Exhibit 10.1
FLOWSERVE CORPORATION
SECOND AMENDMENT TO CREDIT AGREEMENT
     This SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is dated as of
May 8, 2006 and entered into by and among Flowserve Corporation, a New York
corporation (the “Company”), the financial institutions party hereto and Bank of
America, N.A., a national banking association, as administrative agent for the
Lenders (in such capacity, the “Administrative Agent”), and solely for purposes
of Section 2 hereof, the Credit Support Parties (as defined in Section 2
hereof). Reference is made to that certain Credit Agreement dated as of
August 12, 2005, as amended by the Amendment and Waiver dated as of December 20,
2005 (as amended, the “Credit Agreement”), by and among the Company, the
financial institutions from time to time party thereto (collectively, the
“Lenders” and individually, a “Lender”), and Bank of America, N.A., as Swingline
Lender, Administrative Agent and Collateral Agent for the Lenders. Capitalized
terms used herein without definition shall have the same meanings as set forth
in the Credit Agreement.
RECITALS
     WHEREAS, pursuant to Section 5.04 of the Credit Agreement, the Company is
required to deliver its audited financial statements and related opinions for
its fiscal year ended December 31, 2005 (the “2005 Financial Statements”) to the
Administrative Agent on or before May 30, 2006.
     WHEREAS, the Company has requested that the Required Lenders amend the
Credit Agreement to (i) extend the deadline for compliance with Section 5.04 of
the Credit Agreement with respect to the 2005 Financial Statements until
July 31, 2006, (ii) permit Issuing Banks to delegate the issuance of Letters of
Credit to their Affiliates and (iii) add Fitch Ratings, Ltd. as an acceptable
ratings agency for certain purposes under the Credit Agreement; and
     WHEREAS, the Lenders executing this Amendment desire to grant such
requests.
Section 1. AMENDMENTS TO CREDIT AGREEMENT
     A. Amendment to Section 1.01 — Defined Terms.
     Section 1.01 of the Credit Agreement is hereby amended by:
     (i) deleting the definition of “Debt Ratings” contained therein in its
entirety and substituting the following therefor:

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     “Debt Ratings” shall mean the credit rating (which may be either a public
rating or a private letter rating) of the Loans by two of the following three
rating agencies: S&P, Moody’s and Fitch.
     (ii) adding the following definition:
     “Fitch” means Fitch Ratings, Ltd.
     (iii) deleting the definition of “Investment Grade Ratings” contained
therein in its entirety and substituting the following therefore:
     “Investment Grade Ratings” shall mean the Company’s senior unsecured,
non-credit-enhanced long-term debt (the “Senior Unsecured Debt”) (A) for
purposes of Section 9.19(a)(ii), is rated BBB- or higher by S&P and Baa3 or
higher by Moody’s, and (B) for all other purposes hereunder, either (I) is rated
BBB- or higher by S&P and Baa3 or higher by Moody’s or (II) (a) is rated by each
of S&P, Moody’s and Fitch, (b) has two of the following three ratings (i) BBB-
or higher from S&P, (ii) Baa3 or higher from Moody’s, and (iii) BBB- or higher
from Fitch and (c) is rated no lower than BB+ by S&P, Ba1 by Moody’s and BB+ by
Fitch (in each case with an outlook of stable or better). The Company shall be
deemed to have obtained Investment Grade Ratings if it shall deliver to the
Administrative Agent letters from S&P, Moody’s and, to the extent applicable,
Fitch to the effect that the Senior Unsecured Debt would receive the necessary
rating assuming that the Secured Parties had released their liens in the
Collateral.
     (iv) deleting the definition of “Issuing Bank” contained therein in its
entirety and substituting the following therefor:
     “Issuing Bank” shall mean, as the context may require, (a) BofA, (b) with
respect to each Existing Letter of Credit, the Lender that issued such Existing
Letter of Credit, or (c) any other Lender that may become an Issuing Bank
pursuant to Section 2.23(i) or Section 2.23(k), with respect to Letters of
Credit issued by such Lender; provided that, with written consent from the
Company and the Administrative Agent (such consent not to be unreasonably
withheld), any such Lender may delegate the issuance of the applicable Letter of
Credit to its Affiliate, and in the event of any such delegation, such Affiliate
shall be entitled to all rights of reimbursement relating to such Letter of
Credit; provided, further, that the delegating Lender shall be deemed to be the
Issuing Bank for all other purposes hereunder including determining the
utilization of the Revolving Credit Commitment. As of the Closing Date, Company
has designated (and Administrative Agent has approved) pursuant to
Section 2.23(k), the Lenders set forth on Schedule 1.01(g) as Issuing Banks
hereunder.
     B. Amendment to Section 5.04 — Financial Statements, Reports, etc.
     Section 5.04(a) of the Credit Agreement is hereby amended by deleting the
reference to “May 30, 2006” contained therein and replacing it with “July 31,
2006”.
     C. Amendment to Section 5.05 — Litigation and Other Notices.

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     Section 5.05(d) of the Credit Agreement is hereby amended by replacing the
phrase “S&P or Moody’s” with the phrase “S&P, Moody’s or Fitch” in each place it
appears in such section.
     D. Amendment to Section 5.11 — Debt Ratings.
     Section 5.11 of the Credit Agreement is hereby amended by deleting the
words “on Notes” in the caption thereof.
Section 2. ACKNOWLEDGEMENT AND CONSENT
     Each of Company and each Domestic Subsidiary Guarantor (each individually a
“Credit Support Party” and collectively, the “Credit Support Parties”) has read
this Amendment and consents to the terms hereof and further hereby confirms and
agrees that, notwithstanding the effectiveness of this Amendment, the
obligations of such Credit Support Party under, and the Liens granted by such
Credit Support Party as collateral security for the indebtedness, obligations
and liabilities evidenced by the Credit Agreement and the other Loan Documents
pursuant to, each of the Loan Documents to which such Credit Support Party is a
party shall not be impaired and each of the Loan Documents to which such Credit
Support Party is a party is, and shall continue to be, in full force and effect
and is hereby confirmed and ratified in all respects.
     Each Domestic Subsidiary Guarantor acknowledges and agrees that
(i) notwithstanding the conditions to effectiveness set forth in this Amendment,
such Domestic Subsidiary Guarantor is not required by the terms of the Credit
Agreement or any other Loan Document to consent to the amendments to the Credit
Agreement effected pursuant to this Amendment and (ii) nothing in the Credit
Agreement, this Amendment or any other Loan Document shall be deemed to require
the consent of such Domestic Subsidiary Guarantor to any future amendments to
the Credit Agreement.
Section 3. CONDITIONS TO EFFECTIVENESS
     Section 1 hereof shall become effective only upon satisfaction of all of
the following conditions precedent (the date of such satisfaction being referred
to herein as the “Effective Date”):
     A. On the Effective Date, (i) the representations and warranties contained
in Section 4 hereof and in Article III of the Credit Agreement shall be true and
correct as of such date, as though made on and as of such date; (ii) no Default
or Event of Default shall then exist; and (iii) the Company shall deliver to the
Administrative Agent a certificate signed by a Responsible Officer of Company
confirming the foregoing;
     B. On or prior to the Effective Date, the Required Lenders shall have
executed this Amendment; and
     C. The Administrative Agent shall have received payment, for the account of
each Lender that executes and delivers this Amendment on or before 5:00 p.m.
Eastern Standard Time on May 15, 2006 (the “Amendment Deadline”), of an
amendment fee equal to 0.025% of the sum of

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such Lender’s Revolving Credit Commitment and the principal amount of Term Loans
held by such Lender on the Effective Date. In addition, and as a condition
subsequent to the continued effectiveness of Section 1 hereof, if the Company
does not deliver the 2005 Financial Statements to the Administrative Agent on or
before May 30, 2006, Company shall, not later than 5:00 p.m. Eastern Standard
Time on June 2, 2006, pay to the Administrative Agent for the account of each
Lender that executed this Amendment on or prior to the Amendment Deadline, an
additional amendment fee equal to 0.025% of the sum of such Lender’s Revolving
Credit Commitment and the principal amount of Term Loans held by such Lender on
June 1, 2006.
Section 4. REPRESENTATIONS AND WARRANTIES
     In order to induce Lenders to enter into this Amendment and to amend the
Credit Agreement in the manner provided herein, after giving effect to Section 1
hereof, Company represents and warrants to each Lender that the following
statements are true, correct and complete on and as of the Effective Date:
     A. Corporate Power and Authority. Company has all requisite corporate power
and authority to enter into this Amendment and to carry out the transactions
contemplated by, and perform its obligations under, the Credit Agreement as
amended by this Amendment (the “Amended Agreement”).
     B. Authorization of Agreements. The execution and delivery of this
Amendment and the performance of the Amended Agreement has been duly authorized
by all necessary corporate action on the part of Company.
     C. No Conflict. The execution and delivery of this Amendment by Company and
the performance of the Amended Agreement by Company do not and will not violate
any provision of any law or any governmental rule or regulation applicable to
Company, the Certificate of Incorporation of Company or any order, judgment or
decree of any Governmental Authority binding on Company.
     D. Governmental Consents. The execution and delivery of this Amendment by
Company and the performance of the Amended Agreement by Company do not and will
not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any Governmental Authority.
     E. Binding Obligation. This Amendment has been duly executed and delivered
by Company and is the legally valid and binding obligation of Company,
enforceable against Company in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally or by equitable principles
relating to enforceability.
Section 5. MISCELLANEOUS
     A. Fees and Expenses. The Company acknowledges that all costs, fees and
expenses as described in Section 9.05 of the Credit Agreement incurred by the
Administrative

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Agent and its counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of the Company.
     B. Headings. Section and subsection headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose or be given any substantive effect.
     C. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
     D. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

                  BANK OF AMERICA, N.A.,
as the Administrative Agent    
 
           
 
  By: /s/ John Pocalyko    
 
   
 
   
 
  Name: John Pocalyko    
 
  Title: Senior Vice President    
 
                FLOWSERVE CORPORATION    
 
           
 
  By: /s/ Paul W. Fehlman    
 
   
 
   
 
  Name: Paul W. Fehlman    
 
  Title:   Vice President and Treasurer    

CREDIT SUPPORT PARTIES
(for purposes of Section 2):

                  FLOWSERVE US INC.
FLOWSERVE INTERNATIONAL, INC.
FLOWSERVE MANAGEMENT COMPANY
BW/IP-NEW MEXICO, INC.
FLOWSERVE HOLDINGS, INC.
PMV-USA, INC.    
 
           
 
  By: /s/ John M. Nanos    
 
     
 
   
 
  Name: John M. Nanos    
 
  Title:   Vice President    

Second Amendment to Credit Agreement