exv10w7






Exhibit 10.7




FLOWSERVE CORPORATION

DIRECTOR CASH DEFERRAL PLAN

AMENDED AND RESTATED

EFFECTIVE JANUARY 1, 2009




     1. PURPOSE OF THE RESTATEMENT. The purpose of this amendment and restatement (“Restatement”)
of the Flowserve Corporation Director Cash Deferral Plan (the “Plan”) is to continue to provide the
opportunity for a non-employee member (a “Director”) of the Board of Directors of Flowserve
Corporation (the “Company”) to elect to defer all or a specified part of the Director’s
“Compensation” (as defined hereafter) in the form of cash. The Restatement is intended to comply
with the final Treasury regulations under Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”).



     For all relevant periods on and after January 1, 2005 and prior to January 1, 2009, the Plan
has been maintained in accordance with the applicable interim guidance promulgated under Section
409A of the Code. Except as otherwise provided herein, the amounts deferred pursuant to the Plan
as in effect on and after January 1, 2005 and prior to January 1, 2009 shall be governed by the
applicable interim guidance under Section 409A of the Code in effect prior to January 1, 2009, and
the amounts deferred under this Plan from and after January 1, 2009 shall be governed by the terms
and conditions of this Plan. Notwithstanding the foregoing, the amounts deferred pursuant to this
Plan prior to January 1, 2005, to the extent such amount were vested on or prior to December 31,
2004, shall be governed by the terms and conditions of this Plan in effect on December 31, 2004.



     2. COMPENSATION UNCHANGED. The amount of Compensation payable to Directors shall remain
unchanged as the result of the adoption of this Restatement. “Compensation,” for purposes of the
Plan, shall mean the payments to the Directors for services rendered and shall include the annual
retainer, cash compensation for services as a member of a Committee of the Board of Directors,
meeting attendance fees, Committee Chairmanship fees and Board Chairmanship fees.



     3. SHAREHOLDER APPROVAL REQUIREMENT. The prior Restatement effective July 1, 1995 was
approved by the shareholders of the Company at the 1995 Annual Meeting of Shareholders.



     4. ELECTION TO DEFER.



          (a) A Director may execute an election with the Company to defer the payment of all, or a
specified part in an increment of 10%, of the Compensation payable for services as a Director
through completion of a form (Exhibit “A”) or any substantially similar document to be delivered
to, and subject to acceptance by, the Secretary of the Company. An election to defer Compensation
shall be effective as of the first day of the next succeeding calendar year. In the case, however,
of a person who has been elected to serve as a Director but whose term has not yet commenced, the
election to defer shall be effective as of the date of such election, provided that the Director
makes the election to defer within 30 days after the first day of the Director’s term. In either
case, the election shall apply only to Compensation payable for













 






services rendered on or after the effective date of the election to defer. The election to
defer shall remain in effect until terminated or changed as provided in this Plan.




          (b) A Director may terminate any election to defer the payment of Compensation relating to
future services by giving notice of termination to the Company. A Director may change any election
to defer the payment of Compensation relating to future services either in the manner provided in
the election or by executing a new election with the Company. Any such termination or change in the
amount to be deferred shall be effective only with respect to Compensation payable for services as
a Director on or after the first day of the next succeeding calendar year.




          (c) If a Director fails to submit a new election prior to January 1 of a succeeding calendar
year, the Director’s election to defer for the prior year will be effective with respect to
Compensation relating to services rendered in the succeeding calendar year.




          (d) Election forms received prior to January 1, 2009 that were submitted under the Plan prior
to this Restatement shall continue to be valid with respect to Compensation deferred on and before
December 31, 2008.




     5. FORM OF DEFERRAL.



          (a) A Director may elect to defer his or her Compensation in the form of cash and must so
designate on his/her aforementioned election form (“Exhibit A”) to be delivered to the Secretary of
the Company prior to the first day of the calendar year for which it will take effect.




          (b) To the extent a Director’s Compensation is not permitted to be deferred under the
Flowserve Corporation Director Stock Deferral Plan (the “Stock Deferral Plan”) for any particular
period in accordance with Section 5(c) of the Stock Deferral Plan, the Director’s Compensation for
such period will be deferred in the form of cash under this Plan, and the election made under the
Stock Deferral Plan with respect to whether such Compensation will be distributed in a lump sum,
installments, or some combination thereof, will apply to such deferral.




          (c) To the extent that the sole amount credited to a Director under this Plan consists of
dividends paid on shares deferred under the Stock Deferral Plan, in accordance with Section 6(a) of
the Stock Deferral Plan, such dividends shall be paid in a lump sum cash payment within 60 days of
a Director’s Separation from Service.




     6. DIRECTORS’ ACCOUNTS FOR DEFERRED CASH.



          (a) The Company will establish and maintain a separate account for each Director who has
elected to defer his/her Compensation in cash, in which the amount of the Director’s deferred cash
will be recorded. The Company will credit to each such cash account, as of the first day of each
calendar quarter, interest on the amount then credited to such account, including all previous
credits to such account by operation of this Section, computed at an annual rate equal to 120% of
the long-term applicable federal rate compounded quarterly as published by the Internal Revenue
Service for the beginning of the month of each calendar quarter. Any dividends paid on the shares
deferred pursuant to the Stock Deferral Plan will be credited to a



2









 






deferred cash account of the Director under this Plan, with interest to be credited to such
dividends in the same manner as credited to deferred cash under this Plan.




          (b) UNSECURED ACCOUNT. Any amount credited to the cash accounts of a Director as deferred
Compensation or as interest or dividends paid on shares in a deferred stock account established
pursuant to the Stock Deferral Plan will represent only an unfunded and unsecured promise of the
Company to pay the amount so credited in accordance with the terms of the Plan. Neither a Director,
nor any beneficiary of a Director, will acquire any right, title or interest in any asset of the
Company as a result of any amount of cash credited to a Director’s account or accounts. At all
times, a Director’s rights with respect to the amount credited to his/her account or accounts will
be only those of an unsecured creditor of the Company. The Company will not be obligated or
required in any manner to restrict the use of any of its assets as a result of any amount credited
to a Director’s account or accounts. No right or benefit under the Plan shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void.




     7. PAYMENT OF DEFERRED COMPENSATION. Deferred Compensation will be distributed only in
accordance with the following sections.



          (a) SEPARATION FROM SERVICE. In the event of a Director’s Separation from Service (as defined
below) from the Company’s Board of Directors for any reason, any deferred cash will be distributed
commencing within 60 calendar days or his/her Separation from Service in accordance with the method
of distribution elected by the Director at the time of the election to defer. “Separation from
Service” means a termination of services provided by a Director to the Company, whether voluntarily
or involuntarily, as determined by the Committee in accordance with Treas. Reg. §1.409A-1(h). A
Separation from Service shall occur upon the Director’s cessation of services as a Director. In
determining whether a Director has experienced a Separation from Service as a director of the Board
of Directors, the following provisions shall apply: (i) if the Director is providing services both
as an employee of the Company and as a director of the Board at the time of his or her Separation
from Service as a director of the Company’s Board of Directors, the services Director provides as
an employee shall not be taken into account in determining whether the Director has a Separation
from Service as a director for purposes of this Plan (provided that this Plan is not, at the time
of such determination, aggregated under Treas. Reg. § 1.409A-1(c)(2)(ii) with any plan in which the
Director participates in as an employee) and (ii) the Director shall be considered to have
experienced a termination of services when the facts and circumstances indicate that the Director
and the Company reasonably anticipate that the Director will perform no further services for the
Company as a director of the Company’s Board of Directors, and the Director’s term as a member of
the Company’s Board of Directors has expired.




          At the time of the election to defer, the Director may elect to receive such distribution in a
lump sum, in equal annual installments (not exceeding ten), or some designated combination thereof.
If the election is a lump sum, the entire cash account balance will be transferred in kind to the
Director within 60 days of his/her Separation from Service. If installments have been elected,
interest and dividends will be calculated through the date of Separation from Service pursuant to
Section 6 and added to the account. The resulting deferred



3









 






cash account total shall be divided equally by the number of installments elected and the
first payment made within 60 days of Separation from Service. The second and all subsequent
installment payments shall be made between January 1 and 30 of each following year. Interest will
continue to accrue to the account pursuant to Section 6 on the balance remaining in the Directors’
deferred cash account until all installments have been paid and will be paid annually with each
installment payment. Dividends from any undistributed shares in a deferred stock account
established pursuant to the Stock Deferral Plan will continue to accrue to the Director’s deferred
cash account under this Plan, receive applicable interest credit and will be paid with the next
applicable installment payment of deferred cash.




          (b) DEATH. If any portion of a Director’s account remains unpaid at his/her death, then after
his/her death such amount will be paid (i) to his/her beneficiary(ies) in accordance with the
method of distribution elected by the Director at the time of the deferral (following the procedure
for lump sum and installment payments set forth above), or (ii) if the Director has not designated
a beneficiary or if the beneficiary predeceases the Director, to the Director’s estate in a lump
sum within 60 days of Separation from Service. Should a beneficiary die after the Director has
terminated service but before the entire benefit has been disbursed, the balance of the cash
benefit will be paid to the beneficiary’s estate in a lump sum within 60 days of the beneficiary’s
death.




          (c) MANDATORY LUMP SUM. Notwithstanding the above, if the value of the deferred Compensation
under the Plan is less than $10,000 at the time of Separation from Service or death, or if the
Director has failed to elect a form of distribution on Exhibit A at the time of the deferral, then
the balance of the deferred Compensation shall be paid in a lump sum payment within 60 days of a
Separation from Service regardless of the Director’s prior distribution election; provided,
however, that the lump sum payment results in the termination and liquidation of the entirety of
the Director’s interest under the Plan and that the payment is not greater than the applicable
dollar amount under Section 402(g)(1)(B) of the Code.




          (d) SIX MONTH DELAY. Notwithstanding the above, to the extent (i) any payments to which the
Director becomes entitled under this Plan in connection with the Director’s Separation from Service
constitute deferred compensation subject to Section 409A of the Code, and (ii) the Director is
deemed at the time of such Separation from Service to be a Specified Employee (as defined below),
then such payment or payments shall not be made or commence until the earlier of (x) the expiration
of the six (6) month period measured from the date of the Director’s Separation from Service with
the Company; or (y) the date of the Director’s death following such Separation from Service. Upon
the expiration of the applicable deferral period, any payments which would have otherwise been made
during that period (whether in a single sum or in installments) in the absence of this Section 7(d)
shall be paid to the Director or the Director’s beneficiary in one lump sum payment.




          Each Director will be responsible for discussing the tax consequences of this Plan and the
transactions contemplated hereby with his or her own tax advisors. The Company, in its sole
discretion, may request that each Director represent to the Company that he or she is relying
solely on his or her tax advisors and not on any statements or representations of the Company or
any of their agents and acknowledge that he or she understands that the Director (and not the
Company) shall be responsible for the Director’s own tax liability that may arise as a result of



4









 






this Plan or the transactions contemplated hereby, except as otherwise specifically provided
in this Plan.




          “Specified Employee” shall mean a Director who is determined to be a “key employee” (as
defined under Section 416(i) of the Code without regard to paragraph (5) thereof) for the
applicable period, as determined annually by the Committee in accordance with Treas. Reg.
§1.409A-1(i). In determining whether a Director is a Specified Employee, the following provisions
shall apply:





          (i) The Committee’s identification of the individuals who fall within the definition of
“key employee” under Section 416(i) of the Code (without regard to paragraph (5) thereof)
shall be based upon the 12-month period ending on each December 31st (referred to below as
the “identification date”). In applying the applicable provisions of Section 416(i) of the
Code to identify such individuals, “compensation” shall be determined in accordance with
Treas. Reg. §1.415(c)-2(a) without regard to (A) any safe harbor provided in Treas. Reg.
§1.415(c)-2(d), (B) any of the special timing rules provided in Treas. Reg. §1.415(c)-2(e),
and (C) any of the special rules provided in Treas. Reg. §1.415(c)-2(g); and




          (ii) Each Director who is among the individuals identified as a “key employee” in
accordance with part (i) of this Section shall be treated as a Specified Employee for
purposes of this Plan if such Director experiences a Separation from Service during the
12-month period that begins on the April 1st following the applicable identification date.



     8. ADMINISTRATION. This Plan shall be administered by the Compensation Committee (the
“Committee”) of the Board of Directors. The decision of the Committee shall be final and binding
with respect to the interpretation, construction or application of the Plan.



     9. AMENDMENT OR TERMINATION. The Committee may amend or terminate the Plan at any time. No
amendment or termination of the Plan shall void an election already in effect for the then current
calendar year or any preceding calendar year, nor adversely affect the right of a former Director,
his/her account prior to such amendment or termination, together with amounts credited thereto
subsequent to such amendment or termination pursuant to Section 6.



     IN WITNESS WHEREOF, the Company has caused this restatement to be executed as of the 19th day
of November, 2008.



	 	 	 	 	 
	 	FLOWSERVE CORPORATION

 	 
	 	By:  	/s/ Ronald F. Shuff
 	 
	 	 	Ronald F. Shuff 	 
	 	 	Vice President, Secretary and General Counsel 	 



5









 







EXHIBIT A




FLOWSERVE CORPORATION

DIRECTOR CASH DEFERRAL PLAN




DIRECTOR’S ELECTION TO DEFER





     In accordance with the provisions of the amended and restated Director Cash Deferral Plan (the
“Plan”) of Flowserve Corporation (the “Company”), I elect to participate in the Plan. Participation
in this Plan is on a pro rata basis with the Flowserve Corporation Director Stock Deferral Plan.
Specifically, I elect:




	1.	 	To defer                     % (increments of 10%) of the payment of the Compensation (as defined in the
Plan) to be paid to me in cash for services as a Director for calendar years beginning January
1, 20__ and succeeding calendar years until I notify you to end this deferral.
	 
	2.	 	To receive payment of the amount credited to my deferred Compensation account in the
following manner:






	 	o 	 	 In one lump sum payment in cash within 60 calendar days of my Separation from
Service.
	 
	 	o 	 	 In                      equal annual installments (not to exceed ten) of cash commencing
within 60 calendar days of my Separation from Service.
	 
	 	o 	 	 In the following percentage combination (totaling 100%):
	 
	 	 	 	                    % Lump Sum within 60 calendar days of my Separation from Service.
	 
	 	 	 	                    % in                      Equal Annual Installments (not to exceed ten) commencing within
60 calendar days of my Separation from Service.






	3.	 	To have any payments above, which have not been made to me prior to my death, paid after my
death to the following designation person(s) in the same manner as would have been paid to me:





 





 





 





6









 




In making this election, I understand that:





	1.	 	My election may not be changed after the beginning of the calendar year with respect to which
my Compensation is paid.
	 
	2.	 	My election is otherwise subject to the terms of the Plan.





	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Date
	 	 	 	Signature of Participant	 	 
	 
	 	 	 	 	 	 




The undersigned acknowledges receipt of the above election on                                                             .




	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Luke Alverson 	 
	 	Senior Securities Counsel 	 
	 





7