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ITEM 2.03.
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Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a Registrant.
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On December 16, 2021, Pentair
plc (“Pentair”) and its subsidiaries Pentair Finance S.à r.l. (“Pentair Finance”) and Pentair, Inc. (“Pentair
U.S.”) entered into an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”), among Pentair
Finance and Pentair U.S., as borrowers, Pentair, as guarantor, and the lenders and agents party thereto, providing for a five-year $900.0
million senior unsecured revolving credit facility and a three-year $200.0 million senior unsecured term loan facility (collectively,
the “Senior Credit Facilities”). The Amended and Restated Credit Agreement amends and restates in its entirety the Credit
Agreement, dated as of April 25, 2018, among Pentair, Pentair Finance, Pentair U.S., Pentair Investments Switzerland GmbH and the lenders
and agents party thereto, as previously amended by an Amendment No. 1 dated as of December 2, 2019. Pentair Finance has the option to
request to increase the revolving credit facility and/or to enter into one or more additional tranches of term loans in an aggregate
amount of up to $300.0 million, subject to customary conditions, including the commitment of the participating lenders. As of December
16, 2021, the total amount of loans outstanding under the Senior Credit Facilities was $430.0 million.
The Senior Credit Facilities
are guaranteed by Pentair. The Senior Credit Facilities bear interest at a rate equal to an adjusted base rate, LIBOR, EURIBOR, or CBR,
plus, in each case, an applicable margin. The applicable margin is based on, at Pentair Finance’s election, Pentair’s leverage
level or Pentair Finance’s public credit rating. Additionally, Pentair Finance will pay a quarterly facility fee based on the average
daily amount of the revolving credit facility (whether used or unused), which will be determined, at Pentair Finance’s election,
by Pentair’s leverage level or Pentair Finance’s public credit rating. Interest on borrowings and the facility fee are generally
payable quarterly in arrears or at the end of the interest period, unless such interest period is longer than three months, in which
case payment is due on each successive date three months after the first day of such period.
With certain exceptions,
the revolving credit facility matures on December 16, 2026 and the term loan facility matures on December 16, 2024. Pentair Finance is
permitted to voluntarily prepay loans and/or reduce the revolving commitments under the Senior Credit Facilities, in whole or in part,
without penalty or premium, subject to certain minimum amounts and increments and the payment of customary breakage costs. No mandatory
prepayment will be required under the Senior Credit Facilities unless certain affiliate and currency sub-limits are exceeded, subject
to certain other exceptions.
The Senior Credit Facilities
contain financial covenants requiring Pentair not to permit (i) the ratio of its consolidated debt (net of its consolidated unrestricted
cash and cash equivalents in excess of $5.0 million but not to exceed $250.0 million) to its consolidated net income (excluding, among
other things, non-cash gains and losses) before interest, taxes, depreciation, amortization and non-cash share-based compensation expense
(“EBITDA”) on the last day of any period of four consecutive fiscal quarters (each, a “testing period”) to exceed
3.75 to 1.00 (or, at Pentair Finance’s election and subject to certain conditions, 4.25 to 1.00 for four testing periods in connection
with certain material acquisitions) and (ii) the ratio of its EBITDA to its consolidated cash interest expense for the same period to
be less than 3.00 to 1.00. In addition, subject to certain qualifications and exceptions, the Senior Credit Facilities also contain covenants
that, among other things, restrict Pentair’s ability to create liens, merge or consolidate with another person, make acquisitions
and incur subsidiary debt.
The Senior Credit Facilities
contain customary events of default. If an event of default occurs and is continuing, then the lenders may terminate all commitments
to extend further credit and declare all amounts outstanding under the Senior Credit Facilities due and payable immediately. In addition,
in the case of an event of default arising from certain events of bankruptcy, insolvency or reorganization, all amounts outstanding under
the Senior Credit Facilities will automatically become due and payable immediately.
The foregoing description
of the Amended and Restated Credit Agreement is qualified in its entirety by reference to the full text of the Amended and Restated Credit
Agreement filed as Exhibit 10.1 to this Current Report on Form 8-K, which is incorporated by reference herein.