Document:

exv10w3

 

Exhibit 10.3

Performance Restricted Stock Unit Agreement

Flowserve Corporation

2004 Stock Compensation Plan

          This Performance Restricted Stock Unit Agreement (the “Agreement”) is made and entered into by
and between Flowserve Corporation, a New York corporation (the “Company”) and «First_Name»
«Last_Name» (the “Participant”) as of                     , 2007 (the “Date of Grant”).

W I T N E S S E T H

          WHEREAS, the Company has adopted the Flowserve Corporation 2004 Stock Compensation Plan (the
“Plan”) to strengthen the ability of the Company to attract, motivate and retain Employees, Outside
Directors and Consultants who possess superior capabilities and to encourage such persons to have a
proprietary interest in the Company; and

          WHEREAS, the Organization and Compensation Committee of the Board of Directors of the Company
believes that the grant of Performance Restricted Stock Units to the Participant as described
herein is consistent with the stated purposes for which the Plan was adopted; and

          NOW, THEREFORE, in consideration of the mutual covenants and conditions hereafter set forth
and for other good and valuable consideration, the Company and the Participant agree as follows:

	 	1.	 	Performance Restricted Stock Units

          In order to encourage the Participant’s contribution to the successful performance of the
Company, and in consideration of the covenants and promises of the Participant herein contained,
the Company hereby grants to the Participant as of the Date of Grant, an Award of
«M___of_Shares_Granted» Performance Restricted Stock Units (the “Performance Shares”), which may be
converted into the number of shares of Common Stock of the Company equal to the number of vested
Performance Shares, subject to the conditions and restrictions set forth below and in the Plan.

	 	2.	 	Vesting and Conversion of Performance Shares into Common Stock

	 	(a)	 	Prior to March 31, 2007, the Committee shall establish a
threshold, target and maximum Performance Goal with respect to the Award, in
accordance with the requirements of Section 6.7 of the Plan, based upon the
Company’s return on net assets for the period beginning January 1, 2007 and
ending December 31, 2009 (the “Performance Cycle”). Following the end of the
Performance Cycle, the Committee shall compare the actual performance of the
Company with the Performance Goal and certify, in writing, whether and to what
extent the Performance Goal has been achieved for such Performance Cycle.
Subject to the provisions of Paragraph 3 below, upon written certification by
the Committee, which shall occur no later than March 31, 2010, whether, and to
what extent, the Performance Goal has been achieved, the Performance Shares
will become vested (the “Vesting Date”) in accordance with the table set forth
below; provided, however, that the Performance Shares shall not vest and shall
be forfeited to the extent the Performance Goal is not achieved for the
Performance Cycle. The number of Performance Shares vested is contingent upon
the Company’s achievement of the Performance Goal for the Performance Cycle.

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	Performance Goal	 	Percentage of Performance Shares Vested
	Achieved	 	and Eligible for Conversion
	Less Than Threshold
	 	0%
	Threshold
	 	25%
	Target
	 	100%
	Maximum
	 	200%

	 	(b)	 	Except as otherwise provided in Paragraph 2(e) below, no later
than the date that is two and a half (2 1/2) months following the close of the
calendar year in which the Performance Shares vest in accordance with the table
set forth in Paragraph 2(a) above, the Company shall convert the vested
Performance Shares into the number of whole shares of Common Stock equal to the
number of vested Performance Shares, subject to the provisions of the Plan and
the Agreement.
	 
	 	(c)	 	Following conversion of the vested Performance Shares into shares of Common Stock, such shares of Common Stock will be transferred of
record to the Participant and a certificate or certificates representing said
Common Stock will be issued in the name of such Participant and delivered to
the Participant. The delivery of any shares of Common Stock pursuant to this
Agreement is subject to the provisions of Paragraphs 6 and 8 below.
	 
	 	(d)	 	Each year that this Agreement is in effect, the Participant may
receive credits (“Dividend Equivalents”) based upon the cash dividends that
would have been paid on the number of shares of Common Stock equal to 100% of
the Performance Shares as if such shares of Common Stock were actually held by
the Participant. Dividend equivalents shall be deemed to be reinvested in
additional shares of Common Stock (which may thereafter accrue additional
dividend equivalents). Any such reinvestment shall be at the Fair Market Value
of the Common Stock at the time thereof. Dividend Equivalents may be settled
in cash or shares of Common Stock, or any combination thereof, as determined by
the Committee, in its sole and absolute discretion. Following conversion of
the vested Performance Shares into shares of Common Stock, the Participant also
shall receive a distribution of the Dividend Equivalents accrued with respect
to such Performance Shares prior to the date of such conversion. In the event
any Performance Shares do not vest, the Participant shall forfeit his or her
right to any Dividend Equivalents accrued with respect to such unvested
Performance Shares.
	 
	 	(e)	 	Notwithstanding the foregoing provisions of Paragraphs 2(c) and
2(d), the Committee may, in its sole and absolute discretion, in lieu of
distributing any shares of Common Stock to the Participant, elect to pay the
Participant an amount in cash equal to the Fair Market Value on the date of
conversion of the shares of Common Stock that the Participant otherwise would
be entitled to receive pursuant to this Agreement.

	 	3.	 	Effect of Termination of Employment or Services

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	 	(a)	 	The Performance Shares granted pursuant to this Agreement shall
vest in accordance with the provisions of Paragraph 2(a) above, as long as the
Participant remains employed by or continues to provide services to the Company
or a Subsidiary. If, however:

	 	(i)	 	the Company and its Subsidiaries terminate the
Participant’s employment (or if the Participant is not an Employee,
determine that the Participant’s services are no longer needed), or
	 
	 	(ii)	 	the Participant terminates employment (or if
the Participant is not an Employee, ceases to perform services for the
Company and its Subsidiaries),

	 	 	 	Then, except as otherwise provided in Paragraphs 3(b) or 3(c) below, the
Performance Shares that have not previously vested in accordance with the
vesting schedule reflected in Paragraph 2(a) above, as of the date of such
termination of employment (or cessation of services, as applicable), shall
be forfeited by the Participant to the Company.
	 
	 	(b)	 	In the event the Participant’s employment with the Company terminates
due to his or her Retirement, Total and Permanent Disability or death, then on
the Vesting Date the Participant (or the Participant’s estate) shall be
entitled to receive a pro-rata portion of the number of shares of Common Stock
that would have been payable to such Participant if he or she had continued to
provide services up to the Vesting Date, based upon the number of whole years
of employment completed during the Performance Cycle. By way of example, if
the Participant Retires on the one year anniversary of the Date of Grant, such
Participant would be entitled to receive 1/3 of the shares of Common Stock he
or she would have received on the Vesting Date had he or she remained employed
through such date. For purposes of this Agreement, the terms “Retirement” and
“Retire” shall mean the termination of a Participant’s employment with the
Company for any reason other than due to the Participant’s death or Total and
Permanent Disability on or after the earlier of (i) the Participant’s early
retirement date (as such term is defined within the retirement plan in effect
and in which such Participant participates on the date of the Participant’s
termination); or (ii) the Participant attaining the normal retirement date (as
such term is defined within the retirement plan in effect and in which such
Participant participates on the date of the Participant’s termination, or if no
such plan is in effect, age 65).
	 
	 	(c)	 	Notwithstanding Paragraphs 2(a) and 3(a) above, upon the
cessation of the Participant’s employment or services (whether voluntary or
involuntary), the Committee may, in its sole and absolute discretion, elect to
accelerate the vesting of some or all of the unvested Performance Shares.

	 	4.	 	Limitation of Rights
	 
	 	 	 	Nothing in this Agreement or the Plan shall be construed to:

	 	(a)	 	give the Participant any right to be awarded any further
Performance Shares or any other Award in the future, even if Performance Shares
or other Awards are

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	 	 	 	granted on a regular or repeated basis, as grants of Performance Shares and
other Awards are completely voluntary and made solely in the discretion of
the Committee;
	 
	 	(b)	 	give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Subsidiary; or
	 
	 	(c)	 	confer upon the Participant the right to continue in the
employment or service of the Company or any Subsidiary, or affect the right of
the Company or any Subsidiary to terminate the employment or service of the
Participant at any time or for any reason.

	 	5.	 	Prerequisites to Benefits

          Neither the Participant, nor any person claiming through the Participant, shall have any right
or interest in the Performance Shares awarded hereunder, unless and until all the terms, conditions
and provisions of this Agreement and the Plan which affect the Participant or such other person
shall have been complied with as specified herein.

	 	6.	 	Delivery of Shares

          No shares of Common Stock shall be delivered to the Participant upon conversion of the
Performance Shares into shares of Common Stock until:

	 	(a)	 	all the applicable taxes required to be withheld have been paid or withheld in
full;
	 
	 	(b)	 	the approval of any governmental authority required in
connection with this Performance Share, or the issuance of shares of Common
Stock hereunder under has been received by the Company; and
	 
	 	(c)	 	if required by the Committee, the Participant has delivered to
the Committee an “Investment Letter” in form and content satisfactory to the
Company as provided in Paragraph 8 hereof.

	 	7.	 	Successors and Assigns

          This Agreement shall bind and inure to the benefit of and be enforceable by the Participant,
the Company and their respective permitted successors and assigns (including personal
representatives, heirs and legatees), except that the Participant may not assign any rights or
obligations under this Agreement except to the extent and in the manner expressly permitted herein.

	 	8.	 	Securities Act

          The Company will not be required to deliver any shares of Common Stock pursuant to this
Agreement if, in the opinion of counsel for the Company, such issuance would violate the Securities
Act of 1933, as amended (the “Securities Act”) or any other applicable federal or state securities
laws or regulations. The Committee may require that the Participant, prior to the issuance of any
such shares, sign and deliver to the Company a written statement, which shall be in a form and
contain content acceptable to the Committee, in its sole discretion (“Investment Letter”):

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	 	(a)	 	stating that the Participant is acquiring the shares for
investment and not with a view to the sale or distribution thereof;
	 
	 	(b)	 	stating that the Participant will not sell any shares of Common
Stock that the Participant may then own or thereafter acquire except either:

	 	(i)	 	through a broker on a national securities
exchange or
	 
	 	(ii)	 	with the prior written approval of the Company;
and

	 	(c)	 	containing such other terms and conditions as counsel for the
Company may reasonably require to assure compliance with the Securities Act or
other applicable federal or state securities laws and regulations.

	 	9.	 	Federal and State Taxes

	 	(a)	 	Any amount of Common Stock that is payable or transferable to
the Participant hereunder may be subject to the payment of or reduced by any
amount or amounts which the Company is required to withhold under the then
applicable provisions of the laws of the jurisdiction where the Participant is
employed, and, if applicable, the Internal Revenue Code of 1986, as amended
(the “Code”), or its successors, or any other foreign, federal, state or local
tax withholding requirement. When the Company is required to withhold any
amount or amounts under the applicable provisions of any foreign, federal,
state or local requirement or the Code, the Company shall withhold from the
Common Stock to be issued to the Participant a number of shares necessary to
satisfy the Company’s withholding obligations. The number of shares of Common
Stock to be withheld shall be based upon the Fair Market Value of the shares on
the date of withholding.
	 
	 	(b)	 	Notwithstanding Paragraph 9(a) above, if the Participant
elects, and the Committee agrees, the Company’s withholding obligations may
instead be satisfied as follows:

	 	(i)	 	the Participant may direct the Company to
withhold cash that is otherwise payable to the Participant;
	 
	 	(ii)	 	the Participant may deliver to the Company a
sufficient number of shares of Common Stock then owned by the
Participant to satisfy the Company’s withholding obligations, based on
the Fair Market Value of the shares as of the date of withholding;
	 
	 	(iii)	 	the Participant may deliver sufficient cash to
the Company to satisfy its withholding obligations; or
	 
	 	(iv)	 	any combination of the alternatives described
in Paragraphs 9(b)(i) through 9(b)(iii) above.

	 	(c)	 	Authorization of the Participant to the Company to withhold
taxes pursuant to one or more of the alternatives described in Paragraph 9(b)
above must be in a
form and content acceptable to the Committee. The payment or authorization
to

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	 	 	 	withhold taxes by the Participant shall be completed prior to the
delivery of any shares pursuant to this Agreement. An authorization to
withhold taxes pursuant to this provision will be irrevocable unless and
until the tax liability of the Participant has been fully paid.

	 	10.	 	Definitions; Copy of Plan

          Except as specifically provided otherwise herein, all capitalized terms used in this Agreement
shall have the same meanings ascribed to them in the Plan. By the execution of this Agreement, the
Participant acknowledges receipt of a copy of the Plan.

	 	11.	 	Administration

          This Agreement is subject to the terms and conditions of the Plan. The Plan will be
administered by the Committee in accordance with its terms. The Committee has sole and complete
discretion with respect to all matters reserved to it by the Plan and the decisions of the majority
of the Committee with respect to the Plan and this Agreement shall be final and binding upon the
Participant and the Company. In the event of any conflict between the terms and conditions of this
Agreement and the Plan, the provisions of the Plan shall control.

	 	12.	 	Adjustment of Number of Performance Shares

          The number of Performance Shares granted hereunder shall be subject to adjustment in
accordance with Articles 11 and 12 of the Plan.

	 	13.	 	Non-transferability

          The Performance Shares granted by this Agreement are not transferable by the Participant
other than by will or pursuant to applicable laws of descent and distribution. The Performance
Shares and any rights and privileges in connection therewith, cannot be transferred, assigned,
pledged or hypothecated by operation of law, or otherwise, and is not otherwise subject to
execution, attachment, garnishment or similar process. In the event of such occurrence, this
Agreement will automatically terminate and will thereafter be null and void.

	 	14.	 	No Right to Stock

          No Participant and no beneficiary or other person claiming under or through such Participant
shall have any right, title or interest in any shares of Common Stock allocated or reserved under
the Plan or subject to this Agreement, except as to such shares of Common Stock, if any, that have
been issued or transferred to such Participant.

	 	15.	 	Notice

          Any notice to be given to the Company or the Committee shall be addressed to the Company in
care of its Secretary at its principal office. Any such notice shall be in writing and shall be
delivered personally or shall be sent by first class mail, postage prepaid, to the Company.

	 	16.	 	Amendments

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          This Agreement may be amended only by a written agreement executed by the Company and the
Participant. Any such amendment shall be made only upon the mutual consent of the parties, which
consent (of either party) may be withheld for any reason.

	 	17.	 	Governing Law

          This Agreement shall be governed by, construed and enforced in accordance with the laws of the
State of Texas.

	 	18.	 	Definitions

          All capitalized terms in this Agreement shall have the meanings ascribed to them in the Plan
unless otherwise defined in this Agreement.

          IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officers
thereunto duly authorized, and the Participant has hereunto set his/her hand as of the day and year
first above written.

	 	 	 	 	 	 	 
	 	 	FLOWSERVE CORPORATION	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	«First_Name» «Last_Name»	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 

7exv10w4

 

Exhibit 10.4

Restricted Stock Agreement

Flowserve Corporation

2004 Stock Compensation Plan

          This Restricted Stock Agreement (the “Agreement”) is made and entered into by and between
Flowserve Corporation, a New York corporation (the “Company”) and «First_Name» «Last_Name» (the
“Participant”) as of                     , 2007 (the “Date of Grant”).

W I T N E S S E T H

          WHEREAS, the Company has adopted the Flowserve Corporation 2004 Stock Compensation Plan (the
“Plan”) to strengthen the ability of the Company to attract, motivate and retain Employees, Outside
Directors and Consultants who possess superior capabilities and to encourage such persons to have a
proprietary interest in the Company; and

          WHEREAS, the Organization and Compensation Committee of the Board of Directors of the Company
believes that the grant of Restricted Stock to the Participant as described herein is consistent
with the stated purposes for which the Plan was adopted; and

          NOW, THEREFORE, in consideration of the mutual covenants and conditions hereafter set forth
and for other good and valuable consideration, the Company and the Participant agree as follows:

	 	1.	 	Restricted Stock

          In order to encourage the Participant’s contribution to the successful performance of the
Company, and in consideration of the covenants and promises of the Participant herein contained,
the Company hereby grants to the Participant as of the Date of Grant, an Award of
«#___of_Shares_Granted» shares of Common Stock, subject to the conditions and restrictions set forth
below and in the Plan (the “Restricted Stock”).

	 	2.	 	Restrictions on Transfer Before Vesting

	 	(a)	 	The Restricted Stock will be transferred of record to the
Participant and a certificate or certificates representing said Restricted
Stock will be issued in the name of the Participant immediately upon the
execution of this Agreement. Each of such Restricted Stock certificates will
bear a legend as provided by the Company, conspicuously referring to the terms,
conditions and restrictions as permitted under Section 15.9 of the Plan. The
Company either shall retain custody of such Restricted Stock certificate(s)
prior to vesting (the “Restriction Period”) or require the Participant to enter
into an escrow arrangement under which such Restricted Stock certificate(s)
will be held by an escrow agent. Certificates for shares of Common Stock free
of restriction under this Agreement and the Plan shall be delivered to the
Participant promptly after, and only after, the Restriction Period expires
without forfeiture in respect of such shares of Common Stock. The delivery of
any shares of Restricted Stock pursuant to this Agreement is subject to the
provisions of Paragraph 9 below. The Participant, by his or her acceptance of
this Agreement, shall irrevocably grant to the Company a power of attorney to
transfer any shares forfeited pursuant to Paragraph 3 or Paragraph 4 and agrees
to executive any documents requested by the Company in

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	 	 	 	connection with such forfeiture and transfer. The provisions of this
Paragraph 2 shall be specifically performable by the Company in a court of
equity or law.

	 	(b)	 	Absent prior written consent of the Committee, the shares of
Restricted Stock granted hereunder to the Participant may not be sold,
assigned, transferred, pledged or otherwise encumbered, whether voluntarily or
involuntarily, by operation of law or otherwise, from the Date of Grant until
said shares shall have become vested in the Participant over the three-year
period following the Date of Grant in accordance with the following table, or
as otherwise provided in Paragraph 3.

	 	 	 
	 	 	Aggregate Percentage of Shares of
	 	 	Restricted Stock Granted herein which are
	Date	 	Vested
	02/22/08
	 	331/3%
	02/22/09
	 	662/3%
	02/22/10
	 	100%

	 	(c)	 	Consistent with the foregoing, except as contemplated by
Paragraph 6, no right or benefit under this Agreement shall be subject to
transfer, anticipation, alienation, sale, assignment, pledge, encumbrance or
charge, whether voluntary, involuntary, by operation of law or otherwise, and
any attempt to transfer, anticipate, alienate, sell, assign, pledge, encumber
or charge the same shall be void. No right or benefit hereunder shall in any
manner be liable for or subject to any debts, contracts, liabilities or torts
of the person entitled to such benefits. If the Participant or his Beneficiary
hereunder shall become bankrupt or attempt to transfer, anticipate, alienate,
assign, sell, pledge, encumber or charge any right or benefit hereunder, other
than as contemplated by Paragraph 6, or if any creditor shall attempt to
subject the same to a writ of garnishment, attachment, execution,
sequestration, or any other form of process or involuntary lien or seizure,
then such right or benefit shall cease and terminate.

	 	3.	 	Effect of Termination of Employment or Services

	 	(a)	 	The Restricted Stock granted pursuant to this Agreement shall
vest in accordance with the vesting schedule reflected in Paragraph 2(b) above,
as long as the Participant remains employed by or continues to provide services
to the Company or a Subsidiary. If, however, either:

	 	(i)	 	the Company and its Subsidiaries terminate the
Participant’s employment (or if the Participant is not an Employee,
determine that the Participant’s services are no longer needed), or
	 
	 	(ii)	 	the Participant terminates employment (or if
the Participant is not an Employee, ceases to perform services for the
Company and its Subsidiaries),

then the shares of Restricted Stock that have not previously vested in
accordance with the vesting schedule reflected in Paragraph 2(b) above, as
of the date of

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such termination of employment (or cessation of services, as applicable),
shall be forfeited by the Participant to the Company.

	 	(b)	 	Notwithstanding Paragraph 3(a) above, upon the cessation of the
Participant’s employment or services (whether voluntary or involuntary), the
Committee may, in its sole and absolute discretion, elect to accelerate the
vesting of some or all of the unvested shares of Restricted Stock.

	 	4.	 	Forfeiture and Disgorgement Upon Competition

	 	(a)	 	Notwithstanding any provisions in this Agreement to the
contrary, in the event either (A) the Participant violates the provisions of
Paragraph 4(b) or the provisions of any restrictive covenants agreement by and
between the Company or its subsidiaries and the Participant or (B) the
Participant, or anyone acting on the Participant’s behalf, brings a claim
against the Company seeking to declare any term of this Paragraph 4 void or
unenforceable or the provisions of any other restrictive covenants agreement by
and between the Company or its subsidiaries and the Participant void or
unenforceable, then:

	 	(i)	 	the shares of Restricted Stock shall
immediately cease to vest and all shares of Restricted Stock that have
not previously vested in accordance with the vesting schedule reflected
in Paragraph 2(b) above, as of the date of such violation shall be
forfeited by the Participant to the Company;
	 
	 	(ii)	 	the Participant will immediately sell to the
Company one-third of all Restricted Stock acquired by the Participant
pursuant to this Agreement and that Participant still owns on the date
of such violation for the Fair Market Value of such Restricted Stock on
the date of sale to the Company;
	 
	 	(iii)	 	the Participant will immediately pay to the
Company one-third of any gain that the Participant realized on the sale
of shares of Restricted Stock acquired pursuant to this Agreement; and
	 
	 	(iv)	 	the Company shall be entitled to payment by the
Participant of its attorneys’ fees and costs incurred in enforcing the
provisions of Paragraph 4, in addition to any other legal remedies.

The provisions of this Paragraph 4 shall survive the termination or
expiration of this Agreement.

	 	(b)	 	By execution of this Agreement, the Participant, either
individually or as a principal, partner, stockholder, manager, agent,
consultant, contractor, employee, lender, investor, volunteer or as a director
or officer of any corporation or association, or in any other manner or
capacity whatsoever, agrees to the following from the date of grant until the
date one (1) year immediately following his or her termination of employment
(for any reason):
	 
	 	 	 	The Participant shall not, whether directly or indirectly, without the
express prior written consent of the Company:

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	 	(i)	 	Non-Competition
	 
	 	 	 	Become employed by, advise, perform services or otherwise engage in
any capacity with a Competing Business in the Restricted Area. For
purposes of this Agreement, “Competing Business” means any entity or
business that is in the business of providing flow management
products and related repair and/or replacement services. Because the
scope and nature of the Company’s business is international in scope
and the Participant’s job duties are international in scope, the
“Restricted Area” is worldwide. However, the Participant may own,
directly or indirectly, solely as an investment, securities of any
business traded on any national securities exchange or NASDAQ,
provided that the Participant is not a controlling person of, or
member of a group that controls such business, and provided further
that the Participant does not, directly or indirectly, own three
percent (3%) or more of any class of securities of such business;
	 
	 	(ii)	 	Non-Solicitation
	 
	 	 	 	Solicit business from, attempt to transact business with, or transact
business with any customer or prospective customer of the Company
with whom the Company transacted business or solicited within the
preceding twenty-four (24) months, and which either: (1) the
Participant contacted, called on, serviced, conducted business with
or had contact with during the Participant’s employment or that the
Participant attempted to contact, call on, service, or do business
with during the Participant’s employment; or (2) the Participant
became acquainted with or dealt with, for any reason, as a result of
the Participant’s employment with the Company. This restriction
applies only to business that is in the scope of services or products
provided by the Company; or
	 
	 	(iii)	 	Non-Recruitment
	 
	 	 	 	Hire, solicit for employment, induce or encourage to leave the
employment of the Company or its subsidiaries any current employee of
the Company or any former employee of the Company or its subsidiaries
whose employment ceased less than three (3) months earlier.

	 	(c)	 	Confidential Information
	 
	 	 	 	Immediately upon Participant’s execution of this Agreement, and continuing
on an ongoing basis during Participant’s employment, the Company agrees to
provide Participant with new Confidential Information (defined in this
Paragraph 4(c)) to which Participant has not previously had access. For
purposes of this Agreement, “Confidential Information” includes any trade
secrets or confidential or proprietary information of the Company,
including, but not limited to, the following:

	 	(i)	 	information concerning customers, clients,
marketing, business and operational methods of the Company and their
customers or clients,

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	 	 	 	contracts, financial or other data, technical data, e-mail and other
correspondence or any other confidential or proprietary information
possessed, owned or used by any of the Company;
	 
	 	(ii)	 	business records, product construction, product
specifications, financial information, audit processes, pricing,
business strategies, marketing and promotional practices (including
internet-related marketing) and management methods and information;
	 
	 	(iii)	 	financial data, strategies, systems, research,
plans, reports, recommendations and conclusions;
	 
	 	(iv)	 	names, arrangements with, or other information
relating to any of the Company’s customers, clients, suppliers,
financiers, owners, representatives and other persons who have business
relationships with the Company or who are prospects for business
relationships with the Company; and
	 
	 	(v)	 	any non-public matter or thing obtained or
ascertained by Participant through Participant’s association with the
Company, the use or disclosure of which might reasonably be construed
to be contrary to the best interests of the Company.

	 	(d)	 	Non-Disclosure
	 
	 	 	 	In exchange for the Company’s promise to provide Participant with
Confidential Information, Participant shall not, during the period of
Participant’s employment or at any time thereafter, disclose to anyone, or
publish, or use for any purpose, any Confidential Information, except as:
(i) required in the ordinary course of the Company’s business or the
Participant’s work for the Company; (ii) required by law; or (iii) directed
and authorized in writing by the Company. Upon the termination of
Participant’s employment for any reason, Participant shall immediately
return and deliver to the Company any and all Confidential Information,
computers, hard drives, papers, books, records, documents, memoranda,
manuals, e-mail, electronic or magnetic recordings or data, including all
copies thereof, which belong to the Company or relate to the Company’s
business and which are in Participant’s possession, custody or control,
whether prepared by Participant or others. If at any time after termination
of Participant’s employment, for any reason, Participant determines that
Participant has any Confidential Information in Participant’s possession or
control, Participant shall immediately return to the Company all such
Confidential Information in Participant’s possession or control, including
all copies and portions thereof.
	 
	 	(e)	 	By execution of this Agreement, the Participant agrees that the
provisions of this Paragraph 4 shall apply to all grants (including, without
limitation, grants of incentive stock options, nonqualified stock options and
restricted stock) made to the Participant pursuant to the Plan in 2006 and, to
the extent the provisions of such grants are inconsistent with any of the
provisions of this Paragraph 4, the Company and the Participant agree that (i)
the provisions of this Paragraph 4

5

 

	 	 	 	shall control and (ii) the provisions of any such award agreements are
hereby amended by the terms of this Paragraph 4.

	 	5.	 	Limitation of Rights
	 
	 	 	 	Nothing in this Agreement or the Plan shall be construed to:

	 	(a)	 	give the Participant any right to be awarded any further
Restricted Stock or any other Award in the future, even if Restricted Stock or
other Awards are granted on a regular or repeated basis, as grants of
Restricted Stock and other Awards are completely voluntary and made solely in
the discretion of the Committee;
	 
	 	(b)	 	give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Subsidiary; or
	 
	 	(c)	 	confer upon the Participant the right to continue in the
employment or service of the Company or any Subsidiary, or affect the right of
the Company or any Subsidiary to terminate the employment or service of the
Participant at any time or for any reason.

	 	6.	 	Prerequisites to Benefits

          Neither the Participant, nor any person claiming through the Participant, shall have any right
or interest in the Restricted Stock awarded hereunder, unless and until all the terms, conditions
and provisions of this Agreement and the Plan which affect the Participant or such other person
shall have been complied with as specified herein.

	 	7.	 	Rights as a Stockholder

          Subject to the limitations and restrictions contained herein, the Participant (or Beneficiary)
shall have all rights as a stockholder with respect to the shares of Restricted Stock, including
the right to vote and receive dividends.

	 	8.	 	Successors and Assigns

          This Agreement shall bind and inure to the benefit of and be enforceable by the Participant,
the Company and their respective permitted successors and assigns (including personal
representatives, heirs and legatees), except that the Participant may not assign any rights or
obligations under this Agreement except to the extent and in the manner expressly permitted herein.

	 	9.	 	Securities Act

          The Company will not be required to deliver any shares of Common Stock pursuant to this
Agreement if, in the opinion of counsel for the Company, such issuance would violate the Securities
Act of 1933, as amended (the “Securities Act”) or any other applicable federal or state securities
laws or regulations. The Committee may require that the Participant, prior to the issuance of any
such shares, sign and deliver to the Company a written statement, which shall be in a form and
contain content acceptable to the Committee, in its sole discretion (“Investment Letter”):

	 	(a)	 	stating that the Participant is acquiring the shares for
investment and not with a view to the sale or distribution thereof;

6

 

	 	(b)	 	stating that the Participant will not sell any shares of Common
Stock that the Participant may then own or thereafter acquire except either:

	 	(i)	 	through a broker on a national securities
exchange or
	 
	 	(ii)	 	with the prior written approval of the Company;
and

	 	(c)	 	containing such other terms and conditions as counsel for the
Company may reasonably require to assure compliance with the Securities Act or
other applicable federal or state securities laws and regulations.

	 	10.	 	Federal and State Taxes

	 	(a)	 	Any amount of Common Stock that is payable or transferable to
the Participant hereunder may be subject to the payment of or reduced by any
amount or amounts which the Company is required to withhold under the then
applicable provisions of the Internal Revenue Code of 1986, as amended (the
“Code”), or its successors, or any other federal, state or local tax
withholding requirement. When the Company is required to withhold any amount
or amounts under the applicable provisions of the Code, the Company shall
withhold from the Common Stock to be issued to the Participant a number of shares necessary to satisfy the Company’s withholding obligations. The number
of shares of Common Stock to be withheld shall be based upon the Fair Market
Value of the shares on the date of withholding.
	 
	 	(b)	 	Notwithstanding Paragraph 10(a) above, if the Participant
elects, and the Committee agrees, the Company’s withholding obligations may
instead be satisfied as follows:

	 	(i)	 	the Participant may direct the Company to
withhold cash that is otherwise payable to the Participant;
	 
	 	(ii)	 	the Participant may deliver to the Company a
sufficient number of shares of Common Stock then owned by the
Participant to satisfy the Company’s withholding obligations, based on
the Fair Market Value of the shares as of the date of withholding;
	 
	 	(iii)	 	the Participant may deliver sufficient cash to
the Company to satisfy its withholding obligations; or
	 
	 	(iv)	 	any combination of the alternatives described
in Paragraphs 10(b)(i) through 10(b)(iii) above.

	 	(c)	 	Authorization of the Participant to the Company to withhold
taxes pursuant to one or more of the alternatives described in Paragraph 10(b)
above must be in a form and content acceptable to the Committee. The payment
or authorization to withhold taxes by the Participant shall be completed prior
to the delivery of any shares pursuant to this Agreement. An authorization to
withhold taxes pursuant to this provision will be irrevocable unless and until
the tax liability of the Participant has been fully paid.

7

 

	 	11.	 	Adjustment of Number of Shares of Restricted Stock

          The number of shares of Restricted Stock granted hereunder shall be subject to adjustment in
accordance with Articles 11 and 12 of the Plan.

	 	12.	 	Definitions; Copy of Plan

          Except as specifically provided otherwise herein, all capitalized terms used in this Agreement
shall have the same meanings ascribed to them in the Plan. By the execution of this Agreement, the
Participant acknowledges receipt of a copy of the Plan.

	 	13.	 	Administration

          This Agreement is subject to the terms and conditions of the Plan. The Plan will be
administered by the Committee in accordance with its terms. The Committee has sole and complete
discretion with respect to all matters reserved to it by the Plan and the decisions of the majority
of the Committee with respect to the Plan and this Agreement shall be final and binding upon the
Participant and the Company. In the event of any conflict between the terms and conditions of this
Agreement and the Plan, the provisions of the Plan shall control.

	 	14.	 	No Right to Stock

          No Participant and no beneficiary or other person claiming under or through such Participant
shall have any right, title or interest in any shares of Common Stock allocated or reserved under
the Plan or subject to this Agreement, except as to such shares of Common Stock, if any, that have
been issued or transferred to such Participant.

	 	15.	 	Notice

          Any notice to be given to the Company or the Committee shall be addressed to the Company in
care of its Secretary at its principal office. Any such notice shall be in writing and shall be
delivered personally or shall be sent by first class mail, postage prepaid, to the Company.

	 	16.	 	Amendments

          This Agreement may be amended only by a written agreement executed by the Company and the
Participant. Any such amendment shall be made only upon the mutual consent of the parties, which
consent (of either party) may be withheld for any reason.

	 	17.	 	Governing Law

          This Award Agreement shall be governed by, construed and enforced in accordance with the laws
of the State of Texas.

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	 	18.	 	Definitions

          All capitalized terms in this Agreement shall have the meanings ascribed to them in the Plan
unless otherwise defined in this Award Agreement.

          IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officers
thereunto duly authorized, and the Participant has hereunto set his/her hand as of the day and year
first above written.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	FLOWSERVE CORPORATION	 	 
	 	 	By:	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	«First_Name» «Last_Name»	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 

9

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