments)		(1,830	)		—			—			—			(1,830	)
Proceeds from long-term debt		1,269,428			—			—			—			1,269,428
Repayment of long-term debt		(954,077	)		—			—			—			(954,077	)
Debt issuance costs		(1,876	)		—			—			—			(1,876	)
Net change in advances to subsidiaries		(59,737	)		80,007			(20,262	)		(8	)		—
Excess tax benefit from stock-based compensation		4,204			—			—			—			4,204
Proceeds from exercise of stock options		7,388			—			—			—			7,388
Repurchases of common stock		(40,641	)		—			—			—			(40,641	)
Dividends paid		176,187			(237,289	)		1,192			—			(59,910	)
Net cash provided by financing activities of continuing operations		399,046			(157,282	)		(19,070	)		(8	)		222,686
Effect of exchange rate changes on cash		8,610			2,771			(9,947	)		—			1,434
Change in cash and cash equivalents		(2,346	)		4,304			14,022			(5	)		15,975
Cash and cash equivalents, beginning of period		8,810			6,550			39,460			—			54,820
Cash and cash equivalents, end of period	$	6,464		$	10,854		$	53,482		$	(5	)	$	70,795

85

Pentair, Inc. and Subsidiaries

Notes to consolidated financial statements — (continued)

Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
For the year ended December 31, 2006

	Parent			Guarantor			Non-Guarantor
In thousands	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	2,472,021		$	715,360		$	(164,779	)	$	3,022,602
Cost of goods sold		647			1,768,080			522,455			(164,636	)		2,126,546
Gross profit		(647	)		703,941			192,905			(143	)		896,056
Selling, general and administrative		27,410			371,518			127,783			(143	)		526,568
Research and development		—			44,090			12,455			—			56,545
Legal settlement		—			—			—			—			—
Operating (loss) income		(28,057	)		288,333			52,667			—			312,943
Other (income) expense:
Earnings from investment in subsidiary		(159,870	)		—			—			159,870			—
Gain on sale of interest in subsidiaries		—			—			—			—			—
Equity losses of unconsolidated subsidiary		—			3,332			—			—			3,332
Loss on early extinguishment of debt		—			—			—			—			—
Net interest (income) expense		(63,992	)		117,880			(3,588	)		—			50,300
Other		(1,150	)		786			—			—			(364	)
Income (loss) from continuing operations before income taxes and minority interest		196,955			166,335			56,255			(159,870	)		259,675
Minority interest		—			—			—			—			—
Provision for income taxes		12,616			40,895			19,913			—			73,424
Income (loss) from continuing operations		184,339			125,440			36,342			(159,870	)		186,251
Income (loss) from discontinued operations, net of tax		(572	)		(3,000	)		1,088			—			(2,484	)
Gain (loss) on disposal of discontinued operations, net of tax		(36	)		—			—			—			(36	)
Net income (loss)	$	183,731		$	122,440		$	37,430		$	(159,870	)	$	183,731

86

Pentair, Inc. and Subsidiaries

Notes to consolidated financial statements — (continued)

Condensed Consolidated Statements of Cash Flows
For the year ended December 31, 2006
Pentair, Inc. and Subsidiaries

	Parent			Guarantor			Non-Guarantor
In thousands	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Operating activities
Net income (loss)	$	183,731		$	122,908		$	36,962		$	(159,870	)	$	183,731
Adjustments to reconcile net income to net
cash provided by operating activities:
(Income) loss from discontinued operations		572			3,000			(1,088	)		—			2,484
(Gain) loss on disposal of discontinued operations		36			—			—			—			36
Equity losses of unconsolidated subsidiary		—			3,332			—			—			3,332
Minority interest		—			—			—			—			—
Depreciation		1,304			41,658			12,720			—			55,682
Amortization		4,974			12,179			1,024			—			18,177
Earnings from investments in subsidiaries		(159,870	)		—			—			159,870			—
Deferred income taxes		(10,895	)		(4,885	)		5,169			—			(10,611	)
Stock compensation		25,377			—			—			—			25,377
Excess tax benefits from stock-based compensation		(3,043	)		—			—			—			(3,043	)
Other		(1,153	)		789			—			—			(364	)
Gain on sale of interest in subsidiaries		—			—			—			—			—
Changes in assets and liabilities, net of effects of
business acquisitions and dispositions
Accounts and notes receivable		(4,015	)		11,932			(2,732	)		10,285			15,470
Inventories		—			(23,662	)		(22,107	)		—			(45,769	)
Prepaid expenses and other current assets		(8,580	)		(11,197	)		3,434			11,335			(5,008	)
Accounts payable		(146	)		(12,599	)		4,621			(10,285	)		(18,409	)
Employee compensation and benefits		(4,760	)		(8,567	)		639			—			(12,688	)
Accrued product claims and warranties		—			1,313			(117	)		—			1,196
Income taxes		(72,902	)		(21,121	)		104,376			—			10,353
Other current liabilities		2,406			1,269			(5,631	)		(11,335	)		(13,291	)
Pension and post-retirement benefits		11,653			3,278			4,466			—			19,397
Other assets and liabilities		(6,079	)		(3,041	)		12,467			—			3,347
Net cash provided by (used for) continuing operations		(41,390	)		116,586			154,203			—			229,399
Net cash provided by (used for) discontinued operations		(524	)		1,821			761			—			2,058
Net cash provided by operating activities		(41,914	)		118,407			154,964			—			231,457
Investing activities
Capital expenditures		(386	)		(24,438	)		(26,070	)		—			(50,894	)
Proceeds from sale of property and equipment		—			403			251			—			654
Acquisitions, net of cash acquired or received		(23,535	)		(217	)		(5,534	)		—			(29,286	)
Divestitures		(18,246	)		—			(5,761	)		—			(24,007	)
Other		(1,747	)		(4,623	)		—			—			(6,370	)
Net cash provided by (used for ) investing activities of continuing operations		(43,914	)		(28,875	)		(37,114	)		—			(109,903	)
Financing activities
Net short-term borrowings (repayments)		13,831			—			—			—			13,831
Proceeds from long-term debt		608,975			—			—			—			608,975
Repayment of long-term debt		(631,755	)		—			—			—			(631,755	)
Debt issuance costs		—			—			—			—			—
Net change in advances to subsidiaries		75,559			(90,120	)		14,561			—			—
Excess tax benefit from stock-based compensation		3,043			—			—			—			3,043
Proceeds from exercise of stock options		4,066			—			—			—			4,066
Repurchases of common stock		(59,359	)		—			—			—			(59,359	)
Dividends paid		83,133			2,262			(141,978	)		—			(56,583	)
Net cash provided by financing activities of continuing operations		97,493			(87,858	)		(127,417	)		—			(117,782	)
Effect of exchange rate changes on cash		(5,857	)		514			7,891			—			2,548
Change in cash and cash equivalents		5,808			2,188			(1,676	)		—			6,320
Cash and cash equivalents, beginning of period		3,002			4,362			41,136			—			48,500
Cash and cash equivalents, end of period	$	8,810		$	6,550		$	39,460		$	—		$	54,820

87

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.   CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the year ended December 31, 2008, 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 year ended December 31, 2008 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.

Management’s Annual Report on Internal Control Over Financial Reporting

The report of management required under this ITEM 9A is contained in ITEM 8 of this Annual Report on Form 10-K under the caption “Management’s Report on Internal Control Over Financial Reporting.”

Attestation Report of Independent Registered Public Accounting Firm

The attestation report required under this ITEM 9A is contained in ITEM 8 of this Annual Report on Form 10-K under the caption “Report of Independent Registered Public Accounting Firm.”

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.   OTHER INFORMATION

None

88

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE

Information required under this item with respect to directors is contained in our Proxy Statement for our 2009 annual meeting of shareholders under the captions “Corporate Governance Matters”, “Proposal 1 Election of Certain Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein by reference.

Information required under this item with respect to executive officers is contained in Part I of this Form 10-K under the caption “Executive Officers of the Registrant.”

Our Board of Directors has adopted Pentair’s Code of Business Conduct and Ethics and designated it as
the code of ethics for the Company’s Chief Executive Officer and senior financial officers. The Code of Business Conduct and Ethics also applies to all employees and directors in accordance with New York Stock Exchange Listing Standards. We have posted a copy of Pentair’s Code of Business Conduct and Ethics on
our website at www.pentair.com/code.html. Pentair’s Code of Business Conduct and Ethics is also available
in print free of charge, to any shareholder who requests it in writing from our Corporate Secretary. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers
from, Pentair’s Code of Business Conduct and Ethics by posting such information on our website at www.pentair.com/code.html.

We are not including the information contained on our website as part of, or incorporating it by reference into, this report.

ITEM 11.   EXECUTIVE COMPENSATION

Information required under this item is contained in our Proxy Statement for our 2009 annual meeting of shareholders under the captions “Corporate Governance Matters — Compensation Committee,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Executive Compensation” and “Director Compensation” and is incorporated herein by reference.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information required under this item with respect to security ownership is contained in our Proxy Statement for our 2009 annual meeting of shareholders under the captions “Security Ownership” and is incorporated herein by reference.

89

The following table summarizes, as of December 31, 2008, information about compensation plans under which our equity securities are authorized for issuance:

	Equity Compensation Plan Information
	Number of
	Securities to be				Number of Securities
	Issued Upon		Weighted-average		Remaining Available for
	Exercise of		Exercise Price of		Future Issuance Under
	Outstanding		Outstanding		Equity Compensation Plans
	Options, Warrants		Options, Warrants		(Excluding Securities
	and Rights		and Rights		Reflected in Column (a))
Plan category	(a)		(b)		(c)
Equity compensation plans approved by security holders:
2008 Omnibus Stock Incentive Plan		42,400				7,001,600	(1)
2004 Omnibus Stock Incentive Plan		7,025,123	$	31.67		—	(2)
Outside Directors Non-qualified Stock Option Plan		613,524				—	(2)
Equity compensation plans not approved by security holders		48,000	$	11.38		—	(3)
Total		7,729,047	$	31.54		7,001,600

(1)	Represents securities remaining available for issuance under the 2008 Plan.
(2)	The 2004 Plan and the Directors Plan were terminated in 2008. Options previously granted remain outstanding under these plans, but no further options or shares may be granted or issued under either plan.
(3)	Represents ten-year options to purchase common stock granted January 2, 2001 to Randall J. Hogan, our Chairman and Chief Executive Officer at an exercise price of $11.375 per share, which was the closing price of our common stock on the date of grant.

All share numbers and per share amounts described in this section have been adjusted to reflect our 2-for-1 stock split in 2004.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information required under this item is contained in our Proxy Statement for our 2009 annual meeting of shareholders under the captions “Corporate Governance Matters — Independent Directors,” and “Corporate Governance Matters — Policies and Procedures Regarding Related Person Transactions” and is incorporated herein by reference.

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required under this item is contained in our Proxy Statement for our 2009 annual meeting of shareholders under the caption “Audit Committee Disclosure” and is incorporated herein by reference.

90

PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) List of documents filed as part of this report:

(1)  Financial Statements

Consolidated Statements of Income for the Years Ended December 31, 2008, 2007 and 2006

Consolidated Balance Sheets as of December 31, 2008 and December 31, 2007

Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006

Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2008, 2007 and 2006

Notes to Consolidated Financial Statements

(2)  Financial Statement Schedules

Schedule II — Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

(3)  Exhibits

The exhibits of this Annual Report on Form 10-K included herein are set forth on the attached Exhibit Index.

91

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 24, 2009.

PENTAIR, INC.

By  /s/  John L. Stauch

John L. Stauch

Executive Vice President and Chief

Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, on February 24, 2009.

Signature		Title
/s/  Randall J. Hogan Randall J. Hogan		Chairman and Chief Executive Officer
/s/  John L. Stauch John L. Stauch		Executive Vice President and Chief Financial Officer
/s/  Mark C. Borin Mark C. Borin		Corporate Controller and Chief Accounting Officer
* Leslie Abi-Karam		Director
* Glynis A. Bryan		Director
* Jerry W. Burris		Director
* T. Michael Glenn		Director
* Charles A. Haggerty		Director
* David H. Y. Ho		Director
* David A. Jones		Director
* Ronald L. Merriman		Director
* William T. Monahan		Director
*By	/s/  Louis L. Ainsworth Louis L. Ainsworth Attorney-in-fact

92

Schedule II — Valuation and Qualifing Accounts

Pentair, Inc and subsidiaries

			Additions
	Balance		Charged to						Other			Balance
	Beginning		Costs and						Changes			End of
In thousands	in Period		Expenses			Deductions			Add (Deduct)			Period
Allowances for doubtful accounts
Year ended December 31, 2008	$	8,073	$	3,044		$	1,629	(1)	$	(563	)(2)	$	8,925
Year ended December 31, 2007	$	13,941	$	(5,049	)	$	2,906	(1)	$	2,087	(2)	$	8,073
Year ended December 31, 2006	$	13,494	$	1,774		$	2,325	(1)	$	998	(2)	$	13,941

(1)	Uncollectible accounts written off, net of expense
(2)	Result of acqusitions and foreign currency effects

93

Exhibit Index

Exhibit
Number			Exhibit
	3	.1	Third Restated Articles of Incorporation as amended through May 3, 2007 (Incorporated by reference to Exhibit 3.1 contained in Pentair’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	3	.2	Fourth Amended and Superseding By-Laws as amended through May 3, 2007 (Incorporated by reference to Exhibit 3.2 contained in Pentair’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).
	3	.3	Statement of Resolution of the Board of Directors Establishing the Series and Fixing the Relative Rights and Preferences of Series A Junior Participating Preferred Stock (Incorporated by reference to Exhibit 3.1 contained in Pentair’s Current Report on Form 8-K dated December 10, 2004).
	4	.1	Rights Agreement dated as of December 10, 2004 between Pentair, Inc. and Wells Fargo Bank, N.A. (Incorporated by reference to Exhibit 4.1 contained in Pentair’s Registration Statement on Form 8-A, dated as of December 31, 2004).
	4	.2	Form of Indenture, dated June 1, 1999, between Pentair, Inc. and U.S. Bank National Association, as Trustee Agent (Incorporated by reference to Exhibit 4.2 contained in Pentair’s Annual Report on Form 10-K for the year ended December 31, 2000).
	4	.3	Note Purchase Agreement dated as of July 25, 2003 for $50,000,000 4.93% Senior Notes, Series A, due July 25, 2013, $100,000,000 Floating Rate Senior Notes, Series B, due July 25, 2013, and $50,000,000 5.03% Senior Notes, Series C, due October 15, 2013 (Incorporated by reference to Exhibit 10.22 contained in Pentair’s Current Report on Form 8-K dated July 25, 2003).
	4	.4	Supplemental Indenture between Pentair, Inc. and U.S. Bank National Association, as Trustee, dated as of August 2, 2004 (Incorporated by reference to Exhibit 4.1 contained in Pentair’s Quarterly Report on Form 10-Q for the quarterly period ended October 2, 2004).
	4	.5	Third Amended and Restated Credit Agreement dated June 4, 2007 by and among Pentair, Inc. and a consortium of financial institutions including Bank of America, N.A., as Administrative Agent and Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent and The Bank of Tokyo-Mitsubishi UFJ, Ltd., U.S. Bank N.A. and Wells Fargo Bank, N.A., as Co-Documentation Agents (incorporated by reference to Exhibit 4.1 contained in Pentair’s Current Report on Form 8-K dated June 4, 2007).
	4	.6	First Amendment to Note Purchase agreement dated July 19, 2005 by and among Pentair, Inc. and the undersigned holders (Incorporated by reference to Exhibit 4 contained in Pentair’s Quarterly Report on Form 10-Q for the quarterly period ended July 2, 2005).
	4	.7	Form of Note Purchase Agreement, dated May 17, 2007, by and among Pentair, Inc. and various institutional investors, for the sale of $300 million aggregate principal amount of Pentair’s 5.87% Senior Notes, Series D, due May 17, 2017, and $105 million aggregate principal amount of Pentair’s Floating Rate Senior Notes, Series E, due May 17, 2012 (incorporated by reference to Exhibit 4.1 contained in Pentair’s Current Report on Form 8-K dated May 17, 2007).
	10	.1	Pentair’s 1999 Supplemental Executive Retirement Plan as Amended and Restated effective August 23, 2000 (Incorporated by reference to Exhibit 10.2 contained in Pentair’s Current Report on Form 8-K filed September 21, 2000).*
	10	.2	Pentair’s 1999 Supplemental Executive Retirement Plan as Amended and Restated effective January 1, 2009.*
	10	.3	Pentair’s Restoration Plan as Amended and Restated effective August 23, 2000 (Incorporated by reference to Exhibit 10.3 contained in Pentair’s Current Report on Form 8-K filed September 21, 2000).*
	10	.4	Pentair’s Restoration Plan as Amended and Restated effective January 1, 2009.*
	10	.5	Pentair, Inc. Non-Qualified Deferred Compensation Plan effective January 1, 1996 (Incorporated by reference to Exhibit 10.17 contained in Pentair’s Annual Report on Form 10-K for the year ended December 31, 1995).*
	10	.6	Trust Agreement for Pentair, Inc. Non-Qualified Deferred Compensation Plan between Pentair, Inc. and Fidelity Management Trust Company (Incorporated by reference to Exhibit 10.18 contained in Pentair’s Annual Report on Form 10-K for the year ended December 31, 1995).*
	10	.7	Amendment effective August 23, 2000 to Pentair’s Non-Qualified Deferred Compensation Plan effective January 1, 1996 (Incorporated by reference to Exhibit 10.8 contained in Pentair’s Current Report on Form 8-K filed September 21, 2000).*

94

Exhibit
Number			Exhibit
	10	.8	Pentair, Inc. Non-Qualified Deferred Compensation Plan as Amended and Restated effective January 1, 2009.*
	10	.9	Pentair, Inc. Executive Officer Performance Plan as Amended and Restated, effective January 1, 2003 (Incorporated by reference to Appendix 1 contained in Pentair’s Proxy Statement for its 2003 annual meeting of shareholders).*
	10	.10	Form of Key Executive Employment and Severance Agreement for Randall J. Hogan.*
	10	.11	Form of Key Executive Employment and Severance Agreement for Louis Ainsworth, Michael V. Schrock, Frederick S. Koury and Michael G. Meyer.*
	10	.12	Form of Key Executive Employment and Severance Agreement for John L. Stauch and Mark C. Borin.*
	10	.13	Pentair, Inc. International Stock Purchase and Bonus Plan, as Amended and Restated, effective May 1, 2004 (Incorporated by reference to Appendix I contained in Pentair’s Proxy Statement for its 2004 annual meeting of shareholders). *
	10	.14	Pentair, Inc. Compensation Plan for Non-Employee Directors, as Amended and Restated, effective January 1, 2008 (Incorporated by reference to Exhibit 10.13 contained in Pentair’s Annual Report on Form 10-K for the year ended December 31, 2007).*
	10	.15	Pentair, Inc. Omnibus Stock Incentive Plan, as Amended and Restated, effective December 12, 2007 (Incorporated by reference to Exhibit 10.14 contained in Pentair’s Annual Report on Form 10-K for the year ended December 31, 2007).*
	10	.16	Pentair, Inc. Employee Stock Purchase and Bonus Plan, as Amended and Restated, effective May 1, 2004 (Incorporated by reference to Appendix H contained in Pentair’s Proxy Statement for its 2004 annual meeting of shareholders). *
	10	.17	Summary of Board of Director Compensation, approved July 27, 2007 (Incorporated by reference to Exhibit 10.16 contained in Pentair’s Annual Report on Form 10-K for the year ended December 31, 2007).*
	10	.18	Letter Agreement, dated January 6, 2005, between Pentair, Inc. and Michael Schrock (Incorporated by reference to Exhibit 10.1 contained in Pentair’s Current Report on Form 8-K dated January 6, 2005).*
	10	.19	Confidentiality and Non-Competition Agreement, dated January 6, 2005, between Pentair, Inc. and Michael Schrock (Incorporated by reference to Exhibit 10.2 contained in Pentair’s Current Report on Form 8-K dated January 6, 2005).*
	10	.20	Pentair, Inc. 2008 Omnibus Stock Incentive Plan, as Amended Through July 29, 2008 (Incorporated by reference to Exhibit 10.1 contained in Pentair’s Quarterly Report on Form 10-Q for the quarter ended September 27, 2008).*
	10	.21	Form of award letter under the Pentair, Inc. 2008 Omnibus Stock Incentive Plan, as amended (Incorporated by reference to Exhibit 10.1 contained in Pentair’s Current Report on Form 8-K filed January 8, 2009).*
	10	.22	Amended and Restated Pentair, Inc. Outside Directors Nonqualified Stock Option Plan as amended through February 27, 2002 (Incorporated by reference to Exhibit 10.7 contained in Pentair’s Annual Report on Form 10-K for the year ended December 31, 2001).*
	21		List of Pentair subsidiaries.
	23		Consent of Independent Registered Public Accounting Firm — Deloitte & Touche LLP.
	24		Power of Attorney.
	31	.1	Certification of Chief Executive Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
	31	.2	Certification of Chief Financial Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
	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.

* A management contract or compensatory contract.

95

EX-10.2

Exhibit 10.2

PENTAIR, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

As Amended and Restated Effective January 1, 2009

TABLE OF CONTENTS

Section 1. Name of Plan	1
Section 2. General Definitions	1
Section 3. Participation, Vesting and Benefit Service, and Rules Governing the Crediting of Service, Disability and the Determination of Compensation and Final Average Compensation	5
(a) Participation	5
(b) Vesting	6
(c) Benefit Service	6
(d) Service Credits	7
(e) Disability	8
(f) Compensation	9
Section 4. Payments in the Event of Death Before the Benefit Commencement Date	9
(a) General	9
(b) Vested Participant	10
(c) Amount and Timing of Benefit Payment	10
(d) Beneficiary	10
Section 5. Payment of Retirement Benefits	10
(a) General	10
(b) Lump Sum	10
(c) Re-Employment after Commencement of Benefits	11
(d) Death Before End of 180 Month Period	11
(e) Beneficiary	11
(f) Non-Alienation	12
(g) Miscellaneous	12
Section 6. Confidentiality, Covenants Not to Compete, and Non-Solicitation	13
(a) General	13
(b) Forfeiture and Other Remedies	14
Section 7. Funding and Payment of Benefits	14
(a) General	14
(b) Employer Company	14
(c) Company Assumption of Liability	15
(d) Participation by Other Group Members	15
Section 8. Default	15
Section 9. Administration of the Plan	16
(a) General	16
(b) Committee	16
(c) Discretion	16

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(d) Indemnity	16
(e) Code Section 409A	17
(f) Use of Professional Services	17
(g) Communications	17
Section 10. Effect of KEESA	17
Section 11. Amendment or Termination	18
(a) General	18
(b) Limitation on Power to Amend or Terminate	18
(c) Change in Control	18
(d) Continuation of Plan Provisions	18
Section 12. Claims	19
(a) Filing Claims	19
(b) Decision on Claim	19
(c) Appeal of Denied Claim	19
(d) Decision by Appeals Committee	19
Section 13. Miscellaneous	19
(a) Employer’s Rights	19
(b) Interpretation	20
(c) Withholding of Taxes	20
(d) Offset for Amounts Due	20
(e) Computational Errors	20
(f) Requirement of Proof	20
(g) Tax Consequences	20
(h) Communications	20
(i) Not Compensation Under Other Benefit Plans	21
(j) Choice of Law	21
(k) Savings Clause	21
(l) Change in Control	21
Section 14. Transition Rules	21
(a) General	21
(b) 2004 Vested Participants Benefits	21
(c) Excess	21
APPENDIX A	23
SCHEDULE 1	25
SCHEDULE 2	26
TABLE 1	27

ii

PENTAIR, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

     Section 1. Name of Plan. This plan shall be known as the Pentair, Inc. Supplemental Executive Retirement Plan.

     Section 2. General Definitions. Unless the context requires otherwise, when used herein the terms listed below, when capitalized or applied to such capitalized terms, shall have the following meanings:

     (1) “Adjustment Factor” is the factor used in adjusting the Pension Amount to reflect the period of time between the date a vested Participant Separates from Service and his or her Benefit Commencement Date. With respect to such a Participant who survives to his or her Benefit Commencement Date and who so separates:

(a)	on or after attaining age fifty-five (55), the Adjustment Factor is 1.03441 (i.e., the Pension Amount is adjusted to reflect the period beginning on the first day of the month next following the month in which the Participant Separates from Service to the Benefit Commencement Date); or
(b)	before attaining age fifty-five (55), the Adjustment Factor is the appropriate factor set forth in Table 1 to reflect the period beginning on the first day of the month next following the month in which the Participant Separates from Service and ending on the Benefit Commencement Date.

     (2) “Administrator” is the Company.

     (3) “Beneficiary” is a person entitled to receive any benefits payable under the Plan after a former Participant’s death.

     (4) “Benefit Commencement Date” is generally the first day of the first month as of which a Participant’s Retirement Benefit is payable. For a vested Participant who Separates from Service on or after attaining age fifty-five (55), the Benefit Commencement Date is the first day of the month next following the six-month anniversary of the date the Participant Separates from Service. For a vested Participant who Separates from Service before attaining age fifty-five (55), the Benefit Commencement Date is the later of the date described in the immediately preceding sentence and the first day of the month next following the month which includes his or her fifty-fifth (55th) birthday. For a Participant who becomes disabled, the Participant’s Benefit Commencement Date shall be the first day of the month next following the month in which the Participant’s sixty-fifth (65^th) birthday occurs, as provided in Section 3(e).

     (5) “Benefit Service” is the number of Years of Service, beginning with the calendar year which includes the individual’s Benefit Service Date, during which an individual completes 1,000 Hours of Service as an Eligible Employee.

     (6) “Benefit Service Date” is the date from and after which an individual may earn Benefit Service. An individual’s Benefit Service Date shall be listed on Schedule 1.

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     (7) “Board” is the Board of Directors of the Company.

     (8) “Change in Control” is a change in control of the Company as defined in the KEESA.

     (9) “Code” is the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code shall be deemed to refer to any successor provision thereto and the regulations promulgated thereunder.

     (10) “Committee” is the Compensation Committee of the Board.

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

     (12) “Compensation” is any item or class of remuneration or part thereof listed or described in the left-hand column of Schedule 2 and not any such items listed or described in the right-hand column of Schedule 2. In the event a remuneration item is not listed or described in Schedule 2, the Administrator shall determine whether such item is included or excluded from Compensation by taking into account the nature of the item and its similarity to an item which is so listed.

     (13) “Conversion Factor” is the factor used to convert the Pension Amount into the Monthly Installment and shall be 113.4.

     (14) “Covered Termination” is a covered termination, as defined in the KEESA, which entitles the Participant to a termination payment pursuant to Sections 8 and 9(a) of the KEESA.

     (15) “Disabled” or “Disability” is a physical or mental condition, resulting from physical or mental sickness or injury, which prevents the individual 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.

     (16) “Effective Date” is, with respect to this amended and restated Plan document, January 1, 2009.

     (17) “Eligible Employee” is an individual who, on or after the Effective Date, is (i) a full time employee of a Group member, (ii) a citizen or lawful permanent resident of the United States, and (iii) either (x) an officer appointed by the Board or (y) the President of a substantial, operating Group member other than the Company or comparable position (e.g., head of a major operating division of a Group member) who has been nominated by the Company’s Chief Executive Officer for participation in the Plan and such participation has been approved by the Committee; provided, however, the Committee may waive prospectively the requirement that an individual be a U.S. citizen or lawful permanent resident and, with respect to such an individual and to the extent otherwise consistent with Plan terms, may modify other aspects of the Plan if, in the Committee’s sole discretion, such waiver or modification, or both, is appropriate under the circumstances and given tax and other governmental regulatory provisions applicable to such individual and his or her Employer Company.

2

     (18) “Employer Company” is the Group member which employs a Participant as of the date the Participant has a Separation from Service or otherwise terminates all Group employment due to death or Disability.

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

     (20) “Final Average Compensation” is the average Compensation determined by averaging Compensation in those five (5) consecutive calendar years out of the last ten (10) consecutive calendar years, ending with the calendar year which ends coincident with or immediately preceding the date the Participant has a Separation from Service or otherwise ceases to be an Eligible Employee, whichever occurs first, for which the average Compensation is the highest.

          Notwithstanding the immediately preceding paragraph, Final Average Compensation shall not be less than the average Compensation for the sixty (60) months immediately preceding the date the Participant has a Separation from Service or otherwise ceases to be an Eligible Employee, whichever occurs first, determined as the sum of Compensation in the final calendar year of such employment plus Compensation in each of the four (4) calendar years preceding the final calendar year of such employment plus a percentage of the Compensation for the entire fifth calendar year preceding the final calendar year of such employment; such percentage shall be determined as twelve minus the number of full calendar months for which Compensation was payable in the final calendar year of such employment divided by the number of months for which Compensation was paid in the fifth calendar year preceding the final calendar year of such employment.

          If the Participant’s relevant Compensation history is for less than the stated period of time (e.g., less than five (5) years; less than ten (10) years), then such actual period shall be substituted in determining Final Average Compensation (e.g., if the individual has six (6) years of Compensation history, the high five (5) consecutive years within such six (6) years shall be used in determining the average; if the individual has three (3) years of Compensation history, all such Compensation shall be used in determining the average).

     (21) “Group” is the Company and, except as prescribed by the Administrator, 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.

     (22) “Hour of Service” is each hour which an individual is paid or entitled to payment from a Group member for (i) the performance of duties as its employee and (ii) reasons related to such employment but other than for the performance of duties, such as vacation, illness, jury duty, military duty or leave of absence other than (x) payments made or due under a plan maintained solely to comply with worker’s compensation, unemployment compensation, or disability insurance laws, or (y) payments made solely for reimbursement of medical or medically related expenses; provided, however, no more than 501 Hours of Service shall be

3

credited under clause (ii) immediately preceding for any single continuous period during which no duties as such an employee are performed. An individual shall not receive duplicate Hour of Service credits for the same period of service or absence.

          Regardless of the actual number of Hours of Service completed during a year, in determining whether 1,000 Hours of Service have been completed during a calendar year an individual shall be credited with forty-five (45) Hours of Service for each calendar week the individual is otherwise credited with an Hour of Service pursuant to the immediately preceding paragraph.

     (23) “KEESA” is the Key Executive Employment and Severance Agreement, if any, in effect between the Company and the Participant.

     (24) “Monthly Installment” is a monthly payment, commencing as of the Participant’s Benefit Commencement Date, payable for one hundred eighty (180) consecutive months, and shall be determined by dividing the Participant’s Pension Amount by the Conversion Factor, with such monthly payment rounded to the nearest whole dollar amount.

     (25) “Participant” is an Eligible Employee who has become covered by the Plan. Once an individual has become so covered, he or she shall remain a Participant, except as provided in Section 3, until the first to occur of his or her death, Disability, or Separation from Service; provided, however, if the individual has a non-forfeitable right to a Retirement Benefit as of the date he or she incurs such an event (determined without regard to the forfeiture provision of Section 6(b) unless such section has been actually enforced as to such individual), then absent death the individual shall remain a Participant until the individual has received his or her entire Retirement Benefit or the Retirement Benefit has been forfeited as provided for in Section 6(b).

     (26) “Participation Date” is the later of (i) January 1, 1999 and (ii) the earlier of (x) the date an individual becomes an Eligible Employee described in Section 2(17)(iii)(x) and (y) for an individual described in Section 2(17)(iii)(y), the date such individual’s nomination is approved by the Committee or such earlier date as may be provided in approving such nomination. An individual’s Participation Date shall be listed on Schedule 1.

     (27) “Pension Amount” is an amount equal to the Participant’s Final Average Compensation multiplied by fifteen percent (15%) multiplied by the Participant’s Benefit Service, with such amount then multiplied by the Adjustment Factor if the Participant Separates from Service and survives to his or her Benefit Commencement Date.

     (28) “Plan” is the retirement plan herein described. When this term is modified by or with reference to a certain date (e.g., Plan as in effect before year XXXX), it shall refer to the Plan as described in the Plan document in effect for the period referenced.

     (29) “Retirement Benefit” is the monthly retirement benefit payable under the Plan as the Monthly Installment.

4

     (30) “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.

     (31) “Separates from Service” or “Separation from Service” is the termination of employment as an employee, from all business entities that comprise the Group, 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 Group permanently decreases to a level equal to twenty percent (20%) or less of the average level of services performed by the Participant for the Group 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 the Group 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 medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months, where such impairment causes the Participant to be unable to perform the duties of his or her position or a substantially similar position) 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 Group the Participant becomes a non-employee director or becomes or remains a consultant to the Group, 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.

     (32) “Year of Service” is a calendar year in which an individual completes 1,000 Hours of Service.

     Section 3. Participation, Vesting and Benefit Service, and Rules Governing the Crediting of Service, Disability and the Determination of Compensation and Final Average Compensation.

     (a) Participation.

          (1) General. The primary purpose of the Plan is to provide supplemental retirement benefits to Eligible Employees. It is intended that such employees constitute a select group of management or highly paid employees, within the meaning of ERISA section 201(2), of the Group. Except as provided in Section 3(d)(6), in the event an individual who is not within such a select group becomes covered by the Plan, then notwithstanding any Plan provision to the contrary such individual’s participation in the Plan shall immediately cease.

          Because the Plan is described in ERISA section 201(2), and other ERISA provisions corresponding thereto, certain provisions of ERISA do not apply to it and the benefits earned thereunder, including the provisions of Parts 2, 3, and 4 of Title I of ERISA relating to participation and vesting, funding, and fiduciary responsibilities, respectively. In addition, the Plan is not a tax-qualified plan under the Code, and thus the Plan and benefits paid hereunder are not subject to certain rules which apply to benefits payable under such qualified plans including the annual compensation and benefit limits under Code sections 401(a)(17) and 415, respectively, and the manner in which a Participant’s or Beneficiary’s Plan benefits are subject to income tax.

5

          (2) Acceptance. Unless an Eligible Employee declines to become covered by the Plan by delivering a written notice to that effect to the Administrator within thirty (30) days (or such earlier date as the Administrator may prescribe) of what would be otherwise his or her Participation Date, he or she shall have accepted all the terms and conditions of the Plan, including the provisions of Section 6, and without regard to whether he or she becomes entitled to receive a benefit under the Plan. If such a declination is made, the individual shall not be covered by the Plan and no benefits shall be payable hereunder to or with respect to such individual; provided, however, the declination shall not be compensated for or replaced with any other current or future item of compensation and shall not constitute a waiver, release, or modification of any restrictions or covenants relating to such individual’s employment or termination of employment arising under agreements apart from the Plan or under applicable law. Once Plan participation is accepted or declined, such action shall be effective as to the individual concerned regardless of any later break in service and return to covered employment.

          (3) Effective Date Participants. The names of the Eligible Employees covered by the Plan as of the Effective Date and their Participation and Benefit Service Dates are listed on Schedule 1. From time to time Schedule 1 shall be amended to list the names of additional Eligible Employees who have become covered by the Plan and their Participation and Benefit Service Dates.

     (b) Vesting.

          (1) General. Except as otherwise expressly provided herein, all benefits otherwise payable under the Plan to or with respect to a Participant shall be forfeited if the Participant has a Separation from Service before completing five (5) Years of Service.

          (2) Death or Disability. A Participant who dies or becomes Disabled while employed by a Group member shall be fully vested in his or her Retirement Benefit.

          (3) Automatic Acceleration of Vesting. If a Participant has a Covered Termination under his or her KEESA, then immediately before such termination the Participant shall be considered fully vested in his or her Retirement Benefit.

          (4) Other Forfeiture. Notwithstanding the foregoing provisions of this Section 3(b), except as otherwise provided under the Plan, all benefits otherwise payable under the Plan to or with respect to a Participant or former Participant shall be subject to forfeiture to the extent provided in Section 6(b).

     (c) Benefit Service. (1) Benefit Service Date. For an individual who becomes an Eligible Employee on or after the Effective Date, the Benefit Service Date shall be the same date as his or her Participation Date.

6

          (2) Benefit Service Date of Effective Date Participants. The Benefit Service Date of an individual who is an active Participant immediately before and as of the Effective Date shall be the date listed on Schedule 1 for such individual and such date may precede the individual’s Participation Date.

          (3) Benefit Service. An individual who ceases to be a Participant by reason of death while an Eligible Employee shall be considered to have completed a Year of Service in the year of death for purposes of determining the Benefit Service earned by such individual, regardless of the actual Hours of Service credited for such year.

          (4) Benefit Service Upon a Covered Termination. If a Participant incurs a Covered Termination, then immediately before such termination the Participant shall be credited with additional Years of Service for determining Benefit Service equal to the lesser of (i) three (3) and (ii) the greater of (x) seven (7) minus the Benefit Service credited to such Participant under the Plan, determined without regard to this Section 3(c)(4), as of the first day of the Plan Year beginning immediately after such termination and (y) zero (0). The Benefit Service provided for by this Section 3(c)(4) shall be in addition to a Participant’s Benefit Service under the Plan determined without regard to this
Section 3(c)(4).

     (d) Service Credits.

          (1) General. Subject to other Plan provisions, a Participant’s Years of Service shall be based upon the completion of 1,000 Hours of Service during a calendar year.

          (2) No Vesting Service Before Participation Date. No Year of Service completed before the calendar year which includes an individual’s Participation Date shall be considered for purposes of applying Section 3(b)(1).

          (3) Non-Duplication of Service Credit. In no event shall a Participant be credited for more than one (1) Year of Service with respect to any one (1) calendar year. In the event service credit for a period must be provided under the Plan by reason of applicable law (e.g., USERRA) and such credit duplicates service credit otherwise provided under the Plan, then the service crediting provision which is most beneficial to the Participant under the circumstances shall be applied but without duplication of service credit for the same period.

          (4) Leaves of Absence. In the sole discretion of the Committee, a Participant may be granted service credit for a period of absence from active employment due to illness, personal circumstances, or such other events as the Committee may authorize under the circumstances and in such amount, manner or type of service credit as the Committee deems appropriate under the circumstances, but in no event shall such service credit duplicate any such credit otherwise provided under the Plan for the same period or extend beyond the date the Participant Separates from Service.

          (5) Break in Service. Except as determined in the discretion of the Committee, if a Participant Separates from Service before he or she has a nonforfeitable right to a Retirement Benefit by reason of Section 3(b)(1) and thereafter returns to employment as an Eligible Employee, all service credits earned prior to such termination shall be ignored and the individual’s service credits shall be determined as if he or she had not been previously employed by any Group member.

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          (6) Transfer. If an individual becomes a Participant and subsequently, and without a Separation from Service, is employed with a Group member as other than an Eligible Employee, then upon the occurrence of such event the individual shall cease all active participation under the Plan (e.g., he or she will no longer accrue benefits under the Plan). Such an individual shall continue to be covered by the Plan with respect to determining his or her vesting rights and for purposes of applying Plan provisions related to the payment of nonforfeitable benefits.

     (e) Disability.

          (1) General. This Section describes a special service credit and other rules which apply to a Participant who becomes Disabled before age sixty-five (65) and while he or she is an Eligible Employee (i.e., a “Disabled Participant”). In no event shall a Participant be considered Disabled until and unless he or she supplies all information and takes all acts (e.g., submits to medical examinations) reasonably requested by the Administrator to establish the fact of his or her Disability.

          (2) Credit for Benefit Service. A Disabled Participant shall receive credit for Benefit Service during the Disability period. This service credit shall be determined, without duplication of other service credit provided under the Plan for the same period, based upon the complete whole years (with fractional years being rounded to the nearest whole year) which elapse during the Disability period. The Disability period shall begin on the date of Disability as determined by the Administrator, taking into account any applicable waiting period (e.g., end of short-term disability period) prescribed by the Administrator for this purpose, and shall end on the earliest of (i) the date the Participant is no longer Disabled or is considered not to be Disabled, (ii) the date the Disabled Participant attains age sixty-five (65), and (iii) the date of the Participant’s death.

          (3) Final Average Compensation. A Participant’s Final Average Compensation, determined as of the beginning of the Disability period, shall not change during the Disability period. If a Disabled Participant recovers from the Disability before attaining age sixty-five (65) and returns to employment as an Eligible Employee, Final Average Compensation shall be determined as otherwise provided under the Plan and by assuming the Participant’s Compensation during the Disability period was equal to the Participant’s Final Average Compensation as of the beginning of the Disability period.

          (4) Payment of Disability Benefit. A Disabled Participant shall be entitled to a Retirement Benefit commencing as of the first day of the calendar month next following the Participant’s attainment of age sixty-five (65), even if such individual recovers from such Disability prior to such date.

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          (5) Death During the Disability Period. If a Disabled Participant dies during the Disability period or the Disability Period ends by reason of attainment of age sixty-five (65) and the Disabled Participant dies before benefits commence, a death benefit shall be paid after such Disabled Participant’s death to the extent provided in Section 4.

          (6) Proof of Disability. The Administrator shall determine whether and when a Participant is Disabled and may adopt such rules and procedures as it deems appropriate for this purpose. Once a Participant is determined to be Disabled, the Administrator may require the Participant to verify that he or she remains Disabled, and such verification may include requiring the Participant to submit to one or more medical examinations. If a Participant fails to supply information or take action as requested by the Administrator in order to determine whether the Participant is or remains Disabled, the Participant shall not be considered Disabled or shall be considered to have recovered from the Disability, as the case may be, except that in no event shall benefits commence prior to the Participant’s age sixty-five (65).

     (f) Compensation.

          (1) General. Compensation, and thereby Final Average Compensation, shall be determined solely with respect to such remuneration earned from and after a Participant’s Benefit Service Date and during the period of employment as an Eligible Employee. In the event a Participant is employed with a Group member before becoming an Eligible Employee or, subject to the provisions of Section 3(d)(6), after ceasing to be an Eligible Employee, the Administrator shall determine the Compensation allocable to periods of such employment in each capacity in such manner as it deems reasonable in its sole discretion under the circumstances (e.g., allocation of MIP bonuses for the year in which an individual is promoted to an Eligible Employee).

          (2) Determination. The amount of Compensation, and thereby Final Average Compensation, shall be as determined from the books and records of the employing Group member and shall be determined on the basis of when the Compensation is paid to the Participant; provided, however, items of Compensation or portions thereof may be determined on the basis of when the item is earned (in which case the item or portion shall not be again counted as an item or portion of Compensation when paid) by the Participant if and to the extent the Administrator determines such treatment is appropriate under the circumstances (e.g., including MIP bonuses earned during the final year of employment as Compensation before such bonus is actually paid; including an amount deferred at the election of the Participant as Compensation when it otherwise would have been paid but for such election).

     Section 4. Payments in the Event of Death Before the Benefit Commencement Date.

     (a) General. This Section describes the pre-retirement death benefit payable under the Plan to a Beneficiary under circumstances where an individual, who was a Participant immediately before his or her death, dies before the Benefit Commencement Date. Except as provided in Appendix A, this death benefit shall be in lieu of any other benefits under the Plan with respect to such a Participant.

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     (b) Vested Participant. No death benefit shall be payable pursuant to this Section 4 unless the deceased former Participant had a non-forfeitable interest in his or her Retirement Benefit (determined without regard to the forfeiture provision of Section 6(b) unless such section has been actually enforced as to such individual) as of the date of death or as a consequence of such death (e.g., death while in service with a Group member); provided, however, such a Participant who otherwise had such a non-forfeitable interest shall not be considered to have had such an interest if he or she is subsequently determined to have forfeited such benefit as provided for in Section 6(b), even if such action or determination is made after such Participant’s death.

     (c) Amount and Timing of Benefit Payment.

          (1) General. Except as otherwise provided herein, the benefit payable to the Beneficiary shall be determined by multiplying the Participant’s Pension Amount, determined as of the end of the month which includes the date of death and as if the Participant had not died, by the appropriate factor from Table 1 to reflect the period, if any, beginning on the first day of the calendar month next following the calendar month in which the Participant died and ending on the later of the first day of the third calendar month next following the calendar month of such Participant’s death and the first day of the calendar month immediately following the calendar month in which such Participant, had he or she survived, would have attained age fifty-five (55).

          (2) Lump Sum. The death benefit provided under this Section 4 shall be paid to the Beneficiary in a lump sum within ninety (90) days following the date of the Participant’s death.

     (d) Beneficiary. The identity of the Beneficiary and the rules with respect to the payment of benefits to such Beneficiary shall be as provided in Section 5.

     Section 5. Payment of Retirement Benefits.

     (a) General. The Participant shall be responsible for providing such information as the Administrator deems appropriate or useful for processing the payment of the Retirement Benefit. Unless and only to the extent there is a good faith dispute over the right to the Retirement Benefit or the amount due (and reasonable corresponding efforts to resolve same), the Retirement Benefit shall be paid commencing as of the Benefit Commencement Date based on the information reasonably available to the Administrator. If there is a delay in the actual commencement of the Retirement Benefit past the Benefit Commencement Date, the Benefit Commencement Date shall not change and the Participant shall be entitled to receive those benefits which would have been paid on or after such date, but for the delay, but without interest thereon.

     (b) Lump Sum. Notwithstanding anything herein to the contrary, the Retirement Benefit shall be paid to the Participant in a lump sum on the Benefit Commencement Date if the Pension Amount payable hereunder, plus the Pension Amount payable to the Participant under the Pentair, Inc. Restoration Plan (if any), is $150,000 or less as of the Benefit Commencement Date.

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     (c) Re-Employment after Commencement of Benefits.

          (1) General. If a Participant has commenced receiving a Retirement Benefit and subsequent to such commencement again becomes an employee of a Group member, then payment of such benefit shall not cease during the period of re-employment by reason of such re-employment.

          (2) Additional Benefit. In the event the Participant so returns to employment as an Eligible Employee, the Retirement Benefit and Section 4 death benefit payable, if any, for the period of such re-employment shall be determined and paid as if the Participant had no prior service with a Group member except all of such a Participant’s Years of Service, whether earned before or after such re-employment, shall be aggregated for purposes of applying Section 3(b)(1).

     (d) Death Before End of 180 Month Period.

          (1) Death After the Benefit Commencement Date. If a Participant to whom the Retirement Benefit is being paid dies after the Benefit Commencement Date and before the end of the one hundred eighty (180) month period over which such benefit is payable, the monthly benefit for the balance of such period shall continue to be paid to such Participant’s Beneficiary.

          (2) Others. The benefit payable after the death of any former Participant not described in paragraph (1) immediately preceding shall be determined under Section 4.

     (e) Beneficiary.

          (1) General. Except as otherwise limited by paragraph (2) immediately following, a Participant may at any time and without the consent of any other person designate a Beneficiary, or change any such prior designation, entitled to receive any Plan benefits payable after the Participant’s death. No such purported designation shall be effective unless it is made in such form and manner as prescribed by the Administrator. No person shall be recognized as a Beneficiary unless and until such person provides such information or certifications as required under the circumstances by the Administrator. If there is a delay in the payment of the death benefit to the Beneficiary past the date otherwise provided under the Plan (e.g., there is a delay in determining the person entitled to receive such benefits), the Beneficiary shall be entitled to receive the benefit which would have been paid to such Beneficiary on or after such date, but for the delay, but without interest thereon.

          (2) Married Participants. The sole primary Beneficiary of (i) a Participant or former Participant who has a Spouse as of such Participant’s Benefit Commencement Date or (ii) a former Participant with respect to whom a benefit is payable under Section 4, and who is survived by a Spouse, shall be such Spouse. In the event such Spouse (x) waives the right to be the sole primary beneficiary of the Participant in such form and manner as prescribed by the Administrator, (y) does not survive such Participant under the circumstances described in clause (i) immediately preceding or (z) does not survive the one hundred eighty (180) month term certain period over which such benefits are payable, such Participant’s Beneficiary with respect

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to any benefits payable after such Participant’s death shall be determined as otherwise provided in this Section 5(e) without regard to this paragraph (2).

          (3) Default Takers. If a Participant or former Participant fails to make a valid beneficiary designation, makes such a designation but is not survived by any of the persons named as a primary or contingent beneficiary, makes such a designation but the beneficiary named does not survive the period over which the benefits are paid and no other designated beneficiary is then entitled to the share of such deceased beneficiary, or makes such a designation but such designation does not effectively dispose of all benefits payable after such Participant’s death, then, and to the extent such benefits are payable after such Participant’s death, all such benefits shall be paid to the executor or personal representative of such Participant’s estate or, if there is no such person, then in accordance with the laws of intestate succession of the jurisdiction in which such Participant was domiciled as of the date of death.

     (f) Non-Alienation. Except as otherwise provided under the Plan or as required under applicable law, unless otherwise determined by the Administrator, no right or benefit under this Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void, and no such right or benefit shall be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person entitled to such right or benefit, and no such right or benefit shall be subject to garnishment, attachment, execution, or levy of any kind.

     (g) Miscellaneous.

          (1) Payment on Behalf of Incompetent Participants or Beneficiaries. If the Administrator 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 that any Plan benefit payments be made in such shares as it shall determine, to the attorney-in-fact, 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 Administrator 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 and the Company. The Administrator shall be under no obligation to see to the proper application of the payments so made to such person or persons and any such payment shall be a complete discharge of any liability under the Plan to such Participant or Beneficiary, to the extent of such distribution.

          (2) Mailing and Lapse of Payments. All payments under the Plan shall be delivered in person or mailed to the last address supplied to the Administrator by the Participant or Beneficiary, as the case may be. If after reasonable inquiry the Administrator cannot locate the person entitled to the Plan benefits, then payment of such benefits shall be suspended. If such person is thereafter located, however, then such suspension shall immediately cease and the person shall be entitled to receive all benefits he or she would otherwise have been entitled to receive under the Plan but for such suspension, but without interest thereon.

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          (3) Overpayment. If the benefits paid to any person exceed the benefits to which the person was actually entitled, then to the extent of such excess, and as and when payable, future benefits shall be reduced in such manner as the Administrator deems appropriate or, if such reduction is not possible, the Administrator may undertake such actions as it deems reasonable to recover the excess.

          (4) Address and TIN. Each Participant or Beneficiary shall be responsible for furnishing the Administrator with his or her correct current address and taxpayer identification number.

          (5) Requirement of Releases. If in the opinion of the Administrator, 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 Administrator 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 and the Company.

     Section 6. Confidentiality, Covenants Not to Compete, and Non-Solicitation.

     (a) General. Each Eligible Employee acknowledges that as a key executive of the Company or other Group member he or she has become familiar and will continue to be familiar with the trade secrets, know-how, executive personnel, strategies, other confidential information and data of the Group and its members. Each Eligible Employee further acknowledges that the financial security of the Group and the Company’s shareholders depends in large part on the efforts of executives like the Eligible Employee, and that a basic premise for the Plan is to compensate such individuals for their efforts in causing the Group to grow and prosper, thereby helping to insure the Group’s financial future for years well beyond the individual’s period of service. Therefore, in consideration of the extension of the Plan to an Eligible Employee, he or she agrees that (i) after Separation from Service or other cessation of employment with all Group members he or she shall not (directly or indirectly), without the Company’s prior written consent, use or disclose to any other person any confidential information or data concerning the Company or other Group members or former Group members, and (ii) for a period of three (3) years from such separation or cessation he or she shall not (directly or indirectly) and without the Company’s prior written consent:

(1)	own, manage, control, participate in, consult with or render services of any kind for any concern which engages in a business which is competitive with any business being conducted, or contemplated being conducted, by the Group as of the date of such separation or cessation;
(2)	become an employee or agent of any publicly traded corporation or other entity, or any division or subsidiary of such a corporation or entity, where more than 5% of such organization’s business is in competition with any business being conducted, or contemplated being conducted, by the Group as of the date of

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	Separation from Service or other cessation of employment, unless the annual sales of such organization do not exceed $40 million;
(3)	participate in any plan or attempt to acquire the business or assets of the Group or control of the voting stock of any member thereof, or in any manner interfere with the control of the Company, whether by friendly or unfriendly means; or
(4)	induce or attempt to induce any individual to leave the employ of the Company or other Group member or hire any such individual who approaches him or her for employment.

If at the time of enforcement of the terms of this Section 6, a court shall hold that the duration, scope or area of restriction stated herein are unreasonable under the circumstances then existing, the Eligible Employee agrees that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope, or area.

     (b) Forfeiture and Other Remedies. Upon any breach of the covenants described in this Section, all benefits then due under the Plan (and all benefits which otherwise would be due under the Plan in the future) to the Eligible Employee or his or her beneficiaries shall be forfeited. The covenants described in this Section run in favor of and shall be enforceable by the Company or its assigns. The Company shall be entitled to all legal and equitable remedies to prevent, cure and compensate for a breach of the covenants described herein, without posting of bond, and all such remedies shall be in addition to such forfeiture. By accepting coverage under the Plan, each Eligible Employee acknowledges and agrees that his or her breach of the covenants described in this Section 6 will result in irreparable harm to the Company. Therefore, to remedy or prevent such a breach the Company shall be entitled to enjoin the Eligible Employee from taking or failing to take such actions as will or which may be reasonably considered to cause such a breach, including an injunction to prevent the Eligible Employee from breaching the terms of this Section 6.

     Section 7. Funding and Payment of Benefits.

     (a) General. The Plan is an unfunded deferred compensation arrangement. No Group member shall establish or is required to establish any trust to fund benefits provided under the Plan, and no such member shall establish or is required to establish any type of earmarking or segregation of its assets to provide for such benefits. In the event of default of a Group member’s obligations hereunder, each Participant and his or her beneficiaries shall have no greater entitlements or security than does a general creditor of the Group member.

     (b) Employer Company. Except as otherwise expressly provided herein, the Employer Company shall pay or provide for the payment of benefits hereunder. If the Employer Company does not timely pay such benefits, then, except as described in subsection (c), the sole recourse of the claimant Participant or Beneficiary is against such Employer Company and no other member of the Group shall be responsible to pay or provide for the payment of such benefits or liable for the nonpayment thereof.

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     (c) Company Assumption of Liability. Under the following circumstances, the Company shall assume and be responsible for the payment of benefits hereunder even though it is not the Employer Company:

(i)	the Employer Company is not participating in the Plan as of the date benefits hereunder are scheduled to commence to a Participant or his or her beneficiaries;
(ii)	the Employer Company does not timely pay or provide for the payment of benefits hereunder and such failure is not corrected within thirty (30) days; or
(iii)	the Participant has a Separation from Service due to a sale of the stock (or rights analogous to stock) or assets of a Group member, and the Participant has earned a non-forfeitable Retirement Benefit (determined without regard to the forfeiture provision of Section 6(b) unless such section has been actually enforced as to such individual) on or before the date of such termination.

The Company’s obligation under paragraph (i) shall cease when the Employer Company agrees to participate in the Plan. The Company’s obligation under paragraph (ii) shall cease when the Employer Company is current on its payment of benefits. The Company’s obligation under paragraph (iii) shall not come into effect (or if previously effective, shall cease) as of 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 the Participant has then earned hereunder; provided, however, that upon a Change in Control the Company, any person in control of the Company, and the Employer Company if not the Company, shall be jointly and severally responsible for payment of benefits hereunder regardless of the other provisions of this Section 7 and the assumption of such liability by another person shall not discharge the Company, any person in control of the Company, and such Employer Company from liability hereunder.

     (d) Participation by Other Group Members. A member of the Group may join in this Plan by adopting a written resolution of its board of directors, and delivering such resolution to the Administrator. Any Group member, other than the Company, may end its participation under the Plan by a written resolution of its board of directors delivered to the Committee, provided, however, that no such resolution ending participation shall be effective until thirty (30) days after it is received by the Administrator. By agreeing to join in the Plan, each Group member agrees to pay or provide for the payment of benefits hereunder to those Participants and their beneficiaries with respect to whom such member is the Employer Company. No such member, other than the Company, shall have any power or authority to terminate, amend, administer, modify, or interpret the Plan, all such powers being reserved to the Administrator and the Committee.

     Section 8. Default. Should the Employer Company (and the Company to the extent provided for in Section 7(c)) fail to pay when due any benefit under the Plan to or with respect to a Participant or Beneficiary and such failure to pay continues for a period of sixty (60) days from receipt of a written notice of nonpayment from the affected Participant or Beneficiary, the Employer Company (and the Company to the extent provided in Section 7(c)) shall be in default hereunder and shall pay to the Participant or Beneficiary the benefits past due and, by the end of the year next following the year incurred, the reasonable costs of collection of any such amount,

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including reasonable attorney’s fees and costs, so long as such costs are submitted by or on behalf of the Participant or Beneficiary to reasonably allow that timely reimbursement; provided, however, if the Administrator in good faith disputes the amount of such benefit due or whether a person is entitled to such a benefit, then to the extent and duration of such a dispute the Employer Company (and the Company to the extent provided for in Section 7(c)) shall not be considered in default hereunder; provided further, however, upon a Change in Control a Participant for whom and while a Covered Termination may occur, shall be entitled to payment or reimbursement of such costs of collection as provided under Section 13(l).

     Section 9. Administration of the Plan.

     (a) General. The Company, through its designated officers and agents, shall be the Administrator and thereby handle the day-to-day administration of the Plan and such other administrative duties as are allocated to the Administrator under the Plan. All such administrative duties and powers shall be performed by and rest in the Company’s Senior Vice President of Human Resources (or persons designated by such Senior Vice President). Except as otherwise provided under the Plan, the Administrator shall:

(1)	determine the rights and benefits of individuals and other persons under the Plan;
(2)	interpret, construe, and apply the provisions of the Plan;
(3)	process and direct the payment of Plan benefits;
(4)	adopt such forms as it deems appropriate or desirable to administer the Plan and pay benefits thereunder; and
(5)	adopt such rules and procedures as it deems appropriate or desirable to administer the Plan.

     (b) Committee. The Committee shall exercise such powers as are allocated to it under the Plan and shall be empowered to direct other persons as to Plan administration, and its directions shall be followed to the extent consistent with the powers delegated to the Committee and not otherwise contrary to the provisions of the Plan.

     (c) Discretion. In exercising their powers and duties under this Section, and their other powers and duties granted under the Plan, the Committee and the Administrator and each member or delegate thereof is granted such discretion as is appropriate or necessary to carry out such duties and powers. This discretion necessarily follows from the fact that the Plan does not, and is 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.

     (d) Indemnity. No member of the Committee or person acting on behalf of the Administrator shall be subject to any liability with respect to the performance of his or her duties under the Plan or a related document unless he or she acts fraudulently or in bad faith. The Company shall indemnify and hold harmless the members of the Committee and the Company’s officers and employees, and the officers and employees of another Group member, from any liability with respect to the performance of their duties under the Plan, unless such duties were

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performed fraudulently or in bad faith. 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 actually and reasonably incurred, not otherwise paid or reimbursable under an applicable employer paid insurance policy, and not duplicative of other payments made or reimbursements due by the Company or its affiliates under other indemnity agreements.

     (e) Code Section 409A. The Plan shall be administered, and the Administrator and the Committee shall exercise their discretionary authority under the Plan, in a manner consistent with Code section 409A and Treasury Regulations and other applicable guidance thereunder. Any permissible discretion to accelerate or defer a Plan payment under such Regulations, the power which to exercise is not otherwise described expressly in the Plan, shall be exercised by the Committee. Any other discretion with respect to, or which directly or indirectly impact, the application of Code section 409A, the exercise of which is not expressly lodged in the Committee, shall be exercised by the Administrator. In the event the matter over which such discretion may be exercised relates to a Committee member or a delegate of the Administrator, or such member or delegate is otherwise unable to freely exercise such discretion, such member or delegate shall not take part in the deliberations and decisions regarding that matter.

     (f) Use of Professional Services. The Administrator and 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 the Company or other Group member. In any case in which the Administrator and the Committee utilizes such services, it shall retain exclusive discretionary authority and control over the administration and operation of the Plan.

     (g) Communications. Requests, claims, appeals, and other communications related to the Plan shall be in writing and shall be made by transmitting the same via the U.S. Mail to the Company’s Senior Vice President of Human Resources, at the Company’s corporate headquarters address.

     Section 10. Effect of KEESA. If a Participant incurs a Covered Termination, then as or with respect to that Participant:

(i)	notwithstanding the provisions of Section 6, the scope or duration (or both) of such Participant’s covenants under Section 6 shall be no greater or longer than similar covenants provided for in such Participant’s KEESA and, to the extent there are no such similar covenants in such Participant’s KEESA, then Section 6 shall be void and of no force and effect; and
(ii)	in the case of any conflict between the terms and provisions of this Plan and the terms and provisions of such Participant’s KEESA, the terms of such Participant’s KEESA shall control to the extent more beneficial to such Participant, and the obligations of the Company under such KEESA shall be in addition to any of its obligations under the Plan.

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     Section 11. Amendment or Termination.

     (a) General. This Plan may be terminated or amended, in whole or in part, at any time by written resolution of the Board. Any such action may apply to the Plan as a whole, or any individual Participant or group of Participants. Except as provided in Section 11(b) and (c), any such action may reduce or eliminate (retroactively or prospectively, or both) any benefits under the Plan that otherwise would be payable but for such action.

     (b) Limitation on Power to Amend or Terminate. (1) Vested Participants. As to any Participant who has earned a non-forfeitable Retirement Benefit (determined without regard to Section 6) before the date the Plan is amended or terminated (or, if later, before the date such action is effective), no such amendment or termination shall (without the specific written consent of the Participant):

(i)	reduce the Retirement Benefit earned by the Participant;
(ii)	reduce the amount of Retirement Benefit then being paid to a Participant; or
(iii)	terminate, amend, or otherwise change the liability of the Company, Employer Company, or other person to pay or provide for the payment of Retirement Benefits protected under clauses (i) and (ii) immediately preceding.

          (2) Beneficiaries. As to any former Participant who has died before the date the Plan is amended or terminated (or, if later, before the date such action is effective), no such amendment or termination shall (without the specific written consent of such Participant’s Beneficiary):

(i)	reduce the amount of Plan benefits to which such Beneficiary is entitled or change the form in which benefits are payable; or
(ii)	terminate, amend, or otherwise change the liability of the Company, Employer Company, or other person to pay or provide for the payment of benefits protected under clause (i) immediately preceding.

     (c) Change in Control. In addition to the limitations described in Section 11(b), upon a Change in Control and with respect to a Participant for whom a Covered Termination has or may occur, then without the specific written consent of the Participant (or Beneficiary in the event of the Participant’s death), the Plan as in existence immediately prior to the Change in Control may not be (directly or indirectly) terminated, amended, or otherwise changed in any substantive respect during the three year period beginning with the date of the Change in Control, but only with respect to such individual. The prohibition herein described shall apply to any action which affects or is intended to affect the terms and provisions of the Plan as then in effect during such three year period, regardless of when made or effective.

     (d) Continuation of Plan Provisions. To the extent that any Plan benefits, and rights and obligations allocable thereto, are protected under Section 11(b) and (c), then as to the persons described in Section 11(b) and (c) the Plan shall continue in force and effect, as if no such amendment or termination had occurred, until such benefits are fully paid or fully provided for to such persons.

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     Section 12. 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.

     Section 13. Miscellaneous.

     (a) Employer’s Rights. The right of a Group member to discipline or discharge employees or to exercise rights related to the tenure of employment shall not be adversely affected in any manner by reason of the existence of the Plan or any action hereunder.

19

     (b) Interpretation. Section and subsection headings are for convenient reference only and shall not be deemed to be part of the substance of this instrument or in any way to enlarge or limit the contents of any Section or subsection. Masculine gender shall include the feminine, and vice versa, and singular shall include the plural, and vice versa, unless the context clearly requires otherwise.

     (c) Withholding of Taxes. All benefits earned under the Plan or the payment of such benefits, as the case may be, shall be subject to withholding for federal, state, local and other taxes as required by law. If and to the extent any such withholding is required before such benefits are paid to the Participant or Beneficiary, such withholdings shall be made from amounts otherwise payable to such person by a Group member (e.g., salary). If no such other amounts are available to satisfy such withholdings, the Company may reduce the Participant’s Retirement Benefit by the amount needed to pay the Participant’s portion of such tax, plus, with respect to a distribution for FICA taxes, an amount equal to the withholding taxes due under federal, state or local law resulting from the payment of such FICA tax, and an additional amount to pay the additional income tax at source on wages attributable to the pyramiding of the section 3401 wages and taxes, but no greater than the aggregate of the FICA amount and the income tax withholding related to such FICA amount.

     (d) Offset for Amounts Due. A Participant’s Retirement Benefit may be reduced by one or more offsets to repay any amounts then due and owing by the Participant to a Group member, unless another means of repayment is agreed to by the Administrator. Except for the right to immediate offset by reduction of the vested Pension Amount for an amount up to $5,000, or such higher amount as allowed in Treasury Regulations under Code section 409A or other applicable guidance, no such offset shall be made before an amount is scheduled to be paid to the Participant or Beneficiary and the amount then offset shall not exceed the amount that would be then otherwise paid.

     (e) Computational Errors. In the event mathematical, accounting, actuarial or other errors are made in administration of the Plan, the Administrator may make equitable adjustments, which adjustments may be retroactive, to correct such errors. Such adjustments shall be conclusive and binding on all Participants and Beneficiaries.

     (f) Requirement of Proof. In discharging their duties and responsibilities under the Plan, the Administrator and the Committee 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.

     (g) Tax Consequences. Neither the Company nor any other Group member 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.

     (h) Communications. The Administrator shall prescribe the forms of communication, including forms for benefit application and the like, with respect to the Plan as it deems appropriate. Any such communication and assent or consent thereto may be handled by electronic means.

20

     (i) Not Compensation Under Other Benefit Plans. No amounts paid or payable to a Participant under the Plan shall be deemed to be salary or compensation for purposes of any other employee benefit plan of the Company or any other Group member except as and to the extent otherwise specifically provided in such other plan.

     (j) Choice of Law. To the extent not preempted by ERISA or any other federal statute, the construction and interpretation of the Plan shall be governed by the laws of the State of Minnesota, without reference to conflict of law principles thereof.

     (k) Savings Clause. Should any valid federal or state law or final determination of any agency or court of competent jurisdiction affect any provision of this Plan, the Plan provisions not affected by such determination shall continue in full force and effect.

     (l) Change in Control. A Participant, with a KEESA in effect at the time of a Change in Control, shall be entitled to adjudicate any dispute regarding his or her benefits or rights and entitlements under the Plan, after compliance to the extent necessary with the claim procedures under Section 12, in the forums and venues as provided in Section 22 of the KEESA, and shall be entitled to payment or reimbursement of costs and expenses related to such adjudication as provided in Section 15 of the KEESA.

     Section 14. Transition Rules.

     (a) General. Except as described in this Section, this Plan document shall govern when and how Plan benefits are payable with respect to individuals who are Participants on or after January 1, 2009. 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 Administrator in its discretion so that the Plan and its operations were in good faith compliance with Code section 409A.

     (b) 2004 Vested Participants Benefits. The Plan document in effect as of December 31, 2004 (the “2004 Plan”) shall govern when and how then vested Plan benefits are payable, including the elections available or discretion granted to choose or affect the form or commencement date of such benefits. In determining such vested Plan benefits, the Pension Amount as of such date shall be determined as if the Participant had a Separation from Service on the earlier of (i) December 31, 2004 and (ii) the actual date of such event. The Pension Amount as so determined shall be increased by the adjustment factor for the period from the first of the month next following the earlier of such dates to the Monthly Installment commencement date, and shall be converted into the Monthly Installment forms available for payment, all as provided for in the 2004 Plan.

     (c) Excess. The excess, if any, of the total Plan benefit payable to or with respect to a Participant expressed as the Monthly Installment over the Plan benefit so payable expressed as the Monthly Installment and described in subsection (b) immediately preceding shall be subject to this Plan document.

21

     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:

22

APPENDIX A

     Article 1. General. The supplemental retirement benefit, and benefits related thereto, described in this Appendix A are in addition to the benefits payable under the Plan apart from this Appendix A. Except as provided in this Appendix A or as necessary and appropriate to implement its provisions, all Plan provisions apart from this Appendix A shall apply to the benefits described herein (e.g., determination of a Beneficiary and the amount or portion payable to such Beneficiary; the covenants described in Section 6).

     Article 2. Participants and Appendix A Benefits. (a) General. The Participant who may be entitled to the supplemental retirement benefit described in this Appendix A and the amount of such benefit is described below.

Name of Participant	Supplemental Retirement Benefit
Delton D. Nickel	$256.00 per month for each Year of Service

     (b) Year of Service. (1) General. For purposes of applying the benefit formula described immediately above, a Year of Service means a calendar year ending December 31, beginning with the calendar year ending December 31, 1999 and each anniversary thereof, for which the individual completes 1,000 Hours of Service as an Eligible Employee. For this purpose, an individual who becomes Disabled shall be considered to have completed 1,000 Hours of Service as of each such December 31 during the Disability period, and an individual who has a Separation from Service as an Eligible Employee due to death shall be considered to have completed 1,000 Hours of Service for the calendar year of death.

     (2) Service Upon a Covered Termination. If a Participant, described in Article 2(a) immediately preceding, incurs a Covered Termination, the supplemental retirement benefit described in this Appendix A as to such Participant shall be no less than the amount determined as if the Participant completed a Year of Service for each calendar year after 1999 and ending with, but including, the calendar year in which he attains or would attain age sixty-two (62).

     (c) Supplemental Retirement Benefit Described. The supplemental retirement benefit described in this Appendix A is a monthly benefit, commencing as of the Benefit Commencement Date and payable as the Monthly Installment. Assuming the Participant is otherwise entitled to receive such benefit, the commencement date of such supplemental retirement benefit shall be the same date as the Participant’s Retirement Benefit apart from this Appendix A. To account for the fact this Appendix A supplemental benefit is already expressed as a one hundred eighty (180) month term certain Monthly Installment whereas the Retirement Benefit apart from this Appendix A is derived under a formula which starts with the Pension Amount, the amount of such supplemental monthly retirement benefit shall be adjusted if the Participant survives to the Benefit Commencement Date by the appropriate factor set forth in Table 1 to reflect the period beginning on the first day of the calendar month in which the Separation from Service occurs and ending on the Benefit Commencement Date.

23

     (d) Death Before Benefit Commencement Date. If the Participant described in this Appendix A dies before his Benefit Commencement Date, a death benefit shall be paid to such Participant’s Beneficiary in addition to the death benefit payable under Section 4 with respect to such Participant. The commencement date and form of such death benefit shall be the same as the death benefit payable under Section 4, and the amount of the death benefit provided by this Appendix A shall be the supplemental retirement benefit earned hereunder as of such Participant’s death, adjusted in a manner consistent with Section 4 to account for the fact such supplemental retirement benefit is already expressed as an Monthly Installment.

24

SCHEDULE 1

		SERP
		Participation	Benefit
Name	Current Position	Date	Service Date
Ainsworth, Louis	SVP, Gen Counsel & Corp Secretary	1/1/1999	7/1/1997
Borin, Mark	Corporate Controller and Chief Accounting Officer	3/31/2008	3/31/2008
Dempsey, Jack	President, Filtration Global Business Unit	4/4/2005	4/4/2005
Dessing, Peter	President, Technical Products Europe	5/1/2004	5/1/2004
Hogan, Randall	Chairman, Chief Executive Officer	1/1/1999	3/16/1998
Koury, Frederick	SVP, Human Resources	8/11/2003	8/11/2003
Meyer, Mike	VP, Treasury and Tax	5/1/2004	5/1/2004
Nickel, Del	President, Technical Products Global Business Unit	1/1/1999	10/1/1996
Schrock, Michael	President and Chief Operating Officer	1/1/1999	1/1/1999
Stauch, John	EVP and Chief Financial Officer	2/12/2007	2/12/2007
Waltz, William	President, Flow Technologies Global Business Unit	5/1/2004	5/1/2004

25

SCHEDULE 2

Items Included

Items Excluded

Base salary or wages, including such salary or wages deferred at the election of an individual under the Pentair, Inc. Non-Qualified Deferred Compensation Plan 401(k) plan before-tax and after-tax employee contributions Section 125 plan (flexible benefit plan) pre-tax employee contributions Pentair, Inc. Employee Stock Purchase and Bonus Plan employer bonus contributions Pentair, Inc. Management Incentive Plan bonus, including such bonus deferred at the election of an individual under the Pentair, Inc. Non-Qualified Deferred Compensation Plan Holiday pay Sick leave pay Bereavement pay Jury duty pay Military pay Gain-sharing payments Profit-sharing payments Short-term disability benefits Perquisites

Cash payments made and property or rights in property other than cash granted under or pursuant to the Pentair Omnibus Stock Incentive Plan Special awards under the Pentair, Inc. Management Incentive Plan Severance pay Moving expense reimbursements Employee business expense reimbursements Tuition reimbursement Adoption assistance payments Computer hardware and software purchase reimbursements Special cash awards Foreign duty pay enhancements Except as expressly provided in the column immediately to the left, amounts contributed to (e.g., deferred salary) or received under or pursuant to non-qualified deferred compensation arrangements including, but not limited to, the Pentair, Inc. Non-Qualified Deferred Compensation Plan Except as expressly provided in the column immediately to the left, all contributions (other than after-tax employee contributions) to and all benefits received under a tax-qualified plan

26

TABLE 1

Deferral			Deferral				Deferral				Deferral				Deferral				Deferral
Percent			Percent				Percent				Percent				Percent				Percent
(in	Adjustment		(in		Adjustment		(in		Adjustment		(in		Adjustment		(in		Adjustment		(in		Adjustment
months)	Factor		months)		Factor		months)		Factor		months)		Factor		months)		Factor		months)		Factor
0		1.00000		60		1.40255		120		1.96715		180		2.75903		240		3.86968		300		5.42743
1		1.00565		61		1.41048		121		1.97827		181		2.77463		241		3.89156		301		5.45812
2		1.01134		62		1.41846		122		1.98946		182		2.79032		242		3.91357		302		5.48898
3		1.01706		63		1.42648		123		2.00071		183		2.80610		243		3.93570		303		5.52002
4		1.02281		64		1.43454		124		2.01202		184		2.82196		244		3.95795		304		5.55123
5		1.02859		65		1.44265		125		2.02340		185		2.83792		245		3.98033		305		5.58262
6		1.03441		66		1.45081		126		2.03484		186		2.85396		246		4.00283		306		5.61418
7		1.04026		67		1.45901		127		2.04634		187		2.87010		247		4.02547		307		5.64592
8		1.04614		68		1.46726		128		2.05791		188		2.88633		248		4.04823		308		5.67785
9		1.05205		69		1.47556		129		2.06955		189		2.90265		249		4.07112		309		5.70995
10		1.05800		70		1.48390		130		2.08125		190		2.91906		250		4.09413		310		5.74223
11		1.06398		71		1.49229		131		2.09302		191		2.93557		251		4.11728		311		5.77470
12		1.07000		72		1.50073		132		2.10485		192		2.95216		252		4.14056		312		5.80735
13		1.07605		73		1.50922		133		2.11675		193		2.96886		253		4.16397		313		5.84019
14		1.08213		74		1.51775		134		2.12872		194		2.98564		254		4.18752		314		5.87321
15		1.08825		75		1.52633		135		2.14076		195		3.00252		255		4.21119		315		5.90642
16		1.09441		76		1.53496		136		2.15286		196		3.01950		256		4.23500		316		5.93981
17		1.10059		77		1.54364		137		2.16503		197		3.03657		257		4.25895		317		5.97340
18		1.10682		78		1.55237		138		2.17728		198		3.05374		258		4.28303		318		6.00717
19		1.11307		79		1.56114		139		2.18959		199		3.07101		259		4.30725		319		6.04114
20		1.11937		80		1.56997		140		2.20197		200		3.08837		260		4.33160		320		6.07530
21		1.12570		81		1.57885		141		2.21442		201		3.10583		261		4.35609		321		6.10965
22		1.13206		82		1.58778		142		2.22694		202		3.12340		262		4.38072		322		6.14419
23		1.13846		83		1.59675		143		2.23953		203		3.14106		263		4.40549		323		6.17893
24		1.14490		84		1.60578		144		2.25219		204		3.15882		264		4.43040		324		6.21387
25		1.15137		85		1.61486		145		2.26493		205		3.17668		265		4.45545		325		6.24900
26		1.15788		86		1.62399		146		2.27773		206		3.19464		266		4.48064		326		6.28433
27		1.16443		87		1.63317		147		2.29061		207		3.21270		267		4.50598		327		6.31987
28		1.17101		88		1.64241		148		2.30356		208		3.23087		268		4.53146		328		6.35560
29		1.17764		89		1.65169		149		2.31659		209		3.24913		269		4.55708		329		6.39154
30		1.18429		90		1.66103		150		2.32969		210		3.26750		270		4.58284		330		6.42767
31		1.19099		91		1.67042		151		2.34286		211		3.28598		271		4.60876		331		6.46402
32		1.19772		92		1.67987		152		2.35610		212		3.30456		272		4.63481		332		6.50057
33		1.20450		93		1.68937		153		2.36943		213		3.32324		273		4.66102		333		6.53732
34		1.21131		94		1.69892		154		2.38282		214		3.34203		274		4.68737		334		6.57428
35		1.21816		95		1.70853		155		2.39630		215		3.36093		275		4.71388		335		6.61146
36		1.22504		96		1.71819		156		2.40985		216		3.37993		276		4.74053		336		6.64884
37		1.23197		97		1.72790		157		2.42347		217		3.39904		277		4.76733		337		6.68643
38		1.23894		98		1.73767		158		2.43717		218		3.41826		278		4.79429		338		6.72424
39		1.24594		99		1.74750		159		2.45095		219		3.43759		279		4.82140		339		6.76226
40		1.25299		100		1.75738		160		2.46481		220		3.45703		280		4.84866		340		6.80049
41		1.26007		101		1.76731		161		2.47875		221		3.47657		281		4.87607		341		6.83894
42		1.26719		102		1.77731		162		2.49276		222		3.49623		282		4.90364		342		6.87761
43		1.27436		103		1.78735		163		2.50686		223		3.51600		283		4.93137		343		6.91650
44		1.28156		104		1.79746		164		2.52103		224		3.53588		284		4.95925		344		6.95561
45		1.28881		105		1.80762		165		2.53529		225		3.55587		285		4.98729		345		6.99493
46		1.29610		106		1.81784		166		2.54962		226		3.57598		286		5.01549		346		7.03448
47		1.30343		107		1.82812		167		2.56404		227		3.59619		287		5.04385		347		7.07426
48		1.31080		108		1.83846		168		2.57853		228		3.61653		288		5.07237		348		7.11426
49		1.31821		109		1.84885		169		2.59311		229		3.63698		289		5.10105		349		7.15448
50		1.32566		110		1.85931		170		2.60778		230		3.65754		290		5.12989		350		7.19493
51		1.33316		111		1.86982		171		2.62252		231		3.67822		291		5.15889		351		7.23562
52		1.34069		112		1.88039		172		2.63735		232		3.69902		292		5.18806		352		7.27653
53		1.34827		113		1.89102		173		2.65226		233		3.71993		293		5.21740		353		7.31767
54		1.35590		114		1.90172		174		2.66726		234		3.74097		294		5.24690		354		7.35904
55		1.36356		115		1.91247		175		2.68234		235		3.76212		295		5.27656		355		7.40065
56		1.37127		116		1.92328		176		2.69750		236		3.78339		296		5.30640		356		7.44250
57		1.37903		117		1.93416		177		2.71276		237		3.80478		297		5.33640		357		7.48458
58		1.38682		118		1.94509		178		2.72809		238		3.82629		298		5.36657		358		7.52690
59		1.39467		119		1.95609		179		2.74352		239		3.84793		299		5.39692		359		7.56946

27

EX-10.4

Exhibit 10.4

PENTAIR, INC.

RESTORATION PLAN

As Amended and Restated Effective January 1, 2009

PENTAIR, INC.
RESTORATION PLAN

TABLE OF CONTENTS

		Page
SECTION 1.	Name of Plan		1
SECTION 2.	General Definitions		1
SECTION 3.	Participation, Vesting And Benefit Service, And Rules Governing The Crediting Of Service,		6
	Disability And The Determination Of Compensation And Final Average Compensation
(a)	Participation		6
(b)	Vesting		7
(c)	Benefit Service		7
(d)	Service Credits		7
(e)	Disability		8
(f)	Compensation		10
SECTION 4.	Payments In The Event Of Death Before The Benefit Commencement Date		10
SECTION 5.	Payment Of Retirement Benefits		10
SECTION 6.	Confidentiality, Covenants Not To Compete, And Non - Solicitation		10
(a)	General		10
(b)	Forfeiture and Other Remedies		11
SECTION 7.	Funding And Payment Of Benefits		12
(a)	General		12
(b)	Employer Company		12
(c)	Company Assumption of Liability		12
(d)	Participation by Other Group Members		13
SECTION 8.	Default		13
SECTION 9.	Administration Of The Plan		13
(a)	General		13
(b)	Committee		14
(c)	Discretion		14
(d)	Indemnity		14
(e)	Code Section 409A		14
(f)	Use of Professional Services		14
(g)	Communications		15
SECTION 10.	Effect of KEESA		15
SECTION 11.	Amendment Or Termination		15
(a)	General		15
(b)	Limitation on Power to Amend or Terminate		15
(c)	Change in Control		16
(d)	Continuation of Plan Provisions		16
SECTION 12.	Claims		16
(a)	Filing Claims		16
(b)	Decision on Claim		17

		Page
(c)	Appeal of Denied Claim		17
(d)	Decision by Appeals Committee		17
SECTION 13.	Miscellaneous		17
(a)	Employer’s Rights		17
(b)	Interpretation		18
(c)	Withholding of Taxes		18
(d)	Offset for Amounts Due		18
(e)	Computational Errors		18
(f)	Requirement of Proof		18
(g)	Tax Consequences		18
(h)	Communications		19
(i)	Not Compensation Under Other Benefit Plans		19
(j)	Choice of Law		19
(k)	Savings Clause		19
(l)	Change in Control		19
SECTION 14.	Transition Rules		19
(a)	General		19
(b)	2004 Vested Participants Benefits		19
(c)	Excess		20

ii

PENTAIR, INC. RESTORATION PLAN

     SECTION 1. Name of Plan. This plan shall be known as the Pentair, Inc. Restoration Plan.

     SECTION 2. General Definitions. Unless the context requires otherwise, when used herein the terms listed below, when capitalized or applied to such capitalized terms, shall have the following meanings:

               (1) “Adjustment Factor” is the factor used in adjusting the Pension Amount to reflect the period of time between the date a Participant has a Separation from Service and his or her Benefit Commencement Date. The Adjustment Factor shall be the same adjustment factor applicable to such Participant under the SERP.

               (2) “Administrator” is the Company.

               (3) “Beneficiary” is a person entitled to receive benefits, if any, payable under the Plan after a former Participant’s death.

               (4) “Benefit Commencement Date” is the first day of the first calendar month as of which a Participant’s Retirement Benefit is payable and shall be the same date as the Participant’s benefit commencement date under the SERP.

               (5) “Benefit Service” is the number of Years of Service, beginning with the calendar year which includes the individual’s Benefit Service Date, during which an individual completes 1,000 Hours of Service as an Eligible Employee. Notwithstanding anything herein to the contrary, Benefit Service shall not be credited for any period after December 31, 2017.

               (6) “Benefit Service Date” is the date from and after which an individual may earn Benefit Service, and shall be the same date as an individual’s benefit service date under the SERP.

               (7) “Benefit Service Percentage” is the sum of the percentages for each Year of Benefit Service completed, with the percentage for each such year determined as described below and dependent upon the individual’s age in whole years as of the first day of the calendar year in which that Year of Benefit Service is completed.

Attained Age in Whole Years
at Beginning of Relevant
Year of Benefit Service	Percentage
< 25		4	%
> 25 and < 35		5.5	%
> 35 and < 45		7	%
> 45 and < 55		9	%
> 55		12	%

          Example: Employee A, date of birth January 25, 1954, has a Benefit Service Date of May 1, 1999. Employee A remains an Eligible Employee and completes 1,000 Hours of Service in each calendar year from and including 1999 through 2010. Employee A retires on March 1, 2011 and does not complete 1,000 Hours of Service in that year. Employee A’s Benefit Service Percentage is 109% computed as follows:

Year of Benefit Service	Percentage
1999		7	%
2000 - 2009, inclusive		90	%
2010		12	%
Total		109	%

     Notwithstanding the foregoing, a Participant’s Benefit Service Percentage shall not increase after December 31, 2017.

               (8) “Change In Control” is a change in control of the Company as defined in the KEESA.

               (9) “Code” is the Internal Revenue Code of 1986, as amended. Any reference to specific provision of the Code shall be deemed to refer to any successor provision thereto and the regulations promulgated thereunder.

               (10) “Committee” is the Compensation Committee of the Board of Directors of the Company.

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

               (12) “Compensation” is any item or class of remuneration or part thereof listed or described in the left-hand column of Schedule 1 and not any such items listed or described in the right-hand column of Schedule 1. In the event a remuneration item is not listed or described in Schedule 1, the Administrator shall determine whether such item is included or excluded from Compensation by taking into account the nature of the item and its similarity to an item which is so listed.

               (13) “Conversion Factor” is the factor used to convert the Pension Amount into the Monthly Installment, and shall be the same as the conversion factor under the SERP.

               (14) “Covered Compensation” is Final Average Compensation reduced by Section 401(a)(17) Compensation. Covered Compensation earned after December 31, 2017 shall not be counted under the Plan.

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               (15) “Covered Termination” is a covered termination, as defined in the KEESA, which entitles a Participant to a termination payment pursuant to Sections 8 and 9(a) of the KEESA.

               (16) “Disabled” or “Disability” is a physical or mental condition, resulting from physical or mental sickness or injury, which prevents the individual 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.

               (17) “Effective Date” of the Plan is January 1, 1999; the effective date of this amended and restated Plan document is January 1, 2009.

               (18) “Eligible Employee” is an individual who is an eligible employee under the SERP. Notwithstanding the foregoing, only individuals who are Eligible Employees on December 31, 2007 shall be entitled to be treated as an Eligible Employee for any period on or after January 1, 2008.

               (19) “Employer Company” is the Group member which employs a Participant as of the date the Participant has a Separation from Service or otherwise terminates all Group employment due to death or Disability.

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

               (21) “Final Average Compensation” is the average Compensation determined by averaging Compensation in those five (5) consecutive calendar years out of the last ten (10) consecutive calendar years, ending with the earlier of (i) the calendar year which ends coincident with or immediately preceding the date the Participant has a Separation from Service, or otherwise ceases to be an Eligible Employee, whichever occurs first, or (ii) the calendar year ending December 31, 2017, for which the average Compensation is the highest.

          Notwithstanding the immediately preceding paragraph, Final Average Compensation shall not be less than the average Compensation for the sixty (60) months immediately preceding the date the Participant has a Separation from Service or otherwise ceases to be an Eligible Employee, whichever occurs first, determined as the sum of Compensation in the final calendar year of such employment plus Compensation in each of the four (4) calendar years preceding the final calendar year of such employment plus a percentage of the Compensation for the entire fifth calendar year preceding the final calendar year of such employment; such percentage shall be determined as twelve minus the number of full calendar months for which Compensation was payable in the final calendar year of such employment divided by the number of months for which Compensation was paid in the fifth calendar year preceding the final calendar year of such employment.

          If the Participant’s relevant Compensation history is for less than the stated period of time (e.g., less than five (5) years; less than ten (10) years), then such actual period shall be substituted in determining Final Average Compensation (e.g., if the individual has six (6) years of Compensation history, the high five (5) consecutive years within such six (6) years shall be used in determining the average; if the individual has three (3) years of Compensation history, all such Compensation shall be used in determining the average).

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               (22) “Group” is the Company and, except as prescribed by the Administrator, 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.

               (23) “Hour Of Service” is each hour which an individual is paid or entitled to payment from a Group member for (i) the performance of duties as its employee and (ii) reasons related to such employment but other than for the performance of duties, such as vacation, illness, jury duty, military duty or leave of absence other than (x) payments made or due under a plan maintained solely to comply with worker’s compensation, unemployment compensation, or disability insurance laws, or (y) payments made solely for reimbursement of medical or medically related expenses; provided, however, no more than 501 Hours of Service shall be credited under clause (ii) immediately preceding for any single continuous period during which no duties as such an employee are performed. An individual shall not receive duplicate Hour of Service credits for the same period of service or absence.

          Regardless of the actual number of Hours of Service completed during a year, in determining whether 1,000 Hours of Service have been completed during a calendar year an individual shall be credited with forty-five (45) Hours of Service for each calendar week the individual is otherwise credited with an Hour of Service pursuant to the immediately preceding paragraph.

               (24) “KEESA” is the Key Executive Employment and Severance Agreement, if any, in effect between the Company and the Participant.

               (25) “Monthly Installment” is a monthly payment, commencing as of the Participant’s Benefit Commencement Date, payable for a term certain of one hundred eighty (180) consecutive months, and shall be determined by dividing the Participant’s Pension Amount by the Conversion Factor, with such monthly payment rounded to the nearest whole dollar amount.

               (26) “Participant” is an Eligible Employee who has become a participant under the SERP. Once an individual becomes a Participant, he or she shall remain a Participant, except as provided in Section 3, until the first to occur of his or her death, Disability, or Separation from Service; provided, however, if the individual has a non-forfeitable right to a Retirement Benefit as of the date he or she incurs such an event (determined without regard to the forfeiture provision of Section 6(b) unless such section has been actually enforced as to such individual), then absent death the individual shall remain a Participant until the individual has received his or her entire Retirement Benefit or the Retirement Benefit has been forfeited as provided for in Section 6(b).

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               (27) “Participation Date” is an Eligible Employee’s participation date under the SERP.

               (28) “Pension Amount” is an amount equal to the Participant’s Covered Compensation multiplied by his or her Benefit Service Percentage, with such amount then multiplied by the Adjustment Factor if the Participant survives to his or her Benefit Commencement Date.

               (29) “Pension Plan” is the Pentair, Inc. Pension Plan, or any successor plan thereto.

               (30) “Plan” is the retirement plan herein described. When this term is modified by or with reference to a certain date (e.g., Plan as in effect before year XXXX), it shall refer to the Plan as described in the Plan document in effect for the period referenced.

               (31) “Retirement Benefit” is the monthly retirement benefit payable under the Plan as the Monthly Installment.

               (32) “Section 401(A)(17) Compensation” is the amount which would constitute Final Average Compensation if the determination of Final Average Compensation was limited by the provisions of Code section 401(a)(17). Except as modified pursuant to the Administrator’s discretion as provided for under section 3(f)(2), for this purpose Code section 401(a)(17) shall be applied as under the Pension Plan, regardless of whether the Participant concerned is covered by the Pension Plan or any other tax-qualified defined benefit plan sponsored by a Group member.

               (33) “Separates from Service” or “Separation from Service” is the termination of employment as an employee, from all business entities that comprise the Group, 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 Group permanently decreases to a level equal to twenty percent (20%) or less of the average level of services performed by the Participant for the Group 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 the Group 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 medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months, where such impairment causes the Participant to be unable to perform the duties of his or her position or a substantially similar position) 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 Group the Participant becomes a non-employee director or becomes or remains a consultant to the Group, 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.

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               (34) “SERP” is the Pentair, Inc. Supplemental Executive Retirement Plan as amended and restated effective January 1, 2009, but without regard to Appendix A thereto.

               (35) “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.

               (36) “Year of Service” is a calendar year in which an individual completes 1,000 Hours of Service.

     SECTION 3. Participation, Vesting And Benefit Service, And Rules Governing The Crediting Of Service, Disability And The Determination Of Compensation And Final Average Compensation.

          (a) Participation.

               (1) General. The primary purpose of the Plan is to provide supplemental retirement benefits to Eligible Employees to reflect the loss of pension benefits under tax-qualified defined benefit plans sponsored by a member or members of the Group due to the provision of Code section 401(a)(17). It is intended that the employees covered by the Plan constitute a select group of management or highly paid employees, within the meaning of ERISA section 201(2), of the Group. Except as provided in Section 3(d)(6), in the event an individual who is not within such a select group becomes covered by the Plan, then notwithstanding any Plan provision to the contrary such individual’s participation in the Plan shall immediately cease and retroactively he or she shall be treated as never having been covered by the Plan.

          Because the Plan is described in ERISA section 201(2), and other ERISA provisions corresponding thereto, certain provisions of ERISA do not apply to it and the benefits earned thereunder, including the provisions of Parts 2, 3, and 4 of Title I of ERISA relating to participation and vesting, funding, and fiduciary responsibilities, respectively. In addition, the Plan is not a tax-qualified plan under the Code, and thus the Plan and benefits paid hereunder are not subject to certain rules which apply to benefits payable under such qualified plans, including the manner in which a Participant’s or Beneficiary’s Plan benefits are subject to income tax.

               (2) Repeal of Code Section 401(a)(17). Notwithstanding any other provision of the Plan to the contrary, if Code section 401(a)(17) is repealed and no similar or corresponding provision is immediately enacted to replace it, then until further action by the Committee, if any, the Covered Compensation and Benefit Percentages of each Participant shall be frozen as of the end of the calendar year which includes the effective date of such repeal; provided, however, upon a Change in Control this Section 3(a)(2) shall not apply to a Participant so long as such Participant may incur a Covered Termination with respect to that Change in Control and shall not apply thereafter to a Participant who incurs a Covered Termination with respect to that Change in Control.

               (3) Participation Freeze. Notwithstanding the foregoing, only individuals who are Eligible Employees on December 31, 2007 shall be entitled to participate in the Plan. Accordingly, any individual who is hired on or after January 1, 2008, will not be covered by the Plan.

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          (b) Vesting.

               (1) General. Except as otherwise expressly provided herein, all benefits otherwise payable under the Plan to or with respect to a Participant shall be forfeited if the Participant has a Separation from Service before completing five (5) Years of Service.

               (2) Death or Disability. A Participant who dies or becomes Disabled while employed by a Group Member shall be fully vested in his or her Retirement Benefit.

               (3) Automatic Acceleration of Vesting. If a Participant has a Covered Termination under his or her KEESA, then immediately before such termination the Participant shall be considered fully vested in his or her Retirement Benefit.

               (4) Other Forfeiture. Notwithstanding the foregoing provisions of this Section 3(b) or the number of Years of Service completed or deemed completed, all benefits otherwise payable under the Plan to or with respect to a Participant or former Participant shall be subject to forfeiture to the extent provided in Section 6(b).

          (c) Benefit Service.

               (1) Death. An individual who ceases to be a Participant and terminates employment from the Group by reason of death shall be considered to have completed a Year of Service in the year of death for purposes of determining the Benefit Service earned by such individual, regardless of the Hours of Service credited for such year.

               (2) Benefit Service Upon a Covered Termination. If a Participant has a Covered Termination under his or her KEESA, then immediately before such termination the Participant shall be credited with additional Years of Service for determining Benefit Service equal to the lesser of (i) three (3) and (ii) the greater of (x) seven (7) minus the Benefit Service credited to such Participant under the Plan, determined without regard to this Section 3(c)(2), as of the first day of the Plan Year beginning immediately after such termination and (y) zero (0); provided, however, the Benefit Percentage for each such additional year of service, if any, shall be determined based upon what would be the Participant’s attained age in whole years as of January 1 of each calendar year beginning after the date of the Covered Termination corresponding to such additional year of service (e.g., if the Participant, date of birth March 3, 1947, incurs a Covered Termination in the year 2000 and receives three (3) additional years of service hereunder, then the aggregate Benefit Percentage for such years shall be 30% (9% + 9% + 12%). The Benefit Service provided for by this Section 3(c)(2) shall be in addition to a Participant’s Benefit Service under the Plan determined without regard to this Section 3(c)(2).

          (d) Service Credits.

               (1) General. Subject to other Plan provisions, a Participant’s Years of Service shall be based upon the completion of 1,000 Hours of Service during a calendar year.

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               (2) No Vesting Service Before Participation Date. No Year of Service completed before the calendar year which includes an individual’s Participation Date shall be considered for purposes of applying Section 3(b)(1).

               (3) Non-Duplication of Service Credit. In no event shall a Participant be credited for more than one (1) Year of Service with respect to any one (1) calendar year. In the event service credit for a period must be provided under the Plan by reason of applicable law (e.g., USERRA) and such credit duplicates service credit otherwise provided under the Plan, then the service crediting provision which is most beneficial to the Participant under the circumstances shall be applied but without duplication of service credit for the same period.

               (4) Leaves of Absence. In the sole discretion of the Committee, a Participant may be granted service credit for a period of absence from active employment due to illness, personal circumstances, or such other events as the Committee may authorize under the circumstances and in such amount or manner of service credit as the Committee deems appropriate under the circumstances, but in no event shall such service credit duplicate any such credit otherwise provided under the Plan for the same period or extend beyond the date the Participant Separates from Service. Unless otherwise expressly provided by the Committee, however, in no event shall a Participant earn Benefit Service during the period of such absence.

               (5) Break in Service. Except as determined in the sole discretion of the Committee, if a Participant incurs a Separation from Service before he or she has a nonforfeitable right to a Retirement Benefit by reason of Section 3(b)(1) and thereafter returns to employment as an Eligible Employee, all service credits earned prior to such termination shall be ignored and, if the individual again becomes a Participant, the individual’s service credits under the Plan shall be determined as if he or she had not been previously employed by any Group member.

               (6) Transfer. If an individual becomes a Participant and subsequently, and without a Separation from Service, becomes employed as other than an Eligible Employee, then upon the occurrence of such event the individual shall cease all active participation under the Plan (e.g., he or she will no longer accrue benefits under the Plan).

          (e) Disability.

               (1) General. This Section describes special service credit and other rules which apply to a Participant who becomes Disabled before age sixty-five (65) and while he or she is an Eligible Employee (i.e., a “Disabled Participant”). In no event shall a Participant be considered Disabled until and unless he or she supplies all information and takes all acts (e.g., submits to medical examinations) reasonably requested by the Administrator to establish the fact of his or her Disability.

               (2) Credit for Benefit Service. A Disabled Participant shall receive credit for Benefit Service during the Disability period. This service credit shall be determined, without duplication of other service credit provided under the Plan for the same period, based upon the complete whole years (with fractional years being rounded to the nearest whole year) which elapse during the Disability period. The Disability period shall begin on the date of

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Disability as determined by the Administrator, taking into account any applicable waiting period (e.g., end of short-term disability period) prescribed by the Administrator for this purpose, and shall end on the earliest of (i) the date the Participant is no longer Disabled or is considered not to be Disabled, (ii) the date the Disabled Participant attains age sixty-five (65), and (iii) the date of the Participant’s death.

               (3) Covered Compensation. Except as described in the immediately following paragraph, a Participant’s Covered Compensation, determined as of the beginning of the Disability period, shall not change during the Disability period, and if a Disabled Participant recovers from the Disability before attaining age sixty-five (65) and returns to employment as an Eligible Employee, Covered Compensation shall be determined as otherwise provided under the Plan and by assuming the Participant’s (x) Compensation during the Disability period was equal to the Participant’s Final Average Compensation as of the beginning of the Disability period and (y) Section 401(a)(17) Compensation during the Disability period was equal to the Participant’s Section 401(a)(17) Compensation as of the beginning of the Disability period.

          Notwithstanding the immediately preceding paragraph, a Disabled Participant’s Covered Compensation shall be decreased during the Disability period if and to the extent such Participant’s final average compensation or similar amount taken into account under the Pension Plan (or any other tax-qualified defined benefit plan sponsored by a Group member) increases due to the imputation of compensation, during the Disability period and by reason of such disability, for purposes of determining retirement benefits under such plan. In such event, the Participant’s Covered Compensation during the Disability period shall be decreased by the same amount by which final average compensation under such other plan is so increased, and clause (y) of the immediately preceding paragraph shall be applied by substituting the phrase “as of the end of the Disability period” for the phrase “as of the beginning of the Disability period.”

               (4) Payment of Disability Benefit. A Disabled Participant shall be entitled to a Retirement Benefit commencing as of the first day of the month next following the Participant’s attainment of age sixty-five (65), even if such individual recovers from such Disability prior to such date.

               (5) Death During the Disability Period. If a Disabled Participant dies during the Disability period or the Disability ends by reason of attainment of age sixty-five (65) and the Disabled Participant dies before benefits commence, a death benefit shall be paid after such Disabled Participant’s death to the extent provided in Section 4.

               (6) Proof of Disability. The Administrator shall determine whether and when a Participant is Disabled and may adopt such rules and procedures as it deems appropriate for this purpose. Once a Participant is determined to be Disabled, the Administrator may require the Participant to verify that he or she remains Disabled, and such verification may include requiring the Participant to submit to one or more medical examinations. If a Participant fails to supply information or take action as requested by the Administrator in order to determine whether the Participant is or remains Disabled, the Participant shall not be considered Disabled or shall be considered to have recovered from the Disability, as the case may be, except that in no event shall benefits commence prior to the Participant’s age sixty-five (65).

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          (f) Compensation.

               (1) General. Compensation, Final Average Compensation and Section 401(a)(17) Compensation shall be determined solely with respect to such remuneration earned from and after a Participant’s Benefit Service Date and during the period of employment as an Eligible Employee. In the event a Participant is employed with a Group member before becoming an Eligible Employee or, subject to the provisions of Section 3(d)(6), after ceasing to be an Eligible Employee, the Administrator shall determine such compensation allocable to periods of such employment in each capacity in such manner as it deems reasonable in its sole discretion under the circumstances (e.g., allocation of MIP bonuses for the year in which an individual is promoted to an Eligible Employee).

               (2) Determination. The amount of Compensation, Final Average Compensation and Section 401(a)(17) Compensation shall be as determined from the books and records of the employing Group member and shall be determined on the basis of when such remuneration is paid to the Participant; provided, however, items of remuneration or portions thereof may be determined on the basis of when the item is earned (in which case the item or portion shall not be again counted when paid) by the Participant if and to the extent the Administrator determines such treatment is appropriate under the circumstances (e.g., including MIP bonuses earned during the final year of employment as Compensation before such bonus is actually paid; including an amount deferred at the election of the Participant as Compensation when it otherwise would have been paid but for such election).

     SECTION 4. Payments In The Event Of Death Before The Benefit Commencement Date. A pre-retirement death benefit shall be payable under the same events, at the same time, in the same way and to the same persons and in the same proportions, and subject to the same adjustments, terms and conditions as provided for the pre-retirement death benefit payable under Section 4 of the SERP, but solely with respect to the Pension Amount hereunder.

     SECTION 5. Payment Of Retirement Benefits. A Retirement Benefit shall be payable under the same events, at the same time, in the same way and to the same persons and in the same proportions, and subject to the same adjustments, terms and conditions as provided for the retirement benefit payable under Section 5 of the SERP, but solely with respect to the Pension Amount hereunder.

     SECTION 6. Confidentiality, Covenants Not To Compete, And Non-Solicitation.

          (a) General. Each Eligible Employee acknowledges that as a key executive of the Company or other Group member he or she has become familiar and will continue to be familiar with the trade secrets, know-how, executive personnel, strategies, other confidential information and data of the Group and its members. Each Eligible Employee further acknowledges that the financial security of the Group and the Company’s shareholders depends in large part on the efforts of executives like the Eligible Employee, and that a basic premise for the Plan is to compensate such individuals for their efforts in causing the Group to grow and prosper, thereby helping to insure the Group’s financial future for years well beyond the time the individual leaves. Therefore, in consideration of the extension of the Plan to an Eligible Employee, he or she agrees that (i) after Termination of Employment he or she shall not (directly

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or indirectly), without the Company’s prior written consent, use or disclose to any other person any confidential information or data concerning the Company or other Group members or former Group members, and (ii) for a period of three (3) years from Termination of Employment he or she shall not (directly or indirectly) and without the Company’s prior written consent:

(1)	own, manage, control, participate in, consult with or render services of any kind for any concern which engages in a business which is competitive with any business being conducted, or contemplated being conducted, by the Group as of the date of Termination of Employment;
(2)	become an employee or agent of any publicly traded corporation or other entity, or any division or subsidiary of such a corporation or entity, where more than 5% of such organization’s business is in competition with any business being conducted, or contemplated being conducted, by the Group as of the date of Termination of Employment, unless the annual sales of such organization do not exceed $40 million;
(3)	participate in any plan or attempt to acquire the business or assets of the Group or control of the voting stock of any member thereof, or in any manner interfere with the control of the Company, whether by friendly or unfriendly means; or
(4)	induce or attempt to induce any individual to leave the employ of the Company or other Group member or hire any such individual who approaches him or her for employment.

If at the time of enforcement of the terms of this Section 6, a court shall hold that the duration, scope or area of restriction stated herein are unreasonable under the circumstances then existing, the Eligible Employee agrees that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope, or area.

          (b) Forfeiture and Other Remedies. Upon any breach of the covenants described in this Section, all benefits then due under the Plan (and all benefits which otherwise would be due under the Plan in the future) to the Eligible Employee or his or her beneficiaries shall be forfeited. The covenants described in this Section run in favor of and shall be enforceable by the Company or its assigns. The Company shall be entitled to all legal and equitable remedies to prevent, cure and compensate for a breach of the covenants described herein, without posting of bond, and all such remedies shall be in addition to such forfeiture. By accepting coverage under the Plan, each Eligible Employee acknowledges and agrees that his or her breach or breach of the covenants described in this Section 6 will result in irreparable harm to the Company. Therefore, to remedy or prevent such a breach the Company shall be entitled to enjoin the Eligible Employee from taking or failing to take such actions as will or which may be reasonably considered to cause such a breach, including an injunction to prevent the Eligible Employee from breaching the terms of this Section 6.

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     SECTION 7. Funding And Payment Of Benefits.

          (a) General. Except as expressly provided herein, the Plan is an unfunded deferred compensation arrangement. No Group member shall establish or is required to establish any trust to fund benefits provided under the Plan, and no such member shall establish or is required to establish any type of earmarking or segregation of its assets to provide for such benefits. In the event of default of a Group member’s obligations hereunder, each Participant and his or her beneficiaries shall have no greater entitlements or security than does a general creditor of the Group member.

          (b) Employer Company. Except as otherwise expressly provided herein, the Employer Company shall pay or provide for the payment of benefits hereunder. If the Employer Company does not timely pay such benefits, then, except as described in subsection (c) immediately following, the sole recourse of the claimant Participant or Beneficiary is against such Employer Company and no other member of the Group shall be responsible to pay or provide for the payment of such benefits or liable for the nonpayment thereof.

          (c) Company Assumption of Liability. Under the following circumstances, the Company shall assume and be responsible for the payment of benefits hereunder even though it is not the Employer Company:

(i)	the Employer Company is not participating in the Plan as of the date benefits hereunder are scheduled to commence to a Participant or his or her beneficiaries;
(ii)	the Employer Company does not timely pay or provide for the payment of benefits hereunder and such failure is not corrected within thirty (30) days; or
(iii)	the Participant has a Termination of Employment due to a sale of the stock (or rights analogous to stock) or assets of a Group member, and the Participant has earned a non-forfeitable Retirement Benefit (determined without regard to the forfeiture provision of Section 6(b) unless such section has been actually enforced as to such individual) on or before the date of such termination.

The Company’s obligation under paragraph (i) immediately preceding shall cease when the Employer Company agrees to participate in the Plan. The Company’s obligation under paragraph (ii) immediately preceding shall cease when the Employer Company is current on its payment of benefits. The Company’s obligation under paragraph (iii) immediately preceding shall not come into effect (or if previously effective, shall cease) as of 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 the Participant has then earned hereunder; provided, however, that upon a Change in Control the Company, any person in control of the Company, and the Employer Company if not the Company, shall be jointly and severally responsible for payment of benefits hereunder regardless of the other provisions of this Section 7 and the assumption of such liability by another person shall not discharge the Company, any person in control of the Company, and such Employer Company from liability hereunder.

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          (d) Participation by Other Group Members. A member of the Group may join in this Plan by adopting a written resolution of its board of directors, and delivering such resolution to the Administrator. Any Group member, other than the Company, may end its participation under the Plan by a written resolution of its board of directors delivered to the Committee, provided, however, that no such resolution ending participation shall be effective until thirty (30) days after it is received by the Administrator. By agreeing to join in the Plan, each Group member agrees to pay or provide for the payment o£ benefits hereunder to those Participants and their beneficiaries with respect to whom such member is the Employer Company. No such member, other than the Company, shall have any power or authority to terminate, amend, administer, modify, or interpret the Plan, all such powers being reserved to the Administrator and the Committee.

     SECTION 8. Default. Should the Employer Company (and the Company to the extent provided for in Section 7(c)) fail to pay when due any benefit under the Plan to or with respect to a Participant or Beneficiary and such failure to pay continues for a period of sixty (60) days from receipt of a written notice of nonpayment from the affected Participant or Beneficiary, the Employer Company (and the Company to the extent provided in Section 7(c)) shall be in default hereunder and shall pay to the Participant or Beneficiary the benefits past due and the reasonable costs of collection of any such amount, including reasonable attorney’s fees and costs; provided, however, if the Administrator in good faith disputes the amount of such benefit due or whether a person is entitled to such a benefit, then to the extent and duration of such a dispute the Employer Company (and the Company to the extent provided for in Section 7(c)) shall not be considered in default hereunder; provided further, however, a Participant for whom a KEESA becomes operative due to a Change in Control, and regardless of whether such Participant incurs a Covered Termination, shall be entitled to payment or reimbursement of such costs of collection as provided under Section 13(l).

     SECTION 9. Administration Of The Plan.

          (a) General. The Company, through its designated officers and agents, shall be the Administrator and thereby handle the day-to-day administration of the Plan and such other administrative duties as are allocated to the Administrator under the Plan. All such administrative duties and powers shall be performed by and rest in the Company’s Senior Vice President of Human Resources (or persons designated by such Senior Vice President). Except as otherwise provided under the Plan, the Administrator shall:

(1)	determine the rights and benefits of individuals and other persons under the Plan;
(2)	interpret, construe, and apply the provisions of the Plan;
(3)	process and direct the payment of Plan benefits;
(4)	adopt such forms as it deems appropriate or desirable to administer the Plan and pay benefits thereunder; and

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(5) adopt such rules and procedures as it deems appropriate or desirable to administer the Plan.

          (b) Committee. The Committee shall exercise such powers as are allocated to it under the Plan and shall be empowered to direct other persons as to Plan administration, and its directions shall be followed to the extent consistent with the powers delegated to the Committee and not otherwise contrary to the provisions of the Plan.

          (c) Discretion. In exercising their powers and duties under this Section, and their other powers and duties granted under the Plan, the Committee and the Administrator and each member or delegate thereof is granted such discretion as is appropriate or necessary to carry out such duties and powers. This discretion necessarily follows from the fact that the Plan does not, and is 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.

          (d) Indemnity. No member of the Committee or person acting on behalf of the Administrator shall be subject to any liability with respect to the performance of his or her duties under the Plan or a related document unless he or she acts fraudulently or in bad faith. The Company shall indemnify and hold harmless the members of the Committee and the Company’s officers and employees, and the officers and employees of another Group member, from any liability with respect to the performance of their duties under the Plan, unless such duties were performed fraudulently or in bad faith. 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.

          (e) Code Section 409A. The Plan shall be administered, and the Administrator and the Committee shall exercise their discretionary authority under the Plan, in a manner consistent with Code section 409A and Treasury Regulations and other applicable guidance thereunder. Any permissible discretion to accelerate or defer a Plan payment under such Regulations, the power which to exercise is not otherwise described expressly in the Plan, shall be exercised by the Committee. Any other discretion with respect to, or which directly or indirectly impact, the application of Code section 409A, the exercise of which is not expressly lodged in the Committee, shall be exercised by the Administrator. In the event the matter over which such discretion may be exercised relates to a Committee member or a delegate of the Administrator, or such member or delegate is otherwise unable to freely exercise such discretion, such member or delegate shall not take part in the deliberations and decisions regarding that matter.

          (f) Use of Professional Services. The Administrator and 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 the Company or other Group member. In any case in which the Administrator and the Committee utilizes such services, it shall retain exclusive discretionary authority and control over the administration and operation of the Plan.

14

          (g) Communications. Requests, claims, appeals, and other communications related to the Plan shall be in writing and shall be made by transmitting the same via the U.S. Mail to the Company’s Senior Vice President of Human Resources, at the Company’s corporate headquarters address.

     SECTION 10. Effect of KEESA. If a Participant incurs a Covered Termination, then as or with respect to that Participant:

(i)	notwithstanding the provisions of Section 6, the scope or duration (or both) of such Participant’s covenants under Section 6 shall be no greater or longer than similar covenants provided for in such Participant’s KEESA and, to the extent there are no such similar covenants in such Participant’s KEESA, then Section 6 shall be void and of no force and effect;
(ii)	if the Participant is not fully vested in his or her accrued benefit under the Pension Plan when he or she so terminates employment, such Participant’s Pension Amount as of the Benefit Commencement Date shall be increased by the present value of such non-vested accrued benefit; such present value shall be determined (x) as of the Benefit Commencement Date, (y) by using the amount of such non-vested accrued benefit payable as of the Benefit Commencement Date as calculated under the terms of the Pension Plan and by assuming the Participant was eligible to receive such non-vested accrued benefit under the Pension Plan on and after the attainment of age fifty-five (55), and (z) by using UP 84 mortality and seven percent (7%) interest; and
(iii)	in the case of any conflict between the terms and provisions of this Plan and the terms and provisions of such Participant’s KEESA, the terms of such Participant’s KEESA shall control to the extent more beneficial to such Participant, and the obligations of the Company under such KEESA shall be in addition to any of its obligations under the Plan.

     SECTION 11. Amendment Or Termination.

          (a) General. This Plan may be terminated or amended, in whole or in part, at any time by written resolution of the Board of Directors of the Company. Any such action may apply to the Plan as a whole, or any individual Participant or group of Participants. Except as provided in Section 11(b) and (c), any such action may reduce or eliminate (retroactively or prospectively, or both) any benefits under the Plan that otherwise would be payable but for such action.

          (b) Limitation on Power to Amend or Terminate.

               (1) Vested Participants. As to any Participant who has earned a non-forfeitable Retirement Benefit (determined without regard to Section 6) before the date the Plan

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is amended or terminated (or, if later, before the date such action is effective), no such amendment or termination shall (without the specific written consent of the Participant):

(i)	reduce the Retirement Benefit earned by the Participant;
(ii)	reduce the amount of Plan benefits then being paid to a Participant or change the form in which such benefits are being paid; or
(iii)	terminate, amend, or otherwise change the liability of the Company, Employer Company, or other person to pay or provide for the payment of Retirement Benefits protected under clauses (i) and (ii) immediately preceding.

               (2) Beneficiaries. As to any former Participant who has died before the date the Plan is amended or terminated (or, if later, before the date such action is effective), no such amendment or termination shall (without the specific written consent of such Participant’s Beneficiary):

(i)	reduce the amount of Plan benefits to which such Beneficiary is entitled or change the form in which benefits are payable; or
(ii)	terminate, amend, or otherwise change the liability of the Company, Employer Company, or other person to pay or provide for the payment of benefits protected under clause (i) immediately preceding.

          (c) Change in Control. In addition to the limitations described in Section 11(b), upon a Change in Control for which a Participant’s KEESA becomes operative and under which a Covered Termination has or may occur, then without the specific written consent of the Participant (or Beneficiary in the event of the Participant’s death), the Plan as in existence immediately prior to the Change in Control may not be (directly or indirectly) terminated, amended, or otherwise changed in any respect during the three year period beginning with the date of the Change in Control, but only with respect to such individual. The prohibition herein described shall apply to any action which affects or is intended to affect the terms and provisions of the Plan as then in effect during such three year period, regardless of when made or effective.

          (d) Continuation of Plan Provisions. To the extent that any Plan benefits, and rights and obligations allocable thereto, are protected under Section 11(b) and (c), then as to the persons described in Section 11(b) and (c) the Plan shall continue in force and effect, as if no such amendment or termination had occurred, until such benefits are fully paid or fully provided for to such persons.

     SECTION 12. 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.

16

          (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.

     SECTION 13. Miscellaneous.

          (a) Non-Alienation.. Except as otherwise provided under the Plan or as required under applicable law, unless otherwise determined by the Administrator, no right or benefit under this Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void, and no such right or benefit shall be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person entitled to such right or benefit, and no such right or benefit shall be subject to garnishment, attachment, execution, or levy of any kind.

17

          (b) Employer’s Rights. The right of a Group member to discipline or discharge employees or to exercise rights related to the tenure of employment shall not be adversely affected in any manner by reason of the existence of the Plan or any action hereunder.

          (c) Interpretation. Section and subsection headings are for convenient reference only and shall not be deemed to be part of the substance of this instrument or in any way to enlarge or limit the contents of any Section or subsection. Masculine gender shall include the feminine, and vice versa, and singular shall include the plural, and vice versa, unless the context clearly requires otherwise.

          (d) Withholding of Taxes. All benefits earned under the Plan or the payment of such benefits, as the case may be, shall be subject to withholding for federal, state, local and other taxes as required by law. If and to the extent any such withholding is required before such benefits are paid to the Participant or Beneficiary, such withholdings shall be made from amounts otherwise payable to such person by a Group member (e.g., salary). If no such other amounts are available to satisfy such withholdings, the Company may reduce the Participant’s Retirement Benefit by the amount needed to pay the Participant’s portion of such tax, plus, with respect to a distribution for FICA taxes, an amount equal to the withholding taxes due under federal, state or local law resulting from the payment of such FICA tax, and an additional amount to pay the additional income tax at source on wages attributable to the pyramiding of the section 3401 wages and taxes, but no greater than the aggregate of the FICA amount and the income tax withholding related to such FICA amount.

          (e) Offset for Amounts Due. A Participant’s Retirement Benefit may be reduced by one or more offsets to repay any amounts then due and owing by the Participant to a Group member, unless another means of repayment is agreed to by the Administrator. Except for the right to immediate offset by reduction of the vested Pension Amount for an amount up to $5,000, or such higher amount as allowed in Treasury Regulations under Code section 409A or other applicable guidance, no such offset shall be made before an amount is scheduled to be paid to the Participant or Beneficiary and the amount then offset shall not exceed the amount that would be then otherwise paid.

          (f) Computational Errors. In the event mathematical, accounting, actuarial or other errors are made in administration of the Plan due to mistakes of facts, the Administrator may make equitable adjustments, which may be retroactive, to correct such errors. Such adjustments shall be conclusive and binding on all Participants and Beneficiaries.

     (g) Requirement of Proof. In discharging their duties and responsibilities under the Plan, the Administrator and the Committee 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.

     (h) Tax Consequences. Neither the Company nor any other Group member 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.

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     (i) Communications The Administrator shall prescribe the forms of communication, including forms for benefit application and the like, with respect to the Plan as it deems appropriate. Any such communication and assent or consent thereto may be handled by electronic means.

     (j) Not Compensation Under Other Benefit Plans. No amounts paid or payable to a Participant under the Plan shall be deemed to be salary or compensation for purposes of any other employee benefit plan of the Company or any other Group member except as and to the extent otherwise specifically provided in such other plan.

          (k) Choice of Law. To the extent not preempted by ERISA or any other federal statute, the construction and interpretation of the Plan shall be governed by the laws of the State of Minnesota, without reference to conflict of law principles thereof.

          (l) Savings Clause. Should any valid federal or state law or final determination of any agency or court of competent jurisdiction affect any provision of this Plan, the Plan provisions not affected by such determination shall continue in full force and effect.

          (m) Change in Control. A Participant for whom a KEESA becomes operative due to a Change in Control, and regardless of whether such Participant incurs a Covered Termination, shall be entitled to adjudicate any dispute regarding his or her benefits or rights and entitlements under the Plan, after compliance to the extent necessary with the claim procedures under Section 12, in the forums and venues as provided in Section 22 of the KEESA, and shall be entitled to payment or reimbursement of costs and expenses related to such adjudication as provided in Section 15 of the KEESA.

     SECTION 14. Transition Rules.

          (a) General. Except as described in this Section, this Plan document shall govern when and how Plan benefits are payable with respect to individuals who are Participants on or after January 1, 2009. 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 Administrator in its discretion so that the Plan and its operations were in good faith compliance with Code section 409A.

          (b) 2004 Vested Participants Benefits. The Plan document in effect as of December 31, 2004 (the “2004 Plan”) shall govern when and how then vested Plan benefits are payable, including the elections available or discretion granted to choose or affect the form or commencement date of such benefits. In determining such vested Plan benefits, the Pension Amount as of such date shall be determined as if the Participant had a Separation from Service on the earlier of (i) December 31, 2004 and (ii) the actual date of such event. The Pension Amount as so determined shall be increased by the adjustment factor for the period from the first of the month next following the earlier of such dates to the annuity commencement date, and shall be converted into the annuity forms available for payment, all as provided for in the 2004 Plan.

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          (c) Excess. The excess, if any, of the total Plan benefit payable to or with respect to a Participant expressed as the Monthly Installment over the Plan benefit so payable expressed as the Monthly Installment and described in subsection (b) immediately preceding shall be subject to this Plan document.

          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:

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SCHEDULE 1

Items Included

Items Excluded

Base salary or wages, including such salary or wages deferred at the election of an individual under the Pentair, Inc. Non-Qualified Deferred Compensation Plan 401(k) plan before-tax and after-tax employee contributions Section 125 plan (flexible benefit plan) pre-tax employee contributions Pentair, Inc. Employee Stock Purchase and Bonus Plan employer bonus contributions Pentair, Inc. Management Incentive Plan bonus, including such bonus deferred at the election of an individual under the Pentair, Inc. Non-Qualified Deferred Compensation Plan Holiday pay Sick leave pay Bereavement pay Jury duty pay Military pay Gain-sharing payments Profit-sharing payments Short-term disability benefits Perquisites

Cash payments made and property or rights in property other than cash granted under or pursuant to the Pentair Omnibus Stock Incentive Plan Special awards under the Pentair, Inc. Management Incentive Plan Severance pay Moving expense reimbursements Employee business expense reimbursements Tuition reimbursement Adoption assistance payments Computer hardware and software purchase reimbursements Special cash awards Foreign duty pay enhancements Except as expressly provided in the column immediately to the left, amounts contributed to (e.g., deferred salary) or received under or pursuant to non-qualified deferred compensation arrangements including, but not limited to, the Pentair, Inc. Non-Qualified Deferred Compensation Plan Except as expressly provided in the column immediately to the left, all contributions (other than after-tax employee contributions) to and all benefits received under a tax-qualified plan

EX-10.8

Exhibit 10.8

PENTAIR, INC.

NON-QUALIFIED DEFERRED COMPENSATION PLAN

As Amended and Restated Effective January 1, 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

i 

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	29
Section 10.11. Requirement of Releases	29
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

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.

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:

(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

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

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.

          (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

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.

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.

          (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.

     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.

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

(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.

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:

(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.

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)

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.

     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.

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.

     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.

     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.

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.

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

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.

     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.

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 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;

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

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.

     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 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.

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.

     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:

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

EX-10.10

Exhibit 10.10

KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT

          THIS AGREEMENT, made and entered into as of the ___ day of ___, 20___, by and between Pentair, Inc., a Minnesota corporation (hereinafter referred to as the “Company”), and                      (hereinafter referred to as the “Executive”).

W I T N E S S E T H

          WHEREAS, the Executive is employed by the Company and/or a subsidiary of the Company (hereinafter referred to collectively as the “Employer”) in a key executive capacity and the Executive’s services are valuable to the conduct of the business of the Company;

          WHEREAS, the Company desires to continue to attract and retain dedicated and skilled management employees in a period of industry consolidation, consistent with achieving the best possible value for its shareholders in any change in control of the Company;

          WHEREAS, the Company recognizes that circumstances may arise in which a change in control of the Company occurs, through acquisition or otherwise, thereby causing a potential conflict of interest between the Company’s needs for the Executive to remain focused on the Company’s business and for the necessary continuity in management prior to and following a change in control, and the Executive’s reasonable personal concerns regarding future employment with the Employer and economic protection in the event of loss of employment as a consequence of a change in control;

          WHEREAS, the Company and the Executive are desirous that any proposal for a change in control or acquisition of the Company will be considered by the Executive objectively and with reference only to the best interests of the Company and its shareholders;

          WHEREAS, the Executive will be in a better position to consider the Company’s best interests if the Executive is afforded reasonable economic security, as provided in this Agreement, against altered conditions of employment which could result from any such change in control or acquisition;

          WHEREAS, the Executive possesses intimate knowledge of the business and affairs of the Company and has acquired certain confidential information and data with respect to the Company; and

          WHEREAS, the Company desires to insure, insofar as possible, that it will continue to have the benefit of the Executive’s services and to protect its confidential information and goodwill.

          NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto mutually covenant and agree as follows:

          1. Definitions.

          (a) 409A Affiliate. The term “409A Affiliate” means each entity that is required to be included in the Company’s controlled group of corporations within the meaning of Section 414(b) of the Code, or that is under common control with the Company within the meaning of Section 414(c) of the Code; provided, however, that the phrase “at least 50 percent” shall be used

in place of the phrase “at least 80 percent” each place it appears therein or in the regulations thereunder.

          (b) Accrued Benefits. The Executive’s “Accrued Benefits” shall include the following amounts, payable as described herein: (i) all base salary for the time period ending with the Termination Date; (ii) reimbursement for any and all monies advanced in connection with the Executive’s employment for reasonable and necessary expenses incurred by the Executive on behalf of the Employer for the time period ending with the Termination Date; (iii) any and all other cash earned through the Termination Date and deferred at the election of the Executive or pursuant to any deferred compensation plan then in effect; (iv) notwithstanding any provision of any bonus or incentive compensation plan applicable to the Executive, but subject to any irrevocable deferral election then in effect, a lump sum amount, in cash, equal to the sum of (A) any bonus or incentive compensation that has been allocated or awarded to the Executive for a fiscal year or other measuring period under the plan that ends prior to the Termination Date but has not yet been paid (pursuant to Section 5(f) or otherwise) and (B) a pro rata portion to the Termination Date of the aggregate value of all contingent bonus or incentive compensation awards to the Executive for all uncompleted periods under the plan calculated as to each such award as if the Goals with respect to such bonus or incentive compensation award had been attained reduced by any amounts paid to the Executive pursuant to Section(b)(iii) and Section 3(b)(iv) under the plan for the fiscal year in which the Termination Date occurs; and (v) all other payments and benefits to which the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse or other beneficiary) may be entitled on the Termination Date as compensatory fringe benefits or under the terms of any benefit plan of the Employer, excluding severance payments under any Employer severance policy, practice or agreement in effect on the Termination Date. Payment of Accrued Benefits shall be made promptly in accordance with the Company’s prevailing practice with respect to clauses (i) and (ii) or, with respect to clauses (iii), (iv) and (v), pursuant to the terms of the benefit plan or practice establishing such benefits; provided that payments pursuant to clause (iv)(B) shall be paid on the first day of the seventh month following the month in which the Executive’s Separation from Service occurs, unless the Executive’s Separation from Service is due to death, in which event such payment shall be made within ninety (90) days of the date of Executive’s death.

          (c) Act. The term “Act” means the Securities Exchange Act of 1934, as amended.

          (d) Affiliate and Associate. The terms “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule l2b-2 of the General Rules and Regulations under the Act.

          (e) Annual Cash Compensation. The term “Annual Cash Compensation” shall mean the sum of (i) the Executive’s Annual Base Salary (determined as of the time of the Change in Control of the Company or, if higher, immediately prior to the date the Notice of Termination is given) plus (ii) an amount equal to the greater of the Executive’s annual incentive target bonus for the fiscal year in which the Termination Date occurs or the annual incentive bonus the Executive received for the fiscal year prior to the Change in Control of the Company (the aggregate amount set forth in clause (i) and clause (ii) shall hereafter be referred to as the “Annual Cash Compensation”),

          (f) Beneficial Owner. A Person shall be deemed to be the “Beneficial Owner” of any securities:

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               (i) which such Person or any of such Person’s Affiliates or Associates has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, (A) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase, or (B) securities issuable upon exercise of Rights issued pursuant to the terms of the Company’s Rights Agreement, dated as of December 10, 2004, as amended from time to time (or any successor to such Rights Agreement), at any time before the issuance of such securities;

               (ii) which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule l3d-3 of the General Rules and Regulations under the Act), including pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security under this clause (ii) as a result of an agreement, arrangement or understanding to vote such security if the agreement, arrangement or understanding: (A) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Act and (B) is not also then reportable on a Schedule l3D under the Act (or any comparable or successor report); or

               (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in clause (ii) above) or disposing of any voting securities of the Company.

          (g) Cause. “Cause” for termination by the Employer of the Executive’s employment in connection with a Change in Control of the Company shall be limited to (i) the engaging by the Executive in intentional conduct that the Company establishes, by clear and convincing evidence, has caused demonstrable and serious financial injury to the Employer, as evidenced by a determination in a binding and final judgment, order or decree of a court or administrative agency of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal, in an action, suit or proceeding, whether civil, criminal, administrative or investigative; (ii) conviction of a felony (as evidenced by binding and final judgment, order or decree of a court of competent jurisdiction, in effect after exhaustion of all rights of appeal); or (iii) continuing willful and unreasonable refusal by the Executive to perform the Executive’s duties or responsibilities (unless significantly changed without the Executive’s consent).

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          (h) Change in Control of the Company. A “Change in Control of the Company” shall be deemed to have occurred if an event set forth in any one of the following paragraphs shall have occurred:

               (i) any Person (other than (A) the Company or any of its subsidiaries, (B) a trustee or other fiduciary holding securities under any employee benefit plan of the Company or any of its subsidiaries, (C) an underwriter temporarily holding securities pursuant to an offering of such securities or (D) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock in the Company (“Excluded Persons”)) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after the date of this Agreement, pursuant to express authorization by the Board that refers to this exception) representing 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding voting securities; or

               (ii) the following individuals cease for any reason to constitute a majority of the number of directors of the Company then serving: (A) individuals who, on the date of this Agreement constituted the Board and (B) any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Act) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date of this Agreement, or whose appointment, election or nomination for election was previously so approved (collectively the “Continuing Directors”); provided, however, that individuals who are appointed to the Board pursuant to or in accordance with the terms of an agreement relating to a merger, consolidation, or share exchange involving the Company (or any direct or indirect subsidiary of the Company) shall not be Continuing Directors for purposes of this Agreement until after such individuals are first nominated for election by a vote of at least two-thirds (2/3) of the then Continuing Directors and are thereafter elected as directors by the shareholders of the Company at a meeting of shareholders held following consummation of such merger, consolidation, or share exchange; and, provided further, that in the event the failure of any such persons appointed to the Board to be Continuing Directors results in a Change in Control of the Company, the subsequent qualification of such persons as Continuing Directors shall not alter the fact that a Change in Control of the Company occurred; or

               (iii) the consummation of a merger, consolidation or share exchange of the Company with any other corporation or the issuance of voting securities of the Company in connection with a merger, consolidation or share exchange of the Company (or any direct or indirect subsidiary of the Company), in each case, which requires approval of the shareholders of the Company, other than (A) a merger, consolidation or share exchange which would result in the voting securities of the Company outstanding immediately prior to such merger,

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consolidation or share exchange continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger, consolidation or share exchange, or (B) a merger, consolidation or share exchange effected to implement a recapitalization of the Company (or similar transaction) in which no Person (other than an Excluded Person) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after the date of this Agreement, pursuant to express authorization by the Board that refers to this exception) representing 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding voting securities; or

               (iv) the consummation of a plan of complete liquidation or dissolution of the Company or a sale or disposition by the Company of all or substantially all of the Company’s assets (in one transaction or a series of related transactions within any period of 24 consecutive months), in each case, which requires approval of the shareholders of the Company, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity at least 75% of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale.

Notwithstanding the foregoing, no “Change in Control of the Company” shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to own, directly or indirectly, in the same proportions as their ownership in the Company, an entity that owns all or substantially all of the assets or voting securities of the Company immediately following such transaction or series of transactions.

          (i) Code. The term “Code” means the Internal Revenue Code of 1986, including any amendments thereto or successor tax codes thereof.

          (j) Covered Termination. Subject to Section 2(b), the term “Covered Termination” means any Termination of Employment during the Employment Period where the Termination Date or the date Notice of Termination is delivered is any date prior to the end of the Employment Period.

          (k) Employment Period. Subject to Section 2(b), the term “Employment Period” means a period commencing on the date of a Change in Control of the Company, and ending at 11:59 p.m. Central Time on the earlier of the third anniversary of such date or the Executive’s Normal Retirement Date.

          (l) Good Reason. The Executive shall have “Good Reason” for termination of employment in connection with a Change in Control of the Company in the event of:

               (i) any breach of this Agreement by the Employer, including specifically any breach by the Employer of the agreements contained in Section 3,

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Section 4, Section 5, or Section 6, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that the Employer remedies promptly after receipt of notice thereof given by the Executive;

               (ii) any reduction in the Executive’s base salary, percentage of base salary available as incentive compensation or bonus opportunity or benefits, in each case relative to those most favorable to the Executive in effect at any time during the 180-day period prior to the Change in Control of the Company or, to the extent more favorable to the Executive, those in effect at any time during the Employment Period;

               (iii) the removal of the Executive from, or any failure to reelect or reappoint the Executive to, any of the positions held with the Employer on the date of the Change in Control of the Company or any other positions with the Employer to which the Executive shall thereafter be elected, appointed or assigned, except in the event that such removal or failure to reelect or reappoint relates to the termination by the Employer of the Executive’s employment for Cause or by reason of disability pursuant to Section 12;

               (iv) a good faith determination by the Executive that there has been a material adverse change, without the Executive’s written consent, in the Executive’s working conditions or status with the Employer relative to the most favorable working conditions or status in effect during the 180-day period prior to the Change in Control of the Company, or, to the extent more favorable to the Executive, those in effect at any time during the Employment Period, including but not limited to (A) a significant change in the nature or scope of the Executive’s authority, powers, functions, duties or responsibilities, or (B) a significant reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements, but in each case excluding for this purpose an isolated, insubstantial and inadvertent event not occurring in bad faith that the Employer remedies within ten (10) days after receipt of notice thereof given by the Executive;

               (v) the relocation of the Executive’s principal place of employment to a location more than 50 miles from the Executive’s principal place of employment on the date 180 days prior to the Change in Control of the Company;

               (vi) the Employer requires the Executive to travel on Employer business 20% in excess of the average number of days per month the Executive was required to travel during the 180-day period prior to the Change in Control of the Company;

               (vii) failure by the Company to obtain the Agreement referred to in Section 17(a) as provided therein; or

               (viii) any voluntary termination of employment by the Executive where the Notice of Termination is delivered during the 30 days following the first anniversary of the Change in Control of the Company.

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          (m) Normal Retirement Date. The term “Normal Retirement Date” means “Normal Retirement Date” as defined in the primary qualified defined benefit pension plan applicable to the Executive, or any successor plan, as in effect on the date of the Change in Control of the Company.

          (n) Person. The term “Person” shall mean any individual, firm, partnership, corporation or other entity, including any successor (by merger or otherwise) of such entity, or a group of any of the foregoing acting in concert.

          (o) Separation from Service. For purposes of this Agreement, the term “Separation from Service” means the Executive’s Termination of Employment, or if the Executive continues to provide services following his or her Termination of Employment, such later date as is considered a separation from service from the Company and its 409A Affiliates within the meaning of Code Section 409A. Specifically, if the Executive continues to provide services to the Company or a 409A Affiliate in a capacity other than as an employee, such shift in status is not automatically a Separation from Service.

          (p) Termination of Employment. For purposes of this Agreement, the Executive’s termination of employment shall be presumed to occur when the Company and Executive reasonably anticipate that no further services will be performed by the Executive for the Company and its 409A Affiliates or that the level of bona fide services the Executive will perform as an employee of the Company and its 409A Affiliates will permanently decrease to no more than 20% of the average level of bona fide services performed by the Executive (whether as an employee or independent contractor) for the Company and its 409A Affiliates over the immediately preceding 36-month period (or such lesser period of services). Whether the Executive has experienced a Termination of Employment shall be determined by the Employer in good faith and consistent with Section 409A of the Code. Notwithstanding the foregoing, if the Executive takes a leave of absence for purposes of military leave, sick leave or other bona fide reason, the Executive will not be deemed to have incurred a Separation from Service for the first 6 months of the leave of absence, or if longer, for so long as the Executive’s right to reemployment is provided either by statute or by contract, including this Agreement; provided that if the leave of absence is due to a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than six months, where such impairment causes the Executive to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, the leave may be extended by the Employer for up to 29 months without causing a Termination of Employment.

          (q) Termination Date. Except as otherwise provided in Section 2(b), Section 10(b), and Section 17(a), the term “Termination Date” means (i) if the Executive’s Termination of Employment is by the Executive’s death, the date of death; (ii) if the Executive’s Termination of Employment is by reason of voluntary early retirement, as agreed in writing by the Employer and the Executive, the date of such early retirement which is set forth in such written agreement; (iii) if the Executive’s Termination of Employment is, for purposes of this Agreement, by reason of disability pursuant to Section 12, the earlier of thirty days after the Notice of Termination is given or one day prior to the end of the Employment Period; (iv) if the Executive’s Termination of Employment is by the Executive voluntarily (other than for Good Reason), the date the Notice of Termination is given; and (v) if the Executive’s Termination of Employment is by the Employer (other than by reason of disability pursuant to Section 12) or by the Executive for Good Reason, the

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earlier of thirty days after the Notice of Termination is given or one day prior to the end of the Employment Period. Notwithstanding the foregoing,

               (A) If termination is for Cause pursuant to Section 1(f)(iii) and if the Executive has cured the conduct constituting such Cause as described by the Employer in its Notice of Termination within such 30-day or shorter period, then the Executive’s employment hereunder shall continue as if the Employer had not delivered its Notice of Termination.

               (B) If the Executive shall in good faith give a Notice of Termination for Good Reason and the Employer notifies the Executive that a dispute exists concerning the termination within the 15-day period following receipt thereof, then the Executive may elect to continue his or her employment during such dispute and the Termination Date shall be determined under this paragraph. If the Executive so elects and it is thereafter determined that Good Reason did exist, the Termination Date shall be the earliest of (1) the date on which the dispute is finally determined, either (x) by mutual written agreement of the parties or (y) in accordance with Section 22, (2) the date of the Executive’s death or (3) one day prior to the end of the Employment Period. If the Executive so elects and it is thereafter determined that Good Reason did not exist, then the employment of the Executive hereunder shall continue after such determination as if the Executive had not delivered the Notice of Termination asserting Good Reason and there shall be no Termination Date arising out of such Notice. In either case, this Agreement continues, until the Termination Date, if any, as if the Executive had not delivered the Notice of Termination except that, if it is finally determined that Good Reason did exist, the Executive shall in no case be denied the benefits described in Section 9 (including a Termination Payment) based on events occurring after the Executive delivered his Notice of Termination.

               (C) Except as provided in Section 1(n)(B), if the party receiving the Notice of Termination notifies the other party that a dispute exists concerning the termination within the appropriate period following receipt thereof and it is finally determined that the reason asserted in such Notice of Termination did not exist, then (1) if such Notice was delivered by the Executive, the Executive will be deemed to have voluntarily terminated his employment and the Termination Date shall be the earlier of the date 15 days after the Notice of Termination is given or one day prior to the end of the Employment Period and (2) if delivered by the Company, the Company will be deemed to have terminated the Executive other than by reason of death, disability or Cause.

          2. Termination or Cancellation Prior to Change in Control.

          (a) Subject to Section 2(b), the Employer and the Executive shall each retain the right to terminate the employment of the Executive at any time prior to a Change in Control of the Company. Subject to Section 2(b), in the event the Executive’s employment is terminated prior to a Change in Control of the Company, this Agreement shall be terminated and cancelled and of no further force and effect, and any and all rights and obligations of the parties hereunder shall cease.

          (b) Anything in this Agreement to the contrary notwithstanding, if a Change in Control of the Company occurs and if the Executive’s employment with the Employer is terminated

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(other than a termination due to the Executive’s death or as a result of the Executive’s disability) during the period of 180 days prior to the date on which the Change in Control of the Company occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control of the Company or (ii)  otherwise arose in connection with or in anticipation of a Change in Control of the Company, then for all purposes of this Agreement such termination of employment shall be deemed a “Covered Termination,” “Notice of Termination” shall be deemed to have been given, and the “Employment Period” shall be deemed to have begun on the date of such termination which shall be deemed to be the “Termination Date” and the date of the Change in Control of the Company for purposes of this Agreement.

          3. Employment Period; Vesting and Payment of Certain Benefits.

          (a) If a Change in Control of the Company occurs when the Executive is employed by the Employer, the Employer will continue thereafter to employ the Executive during the Employment Period, and the Executive will remain in the employ of the Employer in accordance with and subject to the terms and provisions of this Agreement. Any Termination of Employment during the Employment Period, whether by the Company or the Employer, shall be deemed a termination by the Company for purposes of this Agreement.

          (b) If a Change in Control of the Company occurs when the Executive is employed by the Employer, (i) the Company shall cause all restrictions on restricted stock awards made to the Executive prior to the Change in Control of the Company to lapse such that the Executive is fully and immediately vested in the Executive’s restricted stock upon such a Change in Control of the Company; (ii) the Company shall cause all stock options granted to the Executive prior to the Change in Control of the Company pursuant to the Company’s stock option plan(s) to be fully and immediately vested upon such a Change in Control of the Company; (iii) the Company shall cause all incentive compensation units and performance awards granted to the Executive pursuant to any long-term incentive plan maintained by the Company to be paid to the Executive, subject to any irrevocable deferral election then in effect, within ten (10) business days after the Change in Control of the Company (A) at one-third (1/3) of target, if the award cycle has been in effect less than twelve (12) months, (B) at two thirds (2/3) of the then current value pursuant to such plan, if the award cycle has been in effect twelve (12) or more months but less than twenty-four (24) months, and (C) at the then current value pursuant to such plan, if the award cycle has been in effect twenty-four (24) or more months, in each case as if all performance or incentive requirements and periods had been satisfied; and (iv) the Company shall pay to the Executive within ten (10) business days after the Change in Control of the Company an amount equal to the Executive’s annual incentive target bonus for the fiscal year in which the Change in Control of the Company occurs, subject to any irrevocable deferral election then in effect.

          4. Duties. During the Employment Period, the Executive shall, in the same capacities and positions held by the Executive at the time of the Change in Control of the Company or in such other capacities and positions as may be agreed to by the Employer and the Executive in writing, devote the Executive’s best efforts and all of the Executive’s business time, attention and skill to the business and affairs of the Employer, as such business and affairs now exist and as they may hereafter be conducted.

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          5. Compensation. During the Employment Period, the Executive shall be compensated as follows:

          (a) The Executive shall receive, at reasonable intervals (but not less often than monthly) and in accordance with such standard policies as may be in effect immediately prior to the Change in Control of the Company, an annual base salary in cash equivalent of not less than twelve times the Executive’s highest monthly base salary for the twelve-month period immediately preceding the month in which the Change in Control of the Company occurs or, if higher, annual base salary at the rate in effect immediately prior to the Change in Control of the Company (which base salary shall, unless otherwise agreed in writing by the Executive or subject to any irrevocable deferral election then in effect, include the current receipt by the Executive of any amounts which, prior to the Change in Control of the Company, the Executive had elected to defer, whether such compensation is deferred under Section 401(k) of the Code or otherwise), subject to adjustment as hereinafter provided in Section 6 (such salary amount as adjusted upward from time to time is hereafter referred to as the “Annual Base Salary”).

          (b) The Executive shall receive fringe benefits at least equal in value to the highest value of such benefits provided for the Executive at any time during the 180-day period immediately prior to the Change in Control of the Company or, if more favorable to the Executive, those provided generally at any time during the Employment Period to any executives of the Employer of comparable status and position to the Executive; and shall be reimbursed, at such intervals and in accordance with such standard policies that are most favorable to the Executive that were in effect at any time during the 180-day period immediately prior to the Change in Control of the Company, for any and all monies advanced in connection with the Executive’s employment for reasonable and necessary expenses incurred by the Executive on behalf of the Employer, including travel expenses.

          (c) The Executive and/or the Executive’s family, as the case may be, shall be included, to the extent eligible thereunder (which eligibility shall not be conditioned on the Executive’s salary grade or on any other requirement which excludes persons of comparable status to the Executive unless such exclusion was in effect for such plan or an equivalent plan at any time during the 180-day period immediately prior to the Change in Control of the Company), in any and all plans providing benefits for the Employer’s salaried employees in general, including but not limited to group life insurance, hospitalization, medical, dental, profit sharing and stock bonus plans; provided, that, (i) in no event shall the aggregate level of benefits under such plans in which the Executive is included be less than the aggregate level of benefits under plans of the Employer of the type referred to in this Section 5(c) in which the Executive was participating at any time during the 180-day period immediately prior to the Change in Control of the Company and (ii) in no event shall the aggregate level of benefits under such plans be less than the aggregate level of benefits under plans of the type referred to in this Section 5(c) provided at any time after the Change in Control of the Company to any executive of the Employer of comparable status and position to the Executive.

          (d) The Executive shall annually be entitled to not less than the amount of paid vacation and not fewer than the highest number of paid holidays to which the Executive was entitled annually at any time during the 180-day period immediately prior to the Change in Control of the Company or such greater amount of paid vacation and number of paid holidays as may be made available annually to other executives of the Employer of comparable status and position to the Executive at any time during the Employment Period.

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          (e) The Executive shall be included in all plans providing additional benefits to executives of the Employer of comparable status and position to the Executive, including but not limited to deferred compensation, split-dollar life insurance, supplemental retirement, stock option, stock appreciation, stock bonus and similar or comparable plans; provided, that, (i) in no event shall the aggregate level of benefits under such plans be less than the highest aggregate level of benefits under plans of the Employer of the type referred to in this Section 5(e) in which the Executive was participating at any time during the 180-day period immediately prior to the Change in Control of the Company; (ii) in no event shall the aggregate level of benefits under such plans be less than the aggregate levels of benefits under plans of the type referred to in this Section 5(e) provided at any time after the Change in Control of the Company to any executive of the Employer comparable in status and position to the Executive; and (iii) the Employer’s obligation to include the Executive in bonus or incentive compensation plans shall be determined by Section 5(f).

          (f) To assure that the Executive will have an opportunity to earn incentive compensation after a Change in Control of the Company, the Executive shall be included in a bonus plan of the Employer which shall satisfy the standards described below (such plan, the “Bonus Plan”). Bonuses under the Bonus Plan shall be payable with respect to achieving such financial or other goals reasonably related to the business of the Employer as the Employer shall establish (the “Goals”), all of which Goals shall be attainable, prior to the end of the Employment Period, with approximately the same degree of probability as the most attainable goals under the Employer’s bonus plan or plans as in effect at any time during the 180-day period immediately prior to the Change in Control of the Company (whether one or more, the “Company Bonus Plan”) and in view of the Employer’s existing and projected financial and business circumstances applicable at the time. The amount of the bonus (the “Bonus Amount”) that the Executive is eligible to earn under the Bonus Plan shall be no less than 200% of the Executive’s target award provided in such Company Bonus Plan (such bonus amount herein referred to as the “Targeted Bonus”), and in the event the Goals are not achieved such that the entire Targeted Bonus is not payable, the Bonus Plan shall provide for a payment of a Bonus Amount equal to a portion of the Targeted Bonus reasonably related to that portion of the Goals which were achieved. Payment of the Bonus Amount shall not be affected by any circumstance occurring subsequent to the end of the Employment Period, including the Executive’s Termination of Employment.

          6. Annual Compensation Adjustments. During the Employment Period, the Board of Directors of the Company (or an appropriate committee thereof) will consider and appraise, at least annually, the contributions of the Executive to the Company, and in accordance with the Company’s practice prior to the Change in Control of the Company, due consideration shall be given to the upward adjustment of the Executive’s Annual Base Salary, at least annually, (a) commensurate with increases generally given to other executives of the Company of comparable status and position to the Executive, and (b) as the scope of the Company’s operations or the Executive’s duties expand.

          7. Termination For Cause or Without Good Reason. If there is a Covered Termination for Cause or due to the Executive’s voluntarily terminating his or her employment other than for Good Reason (any such terminations to be subject to the procedures set forth in Section 13), then the Executive shall be entitled to receive only Accrued Benefits.

          8. Termination Giving Rise to a Termination Payment. If there is a Covered Termination by the Executive for Good Reason, or by the Company other than by reason of (i) death, (ii) disability pursuant to Section 12, or (iii) Cause (any such terminations to be subject to the procedures set forth in Section 13), then the Executive shall be entitled to receive, and the Company

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shall promptly pay, Accrued Benefits and, in lieu of further base salary for periods following the Termination Date, as liquidated damages and additional severance pay and in consideration of the covenant of the Executive set forth in Section 14(a), the Termination Payment pursuant to Section 9(a).

          9. Payments Upon Termination.

          (a) Termination Payment. The “Termination Payment” shall be an amount equal to the Annual Cash Compensation times three (3). The Termination Payment shall be paid to the Executive in cash equivalent on the first day of the seventh month following the month in which the Executive’s Separation from Service occurs, without interest thereon; provided that, if on the date of the Executive’s Separation from Service, neither the Company nor any other entity that is considered a “service recipient” with respect to the Executive within the meaning of Code Section 409A has any stock which is publicly traded on an established securities market (within the meaning of Treasury Regulation Section 1.897-1(m)) or otherwise, then the Termination Payment shall be paid to the Executive in cash equivalent within ten (10) business days after the Termination Date. Notwithstanding the foregoing, in the event the Executive’s Termination Date is pursuant to Section 2(b), the Termination Payment shall be paid within ten (10) business days after the date of the Change in Control of the Company (as defined without reference to Section 2(b)), without interest. Such lump sum payment shall not be reduced by any present value or similar factor, and the Executive shall not be required to mitigate the amount of the Termination Payment by securing other employment or otherwise, nor will such Termination Payment be reduced by reason of the Executive securing other employment or for any other reason. The Termination Payment shall be in lieu of, and acceptance by the Executive of the Termination Payment shall constitute the Executive’s release of any rights of the Executive to, any other cash severance payments under any Company severance policy, practice or agreement.

          (b) Certain Additional Payments by the Company.

          (i) Notwithstanding any other provision of this Agreement, if any portion of the Termination Payment or any other payment under this Agreement, or under any other agreement with or plan of the Employer (in the aggregate, “Total Payments”), would constitute an “excess parachute payment” as defined in Section 280G of the Code (or any successor provision), then the Company shall pay the Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Executive after deduction of any excise tax imposed under Section 4999 of the Code (or any successor provision) and any interest charges or penalties in respect of the imposition of such excise tax (collectively, the “Excise Tax”) (but not any federal, state or local income tax, or employment tax) on the Total Payments, and any federal, state and local income tax, employment tax, and excise tax upon the payment provided for by this Section 9(b)(i), shall be equal to the Total Payments. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s domicile for income tax purposes on the date the Gross-Up Payment is made, net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes. Notwithstanding the foregoing, if it shall be determined

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that the Executive is entitled to a Gross-Up Payment, but that the Total Payments would not be subject to the Excise Tax if the Total Payments were reduced by an amount that is less than 10% of the Total Payments that would be treated as “parachute payments” under Section 280G of the Code (or any successor provision), then the amounts payable to the Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to the Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), and no Gross-Up Payment shall be made to the Executive. For purposes of reducing the Total Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Total Payments) shall be reduced. If the reduction of the amounts payable hereunder would not result in a reduction of the Total Payments to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this provision.

          (ii) For purposes of this Agreement, the terms “excess parachute payment” and “parachute payments” shall have the meanings assigned to them in Section 280G of the Code (or any successor provision) and such “parachute payments” shall be valued as provided therein. Present value for purposes of this Agreement shall be calculated in accordance with Section 1274(b)(2) of the Code (or any successor provision). Promptly following a Covered Termination or notice by the Company to the Executive of its belief that there is a payment or benefit due the Executive which will result in an “excess parachute payment” as defined in Section 280G of the Code (or any successor provision), the Executive and the Company, at the Company’s expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel (“National Tax Counsel”) selected by the Company’s independent auditors and reasonably acceptable to the Executive (which may be regular outside counsel to the Company), which opinion sets forth (A) the amount of the Base Period Income, (B) the amount and present value of Total Payments, (C) the amount and present value of any excess parachute payments, and (D) the amount of any Gross-Up Payment or the reduction of any Total Payments to the Safe Harbor Cap, as the case may be. As used in this Agreement, the term “Base Period Income” means an amount equal to the Executive’s “annualized includable compensation for the base period” as defined in Section 280G(d)(1) of the Code. For purposes of such opinion, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code (or any successor provisions), which determination shall be evidenced in a certificate of such auditors addressed to the Company and the Executive. The opinion of National Tax Counsel shall be addressed to the Company and the Executive and shall be binding upon the Company and the Executive. If such National Tax Counsel so requests in connection with the opinion required by this Section 9(b), the Executive and the Company shall obtain, at the Company’s expense, and the National Tax Counsel may rely on, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Executive solely with respect to its status under Section 280G of the Code and the regulations thereunder. The Company shall pay the Executive the Gross-Up Payment, if any, at the same time as the Termination Payment is paid, or if the Executive’s Covered Termination is pursuant to Section 2(b), then within 90 days following the Change in Control of the Company (determined without regard to Section 2(b)); provided that if

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prior to such date the Executive is required to remit the excise tax under Section 4999 of the Code to the Internal Revenue Service, then upon written notice by the Executive to the Company, the Company shall promptly reimburse the Executive for the Gross-Up Payment (but based on Executive’s actual rate of taxation).

          (iii) In the event that upon any audit by the Internal Revenue Service, or by a state or local taxing authority, of the Total Payments or Gross-Up Payment, a change is finally determined to be required in the amount of taxes paid by the Executive, appropriate adjustments shall be made under this Agreement such that the net amount which is payable to the Executive after taking into account the provisions of Section 4999 of the Code (or any successor provision) shall reflect the intent of the parties as expressed in this Section 9, in the manner determined by the National Tax Counsel. If the Company is required to make a payment to the Executive, such payment shall be paid following the date of the final determination by a court or the Internal Revenue Service and within thirty (30) days after the date Executive provides the Company a written request for reimbursement thereof (accompanied by proof of taxes paid), but in no event shall the reimbursement be made later than the end of the calendar year following the year in which the Executive remits the excise tax to the Internal Revenue Service.

          (iv) The Company agrees to bear all costs associated with, and to indemnify and hold harmless, the National Tax Counsel of and from any and all claims, damages, and expenses resulting from or relating to its determinations pursuant to this Section 9(b), except for claims, damages or expenses resulting from the gross negligence or willful misconduct of such firm.

          (b) Additional Benefits. If there is a Covered Termination and the Executive is entitled to Accrued Benefits and the Termination Payment, then the Company shall provide to the Executive the following additional benefits:

          (i) The Executive shall receive until the end of the second calendar year following the calendar year in which the Executive’s Separation from Service occurs, at the expense of the Company, outplacement services, on an individualized basis at a level of service commensurate with the Executive’s status with the Company immediately prior to the date of the Change in Control of the Company (or, if higher, immediately prior to the Executive’s Termination of Employment), provided by a nationally recognized executive placement firm selected by the Company; provided that the cost to the Company of such services shall not exceed 10% of the Executive’s Annual Base Salary.

          (ii) Until the earlier of the end of the Employment Period or such time as the Executive has obtained new employment and is covered by benefits which in the aggregate are at least equal in value to the following benefits, the Executive shall continue to be covered, at the expense of the Company, by the same or equivalent life insurance, hospitalization, medical and dental coverage as was required hereunder with respect to the Executive immediately prior to the date the Notice of Termination is given, subject to the following:

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          (A) Following the end of the COBRA continuation period, if such hospitalization, medical or dental coverage is provided under a health plan that is subject to Section 105(h) of the Code, benefits payable under such health plan shall comply with the requirements of Treasury regulation section 1.409A-3(i)(1)(iv) and, if necessary, the Company shall amend such health plan to comply therewith.

          (B) During the first six months following the Executive’s Separation from Service, the Executive shall pay the Company for any life insurance coverage that provides a benefit in excess of $50,000 under a group term life insurance policy. After the end of such six month period, the Company shall make a cash equivalent payment to the Executive equal to the aggregate premiums paid by the Executive for such coverage, and thereafter such coverage shall be provided at the expense of the Company for the remainder of the period as set forth above; provided that this clause (B) shall cease to apply if on the date of the Executive’s Separation from Service, neither the Company nor any other entity that is considered a “service recipient” with respect to the Executive within the meaning of Code Section 409A has any stock which is publicly traded on an established securities market (within the meaning of Treasury Regulation Section 1.897-1(m)) or otherwise.

If the Executive is entitled to the Termination Payment pursuant to Section 2(b), then within ten (10) days following the Change in Control of the Company (determined without regard to Section 2(b)), the Company shall reimburse the Executive for any COBRA premiums the Executive paid for his or her hospitalization, medical and dental coverage under COBRA from the Executive’s Termination Date through the date of the Change in Control of the Company (determined without regard to Section 2(b)).

          (iii) The Company shall bear up to $15,000 in the aggregate of fees and expenses of consultants and/or legal or accounting advisors engaged by the Executive to advise the Executive as to matters relating to the computation of benefits due and payable under this Section 9.

          (iv) The Company shall cause the Executive to be fully and immediately vested in his accrued benefit under the Pentair, Inc. 1999 Supplemental Executive Retirement Plan (“SERP”) and the Pentair, Inc. Restoration Plan (“Restoration Plan”) or any successor plans thereto (the “Plans”) (to the extent the Executive participates in the Plans) and in any nonqualified defined contribution retirement plan of the Employer. The amount of benefits under the Plans shall be determined as if the Executive had completed additional years of Benefit Service (as such term is defined in the Plans) equal to the lesser of (A) three years or (B) the greater of (x) seven minus the years of Benefit Service credited to such Executive under the Plans, determined without regard to the terms of this Agreement, as of the end of the calendar year which includes the date of the Change in Control of the Company, or (y) zero. In addition, if the Executive is described in Appendix A to the SERP, the additional benefit therein provided for the Executive shall be fully vested and the amount of such additional benefit shall be no less than if the Executive had continued in qualified employment through the end of the calendar year in which he would attain age 62. In addition, the Executive’s accrued benefit under the Restoration Plan shall be appropriately increased by the value of the Executive’s

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accrued benefit, if any, under the Company’s tax-qualified defined benefit plan which is forfeited due to the Executive’s failure to become fully vested thereunder.

          10. Death.

          (a) Except as provided in Section 10(b), in the event of a Covered Termination due to the Executive’s death, the Executive’s estate, heirs and beneficiaries shall receive all the Executive’s Accrued Benefits through the Termination Date.

          (b) In the event the Executive dies after a Notice of Termination is given (i) by the Company or (ii) by the Executive for Good Reason, the Executive’s estate, heirs and beneficiaries shall be entitled to the benefits described in Section 10(a) and, subject to the provisions of this Agreement, to such Termination Payment as the Executive would have been entitled to had the Executive lived, except that the Termination Payment shall be paid within 90 days following the date of the Executive’s death, without interest thereon. For purposes of this Section 10(b), the Termination Date shall be the earlier of 30 days following the giving of the Notice of Termination, subject to extension pursuant to Section 1(n), or one day prior to the end of the Employment Period.

          11. Retirement. If, during the Employment Period, the Executive and the Employer shall execute an agreement providing for the early retirement of the Executive from the Employer, or the Executive shall otherwise give notice that he is voluntarily choosing to retire early from the Employer, the Executive shall receive Accrued Benefits through the Termination Date; provided, that if the Executive’s employment is terminated by the Executive for Good Reason or by the Company other than by reason of death, disability or Cause and the Executive also, in connection with such termination, elects voluntary early retirement, the Executive shall also be entitled to receive a Termination Payment pursuant to Section 8.

          12. Termination for Disability. If, during the Employment Period, as a result of the Executive’s disability due to physical or mental illness or injury (regardless of whether such illness or injury is job-related), the Executive shall have been absent from the Executive’s duties hereunder on a full-time basis for a period of six consecutive months and, within 30 days after the Company notifies the Executive in writing that it intends to terminate the Executive’s employment (which notice shall not constitute the Notice of Termination contemplated below), the Executive shall not have returned to the performance of the Executive’s duties hereunder on a full-time basis, the Company may terminate the Executive’s employment for purposes of this Agreement pursuant to a Notice of Termination given in accordance with Section 13. If the Executive’s employment is terminated on account of the Executive’s disability in accordance with this Section, the Executive shall receive Accrued Benefits through the Termination Date and shall remain eligible for all benefits provided by any long term disability programs of the Employer in effect at the time of such termination.

          13. Termination Notice and Procedure. Any Covered Termination by the Company or the Executive (other than a termination of the Executive’s employment that is a Covered Termination by virtue of Section 2(b)) shall be communicated by a written notice of termination (“Notice of Termination”) to the Executive, if such Notice is given by the Company, and to the Company, if such Notice is given by the Executive, all in accordance with the following procedures and those set forth in Section 24:

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          (a) If such termination is for disability, Cause or Good Reason, the Notice of Termination shall indicate in reasonable detail the facts and circumstances alleged to provide a basis for such termination.

          (b) Any Notice of Termination by the Company shall have been approved, prior to the giving thereof to the Executive, by a resolution duly adopted by a majority of the directors of the Company (or any successor corporation) then in office.

          (c) If the Notice is given by the Executive for Good Reason, the Executive may cease performing his duties hereunder on or after the date fifteen days after the delivery of Notice of Termination and shall in any event cease employment on the Termination Date. If the Notice is given by the Company, then the Executive may cease performing his duties hereunder on the date of receipt of the Notice of Termination, subject to the Executive’s rights hereunder.

          (d) The Executive shall have thirty days, or such longer period as the Company may determine to be appropriate, to cure any conduct or act, if curable, alleged to provide grounds for termination of the Executive’s employment for Cause under this Agreement pursuant to Section 1(f)(iii).

          (e) The recipient of any Notice of Termination shall personally deliver or mail in accordance with Section 24 written notice of any dispute relating to such Notice of Termination to the party giving such Notice within 15 days after receipt thereof; provided, however, that if the Executive’s conduct or act alleged to provide grounds for termination by the Company for Cause is curable, then such period shall be 30 days. After the expiration of such period, the contents of the Notice of Termination shall become final and not subject to dispute.

          14. Further Obligations of the Executive.

          (a) Competition. The Executive agrees that, in the event of any Covered Termination where the Executive is entitled to Accrued Benefits and the Termination Payment, the Executive shall not, for a period expiring one year after the Termination Date, without the prior written approval of the Company’s Board of Directors, (i) solicit for employment an employee of the Company or its subsidiaries or (ii) participate in the management of, be employed by or own any business enterprise at a location within the United States that engages in substantial competition with the Company or its subsidiaries, where such enterprise’s revenues from any competitive activities amount to 10% or more of such enterprise’s net revenues and sales for its most recently completed fiscal year; provided, however, that nothing in this Section 14(a) shall prohibit the Executive from owning stock or other securities of a competitor amounting to less than five percent of the outstanding capital stock of such competitor.

          (b) Confidentiality. During and following the Executive’s employment by the Company, the Executive shall hold in confidence and not directly or indirectly disclose or use or copy or make lists of any confidential information or proprietary data of the Company (including that of the Employer), except to the extent authorized in writing by the Board of Directors of the Company or required by any court or administrative agency, other than to an employee of the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of duties as an executive of the Company. Confidential information shall not include any information known generally to the public or any information of a type not otherwise considered confidential by persons engaged in the same business or a business

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similar to that of the Company. All records, files, documents and materials, or copies thereof, relating to the business of the Company which the Executive shall prepare, or use, or come into contact with, shall be and remain the sole property of the Company and shall be promptly returned to the Company upon termination of employment with the Company.

          15. Expenses and Interest. If, after a Change in Control of the Company, (a) a dispute arises with respect to the enforcement of the Executive’s rights under this Agreement or (b) any legal or arbitration proceeding shall be brought to enforce or interpret any provision contained herein or to recover damages for breach hereof, in either case so long as the Executive is not acting in bad faith, then the Company shall reimburse the Executive for any reasonable attorneys’ fees and necessary costs and disbursements incurred as a result of the dispute, legal or arbitration proceeding (“Expenses”), and prejudgment interest on any money judgment or arbitration award obtained by the Executive calculated at the rate of interest announced by U.S. Bank National Association, Minneapolis, Minnesota, from time to time at its prime or base lending rate from the date that payments to him or her should have been made under this Agreement. Within ten days after the Executive’s written request therefore (but in no event later than the end of the calendar year following the calendar year in which such Expense is incurred), the Company shall reimburse the Executive, or such other person or entity as the Executive may designate in writing to the Company, the Executive’s reasonable Expenses.

          16. Payment Obligations Absolute. The Company’s obligation during and after the Employment Period to pay the Executive the amounts and to make the benefit and other arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any setoff, counterclaim, recoupment, defense or other right which the Company may have against him or anyone else. Except as provided in Section 15, all amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company will not seek to recover all or any part of such payment from the Executive, or from whomsoever may be entitled thereto, for any reason whatsoever.

          17. Successors.

          (a) If the Company sells, assigns or transfers all or substantially all of its business and assets to any Person or if the Company merges into or consolidates or otherwise combines (where the Company does not survive such combination) with any Person (any such event, a “Sale of Business”), then the Company shall assign all of its right, title and interest in this Agreement as of the date of such event to such Person, and the Company shall cause such Person, by written agreement in form and substance reasonably satisfactory to the Executive, to expressly assume and agree to perform from and after the date of such assignment all of the terms, conditions and provisions imposed by this Agreement upon the Company. Failure of the Company to obtain such agreement prior to the effective date of such Sale of Business shall be a breach of this Agreement constituting “Good Reason” hereunder, except that for purposes of implementing the foregoing the date upon which such Sale of Business becomes effective shall be deemed the Termination Date. In case of such assignment by the Company and of assumption and agreement by such Person, as used in this Agreement, “Company” shall thereafter mean such Person which executes and delivers the agreement provided for in this Section 17 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, and this Agreement shall inure to the benefit of, and be enforceable by, such Person. The Executive shall, in his or her discretion, be entitled to proceed against any or all of such Persons, any Person which theretofore was such a successor to the

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Company and the Company (as so defined) in any action to enforce any rights of the Executive hereunder. Except as provided in this Section 17(a), this Agreement shall not be assignable by the Company. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company.

          (b) This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, heirs and beneficiaries. All amounts payable to the Executive under Sections 3, 7, 8, 9, 10, 11, 12 and 15 if the Executive had lived shall be paid, in the event of the Executive’s death, to the Executive’s estate, heirs and representatives; provided, however, that the foregoing shall not be construed to modify any terms of any benefit plan of the Employer, as such terms are in effect on the date of the Change in Control of the Company, that expressly govern benefits under such plan in the event of the Executive’s death.

          18. Severability. The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby.

          19. Contents of Agreement; Waiver of Rights; Amendment. This Agreement sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and shall supersede in all respects, and the Executive hereby waives all rights under, any prior or other agreement or understanding between the parties with respect to such subject matter, including, but not limited to the Management Assurance Agreement and any Key Executive Employment and Severance Agreement between the Company and the Executive entered into prior to the date hereof. This Agreement may not be amended or modified at any time except by written instrument executed by the Company and the Executive.

          20. Withholding. The Company shall be entitled to withhold from amounts to be paid to the Executive hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold; provided, that the amount so withheld shall not exceed the minimum amount required to be withheld by law. In addition, if prior to the date of payment of the Termination Payment hereunder, the Federal Insurance Contributions Act (FICA) tax imposed under Sections 3101, 3121(a) and 3121(v)(2), where applicable, becomes due with respect to any payment or benefit to be provided hereunder, the Company may provide for an immediate payment of the amount needed to pay the Executive’s portion of such tax (plus an amount equal to the taxes that will be due on such amount) and the Executive’s Termination Payment shall be reduced accordingly. The Company shall be entitled to rely on an opinion of the National Tax Counsel if any question as to the amount or requirement of any such withholding shall arise.

          21. Certain Rules of Construction. No party shall be considered as being responsible for the drafting of this Agreement for the purpose of applying any rule construing ambiguities against the drafter or otherwise. No draft of this Agreement shall be taken into account in construing this Agreement. Any provision of this Agreement which requires an agreement in writing shall be deemed to require that the writing in question be signed by the Executive and an authorized representative of the Company.

          22. Governing Law; Resolution of Disputes. This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of

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Minnesota. Any dispute arising out of this Agreement shall, at the Executive’s election, be determined by arbitration under the rules of the American Arbitration Association then in effect (in which case both parties shall be bound by the arbitration award) or by litigation. Whether the dispute is to be settled by arbitration or litigation, the venue for the arbitration or litigation shall be Minneapolis, Minnesota or, at the Executive’s election, if the Executive is not then residing or working in the Minneapolis, Minnesota metropolitan area, in the judicial district encompassing the city in which the Executive resides; provided, that, if the Executive is not then residing in the United States, the election of the Executive with respect to such venue shall be either Minneapolis, Minnesota or in the judicial district encompassing that city in the United States among the thirty cities having the largest population (as determined by the most recent United States Census data available at the Termination Date) which is closest to the Executive’s residence. The parties consent to personal jurisdiction in each trial court in the selected venue having subject matter jurisdiction notwithstanding their residence or situs, and each party irrevocably consents to service of process in the manner provided hereunder for the giving of notices.

          23. Additional Section 409A Provisions. (a) If, after the date of a Change in Control of the Company, any payment amount or the value of any benefit under this Agreement is required to be included in the Executive’s income prior to the date such amount is actually paid or the benefit provided as a result of the failure of this Agreement (or any other arrangement that is required to be aggregated with this Agreement under Code Section 409A) to comply with Code Section 409A, then the Executive shall receive a distribution, in a lump sum, within 90 days after the date it is finally determined that the Agreement (or such other arrangement that is required to be aggregated with this Agreement) fails to meet the requirements of Section 409A of the Code; such distribution shall equal the amount required to be included in the Executives income as a result of such failure and shall reduce the amount of payments or benefits otherwise due hereunder.

          (b) The Company and the Executive intend the terms of this Agreement to be in compliance with Section 409A of the Code. The Company does not guarantee the tax treatment or tax consequences associated with any payment or benefit, including but not limited to consequences related to Section 409A of the Code. To the maximum extent permissible, any ambiguous terms of this Agreement shall be interpreted in a manner that avoids a violation of Section 409A of the Code.

          (c) If the Executive believes he or she is entitled to a payment or benefit pursuant to the terms of this Agreement that was not timely paid or provided, and such payment or benefit is considered deferred compensation subject to the requirements of Section 409A of the Code, the Executive acknowledges that to avoid an additional tax on such payment or benefit pursuant to the provisions of Section 409A of the Code, the Executive must make a reasonable, good faith effort to collect such payment or benefit no later than 90 days after the latest date upon which the payment could have been timely made or benefit timely provided without violating Section 409A of the Code, and if not paid or provided, must take further enforcement measures within 180 days after such latest date.

          24. Notice. Notices given pursuant to this Agreement shall be in writing and, except as otherwise provided by Section 13(d), shall be deemed given when actually received by the Executive or actually received by the Company’s Secretary or any officer of the Company other than the Executive. If mailed, such notices shall be mailed by United States registered or certified mail, return receipt requested, addressee only, postage prepaid, if to the Company, to Pentair, Inc., Attention: Secretary (or Chief Executive Officer, if the Executive is then Secretary), 5500 Wayzata Blvd., Suite 800, Golden Valley, Minnesota 55416, or if to the Executive, at the address set forth

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below the Executive’s signature to this Agreement, or to such other address as the party to be notified shall have theretofore given to the other party in writing.

          25. No Waiver. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time.

          26. Headings. The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement.

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          IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

PENTAIR, INC.
By:
	Its:
Attest:
	Its:
EXECUTIVE:
Address:

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EX-10.11

Exhibit 10.11

KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT

          THIS AGREEMENT, made and entered into as of the ___ day of ___, 20___, by and between Pentair, Inc., a Minnesota corporation (hereinafter referred to as the “Company”), and                      (hereinafter referred to as the “Executive”).

W I T N E S S E T H

          WHEREAS, the Executive is employed by the Company and/or a subsidiary of the Company (hereinafter referred to collectively as the “Employer”) in a key executive capacity and the Executive’s services are valuable to the conduct of the business of the Company;

          WHEREAS, the Company desires to continue to attract and retain dedicated and skilled management employees in a period of industry consolidation, consistent with achieving the best possible value for its shareholders in any change in control of the Company;

          WHEREAS, the Company recognizes that circumstances may arise in which a change in control of the Company occurs, through acquisition or otherwise, thereby causing a potential conflict of interest between the Company’s needs for the Executive to remain focused on the Company’s business and for the necessary continuity in management prior to and following a change in control, and the Executive’s reasonable personal concerns regarding future employment with the Employer and economic protection in the event of loss of employment as a consequence of a change in control;

          WHEREAS, the Company and the Executive are desirous that any proposal for a change in control or acquisition of the Company will be considered by the Executive objectively and with reference only to the best interests of the Company and its shareholders;

          WHEREAS, the Executive will be in a better position to consider the Company’s best interests if the Executive is afforded reasonable economic security, as provided in this Agreement, against altered conditions of employment which could result from any such change in control or acquisition;

          WHEREAS, the Executive possesses intimate knowledge of the business and affairs of the Company and has acquired certain confidential information and data with respect to the Company; and

          WHEREAS, the Company desires to insure, insofar as possible, that it will continue to have the benefit of the Executive’s services and to protect its confidential information and goodwill.

          NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto mutually covenant and agree as follows:

          1. Definitions.

          (a) 409A Affiliate. The term “409A Affiliate” means each entity that is required to be included in the Company’s controlled group of corporations within the meaning of Section 414(b) of the Code, or that is under common control with the Company within the meaning of Section 414(c) of the Code; provided, however, that the phrase “at least 50 percent” shall be used in place of the phrase “at least 80 percent” each place it appears therein or in the regulations thereunder.

          (b) Accrued Benefits. The Executive’s “Accrued Benefits” shall include the following amounts, payable as described herein: (i) all base salary for the time period ending with the Termination Date; (ii) reimbursement for any and all monies advanced in connection with the Executive’s employment for reasonable and necessary expenses incurred by the Executive on behalf of the Employer for the time period ending with the Termination Date; (iii) any and all other cash earned through the Termination Date and deferred at the election of the Executive or pursuant to any deferred compensation plan then in effect; (iv) notwithstanding any provision of any bonus or incentive compensation plan applicable to the Executive, but subject to any irrevocable deferral election then in effect, a lump sum amount, in cash, equal to the sum of (A) any bonus or incentive compensation that has been allocated or awarded to the Executive for a fiscal year or other measuring period under the plan that ends prior to the Termination Date but has not yet been paid (pursuant to Section 5(f) or otherwise) and (B) a pro rata portion to the Termination Date of the aggregate value of all contingent bonus or incentive compensation awards to the Executive for all uncompleted periods under the plan calculated as to each such award as if the Goals with respect to such bonus or incentive compensation award had been attained reduced by any amounts paid to the Executive pursuant to Section(b)(iii) and Section 3(b)(iv) under the plan for the fiscal year in which the Termination Date occurs; and (v) all other payments and benefits to which the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse or other beneficiary) may be entitled on the Termination Date as compensatory fringe benefits or under the terms of any benefit plan of the Employer, excluding severance payments under any Employer severance policy, practice or agreement in effect on the Termination Date. Payment of Accrued Benefits shall be made promptly in accordance with the Company’s prevailing practice with respect to clauses (i) and (ii) or, with respect to clauses (iii), (iv) and (v), pursuant to the terms of the benefit plan or practice establishing such benefits; provided that payments pursuant to clause (iv)(B) shall be paid on the first day of the seventh month following the month in which the Executive’s Separation from Service occurs, unless the Executive’s Separation from Service is due to death, in which event such payment shall be made within ninety (90) days of the date of Executive’s death.

          (c) Act. The term “Act” means the Securities Exchange Act of 1934, as amended.

          (d) Affiliate and Associate. The terms “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule l2b-2 of the General Rules and Regulations under the Act.

          (e) Annual Cash Compensation. The term “Annual Cash Compensation” shall mean the sum of (i) the Executive’s Annual Base Salary (determined as of the time of the Change in Control of the Company or, if higher, immediately prior to the date the Notice of Termination is given) plus (ii) an amount equal to the greater of the Executive’s annual incentive target bonus for the fiscal year in which the Termination Date occurs or the annual incentive bonus the Executive received for the fiscal year prior to the Change in Control of the Company (the aggregate amount set forth in clause (i) and clause (ii) shall hereafter be referred to as the “Annual Cash Compensation”),

          (f) Beneficial Owner. A Person shall be deemed to be the “Beneficial Owner” of any securities:

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          (i) which such Person or any of such Person’s Affiliates or Associates has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, (A) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase, or (B) securities issuable upon exercise of Rights issued pursuant to the terms of the Company’s Rights Agreement, dated as of December 10, 2004, as amended from time to time (or any successor to such Rights Agreement), at any time before the issuance of such securities;

          (ii) which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule l3d-3 of the General Rules and Regulations under the Act), including pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security under this clause (ii) as a result of an agreement, arrangement or understanding to vote such security if the agreement, arrangement or understanding: (A) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Act and (B) is not also then reportable on a Schedule l3D under the Act (or any comparable or successor report); or

          (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in clause (ii) above) or disposing of any voting securities of the Company.

          (g) Cause. “Cause” for termination by the Employer of the Executive’s employment in connection with a Change in Control of the Company shall be limited to (i) the engaging by the Executive in intentional conduct that the Company establishes, by clear and convincing evidence, has caused demonstrable and serious financial injury to the Employer, as evidenced by a determination in a binding and final judgment, order or decree of a court or administrative agency of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal, in an action, suit or proceeding, whether civil, criminal, administrative or investigative; (ii) conviction of a felony (as evidenced by binding and final judgment, order or decree of a court of competent jurisdiction, in effect after exhaustion of all rights of appeal); or (iii) continuing willful and unreasonable refusal by the Executive to perform the Executive’s duties or responsibilities (unless significantly changed without the Executive’s consent).

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          (h) Change in Control of the Company. A “Change in Control of the Company” shall be deemed to have occurred if an event set forth in any one of the following paragraphs shall have occurred:

          (i) any Person (other than (A) the Company or any of its subsidiaries, (B) a trustee or other fiduciary holding securities under any employee benefit plan of the Company or any of its subsidiaries, (C) an underwriter temporarily holding securities pursuant to an offering of such securities or (D) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock in the Company (“Excluded Persons”)) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after the date of this Agreement, pursuant to express authorization by the Board that refers to this exception) representing 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding voting securities; or

          (ii) the following individuals cease for any reason to constitute a majority of the number of directors of the Company then serving: (A) individuals who, on the date of this Agreement constituted the Board and (B) any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Act) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date of this Agreement, or whose appointment, election or nomination for election was previously so approved (collectively the “Continuing Directors”); provided, however, that individuals who are appointed to the Board pursuant to or in accordance with the terms of an agreement relating to a merger, consolidation, or share exchange involving the Company (or any direct or indirect subsidiary of the Company) shall not be Continuing Directors for purposes of this Agreement until after such individuals are first nominated for election by a vote of at least two-thirds (2/3) of the then Continuing Directors and are thereafter elected as directors by the shareholders of the Company at a meeting of shareholders held following consummation of such merger, consolidation, or share exchange; and, provided further, that in the event the failure of any such persons appointed to the Board to be Continuing Directors results in a Change in Control of the Company, the subsequent qualification of such persons as Continuing Directors shall not alter the fact that a Change in Control of the Company occurred; or

          (iii) the consummation of a merger, consolidation or share exchange of the Company with any other corporation or the issuance of voting securities of the Company in connection with a merger, consolidation or share exchange of the Company (or any direct or indirect subsidiary of the Company), in each case, which requires approval of the shareholders of the Company, other than (A) a merger, consolidation or share exchange which would result in the voting securities of the Company outstanding immediately prior to such merger,

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consolidation or share exchange continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger, consolidation or share exchange, or (B) a merger, consolidation or share exchange effected to implement a recapitalization of the Company (or similar transaction) in which no Person (other than an Excluded Person) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after the date of this Agreement, pursuant to express authorization by the Board that refers to this exception) representing 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding voting securities; or

          (iv) the consummation of a plan of complete liquidation or dissolution of the Company or a sale or disposition by the Company of all or substantially all of the Company’s assets (in one transaction or a series of related transactions within any period of 24 consecutive months), in each case, which requires approval of the shareholders of the Company, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity at least 75% of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale.

Notwithstanding the foregoing, no “Change in Control of the Company” shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to own, directly or indirectly, in the same proportions as their ownership in the Company, an entity that owns all or substantially all of the assets or voting securities of the Company immediately following such transaction or series of transactions.

          (i) Code. The term “Code” means the Internal Revenue Code of 1986, including any amendments thereto or successor tax codes thereof.

          (j) Covered Termination. Subject to Section 2(b), the term “Covered Termination” means any Termination of Employment during the Employment Period where the Termination Date or the date Notice of Termination is delivered is any date prior to the end of the Employment Period.

          (k) Employment Period. Subject to Section 2(b), the term “Employment Period” means a period commencing on the date of a Change in Control of the Company, and ending at 11:59 p.m. Central Time on the earlier of the third anniversary of such date or the Executive’s Normal Retirement Date.

          (l) Good Reason. The Executive shall have “Good Reason” for termination of employment in connection with a Change in Control of the Company in the event of:

          (i) any breach of this Agreement by the Employer, including specifically any breach by the Employer of the agreements contained in Section 3,

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Section 4, Section 5, or Section 6, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that the Employer remedies promptly after receipt of notice thereof given by the Executive;

          (ii) any reduction in the Executive’s base salary, percentage of base salary available as incentive compensation or bonus opportunity or benefits, in each case relative to those most favorable to the Executive in effect at any time during the 180-day period prior to the Change in Control of the Company or, to the extent more favorable to the Executive, those in effect at any time during the Employment Period;

          (iii) the removal of the Executive from, or any failure to reelect or reappoint the Executive to, any of the positions held with the Employer on the date of the Change in Control of the Company or any other positions with the Employer to which the Executive shall thereafter be elected, appointed or assigned, except in the event that such removal or failure to reelect or reappoint relates to the termination by the Employer of the Executive’s employment for Cause or by reason of disability pursuant to Section 12;

          (iv) a good faith determination by the Executive that there has been a material adverse change, without the Executive’s written consent, in the Executive’s working conditions or status with the Employer relative to the most favorable working conditions or status in effect during the 180-day period prior to the Change in Control of the Company, or, to the extent more favorable to the Executive, those in effect at any time during the Employment Period, including but not limited to (A) a significant change in the nature or scope of the Executive’s authority, powers, functions, duties or responsibilities, or (B) a significant reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements, but in each case excluding for this purpose an isolated, insubstantial and inadvertent event not occurring in bad faith that the Employer remedies within ten (10) days after receipt of notice thereof given by the Executive;

          (v) the relocation of the Executive’s principal place of employment to a location more than 50 miles from the Executive’s principal place of employment on the date 180 days prior to the Change in Control of the Company;

          (vi) the Employer requires the Executive to travel on Employer business 20% in excess of the average number of days per month the Executive was required to travel during the 180-day period prior to the Change in Control of the Company; or

          (vii) failure by the Company to obtain the Agreement referred to in Section 17(a) as provided therein.

          (m) Normal Retirement Date. The term “Normal Retirement Date” means “Normal Retirement Date” as defined in the primary qualified defined benefit pension plan applicable to the Executive, or any successor plan, as in effect on the date of the Change in Control of the Company.

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          (n) Person. The term “Person” shall mean any individual, firm, partnership, corporation or other entity, including any successor (by merger or otherwise) of such entity, or a group of any of the foregoing acting in concert.

          (o) Separation from Service. For purposes of this Agreement, the term “Separation from Service” means the Executive’s Termination of Employment, or if the Executive continues to provide services following his or her Termination of Employment, such later date as is considered a separation from service from the Company and its 409A Affiliates within the meaning of Code Section 409A. Specifically, if the Executive continues to provide services to the Company or a 409A Affiliate in a capacity other than as an employee, such shift in status is not automatically a Separation from Service.

          (p) Termination of Employment. For purposes of this Agreement, the Executive’s termination of employment shall be presumed to occur when the Company and Executive reasonably anticipate that no further services will be performed by the Executive for the Company and its 409A Affiliates or that the level of bona fide services the Executive will perform as an employee of the Company and its 409A Affiliates will permanently decrease to no more than 20% of the average level of bona fide services performed by the Executive (whether as an employee or independent contractor) for the Company and its 409A Affiliates over the immediately preceding 36-month period (or such lesser period of services). Whether the Executive has experienced a Termination of Employment shall be determined by the Employer in good faith and consistent with Section 409A of the Code. Notwithstanding the foregoing, if the Executive takes a leave of absence for purposes of military leave, sick leave or other bona fide reason, the Executive will not be deemed to have incurred a Separation from Service for the first 6 months of the leave of absence, or if longer, for so long as the Executive’s right to reemployment is provided either by statute or by contract, including this Agreement; provided that if the leave of absence is due to a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than six months, where such impairment causes the Executive to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, the leave may be extended by the Employer for up to 29 months without causing a Termination of Employment.

          (q) Termination Date. Except as otherwise provided in Section 2(b), Section 10(b), and Section 17(a), the term “Termination Date” means (i) if the Executive’s Termination of Employment is by the Executive’s death, the date of death; (ii) if the Executive’s Termination of Employment is by reason of voluntary early retirement, as agreed in writing by the Employer and the Executive, the date of such early retirement which is set forth in such written agreement; (iii) if the Executive’s Termination of Employment is, for purposes of this Agreement, by reason of disability pursuant to Section 12, the earlier of thirty days after the Notice of Termination is given or one day prior to the end of the Employment Period; (iv) if the Executive’s Termination of Employment is by the Executive voluntarily (other than for Good Reason), the date the Notice of Termination is given; and (v) if the Executive’s Termination of Employment is by the Employer (other than by reason of disability pursuant to Section 12) or by the Executive for Good Reason, the earlier of thirty days after the Notice of Termination is given or one day prior to the end of the Employment Period. Notwithstanding the foregoing,

          (A) If termination is for Cause pursuant to Section 1(f)(iii) and if the Executive has cured the conduct constituting such Cause as described by the Employer in its Notice of Termination within such 30-day or shorter period, then the

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Executive’s employment hereunder shall continue as if the Employer had not delivered its Notice of Termination.

          (B) If the Executive shall in good faith give a Notice of Termination for Good Reason and the Employer notifies the Executive that a dispute exists concerning the termination within the 15-day period following receipt thereof, then the Executive may elect to continue his or her employment during such dispute and the Termination Date shall be determined under this paragraph. If the Executive so elects and it is thereafter determined that Good Reason did exist, the Termination Date shall be the earliest of (1) the date on which the dispute is finally determined, either (x) by mutual written agreement of the parties or (y) in accordance with Section 22, (2) the date of the Executive’s death or (3) one day prior to the end of the Employment Period. If the Executive so elects and it is thereafter determined that Good Reason did not exist, then the employment of the Executive hereunder shall continue after such determination as if the Executive had not delivered the Notice of Termination asserting Good Reason and there shall be no Termination Date arising out of such Notice. In either case, this Agreement continues, until the Termination Date, if any, as if the Executive had not delivered the Notice of Termination except that, if it is finally determined that Good Reason did exist, the Executive shall in no case be denied the benefits described in Section 9 (including a Termination Payment) based on events occurring after the Executive delivered his Notice of Termination.

          (C) Except as provided in Section 1(n)(B), if the party receiving the Notice of Termination notifies the other party that a dispute exists concerning the termination within the appropriate period following receipt thereof and it is finally determined that the reason asserted in such Notice of Termination did not exist, then (1) if such Notice was delivered by the Executive, the Executive will be deemed to have voluntarily terminated his employment and the Termination Date shall be the earlier of the date 15 days after the Notice of Termination is given or one day prior to the end of the Employment Period and (2) if delivered by the Company, the Company will be deemed to have terminated the Executive other than by reason of death, disability or Cause.

          2. Termination or Cancellation Prior to Change in Control.

          (a) Subject to Section 2(b), the Employer and the Executive shall each retain the right to terminate the employment of the Executive at any time prior to a Change in Control of the Company. Subject to Section 2(b), in the event the Executive’s employment is terminated prior to a Change in Control of the Company, this Agreement shall be terminated and cancelled and of no further force and effect, and any and all rights and obligations of the parties hereunder shall cease.

          (b) Anything in this Agreement to the contrary notwithstanding, if a Change in Control of the Company occurs and if the Executive’s employment with the Employer is terminated (other than a termination due to the Executive’s death or as a result of the Executive’s disability) during the period of 180 days prior to the date on which the Change in Control of the Company occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control of the Company or (ii)  otherwise arose in connection with or in anticipation of a Change in Control of the Company, then for all purposes of this Agreement such termination of employment

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shall be deemed a “Covered Termination,” “Notice of Termination” shall be deemed to have been given, and the “Employment Period” shall be deemed to have begun on the date of such termination which shall be deemed to be the “Termination Date” and the date of the Change in Control of the Company for purposes of this Agreement.

          3. Employment Period; Vesting and Payment of Certain Benefits.

          (a) If a Change in Control of the Company occurs when the Executive is employed by the Employer, the Employer will continue thereafter to employ the Executive during the Employment Period, and the Executive will remain in the employ of the Employer in accordance with and subject to the terms and provisions of this Agreement. Any Termination of Employment during the Employment Period, whether by the Company or the Employer, shall be deemed a termination by the Company for purposes of this Agreement.

          (b) If a Change in Control of the Company occurs when the Executive is employed by the Employer, (i) the Company shall cause all restrictions on restricted stock awards made to the Executive prior to the Change in Control of the Company to lapse such that the Executive is fully and immediately vested in the Executive’s restricted stock upon such a Change in Control of the Company; (ii) the Company shall cause all stock options granted to the Executive prior to the Change in Control of the Company pursuant to the Company’s stock option plan(s) to be fully and immediately vested upon such a Change in Control of the Company; (iii) the Company shall cause all incentive compensation units and performance awards granted to the Executive pursuant to any long-term incentive plan maintained by the Company to be paid to the Executive, subject to any irrevocable deferral election then in effect, within ten (10) business days after the Change in Control of the Company (A) at one-third (1/3) of target, if the award cycle has been in effect less than twelve (12) months, (B) at two thirds (2/3) of the then current value pursuant to such plan, if the award cycle has been in effect twelve (12) or more months but less than twenty-four (24) months, and (C) at the then current value pursuant to such plan, if the award cycle has been in effect twenty-four (24) or more months, in each case as if all performance or incentive requirements and periods had been satisfied; and (iv) the Company shall pay to the Executive within ten (10) business days after the Change in Control of the Company an amount equal to the Executive’s annual incentive target bonus for the fiscal year in which the Change in Control of the Company occurs, subject to any irrevocable deferral election then in effect.

          4. Duties. During the Employment Period, the Executive shall, in the same capacities and positions held by the Executive at the time of the Change in Control of the Company or in such other capacities and positions as may be agreed to by the Employer and the Executive in writing, devote the Executive’s best efforts and all of the Executive’s business time, attention and skill to the business and affairs of the Employer, as such business and affairs now exist and as they may hereafter be conducted.

          5. Compensation. During the Employment Period, the Executive shall be compensated as follows:

          (a) The Executive shall receive, at reasonable intervals (but not less often than monthly) and in accordance with such standard policies as may be in effect immediately prior to the Change in Control of the Company, an annual base salary in cash equivalent of not less than twelve times the Executive’s highest monthly base salary for the twelve-month period immediately preceding the month in which the Change in Control of the Company occurs or, if higher, annual

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base salary at the rate in effect immediately prior to the Change in Control of the Company (which base salary shall, unless otherwise agreed in writing by the Executive or subject to any irrevocable deferral election then in effect, include the current receipt by the Executive of any amounts which, prior to the Change in Control of the Company, the Executive had elected to defer, whether such compensation is deferred under Section 401(k) of the Code or otherwise), subject to adjustment as hereinafter provided in Section 6 (such salary amount as adjusted upward from time to time is hereafter referred to as the “Annual Base Salary”).

          (b) The Executive shall receive fringe benefits at least equal in value to the highest value of such benefits provided for the Executive at any time during the 180-day period immediately prior to the Change in Control of the Company or, if more favorable to the Executive, those provided generally at any time during the Employment Period to any executives of the Employer of comparable status and position to the Executive; and shall be reimbursed, at such intervals and in accordance with such standard policies that are most favorable to the Executive that were in effect at any time during the 180-day period immediately prior to the Change in Control of the Company, for any and all monies advanced in connection with the Executive’s employment for reasonable and necessary expenses incurred by the Executive on behalf of the Employer, including travel expenses.

          (c) The Executive and/or the Executive’s family, as the case may be, shall be included, to the extent eligible thereunder (which eligibility shall not be conditioned on the Executive’s salary grade or on any other requirement which excludes persons of comparable status to the Executive unless such exclusion was in effect for such plan or an equivalent plan at any time during the 180-day period immediately prior to the Change in Control of the Company), in any and all plans providing benefits for the Employer’s salaried employees in general, including but not limited to group life insurance, hospitalization, medical, dental, profit sharing and stock bonus plans; provided, that, (i) in no event shall the aggregate level of benefits under such plans in which the Executive is included be less than the aggregate level of benefits under plans of the Employer of the type referred to in this Section 5(c) in which the Executive was participating at any time during the 180-day period immediately prior to the Change in Control of the Company and (ii) in no event shall the aggregate level of benefits under such plans be less than the aggregate level of benefits under plans of the type referred to in this Section 5(c) provided at any time after the Change in Control of the Company to any executive of the Employer of comparable status and position to the Executive.

          (d) The Executive shall annually be entitled to not less than the amount of paid vacation and not fewer than the highest number of paid holidays to which the Executive was entitled annually at any time during the 180-day period immediately prior to the Change in Control of the Company or such greater amount of paid vacation and number of paid holidays as may be made available annually to other executives of the Employer of comparable status and position to the Executive at any time during the Employment Period.

          (e) The Executive shall be included in all plans providing additional benefits to executives of the Employer of comparable status and position to the Executive, including but not limited to deferred compensation, split-dollar life insurance, supplemental retirement, stock option, stock appreciation, stock bonus and similar or comparable plans; provided, that, (i) in no event shall the aggregate level of benefits under such plans be less than the highest aggregate level of benefits under plans of the Employer of the type referred to in this Section 5(e) in which the Executive was participating at any time during the 180-day period immediately prior to the Change in Control of the Company; (ii) in no event shall the aggregate level of benefits under such plans be less than the

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aggregate levels of benefits under plans of the type referred to in this Section 5(e) provided at any time after the Change in Control of the Company to any executive of the Employer comparable in status and position to the Executive; and (iii) the Employer’s obligation to include the Executive in bonus or incentive compensation plans shall be determined by Section 5(f).

          (f) To assure that the Executive will have an opportunity to earn incentive compensation after a Change in Control of the Company, the Executive shall be included in a bonus plan of the Employer which shall satisfy the standards described below (such plan, the “Bonus Plan”). Bonuses under the Bonus Plan shall be payable with respect to achieving such financial or other goals reasonably related to the business of the Employer as the Employer shall establish (the “Goals”), all of which Goals shall be attainable, prior to the end of the Employment Period, with approximately the same degree of probability as the most attainable goals under the Employer’s bonus plan or plans as in effect at any time during the 180-day period immediately prior to the Change in Control of the Company (whether one or more, the “Company Bonus Plan”) and in view of the Employer’s existing and projected financial and business circumstances applicable at the time. The amount of the bonus (the “Bonus Amount”) that the Executive is eligible to earn under the Bonus Plan shall be no less than 200% of the Executive’s target award provided in such Company Bonus Plan (such bonus amount herein referred to as the “Targeted Bonus”), and in the event the Goals are not achieved such that the entire Targeted Bonus is not payable, the Bonus Plan shall provide for a payment of a Bonus Amount equal to a portion of the Targeted Bonus reasonably related to that portion of the Goals which were achieved. Payment of the Bonus Amount shall not be affected by any circumstance occurring subsequent to the end of the Employment Period, including the Executive’s Termination of Employment.

          6. Annual Compensation Adjustments. During the Employment Period, the Board of Directors of the Company (or an appropriate committee thereof) will consider and appraise, at least annually, the contributions of the Executive to the Company, and in accordance with the Company’s practice prior to the Change in Control of the Company, due consideration shall be given to the upward adjustment of the Executive’s Annual Base Salary, at least annually, (a) commensurate with increases generally given to other executives of the Company of comparable status and position to the Executive, and (b) as the scope of the Company’s operations or the Executive’s duties expand.

          7. Termination For Cause or Without Good Reason. If there is a Covered Termination for Cause or due to the Executive’s voluntarily terminating his or her employment other than for Good Reason (any such terminations to be subject to the procedures set forth in Section 13), then the Executive shall be entitled to receive only Accrued Benefits.

          8. Termination Giving Rise to a Termination Payment. If there is a Covered Termination by the Executive for Good Reason, or by the Company other than by reason of (i) death, (ii) disability pursuant to Section 12, or (iii) Cause (any such terminations to be subject to the procedures set forth in Section 13), then the Executive shall be entitled to receive, and the Company shall promptly pay, Accrued Benefits and, in lieu of further base salary for periods following the Termination Date, as liquidated damages and additional severance pay and in consideration of the covenant of the Executive set forth in Section 14(a), the Termination Payment pursuant to Section 9(a).

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          9. Payments Upon Termination.

          (a) Termination Payment. The “Termination Payment” shall be an amount equal to the Annual Cash Compensation times two and one-half (2¹/2). The Termination Payment shall be paid to the Executive in cash equivalent on the first day of the seventh month following the month in which the Executive’s Separation from Service occurs, without interest thereon; provided that, if on the date of the Executive’s Separation from Service, neither the Company nor any other entity that is considered a “service recipient” with respect to the Executive within the meaning of Code Section 409A has any stock which is publicly traded on an established securities market (within the meaning of Treasury Regulation Section 1.897-1(m)) or otherwise, then the Termination Payment shall be paid to the Executive in cash equivalent within ten (10) business days after the Termination Date. Notwithstanding the foregoing, in the event the Executive’s Termination Date is pursuant to Section 2(b), the Termination Payment shall be paid within ten (10) business days after the date of the Change in Control of the Company (as defined without reference to Section 2(b)), without interest. Such lump sum payment shall not be reduced by any present value or similar factor, and the Executive shall not be required to mitigate the amount of the Termination Payment by securing other employment or otherwise, nor will such Termination Payment be reduced by reason of the Executive securing other employment or for any other reason. The Termination Payment shall be in lieu of, and acceptance by the Executive of the Termination Payment shall constitute the Executive’s release of any rights of the Executive to, any other cash severance payments under any Company severance policy, practice or agreement.

          (b) Certain Additional Payments by the Company.

          (i) Notwithstanding any other provision of this Agreement, if any portion of the Termination Payment or any other payment under this Agreement, or under any other agreement with or plan of the Employer (in the aggregate, “Total Payments”), would constitute an “excess parachute payment” as defined in Section 280G of the Code (or any successor provision), then the Company shall pay the Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Executive after deduction of any excise tax imposed under Section 4999 of the Code (or any successor provision) and any interest charges or penalties in respect of the imposition of such excise tax (collectively, the “Excise Tax”) (but not any federal, state or local income tax, or employment tax) on the Total Payments, and any federal, state and local income tax, employment tax, and excise tax upon the payment provided for by this Section 9(b)(i), shall be equal to the Total Payments. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s domicile for income tax purposes on the date the Gross-Up Payment is made, net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes. Notwithstanding the foregoing, if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Total Payments would not be subject to the Excise Tax if the Total Payments were reduced by an amount that is less than 10% of the Total Payments that would be treated as “parachute payments” under Section 280G of the Code (or any successor provision), then the amounts payable to the Executive under this Agreement shall be reduced

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(but not below zero) to the maximum amount that could be paid to the Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), and no Gross-Up Payment shall be made to the Executive. For purposes of reducing the Total Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Total Payments) shall be reduced. If the reduction of the amounts payable hereunder would not result in a reduction of the Total Payments to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this provision.

          (ii) For purposes of this Agreement, the terms “excess parachute payment” and “parachute payments” shall have the meanings assigned to them in Section 280G of the Code (or any successor provision) and such “parachute payments” shall be valued as provided therein. Present value for purposes of this Agreement shall be calculated in accordance with Section 1274(b)(2) of the Code (or any successor provision). Promptly following a Covered Termination or notice by the Company to the Executive of its belief that there is a payment or benefit due the Executive which will result in an “excess parachute payment” as defined in Section 280G of the Code (or any successor provision), the Executive and the Company, at the Company’s expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel (“National Tax Counsel”) selected by the Company’s independent auditors and reasonably acceptable to the Executive (which may be regular outside counsel to the Company), which opinion sets forth (A) the amount of the Base Period Income, (B) the amount and present value of Total Payments, (C) the amount and present value of any excess parachute payments, and (D) the amount of any Gross-Up Payment or the reduction of any Total Payments to the Safe Harbor Cap, as the case may be. As used in this Agreement, the term “Base Period Income” means an amount equal to the Executive’s “annualized includable compensation for the base period” as defined in Section 280G(d)(1) of the Code. For purposes of such opinion, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code (or any successor provisions), which determination shall be evidenced in a certificate of such auditors addressed to the Company and the Executive. The opinion of National Tax Counsel shall be addressed to the Company and the Executive and shall be binding upon the Company and the Executive. If such National Tax Counsel so requests in connection with the opinion required by this Section 9(b), the Executive and the Company shall obtain, at the Company’s expense, and the National Tax Counsel may rely on, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Executive solely with respect to its status under Section 280G of the Code and the regulations thereunder. The Company shall pay the Executive the Gross-Up Payment, if any, at the same time as the Termination Payment is paid, or if the Executive’s Covered Termination is pursuant to Section 2(b), then within 90 days following the Change in Control of the Company (determined without regard to Section 2(b)); provided that if prior to such date the Executive is required to remit the excise tax under Section 4999 of the Code to the Internal Revenue Service, then upon written notice by the Executive to the Company, the Company shall promptly reimburse the Executive for the Gross-Up Payment (but based on Executive’s actual rate of taxation).

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          (iii) In the event that upon any audit by the Internal Revenue Service, or by a state or local taxing authority, of the Total Payments or Gross-Up Payment, a change is finally determined to be required in the amount of taxes paid by the Executive, appropriate adjustments shall be made under this Agreement such that the net amount which is payable to the Executive after taking into account the provisions of Section 4999 of the Code (or any successor provision) shall reflect the intent of the parties as expressed in this Section 9, in the manner determined by the National Tax Counsel. If the Company is required to make a payment to the Executive, such payment shall be paid following the date of the final determination by a court or the Internal Revenue Service and within thirty (30) days after the date Executive provides the Company a written request for reimbursement thereof (accompanied by proof of taxes paid), but in no event shall the reimbursement be made later than the end of the calendar year following the year in which the Executive remits the excise tax to the Internal Revenue Service.

          (iv) The Company agrees to bear all costs associated with, and to indemnify and hold harmless, the National Tax Counsel of and from any and all claims, damages, and expenses resulting from or relating to its determinations pursuant to this Section 9(b), except for claims, damages or expenses resulting from the gross negligence or willful misconduct of such firm.

          (b) Additional Benefits. If there is a Covered Termination and the Executive is entitled to Accrued Benefits and the Termination Payment, then the Company shall provide to the Executive the following additional benefits:

          (i) The Executive shall receive until the end of the second calendar year following the calendar year in which the Executive’s Separation from Service occurs, at the expense of the Company, outplacement services, on an individualized basis at a level of service commensurate with the Executive’s status with the Company immediately prior to the date of the Change in Control of the Company (or, if higher, immediately prior to the Executive’s Termination of Employment), provided by a nationally recognized executive placement firm selected by the Company; provided that the cost to the Company of such services shall not exceed 10% of the Executive’s Annual Base Salary.

          (ii) Until the earlier of the end of the Employment Period or such time as the Executive has obtained new employment and is covered by benefits which in the aggregate are at least equal in value to the following benefits, the Executive shall continue to be covered, at the expense of the Company, by the same or equivalent life insurance, hospitalization, medical and dental coverage as was required hereunder with respect to the Executive immediately prior to the date the Notice of Termination is given, subject to the following:

          (A) Following the end of the COBRA continuation period, if such hospitalization, medical or dental coverage is provided under a health plan that is subject to Section 105(h) of the Code, benefits payable under such health plan shall comply with the requirements of Treasury regulation section 1.409A-3(i)(1)(iv) and, if necessary, the Company shall amend such health plan to comply therewith.

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          (B) During the first six months following the Executive’s Separation from Service, the Executive shall pay the Company for any life insurance coverage that provides a benefit in excess of $50,000 under a group term life insurance policy. After the end of such six month period, the Company shall make a cash equivalent payment to the Executive equal to the aggregate premiums paid by the Executive for such coverage, and thereafter such coverage shall be provided at the expense of the Company for the remainder of the period as set forth above; provided that this clause (B) shall cease to apply if on the date of the Executive’s Separation from Service, neither the Company nor any other entity that is considered a “service recipient” with respect to the Executive within the meaning of Code Section 409A has any stock which is publicly traded on an established securities market (within the meaning of Treasury Regulation Section 1.897-1(m)) or otherwise.

If the Executive is entitled to the Termination Payment pursuant to Section 2(b), then within ten (10) days following the Change in Control of the Company (determined without regard to Section 2(b)), the Company shall reimburse the Executive for any COBRA premiums the Executive paid for his or her hospitalization, medical and dental coverage under COBRA from the Executive’s Termination Date through the date of the Change in Control of the Company (determined without regard to Section 2(b)).

          (iii) The Company shall bear up to $15,000 in the aggregate of fees and expenses of consultants and/or legal or accounting advisors engaged by the Executive to advise the Executive as to matters relating to the computation of benefits due and payable under this Section 9.

          (iv) The Company shall cause the Executive to be fully and immediately vested in his accrued benefit under the Pentair, Inc. 1999 Supplemental Executive Retirement Plan (“SERP”) and the Pentair, Inc. Restoration Plan (“Restoration Plan”) or any successor plans thereto (the “Plans”) (to the extent the Executive participates in the Plans) and in any nonqualified defined contribution retirement plan of the Employer. The amount of benefits under the Plans shall be determined as if the Executive had completed additional years of Benefit Service (as such term is defined in the Plans) equal to the lesser of (A) three years or (B) the greater of (x) seven minus the years of Benefit Service credited to such Executive under the Plans, determined without regard to the terms of this Agreement, as of the end of the calendar year which includes the date of the Change in Control of the Company, or (y) zero. In addition, if the Executive is described in Appendix A to the SERP, the additional benefit therein provided for the Executive shall be fully vested and the amount of such additional benefit shall be no less than if the Executive had continued in qualified employment through the end of the calendar year in which he would attain age 62. In addition, the Executive’s accrued benefit under the Restoration Plan shall be appropriately increased by the value of the Executive’s accrued benefit, if any, under the Company’s tax-qualified defined benefit plan which is forfeited due to the Executive’s failure to become fully vested thereunder.

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          10. Death.

          (a) Except as provided in Section 10(b), in the event of a Covered Termination due to the Executive’s death, the Executive’s estate, heirs and beneficiaries shall receive all the Executive’s Accrued Benefits through the Termination Date.

          (b) In the event the Executive dies after a Notice of Termination is given (i) by the Company or (ii) by the Executive for Good Reason, the Executive’s estate, heirs and beneficiaries shall be entitled to the benefits described in Section 10(a) and, subject to the provisions of this Agreement, to such Termination Payment as the Executive would have been entitled to had the Executive lived, except that the Termination Payment shall be paid within 90 days following the date of the Executive’s death, without interest thereon. For purposes of this Section 10(b), the Termination Date shall be the earlier of 30 days following the giving of the Notice of Termination, subject to extension pursuant to Section 1(n), or one day prior to the end of the Employment Period.

          11. Retirement. If, during the Employment Period, the Executive and the Employer shall execute an agreement providing for the early retirement of the Executive from the Employer, or the Executive shall otherwise give notice that he is voluntarily choosing to retire early from the Employer, the Executive shall receive Accrued Benefits through the Termination Date; provided, that if the Executive’s employment is terminated by the Executive for Good Reason or by the Company other than by reason of death, disability or Cause and the Executive also, in connection with such termination, elects voluntary early retirement, the Executive shall also be entitled to receive a Termination Payment pursuant to Section 8.

          12. Termination for Disability. If, during the Employment Period, as a result of the Executive’s disability due to physical or mental illness or injury (regardless of whether such illness or injury is job-related), the Executive shall have been absent from the Executive’s duties hereunder on a full-time basis for a period of six consecutive months and, within 30 days after the Company notifies the Executive in writing that it intends to terminate the Executive’s employment (which notice shall not constitute the Notice of Termination contemplated below), the Executive shall not have returned to the performance of the Executive’s duties hereunder on a full-time basis, the Company may terminate the Executive’s employment for purposes of this Agreement pursuant to a Notice of Termination given in accordance with Section 13. If the Executive’s employment is terminated on account of the Executive’s disability in accordance with this Section, the Executive shall receive Accrued Benefits through the Termination Date and shall remain eligible for all benefits provided by any long term disability programs of the Employer in effect at the time of such termination.

          13. Termination Notice and Procedure. Any Covered Termination by the Company or the Executive (other than a termination of the Executive’s employment that is a Covered Termination by virtue of Section 2(b)) shall be communicated by a written notice of termination (“Notice of Termination”) to the Executive, if such Notice is given by the Company, and to the Company, if such Notice is given by the Executive, all in accordance with the following procedures and those set forth in Section 24:

          (a) If such termination is for disability, Cause or Good Reason, the Notice of Termination shall indicate in reasonable detail the facts and circumstances alleged to provide a basis for such termination.

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          (b) Any Notice of Termination by the Company shall have been approved, prior to the giving thereof to the Executive, by a resolution duly adopted by a majority of the directors of the Company (or any successor corporation) then in office.

          (c) If the Notice is given by the Executive for Good Reason, the Executive may cease performing his duties hereunder on or after the date fifteen days after the delivery of Notice of Termination and shall in any event cease employment on the Termination Date. If the Notice is given by the Company, then the Executive may cease performing his duties hereunder on the date of receipt of the Notice of Termination, subject to the Executive’s rights hereunder.

          (d) The Executive shall have thirty days, or such longer period as the Company may determine to be appropriate, to cure any conduct or act, if curable, alleged to provide grounds for termination of the Executive’s employment for Cause under this Agreement pursuant to Section 1(f)(iii).

          (e) The recipient of any Notice of Termination shall personally deliver or mail in accordance with Section 24 written notice of any dispute relating to such Notice of Termination to the party giving such Notice within 15 days after receipt thereof; provided, however, that if the Executive’s conduct or act alleged to provide grounds for termination by the Company for Cause is curable, then such period shall be 30 days. After the expiration of such period, the contents of the Notice of Termination shall become final and not subject to dispute.

          14. Further Obligations of the Executive.

          (a) Competition. The Executive agrees that, in the event of any Covered Termination where the Executive is entitled to Accrued Benefits and the Termination Payment, the Executive shall not, for a period expiring one year after the Termination Date, without the prior written approval of the Company’s Board of Directors, (i) solicit for employment an employee of the Company or its subsidiaries or (ii) participate in the management of, be employed by or own any business enterprise at a location within the United States that engages in substantial competition with the Company or its subsidiaries, where such enterprise’s revenues from any competitive activities amount to 10% or more of such enterprise’s net revenues and sales for its most recently completed fiscal year; provided, however, that nothing in this Section 14(a) shall prohibit the Executive from owning stock or other securities of a competitor amounting to less than five percent of the outstanding capital stock of such competitor.

          (b) Confidentiality. During and following the Executive’s employment by the Company, the Executive shall hold in confidence and not directly or indirectly disclose or use or copy or make lists of any confidential information or proprietary data of the Company (including that of the Employer), except to the extent authorized in writing by the Board of Directors of the Company or required by any court or administrative agency, other than to an employee of the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of duties as an executive of the Company. Confidential information shall not include any information known generally to the public or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that of the Company. All records, files, documents and materials, or copies thereof, relating to the business of the Company which the Executive shall prepare, or use, or come into contact with, shall be and remain the sole property of the Company and shall be promptly returned to the Company upon termination of employment with the Company.

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          15. Expenses and Interest. If, after a Change in Control of the Company, (a) a dispute arises with respect to the enforcement of the Executive’s rights under this Agreement or (b) any legal or arbitration proceeding shall be brought to enforce or interpret any provision contained herein or to recover damages for breach hereof, in either case so long as the Executive is not acting in bad faith, then the Company shall reimburse the Executive for any reasonable attorneys’ fees and necessary costs and disbursements incurred as a result of the dispute, legal or arbitration proceeding (“Expenses”), and prejudgment interest on any money judgment or arbitration award obtained by the Executive calculated at the rate of interest announced by U.S. Bank National Association, Minneapolis, Minnesota, from time to time at its prime or base lending rate from the date that payments to him or her should have been made under this Agreement. Within ten days after the Executive’s written request therefore (but in no event later than the end of the calendar year following the calendar year in which such Expense is incurred), the Company shall reimburse the Executive, or such other person or entity as the Executive may designate in writing to the Company, the Executive’s reasonable Expenses.

          16. Payment Obligations Absolute. The Company’s obligation during and after the Employment Period to pay the Executive the amounts and to make the benefit and other arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any setoff, counterclaim, recoupment, defense or other right which the Company may have against him or anyone else. Except as provided in Section 15, all amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company will not seek to recover all or any part of such payment from the Executive, or from whomsoever may be entitled thereto, for any reason whatsoever.

          17. Successors.

          (a) If the Company sells, assigns or transfers all or substantially all of its business and assets to any Person or if the Company merges into or consolidates or otherwise combines (where the Company does not survive such combination) with any Person (any such event, a “Sale of Business”), then the Company shall assign all of its right, title and interest in this Agreement as of the date of such event to such Person, and the Company shall cause such Person, by written agreement in form and substance reasonably satisfactory to the Executive, to expressly assume and agree to perform from and after the date of such assignment all of the terms, conditions and provisions imposed by this Agreement upon the Company. Failure of the Company to obtain such agreement prior to the effective date of such Sale of Business shall be a breach of this Agreement constituting “Good Reason” hereunder, except that for purposes of implementing the foregoing the date upon which such Sale of Business becomes effective shall be deemed the Termination Date. In case of such assignment by the Company and of assumption and agreement by such Person, as used in this Agreement, “Company” shall thereafter mean such Person which executes and delivers the agreement provided for in this Section 17 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, and this Agreement shall inure to the benefit of, and be enforceable by, such Person. The Executive shall, in his or her discretion, be entitled to proceed against any or all of such Persons, any Person which theretofore was such a successor to the Company and the Company (as so defined) in any action to enforce any rights of the Executive hereunder. Except as provided in this Section 17(a), this Agreement shall not be assignable by the Company. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company.

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          (b) This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, heirs and beneficiaries. All amounts payable to the Executive under Sections 3, 7, 8, 9, 10, 11, 12 and 15 if the Executive had lived shall be paid, in the event of the Executive’s death, to the Executive’s estate, heirs and representatives; provided, however, that the foregoing shall not be construed to modify any terms of any benefit plan of the Employer, as such terms are in effect on the date of the Change in Control of the Company, that expressly govern benefits under such plan in the event of the Executive’s death.

          18. Severability. The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby.

          19. Contents of Agreement; Waiver of Rights; Amendment. This Agreement sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and shall supersede in all respects, and the Executive hereby waives all rights under, any prior or other agreement or understanding between the parties with respect to such subject matter, including, but not limited to the Management Assurance Agreement and any Key Executive Employment and Severance Agreement between the Company and the Executive entered into prior to the date hereof. This Agreement may not be amended or modified at any time except by written instrument executed by the Company and the Executive.

          20. Withholding. The Company shall be entitled to withhold from amounts to be paid to the Executive hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold; provided, that the amount so withheld shall not exceed the minimum amount required to be withheld by law. In addition, if prior to the date of payment of the Termination Payment hereunder, the Federal Insurance Contributions Act (FICA) tax imposed under Sections 3101, 3121(a) and 3121(v)(2), where applicable, becomes due with respect to any payment or benefit to be provided hereunder, the Company may provide for an immediate payment of the amount needed to pay the Executive’s portion of such tax (plus an amount equal to the taxes that will be due on such amount) and the Executive’s Termination Payment shall be reduced accordingly. The Company shall be entitled to rely on an opinion of the National Tax Counsel if any question as to the amount or requirement of any such withholding shall arise.

          21. Certain Rules of Construction. No party shall be considered as being responsible for the drafting of this Agreement for the purpose of applying any rule construing ambiguities against the drafter or otherwise. No draft of this Agreement shall be taken into account in construing this Agreement. Any provision of this Agreement which requires an agreement in writing shall be deemed to require that the writing in question be signed by the Executive and an authorized representative of the Company.

          22. Governing Law; Resolution of Disputes. This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Minnesota. Any dispute arising out of this Agreement shall, at the Executive’s election, be determined by arbitration under the rules of the American Arbitration Association then in effect (in which case both parties shall be bound by the arbitration award) or by litigation. Whether the dispute is to be settled by arbitration or litigation, the venue for the arbitration or litigation shall be Minneapolis, Minnesota or, at the Executive’s election, if the Executive is not then residing or

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working in the Minneapolis, Minnesota metropolitan area, in the judicial district encompassing the city in which the Executive resides; provided, that, if the Executive is not then residing in the United States, the election of the Executive with respect to such venue shall be either Minneapolis, Minnesota or in the judicial district encompassing that city in the United States among the thirty cities having the largest population (as determined by the most recent United States Census data available at the Termination Date) which is closest to the Executive’s residence. The parties consent to personal jurisdiction in each trial court in the selected venue having subject matter jurisdiction notwithstanding their residence or situs, and each party irrevocably consents to service of process in the manner provided hereunder for the giving of notices.

          23. Additional Section 409A Provisions. (a) If, after the date of a Change in Control of the Company, any payment amount or the value of any benefit under this Agreement is required to be included in the Executive’s income prior to the date such amount is actually paid or the benefit provided as a result of the failure of this Agreement (or any other arrangement that is required to be aggregated with this Agreement under Code Section 409A) to comply with Code Section 409A, then the Executive shall receive a distribution, in a lump sum, within 90 days after the date it is finally determined that the Agreement (or such other arrangement that is required to be aggregated with this Agreement) fails to meet the requirements of Section 409A of the Code; such distribution shall equal the amount required to be included in the Executives income as a result of such failure and shall reduce the amount of payments or benefits otherwise due hereunder.

          (b) The Company and the Executive intend the terms of this Agreement to be in compliance with Section 409A of the Code. The Company does not guarantee the tax treatment or tax consequences associated with any payment or benefit, including but not limited to consequences related to Section 409A of the Code. To the maximum extent permissible, any ambiguous terms of this Agreement shall be interpreted in a manner that avoids a violation of Section 409A of the Code.

          (c) If the Executive believes he or she is entitled to a payment or benefit pursuant to the terms of this Agreement that was not timely paid or provided, and such payment or benefit is considered deferred compensation subject to the requirements of Section 409A of the Code, the Executive acknowledges that to avoid an additional tax on such payment or benefit pursuant to the provisions of Section 409A of the Code, the Executive must make a reasonable, good faith effort to collect such payment or benefit no later than 90 days after the latest date upon which the payment could have been timely made or benefit timely provided without violating Section 409A of the Code, and if not paid or provided, must take further enforcement measures within 180 days after such latest date.

          24. Notice. Notices given pursuant to this Agreement shall be in writing and, except as otherwise provided by Section 13(d), shall be deemed given when actually received by the Executive or actually received by the Company’s Secretary or any officer of the Company other than the Executive. If mailed, such notices shall be mailed by United States registered or certified mail, return receipt requested, addressee only, postage prepaid, if to the Company, to Pentair, Inc., Attention: Secretary (or Chief Executive Officer, if the Executive is then Secretary), 5500 Wayzata Blvd., Suite 800, Golden Valley, Minnesota 55416, or if to the Executive, at the address set forth below the Executive’s signature to this Agreement, or to such other address as the party to be notified shall have theretofore given to the other party in writing.

          25. No Waiver. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time.

          26. Headings. The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement.

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          IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

PENTAIR, INC.
By:
	Its:
Attest:
	Its:
EXECUTIVE:
Address:

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EX-10.12

Exhibit 10.12

KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT

          THIS AGREEMENT, made and entered into as of the                      day of                     , 20___, by and between Pentair, Inc., a Minnesota corporation (hereinafter referred to as the “Company”), and                                          (hereinafter referred to as the “Executive”).

W I T N E S S E T H

          WHEREAS, the Executive is employed by the Company and/or a subsidiary of the Company (hereinafter referred to collectively as the “Employer”) in a key executive capacity and the Executive’s services are valuable to the conduct of the business of the Company;

          WHEREAS, the Company desires to continue to attract and retain dedicated and skilled management employees in a period of industry consolidation, consistent with achieving the best possible value for its shareholders in any change in control of the Company;

          WHEREAS, the Company recognizes that circumstances may arise in which a change in control of the Company occurs, through acquisition or otherwise, thereby causing a potential conflict of interest between the Company’s needs for the Executive to remain focused on the Company’s business and for the necessary continuity in management prior to and following a change in control, and the Executive’s reasonable personal concerns regarding future employment with the Employer and economic protection in the event of loss of employment as a consequence of a change in control;

          WHEREAS, the Company and the Executive are desirous that any proposal for a change in control or acquisition of the Company will be considered by the Executive objectively and with reference only to the best interests of the Company and its shareholders;

          WHEREAS, the Executive will be in a better position to consider the Company’s best interests if the Executive is afforded reasonable economic security, as provided in this Agreement, against altered conditions of employment which could result from any such change in control or acquisition;

          WHEREAS, the Executive possesses intimate knowledge of the business and affairs of the Company and has acquired certain confidential information and data with respect to the Company; and

          WHEREAS, the Company desires to insure, insofar as possible, that it will continue to have the benefit of the Executive’s services and to protect its confidential information and goodwill.

          NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto mutually covenant and agree as follows:

          1. Definitions.

          (a) 409A Affiliate. The term “409A Affiliate” means each entity that is required to be included in the Company’s controlled group of corporations within the meaning of Section 414(b) of the Code, or that is under common control with the Company within the meaning of Section 414(c) of the Code; provided, however, that the phrase “at least 50 percent” shall be used in place of the phrase “at least 80 percent” each place it appears therein or in the regulations thereunder.

          (b) Accrued Benefits. The Executive’s “Accrued Benefits” shall include the following amounts, payable as described herein: (i) all base salary for the time period ending with the Termination Date; (ii) reimbursement for any and all monies advanced in connection with the Executive’s employment for reasonable and necessary expenses incurred by the Executive on behalf of the Employer for the time period ending with the Termination Date; (iii) any and all other cash earned through the Termination Date and deferred at the election of the Executive or pursuant to any deferred compensation plan then in effect; (iv) notwithstanding any provision of any bonus or incentive compensation plan applicable to the Executive, but subject to any irrevocable deferral election then in effect, a lump sum amount, in cash, equal to the sum of (A) any bonus or incentive compensation that has been allocated or awarded to the Executive for a fiscal year or other measuring period under the plan that ends prior to the Termination Date but has not yet been paid (pursuant to Section 5(f) or otherwise) and (B) a pro rata portion to the Termination Date of the aggregate value of all contingent bonus or incentive compensation awards to the Executive for all uncompleted periods under the plan calculated as to each such award as if the Goals with respect to such bonus or incentive compensation award had been attained reduced by any amounts paid to the Executive pursuant to Section(b)(iii) and Section 3(b)(iv) under the plan for the fiscal year in which the Termination Date occurs; and (v) all other payments and benefits to which the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse or other beneficiary) may be entitled on the Termination Date as compensatory fringe benefits or under the terms of any benefit plan of the Employer, excluding severance payments under any Employer severance policy, practice or agreement in effect on the Termination Date. Payment of Accrued Benefits shall be made promptly in accordance with the Company’s prevailing practice with respect to clauses (i) and (ii) or, with respect to clauses (iii), (iv) and (v), pursuant to the terms of the benefit plan or practice establishing such benefits; provided that payments pursuant to clause (iv)(B) shall be paid on the first day of the seventh month following the month in which the Executive’s Separation from Service occurs, unless the Executive’s Separation from Service is due to death, in which event such payment shall be made within ninety (90) days of the date of Executive’s death.

          (c) Act. The term “Act” means the Securities Exchange Act of 1934, as amended.

          (d) Affiliate and Associate. The terms “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule l2b-2 of the General Rules and Regulations under the Act.

          (e) Annual Cash Compensation. The term “Annual Cash Compensation” shall mean the sum of (i) the Executive’s Annual Base Salary (determined as of the time of the Change in Control of the Company or, if higher, immediately prior to the date the Notice of Termination is given) plus (ii) an amount equal to the greater of the Executive’s annual incentive target bonus for the fiscal year in which the Termination Date occurs or the annual incentive bonus the Executive received for the fiscal year prior to the Change in Control of the Company (the aggregate amount set forth in clause (i) and clause (ii) shall hereafter be referred to as the “Annual Cash Compensation”),

          (f) Beneficial Owner. A Person shall be deemed to be the “Beneficial Owner” of any securities:

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               (i) which such Person or any of such Person’s Affiliates or Associates has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, (A) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase, or (B) securities issuable upon exercise of Rights issued pursuant to the terms of the Company’s Rights Agreement, dated as of December 10, 2004, as amended from time to time (or any successor to such Rights Agreement), at any time before the issuance of such securities;

               (ii) which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule l3d-3 of the General Rules and Regulations under the Act), including pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security under this clause (ii) as a result of an agreement, arrangement or understanding to vote such security if the agreement, arrangement or understanding: (A) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Act and (B) is not also then reportable on a Schedule l3D under the Act (or any comparable or successor report); or

               (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in clause (ii) above) or disposing of any voting securities of the Company.

          (g) Cause. “Cause” for termination by the Employer of the Executive’s employment in connection with a Change in Control of the Company shall be limited to (i) the engaging by the Executive in intentional conduct that the Company establishes, by clear and convincing evidence, has caused demonstrable and serious financial injury to the Employer, as evidenced by a determination in a binding and final judgment, order or decree of a court or administrative agency of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal, in an action, suit or proceeding, whether civil, criminal, administrative or investigative; (ii) conviction of a felony (as evidenced by binding and final judgment, order or decree of a court of competent jurisdiction, in effect after exhaustion of all rights of appeal); or (iii) continuing willful and unreasonable refusal by the Executive to perform the Executive’s duties or responsibilities (unless significantly changed without the Executive’s consent).

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          (h) Change in Control of the Company. A “Change in Control of the Company” shall be deemed to have occurred if an event set forth in any one of the following paragraphs shall have occurred:

               (i) any Person (other than (A) the Company or any of its subsidiaries, (B) a trustee or other fiduciary holding securities under any employee benefit plan of the Company or any of its subsidiaries, (C) an underwriter temporarily holding securities pursuant to an offering of such securities or (D) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock in the Company (“Excluded Persons”)) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after the date of this Agreement, pursuant to express authorization by the Board that refers to this exception) representing 30% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding voting securities; or

               (ii) the following individuals cease for any reason to constitute a majority of the number of directors of the Company then serving: (A) individuals who, on the date of this Agreement constituted the Board and (B) any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Act) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date of this Agreement, or whose appointment, election or nomination for election was previously so approved (collectively the “Continuing Directors”); provided, however, that individuals who are appointed to the Board pursuant to or in accordance with the terms of an agreement relating to a merger, consolidation, or share exchange involving the Company (or any direct or indirect subsidiary of the Company) shall not be Continuing Directors for purposes of this Agreement until after such individuals are first nominated for election by a vote of at least two-thirds (2/3) of the then Continuing Directors and are thereafter elected as directors by the shareholders of the Company at a meeting of shareholders held following consummation of such merger, consolidation, or share exchange; and, provided further, that in the event the failure of any such persons appointed to the Board to be Continuing Directors results in a Change in Control of the Company, the subsequent qualification of such persons as Continuing Directors shall not alter the fact that a Change in Control of the Company occurred; or

               (iii) the consummation of a merger, consolidation or share exchange of the Company with any other corporation or the issuance of voting securities of the Company in connection with a merger, consolidation or share exchange of the Company (or any direct or indirect subsidiary of the Company), in each case, which requires approval of the shareholders of the Company, other than (A) a merger, consolidation or share exchange which would result in the voting securities of the Company outstanding immediately prior to such merger,

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consolidation or share exchange continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger, consolidation or share exchange, or (B) a merger, consolidation or share exchange effected to implement a recapitalization of the Company (or similar transaction) in which no Person (other than an Excluded Person) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after the date of this Agreement, pursuant to express authorization by the Board that refers to this exception) representing 30% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding voting securities; or

               (iv) the consummation of a plan of complete liquidation or dissolution of the Company or a sale or disposition by the Company of all or substantially all of the Company’s assets (in one transaction or a series of related transactions within any period of 24 consecutive months), in each case, which requires approval of the shareholders of the Company, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity at least 75% of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale.

Notwithstanding the foregoing, no “Change in Control of the Company” shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to own, directly or indirectly, in the same proportions as their ownership in the Company, an entity that owns all or substantially all of the assets or voting securities of the Company immediately following such transaction or series of transactions.

          (i) Code. The term “Code” means the Internal Revenue Code of 1986, including any amendments thereto or successor tax codes thereof.

          (j) Covered Termination. Subject to Section 2(b), the term “Covered Termination” means any Termination of Employment during the Employment Period where the Termination Date or the date Notice of Termination is delivered is any date prior to the end of the Employment Period.

          (k) Employment Period. Subject to Section 2(b), the term “Employment Period” means a period commencing on the date of a Change in Control of the Company, and ending at 11:59 p.m. Central Time on the earlier of the second anniversary of such date or the Executive’s Normal Retirement Date.

          (l) Good Reason. The Executive shall have “Good Reason” for termination of employment in connection with a Change in Control of the Company in the event of:

               (i) any breach of this Agreement by the Employer, including specifically any breach by the Employer of the agreements contained in Section 3,

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Section 4, Section 5, or Section 6, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that the Employer remedies promptly after receipt of notice thereof given by the Executive;

               (ii) any reduction in the Executive’s base salary, percentage of base salary available as incentive compensation or bonus opportunity or benefits, in each case relative to those most favorable to the Executive in effect at any time during the 180-day period prior to the Change in Control of the Company or, to the extent more favorable to the Executive, those in effect at any time during the Employment Period;

               (iii) the removal of the Executive from, or any failure to reelect or reappoint the Executive to, any of the positions held with the Employer on the date of the Change in Control of the Company or any other positions with the Employer to which the Executive shall thereafter be elected, appointed or assigned, except in the event that such removal or failure to reelect or reappoint relates to the termination by the Employer of the Executive’s employment for Cause or by reason of disability pursuant to Section 12;

               (iv) a good faith determination by the Executive that there has been a material adverse change, without the Executive’s written consent, in the Executive’s working conditions or status with the Employer relative to the most favorable working conditions or status in effect during the 180-day period prior to the Change in Control of the Company, or, to the extent more favorable to the Executive, those in effect at any time during the Employment Period, including but not limited to (A) a significant change in the nature or scope of the Executive’s authority, powers, functions, duties or responsibilities, or (B) a significant reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements, but in each case excluding for this purpose an isolated, insubstantial and inadvertent event not occurring in bad faith that the Employer remedies within ten (10) days after receipt of notice thereof given by the Executive;

               (v) the relocation of the Executive’s principal place of employment to a location more than 50 miles from the Executive’s principal place of employment on the date 180 days prior to the Change in Control of the Company;

               (vi) the Employer requires the Executive to travel on Employer business 20% in excess of the average number of days per month the Executive was required to travel during the 180-day period prior to the Change in Control of the Company; or

               (vii) failure by the Company to obtain the Agreement referred to in Section 17(a) as provided therein.

          (m) Normal Retirement Date. The term “Normal Retirement Date” means “Normal Retirement Date” as defined in the primary qualified defined benefit pension plan applicable to the Executive, or any successor plan, as in effect on the date of the Change in Control of the Company.

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          (n) Person. The term “Person” shall mean any individual, firm, partnership, corporation or other entity, including any successor (by merger or otherwise) of such entity, or a group of any of the foregoing acting in concert.

          (o) Separation from Service. For purposes of this Agreement, the term “Separation from Service” means the Executive’s Termination of Employment, or if the Executive continues to provide services following his or her Termination of Employment, such later date as is considered a separation from service from the Company and its 409A Affiliates within the meaning of Code Section 409A. Specifically, if the Executive continues to provide services to the Company or a 409A Affiliate in a capacity other than as an employee, such shift in status is not automatically a Separation from Service.

          (p) Termination of Employment. For purposes of this Agreement, the Executive’s termination of employment shall be presumed to occur when the Company and Executive reasonably anticipate that no further services will be performed by the Executive for the Company and its 409A Affiliates or that the level of bona fide services the Executive will perform as an employee of the Company and its 409A Affiliates will permanently decrease to no more than 20% of the average level of bona fide services performed by the Executive (whether as an employee or independent contractor) for the Company and its 409A Affiliates over the immediately preceding 36-month period (or such lesser period of services). Whether the Executive has experienced a Termination of Employment shall be determined by the Employer in good faith and consistent with Section 409A of the Code. Notwithstanding the foregoing, if the Executive takes a leave of absence for purposes of military leave, sick leave or other bona fide reason, the Executive will not be deemed to have incurred a Separation from Service for the first 6 months of the leave of absence, or if longer, for so long as the Executive’s right to reemployment is provided either by statute or by contract, including this Agreement; provided that if the leave of absence is due to a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than six months, where such impairment causes the Executive to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, the leave may be extended by the Employer for up to 29 months without causing a Termination of Employment.

          (q) Termination Date. Except as otherwise provided in Section 2(b), Section 10(b), and Section 17(a), the term “Termination Date” means (i) if the Executive’s Termination of Employment is by the Executive’s death, the date of death; (ii) if the Executive’s Termination of Employment is by reason of voluntary early retirement, as agreed in writing by the Employer and the Executive, the date of such early retirement which is set forth in such written agreement; (iii) if the Executive’s Termination of Employment is, for purposes of this Agreement, by reason of disability pursuant to Section 12, the earlier of thirty days after the Notice of Termination is given or one day prior to the end of the Employment Period; (iv) if the Executive’s Termination of Employment is by the Executive voluntarily (other than for Good Reason), the date the Notice of Termination is given; and (v) if the Executive’s Termination of Employment is by the Employer (other than by reason of disability pursuant to Section 12) or by the Executive for Good Reason, the earlier of thirty days after the Notice of Termination is given or one day prior to the end of the Employment Period. Notwithstanding the foregoing,

               (A) If termination is for Cause pursuant to Section 1(f)(iii) and if the Executive has cured the conduct constituting such Cause as described by the Employer in its Notice of Termination within such 30-day or shorter period, then the

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Executive’s employment hereunder shall continue as if the Employer had not delivered its Notice of Termination.

               (B) If the Executive shall in good faith give a Notice of Termination for Good Reason and the Employer notifies the Executive that a dispute exists concerning the termination within the 15-day period following receipt thereof, then the Executive may elect to continue his or her employment during such dispute and the Termination Date shall be determined under this paragraph. If the Executive so elects and it is thereafter determined that Good Reason did exist, the Termination Date shall be the earliest of (1) the date on which the dispute is finally determined, either (x) by mutual written agreement of the parties or (y) in accordance with Section 22, (2) the date of the Executive’s death or (3) one day prior to the end of the Employment Period. If the Executive so elects and it is thereafter determined that Good Reason did not exist, then the employment of the Executive hereunder shall continue after such determination as if the Executive had not delivered the Notice of Termination asserting Good Reason and there shall be no Termination Date arising out of such Notice. In either case, this Agreement continues, until the Termination Date, if any, as if the Executive had not delivered the Notice of Termination except that, if it is finally determined that Good Reason did exist, the Executive shall in no case be denied the benefits described in Section 9 (including a Termination Payment) based on events occurring after the Executive delivered his Notice of Termination.

               (C) Except as provided in Section 1(n)(B), if the party receiving the Notice of Termination notifies the other party that a dispute exists concerning the termination within the appropriate period following receipt thereof and it is finally determined that the reason asserted in such Notice of Termination did not exist, then (1) if such Notice was delivered by the Executive, the Executive will be deemed to have voluntarily terminated his employment and the Termination Date shall be the earlier of the date 15 days after the Notice of Termination is given or one day prior to the end of the Employment Period and (2) if delivered by the Company, the Company will be deemed to have terminated the Executive other than by reason of death, disability or Cause.

          2. Termination or Cancellation Prior to Change in Control.

          (a) Subject to Section 2(b), the Employer and the Executive shall each retain the right to terminate the employment of the Executive at any time prior to a Change in Control of the Company. Subject to Section 2(b), in the event that prior to a Change in Control of the Company (i) the Executive’s employment is terminated or (ii) as determined in writing by the Compensation Committee of the Board of Directors of the Company in its sole discretion, the Executive’s authority, powers, functions, duties, responsibilities or pay grade are materially reduced, this Agreement shall be terminated and cancelled and of no further force and effect, and any and all rights and obligations of the parties hereunder shall cease.

          (b) Anything in this Agreement to the contrary notwithstanding, if a Change in Control of the Company occurs and if the Executive’s employment with the Employer is terminated (other than a termination due to the Executive’s death or as a result of the Executive’s disability) during the period of 180 days prior to the date on which the Change in Control of the Company occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i)

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was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control of the Company or (ii) otherwise arose in connection with or in anticipation of a Change in Control of the Company, then for all purposes of this Agreement such termination of employment shall be deemed a “Covered Termination,” “Notice of Termination” shall be deemed to have been given, and the “Employment Period” shall be deemed to have begun on the date of such termination which shall be deemed to be the “Termination Date” and the date of the Change of Control of the Company for purposes of this Agreement. Anything in this Agreement to the contrary notwithstanding, if a Change in Control of the Company occurs and if the Executive’s authority, powers, functions, duties, responsibilities or pay grade were reduced pursuant to Section 2(a)(ii) during the period of 180 days prior to the date on which the Change in Control of the Company occurs, and if it is reasonably demonstrated by the Executive that such reduction in authority, powers, functions, duties, responsibilities or pay grade (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control of the Company or (ii) otherwise arose in connection with or in anticipation of a Change in Control of the Company, then the termination and cancellation of this Agreement pursuant to Section 2(a) shall be deemed null and void, this Agreement shall be deemed to remain in full force and effect with any and all rights and obligations of the parties hereunder continuing and such reduction in authority, powers, functions, duties, responsibilities or pay grade shall be considered “Good Reason” for the Executive to terminate employment in connection with a Change in Control of the Company.

          3. Employment Period; Vesting and Payment of Certain Benefits.

          (a) If a Change in Control of the Company occurs when the Executive is employed by the Employer, the Employer will continue thereafter to employ the Executive during the Employment Period, and the Executive will remain in the employ of the Employer in accordance with and subject to the terms and provisions of this Agreement. Any Termination of Employment during the Employment Period, whether by the Company or the Employer, shall be deemed a termination by the Company for purposes of this Agreement.

          (b) If a Change in Control of the Company occurs when the Executive is employed by the Employer, (i) the Company shall cause all restrictions on restricted stock awards made to the Executive prior to the Change in Control of the Company to lapse such that the Executive is fully and immediately vested in the Executive’s restricted stock upon such a Change in Control of the Company; (ii) the Company shall cause all stock options granted to the Executive prior to the Change in Control of the Company pursuant to the Company’s stock option plan(s) to be fully and immediately vested upon such a Change in Control of the Company; (iii) the Company shall cause all incentive compensation units and performance awards granted to the Executive pursuant to any long-term incentive plan maintained by the Company to be paid to the Executive, subject to any irrevocable deferral election then in effect, within ten (10) business days after the Change in Control of the Company (A) at one-third (1/3) of target, if the award cycle has been in effect less than twelve (12) months, (B) at two thirds (2/3) of the then current value pursuant to such plan, if the award cycle has been in effect twelve (12) or more months but less than twenty-four (24) months, and (C) at the then current value pursuant to such plan, if the award cycle has been in effect twenty-four (24) or more months, in each case as if all performance or incentive requirements and periods had been satisfied; and (iv) the Company shall pay to the Executive within ten (10) business days after the Change in Control of the Company an amount equal to the Executive’s annual incentive target bonus for the fiscal year in which the Change in Control of the Company occurs, subject to any irrevocable deferral election then in effect.

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          4. Duties. During the Employment Period, the Executive shall, in the same capacities and positions held by the Executive at the time of the Change in Control of the Company or in such other capacities and positions as may be agreed to by the Employer and the Executive in writing, devote the Executive’s best efforts and all of the Executive’s business time, attention and skill to the business and affairs of the Employer, as such business and affairs now exist and as they may hereafter be conducted.

          5. Compensation. During the Employment Period, the Executive shall be compensated as follows:

          (a) The Executive shall receive, at reasonable intervals (but not less often than monthly) and in accordance with such standard policies as may be in effect immediately prior to the Change in Control of the Company, an annual base salary in cash equivalent of not less than twelve times the Executive’s highest monthly base salary for the twelve-month period immediately preceding the month in which the Change in Control of the Company occurs or, if higher, annual base salary at the rate in effect immediately prior to the Change in Control of the Company (which base salary shall, unless otherwise agreed in writing by the Executive or subject to any irrevocable deferral election then in effect, include the current receipt by the Executive of any amounts which, prior to the Change in Control of the Company, the Executive had elected to defer, whether such compensation is deferred under Section 401(k) of the Code or otherwise), subject to adjustment as hereinafter provided in Section 6 (such salary amount as adjusted upward from time to time is hereafter referred to as the “Annual Base Salary”).

          (b) The Executive shall receive fringe benefits at least equal in value to the highest value of such benefits provided for the Executive at any time during the 180-day period immediately prior to the Change in Control of the Company or, if more favorable to the Executive, those provided generally at any time during the Employment Period to any executives of the Employer of comparable status and position to the Executive; and shall be reimbursed, at such intervals and in accordance with such standard policies that are most favorable to the Executive that were in effect at any time during the 180-day period immediately prior to the Change in Control of the Company, for any and all monies advanced in connection with the Executive’s employment for reasonable and necessary expenses incurred by the Executive on behalf of the Employer, including travel expenses.

          (c) The Executive and/or the Executive’s family, as the case may be, shall be included, to the extent eligible thereunder (which eligibility shall not be conditioned on the Executive’s salary grade or on any other requirement which excludes persons of comparable status to the Executive unless such exclusion was in effect for such plan or an equivalent plan at any time during the 180-day period immediately prior to the Change in Control of the Company), in any and all plans providing benefits for the Employer’s salaried employees in general, including but not limited to group life insurance, hospitalization, medical, dental, profit sharing and stock bonus plans; provided, that, (i) in no event shall the aggregate level of benefits under such plans in which the Executive is included be less than the aggregate level of benefits under plans of the Employer of the type referred to in this Section 5(c) in which the Executive was participating at any time during the 180-day period immediately prior to the Change in Control of the Company and (ii) in no event shall the aggregate level of benefits under such plans be less than the aggregate level of benefits under plans of the type referred to in this Section 5(c) provided at any time after the Change in Control of the Company to any executive of the Employer of comparable status and position to the Executive.

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          (d) The Executive shall annually be entitled to not less than the amount of paid vacation and not fewer than the highest number of paid holidays to which the Executive was entitled annually at any time during the 180-day period immediately prior to the Change in Control of the Company or such greater amount of paid vacation and number of paid holidays as may be made available annually to other executives of the Employer of comparable status and position to the Executive at any time during the Employment Period.

          (e) The Executive shall be included in all plans providing additional benefits to executives of the Employer of comparable status and position to the Executive, including but not limited to deferred compensation, split-dollar life insurance, supplemental retirement, stock option, stock appreciation, stock bonus and similar or comparable plans; provided, that, (i) in no event shall the aggregate level of benefits under such plans be less than the highest aggregate level of benefits under plans of the Employer of the type referred to in this Section 5(e) in which the Executive was participating at any time during the 180-day period immediately prior to the Change in Control of the Company; (ii) in no event shall the aggregate level of benefits under such plans be less than the aggregate levels of benefits under plans of the type referred to in this Section 5(e) provided at any time after the Change in Control of the Company to any executive of the Employer comparable in status and position to the Executive; and (iii) the Employer’s obligation to include the Executive in bonus or incentive compensation plans shall be determined by Section 5(f).

          (f) To assure that the Executive will have an opportunity to earn incentive compensation after a Change in Control of the Company, the Executive shall be included in a bonus plan of the Employer which shall satisfy the standards described below (such plan, the “Bonus Plan”). Bonuses under the Bonus Plan shall be payable with respect to achieving such financial or other goals reasonably related to the business of the Employer as the Employer shall establish (the “Goals”), all of which Goals shall be attainable, prior to the end of the Employment Period, with approximately the same degree of probability as the most attainable goals under the Employer’s bonus plan or plans as in effect at any time during the 180-day period immediately prior to the Change in Control of the Company (whether one or more, the “Company Bonus Plan”) and in view of the Employer’s existing and projected financial and business circumstances applicable at the time. The amount of the bonus (the “Bonus Amount”) that the Executive is eligible to earn under the Bonus Plan shall be no less than 200% of the Executive’s target award provided in such Company Bonus Plan (such bonus amount herein referred to as the “Targeted Bonus”), and in the event the Goals are not achieved such that the entire Targeted Bonus is not payable, the Bonus Plan shall provide for a payment of a Bonus Amount equal to a portion of the Targeted Bonus reasonably related to that portion of the Goals which were achieved. Payment of the Bonus Amount shall not be affected by any circumstance occurring subsequent to the end of the Employment Period, including the Executive’s Termination of Employment.

          6. Annual Compensation Adjustments. During the Employment Period, the Board of Directors of the Company (or an appropriate committee thereof) will consider and appraise, at least annually, the contributions of the Executive to the Company, and in accordance with the Company’s practice prior to the Change in Control of the Company, due consideration shall be given to the upward adjustment of the Executive’s Annual Base Salary, at least annually, (a) commensurate with increases generally given to other executives of the Company of comparable status and position to the Executive, and (b) as the scope of the Company’s operations or the Executive’s duties expand.

          7. Termination For Cause or Without Good Reason. If there is a Covered Termination for Cause or due to the Executive’s voluntarily terminating his or her employment other

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than for Good Reason (any such terminations to be subject to the procedures set forth in Section 13), then the Executive shall be entitled to receive only Accrued Benefits.

          8. Termination Giving Rise to a Termination Payment. If there is a Covered Termination by the Executive for Good Reason, or by the Company other than by reason of (i) death, (ii) disability pursuant to Section 12, or (iii) Cause (any such terminations to be subject to the procedures set forth in Section 13), then the Executive shall be entitled to receive, and the Company shall promptly pay, Accrued Benefits and, in lieu of further base salary for periods following the Termination Date, as liquidated damages and additional severance pay and in consideration of the covenant of the Executive set forth in Section 14(a), the Termination Payment pursuant to Section 9(a).

          9. Payments Upon Termination.

          (a) Termination Payment. The “Termination Payment” shall be an amount equal to the Annual Cash Compensation times two and one-half (2¹/2). The Termination Payment shall be paid to the Executive in cash equivalent on the first day of the seventh month following the month in which the Executive’s Separation from Service occurs, without interest thereon; provided that, if on the date of the Executive’s Separation from Service, neither the Company nor any other entity that is considered a “service recipient” with respect to the Executive within the meaning of Code Section 409A has any stock which is publicly traded on an established securities market (within the meaning of Treasury Regulation Section 1.897-1(m)) or otherwise, then the Termination Payment shall be paid to the Executive in cash equivalent within ten (10) business days after the Termination Date. Notwithstanding the foregoing, in the event the Executive’s Termination Date is pursuant to Section 2(b), the Termination Payment shall be paid within ten (10) business days after the date of the Change in Control of the Company (as defined without reference to Section 2(b)), without interest. Such lump sum payment shall not be reduced by any present value or similar factor, and the Executive shall not be required to mitigate the amount of the Termination Payment by securing other employment or otherwise, nor will such Termination Payment be reduced by reason of the Executive securing other employment or for any other reason. The Termination Payment shall be in lieu of, and acceptance by the Executive of the Termination Payment shall constitute the Executive’s release of any rights of the Executive to, any other cash severance payments under any Company severance policy, practice or agreement.

          (b) Certain Additional Payments by the Company.

               (i) Notwithstanding any other provision of this Agreement, if any portion of the Termination Payment or any other payment under this Agreement, or under any other agreement with or plan of the Employer (in the aggregate, “Total Payments”), would constitute an “excess parachute payment” as defined in Section 280G of the Code (or any successor provision), then the Company shall pay the Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Executive after deduction of any excise tax imposed under Section 4999 of the Code (or any successor provision) and any interest charges or penalties in respect of the imposition of such excise tax (collectively, the “Excise Tax”) (but not any federal, state or local income tax, or employment tax) on the Total Payments, and any federal, state and local income tax, employment tax, and excise tax upon the payment provided for by this Section 9(b)(i), shall be equal to the Total Payments. For purposes of determining the amount of the Gross-Up Payment, the Executive

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shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s domicile for income tax purposes on the date the Gross-Up Payment is made, net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes. Notwithstanding the foregoing, if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Total Payments would not be subject to the Excise Tax if the Total Payments were reduced by an amount that is less than 10% of the Total Payments that would be treated as “parachute payments” under Section 280G of the Code (or any successor provision), then the amounts payable to the Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to the Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), and no Gross-Up Payment shall be made to the Executive. For purposes of reducing the Total Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Total Payments) shall be reduced. If the reduction of the amounts payable hereunder would not result in a reduction of the Total Payments to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this provision.

               (ii) For purposes of this Agreement, the terms “excess parachute payment” and “parachute payments” shall have the meanings assigned to them in Section 280G of the Code (or any successor provision) and such “parachute payments” shall be valued as provided therein. Present value for purposes of this Agreement shall be calculated in accordance with Section 1274(b)(2) of the Code (or any successor provision). Promptly following a Covered Termination or notice by the Company to the Executive of its belief that there is a payment or benefit due the Executive which will result in an “excess parachute payment” as defined in Section 280G of the Code (or any successor provision), the Executive and the Company, at the Company’s expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel (“National Tax Counsel”) selected by the Company’s independent auditors and reasonably acceptable to the Executive (which may be regular outside counsel to the Company), which opinion sets forth (A) the amount of the Base Period Income, (B) the amount and present value of Total Payments, (C) the amount and present value of any excess parachute payments, and (D) the amount of any Gross-Up Payment or the reduction of any Total Payments to the Safe Harbor Cap, as the case may be. As used in this Agreement, the term “Base Period Income” means an amount equal to the Executive’s “annualized includable compensation for the base period” as defined in Section 280G(d)(1) of the Code. For purposes of such opinion, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code (or any successor provisions), which determination shall be evidenced in a certificate of such auditors addressed to the Company and the Executive. The opinion of National Tax Counsel shall be addressed to the Company and the Executive and shall be binding upon the Company and the Executive. If such National Tax Counsel so requests in connection with the opinion required by this Section 9(b), the Executive and the Company shall obtain, at the Company’s expense, and the National Tax Counsel may rely on, the

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advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Executive solely with respect to its status under Section 280G of the Code and the regulations thereunder. The Company shall pay the Executive the Gross-Up Payment, if any, at the same time as the Termination Payment is paid, or if the Executive’s Covered Termination is pursuant to Section 2(b), then within 90 days following the Change in Control of the Company (determined without regard to Section 2(b)); provided that if prior to such date the Executive is required to remit the excise tax under Section 4999 of the Code to the Internal Revenue Service, then upon written notice by the Executive to the Company, the Company shall promptly reimburse the Executive for the Gross-Up Payment (but based on Executive’s actual rate of taxation).

               (iii) In the event that upon any audit by the Internal Revenue Service, or by a state or local taxing authority, of the Total Payments or Gross-Up Payment, a change is finally determined to be required in the amount of taxes paid by the Executive, appropriate adjustments shall be made under this Agreement such that the net amount which is payable to the Executive after taking into account the provisions of Section 4999 of the Code (or any successor provision) shall reflect the intent of the parties as expressed in this Section 9, in the manner determined by the National Tax Counsel. If the Company is required to make a payment to the Executive, such payment shall be paid following the date of the final determination by a court or the Internal Revenue Service and within thirty (30) days after the date Executive provides the Company a written request for reimbursement thereof (accompanied by proof of taxes paid), but in no event shall the reimbursement be made later than the end of the calendar year following the year in which the Executive remits the excise tax to the Internal Revenue Service.

               (iv) The Company agrees to bear all costs associated with, and to indemnify and hold harmless, the National Tax Counsel of and from any and all claims, damages, and expenses resulting from or relating to its determinations pursuant to this Section 9(b), except for claims, damages or expenses resulting from the gross negligence or willful misconduct of such firm.

          (b) Additional Benefits. If there is a Covered Termination and the Executive is entitled to Accrued Benefits and the Termination Payment, then the Company shall provide to the Executive the following additional benefits:

               (i) The Executive shall receive until the end of the second calendar year following the calendar year in which the Executive’s Separation from Service occurs, at the expense of the Company, outplacement services, on an individualized basis at a level of service commensurate with the Executive’s status with the Company immediately prior to the date of the Change in Control of the Company (or, if higher, immediately prior to the Executive’s Termination of Employment), provided by a nationally recognized executive placement firm selected by the Company; provided that the cost to the Company of such services shall not exceed 10% of the Executive’s Annual Base Salary.

               (ii) Until the earlier of the end of the Employment Period or such time as the Executive has obtained new employment and is covered by benefits which

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in the aggregate are at least equal in value to the following benefits, the Executive shall continue to be covered, at the expense of the Company, by the same or equivalent life insurance, hospitalization, medical and dental coverage as was required hereunder with respect to the Executive immediately prior to the date the Notice of Termination is given, subject to the following:

               (A) Following the end of the COBRA continuation period, if such hospitalization, medical or dental coverage is provided under a health plan that is subject to Section 105(h) of the Code, benefits payable under such health plan shall comply with the requirements of Treasury regulation section 1.409A-3(i)(1)(iv) and, if necessary, the Company shall amend such health plan to comply therewith.

               (B) During the first six months following the Executive’s Separation from Service, the Executive shall pay the Company for any life insurance coverage that provides a benefit in excess of $50,000 under a group term life insurance policy. After the end of such six month period, the Company shall make a cash equivalent payment to the Executive equal to the aggregate premiums paid by the Executive for such coverage, and thereafter such coverage shall be provided at the expense of the Company for the remainder of the period as set forth above; provided that this clause (B) shall cease to apply if on the date of the Executive’s Separation from Service, neither the Company nor any other entity that is considered a “service recipient” with respect to the Executive within the meaning of Code Section 409A has any stock which is publicly traded on an established securities market (within the meaning of Treasury Regulation Section 1.897-1(m)) or otherwise.

If the Executive is entitled to the Termination Payment pursuant to Section 2(b), then within ten (10) days following the Change in Control of the Company (determined without regard to Section 2(b)), the Company shall reimburse the Executive for any COBRA premiums the Executive paid for his or her hospitalization, medical and dental coverage under COBRA from the Executive’s Termination Date through the date of the Change in Control of the Company (determined without regard to Section 2(b)).

               (iii) The Company shall bear up to $15,000 in the aggregate of fees and expenses of consultants and/or legal or accounting advisors engaged by the Executive to advise the Executive as to matters relating to the computation of benefits due and payable under this Section 9.

               (iv) The Company shall cause the Executive to be fully and immediately vested in his accrued benefit under the Pentair, Inc. 1999 Supplemental Executive Retirement Plan (“SERP”) and the Pentair, Inc. Restoration Plan (“Restoration Plan”) or any successor plans thereto (the “Plans”) (to the extent the Executive participates in the Plans) and in any nonqualified defined contribution retirement plan of the Employer. The amount of benefits under the Plans shall be determined as if the Executive had completed additional years of Benefit Service (as such term is defined in the Plans) equal to the lesser of (A) three years or (B) the greater of (x) seven minus the years of Benefit Service credited to such Executive under the Plans, determined without regard to the terms of this Agreement, as of the end of the calendar year which includes the date of the Change in Control of the Company, or (y) zero. In addition, if the Executive is described in Appendix A to the

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SERP, the additional benefit therein provided for the Executive shall be fully vested and the amount of such additional benefit shall be no less than if the Executive had continued in qualified employment through the end of the calendar year in which he would attain age 62. In addition, the Executive’s accrued benefit under the Restoration Plan shall be appropriately increased by the value of the Executive’s accrued benefit, if any, under the Company’s tax-qualified defined benefit plan which is forfeited due to the Executive’s failure to become fully vested thereunder.

          10. Death.

          (a) Except as provided in Section 10(b), in the event of a Covered Termination due to the Executive’s death, the Executive’s estate, heirs and beneficiaries shall receive all the Executive’s Accrued Benefits through the Termination Date.

          (b) In the event the Executive dies after a Notice of Termination is given (i) by the Company or (ii) by the Executive for Good Reason, the Executive’s estate, heirs and beneficiaries shall be entitled to the benefits described in Section 10(a) and, subject to the provisions of this Agreement, to such Termination Payment as the Executive would have been entitled to had the Executive lived, except that the Termination Payment shall be paid within 90 days following the date of the Executive’s death, without interest thereon. For purposes of this Section 10(b), the Termination Date shall be the earlier of 30 days following the giving of the Notice of Termination, subject to extension pursuant to Section 1(n), or one day prior to the end of the Employment Period.

          11. Retirement. If, during the Employment Period, the Executive and the Employer shall execute an agreement providing for the early retirement of the Executive from the Employer, or the Executive shall otherwise give notice that he is voluntarily choosing to retire early from the Employer, the Executive shall receive Accrued Benefits through the Termination Date; provided, that if the Executive’s employment is terminated by the Executive for Good Reason or by the Company other than by reason of death, disability or Cause and the Executive also, in connection with such termination, elects voluntary early retirement, the Executive shall also be entitled to receive a Termination Payment pursuant to Section 8.

          12. Termination for Disability. If, during the Employment Period, as a result of the Executive’s disability due to physical or mental illness or injury (regardless of whether such illness or injury is job-related), the Executive shall have been absent from the Executive’s duties hereunder on a full-time basis for a period of six consecutive months and, within 30 days after the Company notifies the Executive in writing that it intends to terminate the Executive’s employment (which notice shall not constitute the Notice of Termination contemplated below), the Executive shall not have returned to the performance of the Executive’s duties hereunder on a full-time basis, the Company may terminate the Executive’s employment for purposes of this Agreement pursuant to a Notice of Termination given in accordance with Section 13. If the Executive’s employment is terminated on account of the Executive’s disability in accordance with this Section, the Executive shall receive Accrued Benefits through the Termination Date and shall remain eligible for all benefits provided by any long term disability programs of the Employer in effect at the time of such termination.

          13. Termination Notice and Procedure. Any Covered Termination by the Company or the Executive (other than a termination of the Executive’s employment that is a Covered Termination by virtue of Section 2(b)) shall be communicated by a written notice of termination

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(“Notice of Termination”) to the Executive, if such Notice is given by the Company, and to the Company, if such Notice is given by the Executive, all in accordance with the following procedures and those set forth in Section 24:

          (a) If such termination is for disability, Cause or Good Reason, the Notice of Termination shall indicate in reasonable detail the facts and circumstances alleged to provide a basis for such termination.

          (b) Any Notice of Termination by the Company shall have been approved, prior to the giving thereof to the Executive, by a resolution duly adopted by a majority of the directors of the Company (or any successor corporation) then in office.

          (c) If the Notice is given by the Executive for Good Reason, the Executive may cease performing his duties hereunder on or after the date fifteen days after the delivery of Notice of Termination and shall in any event cease employment on the Termination Date. If the Notice is given by the Company, then the Executive may cease performing his duties hereunder on the date of receipt of the Notice of Termination, subject to the Executive’s rights hereunder.

          (d) The Executive shall have thirty days, or such longer period as the Company may determine to be appropriate, to cure any conduct or act, if curable, alleged to provide grounds for termination of the Executive’s employment for Cause under this Agreement pursuant to Section 1(f)(iii).

          (e) The recipient of any Notice of Termination shall personally deliver or mail in accordance with Section 24 written notice of any dispute relating to such Notice of Termination to the party giving such Notice within 15 days after receipt thereof; provided, however, that if the Executive’s conduct or act alleged to provide grounds for termination by the Company for Cause is curable, then such period shall be 30 days. After the expiration of such period, the contents of the Notice of Termination shall become final and not subject to dispute.

          14. Further Obligations of the Executive.

          (a) Competition. The Executive agrees that, in the event of any Covered Termination where the Executive is entitled to Accrued Benefits and the Termination Payment, the Executive shall not, for a period expiring one year after the Termination Date, without the prior written approval of the Company’s Board of Directors, (i) solicit for employment an employee of the Company or its subsidiaries or (ii) participate in the management of, be employed by or own any business enterprise at a location within the United States that engages in substantial competition with the Company or its subsidiaries, where such enterprise’s revenues from any competitive activities amount to 10% or more of such enterprise’s net revenues and sales for its most recently completed fiscal year; provided, however, that nothing in this Section 14(a) shall prohibit the Executive from owning stock or other securities of a competitor amounting to less than five percent of the outstanding capital stock of such competitor.

          (b) Confidentiality. During and following the Executive’s employment by the Company, the Executive shall hold in confidence and not directly or indirectly disclose or use or copy or make lists of any confidential information or proprietary data of the Company (including that of the Employer), except to the extent authorized in writing by the Board of Directors of the Company or required by any court or administrative agency, other than to an employee of the

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Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of duties as an executive of the Company. Confidential information shall not include any information known generally to the public or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that of the Company. All records, files, documents and materials, or copies thereof, relating to the business of the Company which the Executive shall prepare, or use, or come into contact with, shall be and remain the sole property of the Company and shall be promptly returned to the Company upon termination of employment with the Company.

          15. Expenses and Interest. If, after a Change in Control of the Company, (a) a dispute arises with respect to the enforcement of the Executive’s rights under this Agreement or (b) any legal or arbitration proceeding shall be brought to enforce or interpret any provision contained herein or to recover damages for breach hereof, in either case so long as the Executive is not acting in bad faith, then the Company shall reimburse the Executive for any reasonable attorneys’ fees and necessary costs and disbursements incurred as a result of the dispute, legal or arbitration proceeding (“Expenses”), and prejudgment interest on any money judgment or arbitration award obtained by the Executive calculated at the rate of interest announced by U.S. Bank National Association, Minneapolis, Minnesota, from time to time at its prime or base lending rate from the date that payments to him or her should have been made under this Agreement. Within ten days after the Executive’s written request therefore (but in no event later than the end of the calendar year following the calendar year in which such Expense is incurred), the Company shall reimburse the Executive, or such other person or entity as the Executive may designate in writing to the Company, the Executive’s reasonable Expenses.

          16. Payment Obligations Absolute. The Company’s obligation during and after the Employment Period to pay the Executive the amounts and to make the benefit and other arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any setoff, counterclaim, recoupment, defense or other right which the Company may have against him or anyone else. Except as provided in Section 15, all amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company will not seek to recover all or any part of such payment from the Executive, or from whomsoever may be entitled thereto, for any reason whatsoever.

          17. Successors.

          (a) If the Company sells, assigns or transfers all or substantially all of its business and assets to any Person or if the Company merges into or consolidates or otherwise combines (where the Company does not survive such combination) with any Person (any such event, a “Sale of Business”), then the Company shall assign all of its right, title and interest in this Agreement as of the date of such event to such Person, and the Company shall cause such Person, by written agreement in form and substance reasonably satisfactory to the Executive, to expressly assume and agree to perform from and after the date of such assignment all of the terms, conditions and provisions imposed by this Agreement upon the Company. Failure of the Company to obtain such agreement prior to the effective date of such Sale of Business shall be a breach of this Agreement constituting “Good Reason” hereunder, except that for purposes of implementing the foregoing the date upon which such Sale of Business becomes effective shall be deemed the Termination Date. In case of such assignment by the Company and of assumption and agreement by such Person, as used in this Agreement, “Company” shall thereafter mean such Person which executes and delivers the

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agreement provided for in this Section 17 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, and this Agreement shall inure to the benefit of, and be enforceable by, such Person. The Executive shall, in his or her discretion, be entitled to proceed against any or all of such Persons, any Person which theretofore was such a successor to the Company and the Company (as so defined) in any action to enforce any rights of the Executive hereunder. Except as provided in this Section 17(a), this Agreement shall not be assignable by the Company. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company.

          (b) This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, heirs and beneficiaries. All amounts payable to the Executive under Sections 3, 7, 8, 9, 10, 11, 12 and 15 if the Executive had lived shall be paid, in the event of the Executive’s death, to the Executive’s estate, heirs and representatives; provided, however, that the foregoing shall not be construed to modify any terms of any benefit plan of the Employer, as such terms are in effect on the date of the Change in Control of the Company, that expressly govern benefits under such plan in the event of the Executive’s death.

          18. Severability. The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby.

          19. Contents of Agreement; Waiver of Rights; Amendment. This Agreement sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and shall supersede in all respects, and the Executive hereby waives all rights under, any prior or other agreement or understanding between the parties with respect to such subject matter, including, but not limited to the Management Assurance Agreement and any Key Executive Employment and Severance Agreement between the Company and the Executive entered into prior to the date hereof. This Agreement may not be amended or modified at any time except by written instrument executed by the Company and the Executive.

          20. Withholding. The Company shall be entitled to withhold from amounts to be paid to the Executive hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold; provided, that the amount so withheld shall not exceed the minimum amount required to be withheld by law. In addition, if prior to the date of payment of the Termination Payment hereunder, the Federal Insurance Contributions Act (FICA) tax imposed under Sections 3101, 3121(a) and 3121(v)(2), where applicable, becomes due with respect to any payment or benefit to be provided hereunder, the Company may provide for an immediate payment of the amount needed to pay the Executive’s portion of such tax (plus an amount equal to the taxes that will be due on such amount) and the Executive’s Termination Payment shall be reduced accordingly. The Company shall be entitled to rely on an opinion of the National Tax Counsel if any question as to the amount or requirement of any such withholding shall arise.

          21. Certain Rules of Construction. No party shall be considered as being responsible for the drafting of this Agreement for the purpose of applying any rule construing ambiguities against the drafter or otherwise. No draft of this Agreement shall be taken into account in construing this Agreement. Any provision of this Agreement which requires an agreement in writing shall be deemed to require that the writing in question be signed by the Executive and an authorized representative of the Company.

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          22. Governing Law; Resolution of Disputes. This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Minnesota. Any dispute arising out of this Agreement shall, at the Executive’s election, be determined by arbitration under the rules of the American Arbitration Association then in effect (in which case both parties shall be bound by the arbitration award) or by litigation. Whether the dispute is to be settled by arbitration or litigation, the venue for the arbitration or litigation shall be Minneapolis, Minnesota or, at the Executive’s election, if the Executive is not then residing or working in the Minneapolis, Minnesota metropolitan area, in the judicial district encompassing the city in which the Executive resides; provided, that, if the Executive is not then residing in the United States, the election of the Executive with respect to such venue shall be either Minneapolis, Minnesota or in the judicial district encompassing that city in the United States among the thirty cities having the largest population (as determined by the most recent United States Census data available at the Termination Date) which is closest to the Executive’s residence. The parties consent to personal jurisdiction in each trial court in the selected venue having subject matter jurisdiction notwithstanding their residence or situs, and each party irrevocably consents to service of process in the manner provided hereunder for the giving of notices.

          23. Additional Section 409A Provisions. (a) If, after the date of a Change in Control of the Company, any payment amount or the value of any benefit under this Agreement is required to be included in the Executive’s income prior to the date such amount is actually paid or the benefit provided as a result of the failure of this Agreement (or any other arrangement that is required to be aggregated with this Agreement under Code Section 409A) to comply with Code Section 409A, then the Executive shall receive a distribution, in a lump sum, within 90 days after the date it is finally determined that the Agreement (or such other arrangement that is required to be aggregated with this Agreement) fails to meet the requirements of Section 409A of the Code; such distribution shall equal the amount required to be included in the Executives income as a result of such failure and shall reduce the amount of payments or benefits otherwise due hereunder.

          (b) The Company and the Executive intend the terms of this Agreement to be in compliance with Section 409A of the Code. The Company does not guarantee the tax treatment or tax consequences associated with any payment or benefit, including but not limited to consequences related to Section 409A of the Code. To the maximum extent permissible, any ambiguous terms of this Agreement shall be interpreted in a manner that avoids a violation of Section 409A of the Code.

          (c) If the Executive believes he or she is entitled to a payment or benefit pursuant to the terms of this Agreement that was not timely paid or provided, and such payment or benefit is considered deferred compensation subject to the requirements of Section 409A of the Code, the Executive acknowledges that to avoid an additional tax on such payment or benefit pursuant to the provisions of Section 409A of the Code, the Executive must make a reasonable, good faith effort to collect such payment or benefit no later than 90 days after the latest date upon which the payment could have been timely made or benefit timely provided without violating Section 409A of the Code, and if not paid or provided, must take further enforcement measures within 180 days after such latest date.

          24. Notice. Notices given pursuant to this Agreement shall be in writing and, except as otherwise provided by Section 13(d), shall be deemed given when actually received by the

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Executive or actually received by the Company’s Secretary or any officer of the Company other than the Executive. If mailed, such notices shall be mailed by United States registered or certified mail, return receipt requested, addressee only, postage prepaid, if to the Company, to Pentair, Inc., Attention: Secretary (or Chief Executive Officer, if the Executive is then Secretary), 5500 Wayzata Blvd., Suite 800, Golden Valley, Minnesota 55416, or if to the Executive, at the address set forth below the Executive’s signature to this Agreement, or to such other address as the party to be notified shall have theretofore given to the other party in writing.

          25. No Waiver. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time.

          26. Headings. The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement.

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          IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

PENTAIR, INC.
By:
	Its:
Attest:
	Its:
EXECUTIVE:
Address:

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EX-21

Exhibit 21

Pentair, Inc. and subsidiaries as of December 31, 2008.

Name of Company	Jurisdiction of	Segment
	Incorporation
Alberta Electronic Company Limited	Hong Kong	Technical Products
Aplex Industries, Inc.	United States	Water
Apno S.A. de C.V.	Mexico	Other
Aspen Motion Technologies, Inc.	United States	Technical Products
Axholme Resources Limited	United Kingdom	Water
Beijing Pentair Water Jieming Co., Ltd. 1	P.R.C.	Water
Calmark Europe Limited	Ireland	Technical Products
Century Mfg. Co.	United States	Other
Chansuba Pumps Private Ltd. 2	India	Water
Davies Pumps & Co. Limited	New Zealand	Water
Dongguan Jieming Tianyuan Water Purifying Equipment Co., Ltd.1	P.R.C.	Water
Electronic Enclosures, Inc.	United States	Technical Products
Epps Limited	Mauritius	Water
EuroPentair GmbH	Germany	Other
Everpure Sub Limited (UK)	United Kingdom	Water
Everpure (UK) Limited (UK)	United Kingdom	Water
Everpure Japan, K.K.	Japan	Water
Everpure, LLC	United States	Water
FARADYNE Motors (Suzhou) Co., Ltd 3	P.R.C.	Water
FARADYNE Motors LLC 3	United States	Water
FilterSoft, LLC	United States	Water
Fleck Controls, Inc.	United States	Water
Hoffman Enclosures (Mex), LLC	United States	Technical Products
Hoffman Enclosures Inc.	United States	Technical Products
Hoffman Enclosures Mexico, S. de R.L. de C.V.	Mexico	Technical Products
Hoffman Schroff Pte. Ltd.	Singapore	Technical Products
Hypro, EU Limited	United Kingdom	Water
Inversiones Sta-Rite Chile Limitada	Chile	Water
Jung Pumpen CZ	Czech Republic	Water
Jung Pumpen France SARL	France	Water
Jung Pumpen GmbH	Germany	Water
Jung Pumpen Handelsgesellschaft mbH	Germany	Water
Jung Pumpen Hungary Kft.	Hungary	Water
Jung Pumpen Polska Sp.z.o.o.	Poland	Water
Jung Pumpen s.r.o.	Slovakia	Water
Lincoln Automotive Company	United States	Other
McLean Midwest Corporation	United States	Technical Products
McNeil (Ohio) Corporation	United States	Other
Moraine Properties, LLC	United States	Other
Nocchi Pompes Europe S.a.r.l.	France	Water
Nocchi Pumps Moscow	Russian Federation	Water
Onga (NZ) Limited	New Zealand	Water
Onga Pump Shop Pty. Ltd.	Australia	Water
Optima Enclosures Limited	United Kingdom	Technical Products
Pentair Acu-Trol, LLC	United States	Water
Pentair Asia PTE Ltd.	Singapore	Other
Pentair Beteiligungs GmbH	Germany	Other
Pentair Bermuda Holdings 4	Bermuda	Other
Pentair Bermuda, LLC	United States	Other
Pentair Canada, Inc.	Canada	Water

Name of Company	Jurisdiction of	Segment
	Incorporation
Pentair DMP Corp.	United States	Other
Pentair Electronic Packaging Company	United States	Technical Products
Pentair Electronic Packaging de Mexico, S. de R.L de C.V.	Mexico	Technical Products
Pentair Enclosures Group, Inc.	United States	Technical Products
Pentair Enclosures, Inc.	United States	Technical Products
Pentair Enclosures, S. de R.L. de C.V.	Mexico	Technical Products
Pentair Filtration, Inc.	United States	Water
Pentair France SARL	France	Water
Pentair Germany GmbH	Germany	Other
Pentair Global Sarl	Luxembourg	Other
Pentair Holdings S.a.r.l.	Luxembourg	Other
Pentair Housing LP	United States	Other
Pentair Housing, Inc.	United States	Other
Pentair International Sarl	Luxembourg	Other
Pentair International Sarl	Switzerland	Other
Pentair Janus Holdings	Bermuda	Other
Pentair Luxembourg, S.A.R.L.	Luxembourg	Other
Pentair Manufacturing Belgium BVBA	Belgium	Water
Pentair Manufacturing France S.A.S.	France	Water
Pentair Manufacturing Italy Srl	Italy	Water
Pentair Nanosoft Bermuda Holdings	Bermuda	Other
Pentair Nanosoft US Holdings, LLC	United States	Other
Pentair Pacific Rim (Water) Limited	Hong Kong	Other
Pentair Pacific Rim, Ltd.	Hong Kong	Technical Products
Pentair Poland Sp.z.o.o.	Poland	Technical Products
Pentair Pump Group Inc.	United States	Water
Pentair Qingdao Enclosure Company Ltd.	P.R.C.	Technical Products
Pentair Residential Filtration, LLC 4	United States	Water
Pentair Shenzhen Enclosure Company Ltd.	P.R.C.	Technical Products
Pentair Taunus Electrometalurgica Ltda	Brazil	Technical Products
Pentair Technical Products, S. de R.L. de C.V.	Mexico	Technical Products
Pentair Technical Products India Private Limited	India	Technical Products
Pentair Thailand, Inc.	Thailand	Water
Pentair Trading (Shanghai) Co. Ltd.	Shanghai	Water
Pentair Transport, Inc.	United States	Other
Pentair UK Group Limited	United Kingdom	Other
Pentair Verwaltungs GmbH & Co KG	Germany	Other
Pentair Water (Suzhou) Company Ltd.	P.R.C.	Water
Pentair Water Australia Pty Ltd	Australia	Water
Pentair Water Belgium B.V.B.A.	Belgium	Water
Pentair Water Europe s.r.l.	Italy	Water
Pentair Water Filtration France SAS	France	Water
Pentair Water Filtration Indiana, LLC	United States	Water
Pentair Water Filtration UK Limited	United Kingdom	Water
Pentair Water France SAS	France	Water
Pentair Water Germany GmbH	Germany	Water
Pentair Water Group, Inc.	United States	Water
Pentair Water India Private Limited	India	Water
Pentair Water Italy S.r.l.	Italy	Water
Pentair Water Middle East	United Arab Emirates	Water
Pentair Water New Zealand Limited	New Zealand	Water
Pentair Water Pool and Spa, Inc.	United States	Water
Pentair Water South Africa (Proprietary) Limited	South Africa	Water
Pentair Water Spain, SL	Spain	Water
Pentair Water Treatment (OH) Company	United States	Water
Pentair Water Treatment Company	United States	Water
Pentair Water Treatment Private Limited	India	Water

Name of Company	Jurisdiction of	Segment
	Incorporation
Pentair Water, LLC	United States	Water
Pentair Water-Mexico S. de R.L. de C.V.	Mexico	Water
Penwald Insurance Company	United States	Other
PEP Central, Inc.	United States	Technical Products
PEP West, Inc.	United States	Technical Products
PFAM, Inc.	United States	Other
Porous Media Corporation	United States	Water
Porous Media, LLC	United States	Water
Porter-Cable de Mexico S.A. de C.V.	Mexico	Other
PTG Accessories Group	United States	Other
Schroff Co. Ltd.	Taiwan	Technical Products
Schroff GmbH	Germany	Technical Products
Schroff, Inc.	United States	Technical Products
Schroff K.K.	Japan	Technical Products
Schroff S.R.L.	Italy	Technical Products
Schroff SAS	France	Technical Products
Schroff Scandinavia AB	Sweden	Technical Products
Schroff U.K. Ltd.	United Kingdom	Technical Products
Seneca Enterprises Co.	United States	Water
Shaanxi Jieming Environmental Protection Equipment Co., Ltd.1	P.R.C.	Water
Shanghai Alberta Electronics Co., Ltd.	P.R.C.	Technical Products
Shanghai Shangjie Environment Equipment Co., Ltd.1	P.R.C.	Water
SHURflo International Limited	United Kingdom	Water
SHURflo Limited	United Kingdom	Water
Sichuan Jieming Environmental Trading & Consulting Co. Ltd.1	P.R.C.	Water
Sta-Rite de Argentina, S.A.	Argentina	Water
Sta-Rite de Mexico S.A. de C.V.	Mexico	Water
Sta-Rite de Puerto Rico, Inc.	Puerto Rico	Water
Sta-Rite Industries, LLC	United States	Water
Surewood Acquisition Corporation	United States	Other
Tupelo Real Estate, LLC	United States	Other
Webster Electric Company, LLC	United States	Water
WICOR Industries (Australia) Pty. Ltd.	Australia	Water
Yabaida Electronic (Shenzhen) Co., Ltd.	P.R.C.	Technical Products
Yixing Jieming Shirun Environmental Protection Equipment Co., Ltd.1	P.R.C.	Water

⁽¹⁾ — 70% owned

⁽²⁾ — 47% owned

⁽³⁾ — 50% owned

⁽⁴⁾ — 80.1% owned

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     We consent to the incorporation by reference in Registration Statement Nos. 333-12561, 333-62475, 333-75166, 333-115429, 333-115430, 333-115432, 333-126693, and 333-152458 of Pentair, Inc. of our reports dated February 23, 2009, with respect to the consolidated financial statements and financial statement schedule of Pentair, Inc. and subsidiaries which reports expressed an unqualified opinion and included an explanatory paragraph relating to the Company’s changes in its method of accounting for uncertain tax positions in 2007 and defined benefit pension and postretirement benefit plans in 2006 and the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K for the year ended December 31, 2008.

Minneapolis, Minnesota
February 23, 2009

EX-24

Exhibit 24

Power of Attorney

KNOW ALL MEN BY THESE PRESENTS that the undersigned directors of Pentair, Inc., a Minnesota corporation, hereby constitute and appoint John L. Stauch and Louis L. Ainsworth, or either of them, his/her attorney-in-fact and agent, with full power of substitution, for the purpose of signing on his/her behalf as a director of Pentair, Inc. the Annual Report on Form 10-K, to be filed with the Securities and Exchange Commission within the next sixty days, and to file the same, with all exhibits thereto and other supporting documents, with the Commission, granting unto such attorney-in-fact, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers herein expressly granted.

Date: February 24, 2009

Signature	Title
/s/ Leslie Abi-Karam Leslie Abi-Karam	Director
/s/ Glynis A. Bryan Glynis A. Bryan	Director
/s/ Jerry W. Burris Jerry W. Burris	Director
/s/ T. Michael Glenn T. Michael Glenn	Director
/s/ Charles A. Haggerty Charles A. Haggerty	Director
/s/ David H. Y. Ho David H. Y. Ho	Director
/s/ David A. Jones David A. Jones	Director
/s/ Ronald L. Merriman Ronald L. Merriman	Director
/s/ William T. Monahan William T. Monahan	Director

EX-31.1

Exhibit 31.1

Certifications

I, Randall J. Hogan, certify that:

1.	I have reviewed this annual report on Form 10-K 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 the 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: February 24, 2009	/s/ Randall J. Hogan
	Randall J. Hogan
	Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certifications

I, John L. Stauch, certify that:

1.	I have reviewed this annual report on Form 10-K 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 the 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: February 24, 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 Annual Report of Pentair, Inc. (the Company) on Form 10-K for the period ending December 31, 2008 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: February 24, 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 Annual Report of Pentair, Inc. (the Company) on Form 10-K for the period ending December 31, 2008 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: February 24, 2009	/s/ John L. Stauch
	John L. Stauch
	Executive Vice President and Chief Financial Officer