Document:

exv10w56

 

EXHIBIT
10.56

SEPARATION AGREEMENT AND RELEASE

     This Separation Agreement and Release (“Agreement”) is voluntarily entered into on April 4,
2005, by Charles Scott Greer (“Executive”) and Flowserve Corporation (“Company”).

Background

     WHEREAS, the Executive currently serves as the Company’s Chief Executive Officer and
President pursuant to an Employment Agreement by and between the Executive and the Company dated,
June 15, 1999 that expires on June 30, 2005 (“Employment Agreement”).

     WHEREAS, the Executive holds (i) options to purchase shares of Company common stock, including
options that will become vested on July 14, 2005, if the Executive is employed by the Company on
that date, (ii) shares of Company common stock subject to vesting, including shares that will
become vested on July 14 and July 17, 2005, if Executive is employed by the Company on those dates,
and (iii) benefits under other compensation plans, all as set forth in Exhibit A attached hereto;
and

     WHEREAS, the Company and the Executive have decided to terminate their employment
relationship, as provided herein, and desire to have an effective transition of leadership prior to
the expiration of the Employment Agreement, and therefore wish to enter into this Agreement
regarding the Executive’s separation from the Company.

Agreement

     NOW, THEREFORE, in consideration of the premises and the mutual agreements set out
herein, the sufficiency of which is hereby acknowledged, the Company and the Executive, intending
to be legally bound, hereby agree as follows:

     1. The Executive shall continue as the Company’s President and Chief Executive Officer until
April 4, 2005. By signing this Agreement, the Executive resigns as a director (including his
capacity as Chairman of the Board of Directors), Chief Executive Officer, and President of the
Company, effective as of midnight at the end of April 4, 2005. The Executive hereby acknowledges
that neither his ceasing to serve in such capacities nor any other matter contemplated by this
Agreement constitutes “Good Reason” for the termination of his employment within the meaning of the
Employment Agreement.

     2. For the period from April 5, 2005, through June 30, 2005 (“Separation Period”), the
Executive shall continue as an employee of the Company performing such duties as reasonably
requested by the Company’s Board of Directors. The Company shall timely pay to Executive all
compensation payable to him under his Employment Agreement and under existing compensation programs
through June 30, 2005 in accordance with the provisions of the Employment Agreement and such
compensation programs.

     3. The Executive agrees that he will fully cooperate in responding to claims against the
Company or its officers or investigations relating to periods in which the Executive was an
employee or officer of the Company and that he will fully cooperate in any litigation in which the
Company or its subsidiaries or affiliates is or may become involved by providing truthful and

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accurate information. Such cooperation shall include the Executive making himself reasonably
available, upon the request of the Company, for depositions, court appearances and interviews by
Company’s counsel. To the maximum extent permitted by law, the Executive agrees that he will
notify the Company, in care of the Chairman of the Compensation Committee of the Board of Directors
of the Company, if he is contacted by any government agency or any other person contemplating or
maintaining any claim or legal action against the Company or its subsidiaries or affiliates or by
any agent or attorney of such person.

     4. Except as required by law, the Executive shall not divulge and the Company shall use its
best effort to cause its officers, employees and agents (and the officers, employees and agents of
its subsidiaries and affiliates) not to divulge, to any other entity or person (except in the case
of the Executive, to his spouse, in case of the Company, to its shareholders, and in the case of
the Company and the Executive to its, or his, legal and financial advisors) any information
concerning this Agreement or the terms thereof or the discussions relating thereto. The Executive
shall not make unfavorable comments about the Company, its business, its directors, or management;
provided, however, this obligation is not intended to impede the Executive’s cooperation with
appropriate governmental and regulatory authorities nor to limit Executive’s testimony in
connection with any legal proceedings, or as otherwise required by law.

     5. In consideration of the Executive’s performance of his obligations pursuant to this
Agreement, and provided that the Executive, on or after June 30, 2005, executes a Release
substantially in the form set out as Exhibit B attached hereto (the “Release”) and does not revoke
his consent to such Release on or before the seventh (7th) day following its execution,
the Company agrees as follows:

     (a) On or as soon as practicable (but in any event within two (2) business days after)
the eighth (8th) day after the date Executive has signed the Release (provided that the
Executive has not earlier revoked the Release), the Company shall pay to Executive $810,000
as a transition allowance.

     (b) The Company shall cause all options and restricted stock held by the Executive and
subject to vesting after June 30, 2005 and on or before July 17, 2005 to become vested on
June 30, 2005. The Executive’s stock options that are vested and outstanding on June 30,
2005 (including those that first become vested on June 30, 2005 pursuant to the immediately
preceding sentence), shall be exercisable by him at any time on or before the later of (i)
December 31, 2006, or, (ii) if the Company is unable to sell stock to the Executive because
of securities laws or other restrictions on that date, ninety days after the date when the
stock can be issued by the Company in compliance with such laws and restrictions (but in any
event not beyond the expiration date of the option).

     (c) The Company shall provide (at a location other than the Company’s offices) for the
Executive’s use a furnished office, along with telephone and computer service, and
secretarial support for the period beginning April 5, 2005, and ending June 30, 2006,
provided that the Executive shall not be entitled to such office space and support after his
full-time employment by another employer.

     (d) In addition to (and not in lieu of) the reimbursement of fees to which the
Executive is entitled under the Employment Agreement and existing Company compensation
programs, the Company shall reimburse the Executive for reasonable expenses incurred in
connection with and/or within the one-year period following his

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termination of employment for financial and tax-planning and legal services (up to a
maximum of $25,000.00 over and above those amounts payable under the Employment Agreement or
the Company’s existing compensation programs).

     (e) The Company shall assist the Executive in the transfer of club memberships used by
the Executive, as mutually agreed to by the parties.

     6. Executive acknowledges and agrees that, absent this Agreement, Executive would not be
entitled to any of the payments or benefits set forth in Section 5. Except as provided in Section
5 or Exhibit A, the Executive shall not be entitled to any further payment or benefit in connection
with the termination of his employment.

     7. Following the termination of his employment, the Executive shall promptly return to the
Company any and all property belonging to the Company (such as computer equipment, keys, credit
cards, books, manuals, and documents) including, without limitation, any documents or materials
containing “Confidential Information” (as defined below) relating to the Company or any of its
subsidiaries or affiliates. Executive further agrees that he shall not retain any copies or
reproductions in whatever form of the foregoing. For purposes of this Agreement, the term
“Confidential Information” means any information, which is not publicly available (other than by
breach of this provision by Executive), including, without limitation, any information that would
be treated as confidential Company information under applicable state or federal law, customer or
client lists or records, customer or client identities, the terms of agreements (including, but not
limited to, fees charged) with any customer or client, economic and financial data and analyses,
business notes, strategic, marketing or other business plans, or research or reports. Executive
agrees to hold such Confidential Information in strictest confidence at all times. Executive
further agrees not to use or to disclose such Confidential Information for any reason at any time
without the prior written consent of the Company. Nothing in this Agreement shall in any way limit
Executive’s ability to provide truthful and complete information as may be required by any court or
requested by any governmental agency.

     8. During his employment by the Company and for a period of one year after his termination of
employment:

     (a) Executive shall not, directly or indirectly, without the prior written consent of
the Company, provide services to, have any management responsibilities for, or have any
ownership interest in (other than owning less than .1% of the shares in a publicly traded
company) the pumps, valves, mechanical seals or related flow equipment businesses of any of
the following entities: Sulzer Corporation, The Weir Group plc, Emerson Electric Co., Tyco
International, Ltd., ITT Industries, Inc. and John Crane Inc.;

     (b) Executive shall not seek to acquire ownership or control of, or participate as any
member of a group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended) seeking to acquire ownership or control of, any portion of
the business, operations, or assets of the Company without the prior written consent of the
Board of Directors of the Company; and

     (c) Executive shall not, directly or indirectly, for his benefit or for the benefit of
any other person, firm or entity, solicit the employment or services of, or hire, any person
who was known to be employed by or a known consultant to the Company or any

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of its subsidiaries or affiliates within one year prior to the termination of his
employment with the Company.

The Noncompetition Agreement between Executive and the Company effective as of July 1, 1999 and any
other agreements restricting Executive’s competition are hereby terminated and are superseded by
this Agreement.

     9. The Executive acknowledges that the Company has advised him to seek legal counsel regarding
this Agreement and that he has had adequate time to review this Agreement with legal counsel. The
Executive represents that he has read this Agreement, fully understands each and every provision,
and signs it voluntarily.

     10. The Executive represents and warrants that in the making, negotiation, and execution of
this Agreement, he is not relying upon any representation, statement, or assertion of fact or
opinion made by any agent, attorney, employee, or representative of the persons, parties, or
corporations being released herein, and he hereby waives any right to rely upon prior agreements
and/or oral representations made by any agent, attorney, employee, or representative of such
persons, parties, or corporations, even though made for the purpose of inducing him to enter into
this Agreement.

     11. The Company represents and warrants that in the making, negotiation, and execution of this
Agreement, it is not relying upon any representation, statement, or assertion of fact or opinion
made by the Executive or any agent, attorney, employee, or representative of the Executive, and it
hereby waives any right to rely upon prior agreements and/or oral representations made by the
Executive or any agent, attorney, employee, or representative of the Executive, even though made
for the purpose of inducing it to enter into this Agreement.

     12. The Executive represents and warrants that, to the knowledge of the Executive, there is no
reasonable basis for any third party to assert any claim against the Company Releasees (within the
meaning of the Release) acting in their Company capacities under any federal, state or local law,
including a breach of any applicable duty under common law. The Executive further represents and
warrants that, to the knowledge of the Executive, there are no claims, actions, suits,
investigations or proceedings threatened against the Company Releasees (within the meaning of the
Release) acting in their Company capacities under any federal, state or local law, including a
breach of any applicable duty under common law. The Executive further represents and warrants that
there is no reasonable basis for the Company or its subsidiaries or affiliates to assert any claim
against the Executive for violation of any federal, state, or local law, or breach of any
applicable duty under common law.

     13. Any dispute, controversy or claim arising between the parties, including but not limited
to claims arising out of or relating to this Agreement, shall be submitted to binding arbitration
to the American Arbitration Association (“AAA”) in Dallas, Texas, in accordance with the rules of
the AAA then in effect. The arbitration shall be conducted before a panel of three (3) arbitrators
selected in accordance with the rules and procedures of the AAA. Notwithstanding this provision,
the Company shall have the right to seek temporary, preliminary and/or permanent injunctive relief
and damages from the AAA (in accordance with any expedited injunctive relief procedures that may be
available) in the event Executive breaches any of sections 7 or 8 of this Agreement.

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     14. All payments made by the Company to the Executive pursuant to Section 5 shall be subject
to withholding of all amounts required or authorized to be withheld by law, including without
limitation tax withholdings.

     15. This Agreement contains the entire agreement of the parties with respect to the subject
matter hereof and supersedes all previous negotiations and agreements, except as provided herein,
whether written or oral. This Agreement may be changed only by an instrument in writing signed by
the party against whom the change, waiver, modification, extension, or discharge is sought.

     16. This Agreement shall inure to the benefit of, may be enforced by, and shall be binding on
the parties and their heirs, executors, administrators, personal representatives, assigns and
successors in interest. It is understood and agreed that no breach of this Agreement shall be
cause to set it aside or to revive any of the claims being released herein or pursuant to the
Release.

     17. It is the desire and intent of the parties that the provisions of this Agreement shall be
enforced to the fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. In the event that any one or more of the provisions
of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remainder of this Agreement shall not in any way be affected or impaired
thereby. Moreover, if any one or more of the provisions contained in this Agreement is held to be
excessively broad as to duration, scope, activity or subject, such provisions shall be construed by
limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable
law.

     18. This Agreement may be executed in two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same instrument.

     19. In the event of any dispute about this Agreement, the laws of the State of Texas shall
govern the validity, performance, enforcement, and all other aspects of this Agreement, subject to
the provisions of Section 13.

     IN WITNESS WHEREOF, the Executive has executed and the Company has caused this Agreement to be
executed as of the date first set out above.

	 	 	 	 	 	 	 
	 	 	 	 	     FLOWSERVE CORPORATION
	 
	 	 	 	 	 	 
	/s/ C. Scott Greer

	 	 	 	By:
	 	/s/ George T. Haymaker, Jr.
	 

	 	 	 	 	 	 
	Charles Scott Greer

	 	 	 	 	 	George T. Haymaker, Jr., Chairman of
	 

	 	 	 	 	 	Compensation Committee

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EXHIBIT A

CERTAIN BENEFITS

The Company acknowledges that Executive is vested in and upon the termination of his employment
with the Company hereunder he will be entitled to benefits under the following benefit plans of the
Company in accordance with the terms of those plans:

	 	•	 	Flowserve Corporation Pension Plan
	 
	 	•	 	Flowserve Corporation Senior Manager Retirement Plan
	 
	 	•	 	Flowserve Corporation Supplemental Executive Retirement Plan
	 
	 	•	 	Flowserve Corporation Retirement Savings Plan

The Company also acknowledges that the Executive currently is credited with 66,666 shares of
Company common stock held under the Company’s “rabbi trust” and that those shares will be
distributable to the Executive upon the termination of his employment with the Company hereunder.

The Company also acknowledges that the Executive currently holds the following vested options to
purchase the Company’s common stock:

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Number of	 	 
	 	 	Expiration	 	 	 	 	 	Shares	 	Per Share
	Grant Date	 	Date	 	Plan	 	Grant Type	 	Covered	 	Option Price
	July 1, 1999
	 	July 1, 2009	 	1997	 	Incentive	 	4,618	 	$18.5625
	July 1, 1999
	 	July 1, 2009	 	1997	 	Nonqualified	 	195,382	 	$18.5625
	July 1, 1999
	 	July 1, 2009	 	99SOP	 	Nonqualified	 	488,456	 	$18.5625
	July 1, 1999
	 	July 1, 2009	 	99SOP	 	Nonqualified	 	2	 	$18.5625
	July 1, 1999
	 	July 1, 2009	 	99SOP	 	Incentive	 	11,542	 	$18.5625
	July 17, 2002
	 	July 17, 2012	 	99SOP	 	Nonqualified	 	36,667	 	$24.84
	July 17, 2003
	 	July 17, 2013	 	1997	 	Nonqualified	 	18,334	 	$19.15

The Company also acknowledges that the Executive currently holds the following options to purchase
the Company’s common stock that are not now vested but will become vested in accordance with
Section 5(b) hereof:

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Number of	 	 
	 	 	Expiration	 	 	 	 	 	Shares	 	Per Share
	Grant Date	 	Date	 	Plan	 	Grant Type	 	Covered	 	Option Price
	July 17, 2002
	 	July 17, 2012	 	99SOP	 	Nonqualified	 	14,308	 	$24.84
	July 17, 2002
	 	July 17, 2012	 	99SOP	 	Incentive	 	4,025	 	$24.84
	July 17, 2003
	 	July 17, 2013	 	1997	 	Nonqualified	 	18,333	 	$19.15
	July 15, 2004
	 	July 15, 2014	 	1997	 	Nonqualified	 	18,000	 	$22.90

The Company also acknowledges that the Executive currently holds 10,667 restricted shares of the
Company’s common stock that were granted on July 15, 2004 and that will become vested in accordance
with Section 5(b) hereof.

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EXHIBIT B

RELEASE

     In exchange for, and as a condition precedent to, the payments and benefits set forth in the
Separation Agreement and Release by and between Charles Scott Greer (the “Executive”) and Flowserve
Corporation (the “Company”) dated April 4, 2005 (the “Separation Agreement”):

     (a) The Executive does for himself and his heirs, executors, administrators, successors and
assigns voluntarily, knowingly and willingly release the Company and its direct and indirect
subsidiaries and affiliates, together with their respective present and former partners, officers,
directors, insurers, shareholders, managers, attorneys, accountants, employees and agents, and each
of their respective predecessors, heirs, executors, administrators, successors and assigns, and any
employee benefit plan maintained by the Company (other than a retirement plan under which Executive
is entitled to future benefits) and any agent or fiduciary of any such plan (collectively, the
“Company Releasees”) from any and all obligations, charges, complaints, claims, promises,
agreements, controversies, causes of action and demands of any nature whatsoever, known or unknown,
suspected or unsuspected, which against them Executive or Executive’s heirs, executors,
administrators, successors or assigns ever had, now have or hereafter can, shall or may have by
reason of any matter, cause or thing whatsoever arising from the beginning of time to the time
Executive executes this Agreement. This release includes, but is not limited to, any and all
rights or claims pursuant to the Employment Agreement by and between Executive and the Company
dated, June 15, 1999 (the “Employment Agreement”) except as expressly set forth herein, relating in
any way to Executive’s employment with the Company or the termination thereof, or any rights or
claims arising under any statute or regulation, including the Age Discrimination in Employment Act
of 1967 (“ADEA”), Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the
Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Texas
Commission on Human Rights Act (each as amended) or any other foreign, federal, state or local law,
regulation, ordinance or common law, or under any policy, agreement, understanding or promise,
written or oral, formal or informal, between any of the Company Releasees and Executive.

     (b) Executive represents that he has not commenced or joined in any claim, charge, action or
proceeding against any of the Company Releasees, arising out of or relating to any of the matters
set forth in this Release. Executive shall not be entitled to any recovery, in any action or
proceeding that may be commenced on Executive’s behalf in any way arising out of or relating to the
matters released under this Release.

     (c) Nothing in this Release shall affect or impair (i) Executive’s vested benefits identified
in Exhibit A to the Separation Agreement; (ii) Executive’s right to enforce the terms of the
Separation Agreement; (iii) any right Executive may have to indemnification pursuant to the
Indemnification Agreement dated June 15, 1999, between him and the Company or Section 11 of the
Employment Agreement and any other rights to indemnification under the Company’s articles of
incorporation, bylaws, board resolutions, or under any directors’ and officers’ insurance policies.
The Company agrees that if the Company increases, or otherwise enhances, its indemnification of
its officers or directors or its insurance of such persons, at any time and from time to time, such
enhancements and increases shall also be for the benefit of and provided to Executive. The Company
agrees to provide director and officer insurance coverage to Executive to the maximum extent
provided to any other officer or director of the Company.

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     (d) Executive acknowledges that he has twenty-one (21) days to consider this Release, although
he may elect to sign it sooner. Once Executive has signed this Release, he has seven (7) days from
the date he signs it to revoke his consent to the Release by delivering (by hand or overnight
courier) written notice of revocation to the Company. In the event Executive does not revoke his
consent, this Release shall become effective on the eighth (8th) day after the date Executive has
signed it. In the event that Executive revokes his consent, this Release shall not become
effective and the Company shall be under no obligation to make the payments or to provide the
benefits set forth in paragraph 5 of the Separation Agreement.

     (e) The Executive acknowledges that the Company has advised him to seek legal counsel
regarding this Release and that he has had adequate time to review this Release with legal counsel.
The Executive represents that he has read this Release, fully understands each and every
provision, and signs it voluntarily. The Executive further acknowledges that in consideration of
agreeing to accept the payments and benefits specified in Section 5 of the Separation Agreement, he
is giving up possible administrative and/or legal claims.

	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	/s/ C. Scott Greer
	 

	 	 
	 	 	 	 
	 

	 	 	 	 	 	Charles Scott Greer

8exv10w57

 

EXHIBIT
10.57

April 1, 2005

Mr. Kevin E. Sheehan

c/o CID Equity Partners

One American Square, Suite 2850

Indianapolis, IN 46282

Dear Kevin:

This will confirm the compensation arrangement between you and Flowserve Corporation for the period
during which you will serve as Interim Chairman, President, and Chief Executive Officer of the
Company.

As you know, the Board of Directors has elected you to serve as Interim Chairman, President, and
Chief Executive effective as of the close of business on April 4, 2005. The Board expects that you
will perform all the duties of those offices until such time as a successor Chief Executive Officer
is elected by the Board and takes office. In particular, the Board has established, after
consultation with you, certain objectives provided to you in a separate document, as priorities on
which it expects you to focus during this period.

During the period of your service, you will be compensated with a salary set at a rate equal to the
sum of the current Chief Executive Officer’s annual Base Salary ($810,000) and Annual Incentive
Compensation Target ($700,000), adjusted pro-rata for the number of workdays you actually serve. To
illustrate, if you begin your active service on April 5, 2005, and serve through August 31, 2005,
and do not take vacation time off, that would be a total of 107 workdays of service. Each day of
service would be compensated at $6,292 ($1,510,000 divided by 240), so that your compensation for
this period of service would be a total of $673,244. You will be paid at the normal interval for
officers of the company.

Because this is an interim position, you will not be awarded Long Term Incentive opportunities, but
you will receive an award of options or restricted stock equivalent to that which you would have
received as a independent Director on the same day that the independent directors awards are made.
Additionally, in this interim position, you will not participate in the Company’s qualified pension
plan, non qualified executive supplemental pension plans nor its Section 401(k) plan.

I understand that you prefer to remain with your current health and disability insurance provides
during the term of your service, and you will be reimbursed for your expenses for that coverage.
You will participate in the Company’s employee group life insurance program during the term of
service.

 

 

You will also be reimbursed for appropriate living and travel expenses to and from your home for
this interim period. You may either elect to accept the existing CEO monthly automobile allowance
or to be directly reimbursed for your car rental expenses, at your option. You will also be
eligible to participate in the existing tax and estate planning allowance program for Company
officers, plus the existing Company-paid annual physical examination program for officers.

Please acknowledge your acceptance of this arrangement by signing a copy of this letter and
returning it to me.

Very truly yours,

	 	 	 	 	 
	/s/ George T. Haymaker Jr.
	 	/s/ Kevin E. Sheehan	 	 
	 

George T. Haymaker Jr.	 	 

Kevin E. Sheehan
	 	 
	Chairman, Compensation Committee of
the Board of Directors

	 	 	 	 
	Flowserve Corporation
	 	 	 	 

 

 

INTERIM CEO OBJECTIVES FOR KEVIN SHEEHAN

	n	 	 Provide a strong leadership focus to the executive team and retain the team during the
transition period
	 
	n	 	 Meet company 2005 budget objectives for sales, bookings, operating profit and cash flow
	 
	n	 	 Complete financial restatements, SOX 404 assertions/field work, and 2004 10K by end of
3Q2005
	 
	n	 	 Resolve 1999-2001 IRS Tax Audit issues by year-end 2005.
	 
	n	 	 Resolve leadership issues in the HR Function
	 
	n	 	 Establish a different “Tone at the Top” during transition period
	 
	n	 	 Maintain good communications and relationships with key shareholders and analysts

	 
	n	 	 Build relationships with key customers as necessary
	 
	n	 	 Using the strategic work presented by John Jacko, develop a shared vision within the
executive leadership team on the strategic direction of the company
	 
	n	 	 Keep the Board properly informed about important issues relating to the company, its
performance and its personnel
	 
	n	 	 Actively participate in the CEO selection process

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