Document:

exv10w23

Exhibit 10.23

2007 FLOWSERVE CORPORATION

ANNUAL INCENTIVE PLAN

As Amended and Restated Effective January 1, 2010

ARTICLE 1.

ESTABLISHMENT AND PURPOSE

     Section 1.1 Establishment of the Plan. Flowserve Corporation, a New York corporation
(the “Company” as defined in Section 2.8 below), hereby establishes an annual incentive
compensation plan known as the Flowserve Corporation Annual Incentive Plan effective as of January
1, 2007 (the “Plan”). The Plan permits the Company to award annual incentive award payouts to
Participants based on the achievement of pre-established performance goals. The Plan shall continue
to be effective until December 31, 2012, unless earlier terminated by the Board, pursuant to
Article 10.

     Section 1.2 Purpose. The primary purposes of the Plan are to:

     (a) motivate Participants (as defined in Section 2.19 below) towards achieving annual
goals that are within corporate, divisional, group and/or local facility control and are
considered key to the Company’s success;

     (b) encourage teamwork among Participants in various segments of the Company; and

     (c) reward performance with pay that varies in relation to the extent to which the
pre-established goals are achieved.

ARTICLE 2.

DEFINITIONS

     Whenever used in the Plan, the following terms shall have the meanings set forth below:

     Section 2.1 Affiliate or Subsidiary means any corporation or company which is
a member of a controlled group of corporations (determined in accordance with Section 414(b) of the
U.S. Internal Revenue Code of 1986, as amended (the “Code”)) of which the Company is a member and
any other trade or business (whether or not incorporated) which is controlled by, or under common
control (determined in accordance with Section 414(c) of the Code) with the Company.

     Section 2.2 Award Opportunity means the various levels of incentive award payouts that
a Participant may earn under the Plan, as established by the Committee pursuant to Section 5.1 and
Section 5.2 herein.

     Section 2.3 Board means the Board of Directors of the Company.

     Section 2.4 Cause means any of the following events:

 

 

     (a) the continued failure by a Participant to substantially perform his duties with the
Company,

     (b) conviction of a felony or his plea of guilty or nolo contendre to a felony,

     (c) the willful engaging by the Participant in gross misconduct which is injurious to
the Company,

     (d) the Participant’s violation of the Company’s policies and procedures and/or the
Flowserve Code of Business Conduct, or

     (e) any other action or reason arising from the conduct of a Participant determined to
be cause in the sole and absolute discretion of the Committee.

     Section 2.5 Change-In-Control means any of the following:

     (a) Any transaction that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 (the
“Exchange Act”) (excluding any transaction described in Section 2.5(b) through Section
2.5(f) below that is otherwise specifically excluded from constituting a change-in-control);

     (b) Any “Person” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange
Act), other than the Company, Subsidiaries, or its Affiliates, becoming the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of twenty percent (20%) or more of either the Outstanding Shares or the Voting
Securities; provided, however, that such beneficial ownership shall not constitute a
Change-In-Control if it occurs as a result of:

     (i) any acquisition directly from the Company,

     (ii) any acquisition by a Subsidiary,

     (iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any Subsidiary,

     (iv) any acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or consolidation, the
conditions described in 0 below are satisfied, or

     (v) any Person (the “Subject Person”) becoming the beneficial owner of twenty
percent (20%) or more of the Outstanding Shares or Voting Securities as a result of
the acquisition of Outstanding Shares or Voting Securities by the Company, including
any affiliates defined in Section 2.5(b)(ii) or Section 2.5(b)(iii) above, which, by
reducing the number of Outstanding Shares or Voting Securities, increases the
proportional number of shares beneficially owned by the Subject Person; provided,
that if a Change-In-Control would be deemed to have occurred (but for the operation
of this sentence) as a result of the acquisition of

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Outstanding Shares or Voting
Securities by the Company and after such share acquisition by the Company, the
Subject Person becomes the beneficial owner of any additional Outstanding Shares or
Voting Securities which increases the percentage of the Outstanding Shares or Voting
Securities beneficially owned by the Subject Person, then a Change-In-Control shall
then be deemed to have occurred; or

     (c) Individuals who currently constitute the Board (the “Incumbent Board”) cease for
any reason except for the death, Disability, or ineligibility of the director to seek
re-election to the Board as a result of term or age limitations, to constitute at least
two-thirds (2/3) of the Board within any consecutive twenty-four (24) month period;
provided, however, that any individual becoming a director subsequent to the date of the
beginning of such twenty-four (24) month period whose election, or nomination for election
by the Company’s shareholders, was approved by a vote of at least two-thirds (2/3) of the
elected directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of either an actual or
threatened election contest or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board, including by reason of agreement
intended to avoid or settle any such actual or threatened contest or solicitation; or

     (d) The consummation of a reorganization, merger or consolidation, in each case,
unless, following such reorganization, merger or consolidation:

     (i) more than 50% of, respectively, the then outstanding shares of common stock
of the corporation resulting from such reorganization, merger or consolidation (or
any parent thereof) and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Shares and Voting Securities immediately prior to
such reorganization, merger or consolidation, in substantially the same proportions
as their ownership immediately prior to such reorganization, merger or consolidation
of such Outstanding Shares and Voting Securities, as the case may be, or

     (ii) each of the following three criteria are met:

     (A) officers of the Company as of the effective date of such
reorganization, merger or consolidation constitute at least three-quarters
(3/4) of the officers of the ultimate parent corporation resulting from such
reorganization, merger or consolidation,

     (B) elected members of the Board of Directors of the Company as of the
effective date of such reorganization, merger or consolidation constitute at
least three-quarters (3/4) of the board of directors of the

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ultimate parent
corporation resulting from such reorganization, merger or consolidation, and

     (C) the positions of Chairman of the Board of Directors, the Chief
Executive Officer and the President of the corporation resulting from such
reorganization, merger or consolidation are held by individuals with the
same positions at the Company as of the effective date of such
reorganization, merger or consolidation; or

     (e) The consummation of the sale, lease, exchange or other disposition of all or
substantially all of the assets of the Company, unless such assets have been sold, leased,
exchanged or disposed of to a corporation with respect to which following such sale, lease,
exchange or other disposition:

     (i) more than 50% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof) entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Shares and Voting Securities of the Company
immediately prior to such sale, lease, exchange or other disposition in
substantially the same proportions as their ownership immediately prior to such
sale, lease, exchange or other disposition of such Outstanding Shares and Voting
Securities, as the case may be,

     (ii) no Person (excluding the Company and any employee benefit plan (or related
trust) of the Company or a Subsidiary of the Company or any Person, beneficially
owning, immediately prior to such sale, lease, exchange or other disposition,
directly or indirectly, 20% or more of the Outstanding Shares or Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof) entitled to vote generally in
the election of directors, and

     (iii) at least two-thirds (2/3) of the members of the board of directors of
such corporation (or any parent thereof) were members of the Incumbent Board at the
time of the execution of the initial agreement or action of the Board providing for
such sale, lease, exchange or other disposition of assets of the Company.

     (f) Notwithstanding anything to the contrary in Section 2.5(a) through Section 2.5(e)
above and without limitation, the Incumbent Board may, in its sole discretion, determine
that a Change-In-Control has occurred under circumstances other than those contemplated by
this Section 2.5. In such circumstances, a Change-In-Control will be deemed to have occurred
through a vote by two-thirds (2/3) of the Incumbent Board to approve a motion declaring such
a Change-In-Control has occurred.

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     Section 2.6 Code means the U.S. Internal Revenue Code of 1986, as amended from time to
time.

     Section 2.7 Committee means the Organization and Compensation Committee established
and appointed by the Board.

     Section 2.8 Company means Flowserve Corporation, a New York corporation and its
successors and assigns.

     Section 2.9 Disability means a long-term disability as defined in and meeting the
terms and conditions of the appropriate plan of the Company that provides long-term disability
benefits to the Company’s eligible employees (or, as set forth in any successor plans), as
applicable to the Participant, or, if no long-term disability plan is in place or is applicable to
the Participant, a physical or mental condition resulting from bodily injury, disease, or mental
disorder which prevents the Participant from performing his or her duties of employment for a
period of six (6) continuous months, as determined in good faith by the Committee or its delegate,
based upon medical reports or other evidence satisfactory to the Committee or its delegate.

     Section 2.10 Discretion or Discretionary means the Committee’s sole and exclusive
right to make determinations.

     Section 2.11 Effective Date means, except as otherwise specified herein, the date the
Plan became effective, as set forth in Section 1.1.

     Section 2.12 Eligible Earnings means (i) base salary on a date selected by the
Committee or its delegate between December 1st and December 31st of a
Performance Period; (ii) overtime pay for United States and Canadian-based Employees; and (iii)
actual premium pay for United States and Canadian-based Employees. “Eligible Earnings” excludes all
amounts not otherwise enumerated in this Section 2.12, including, without limitation:

(A) Annual Incentive Plan awards for prior years,

(B) Long-Term Incentive Plan awards,

(C) commissions,

(D) discretionary and non-discretionary bonuses,

(E) accrued vacation pay or paid leave,

(F) long-term disability pay,

(G) severance pay,

(H) expense reimbursements,

(I) car allowances,

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(J) tax/financial planning reimbursements,

(K) club dues, and

(L) foreign service allowances.

     Section 2.13 Employee means any person paid through the payroll department of the
Company or its Subsidiaries or Affiliates (as opposed to the accounts payable department of the
Company); provided, however, that the term “Employee” shall not include any person who has entered
into an independent contractor agreement, consulting agreement, franchise agreement or any similar
agreement with the Company, nor the employees of any such person, regardless of whether that person
(including his or her employees) is later found to be an employee of the Company by any court of
law or regulatory authority.

     Section 2.14 Exchange Act means the Securities Exchange Act of 1934, as amended from
time to time, or any successor act thereto.

     Section 2.15 Executive Officer means an officer of the Company or its Subsidiaries or
Affiliates who is a “covered employee”, as defined in Section 162(m) of the Code, as determined in
accordance with Section 6.7(e) of the Flowserve Corporation Equity and Incentive Compensation Plan.

     Section 2.16 Final Award means the actual award earned during a Performance Period by
a Participant, as determined by the Committee following the end of the Performance Period.

     Section 2.17 Incumbent Board shall have the meaning ascribed in Section 2.5(c).

     Section 2.18 Outstanding Shares means the then outstanding common shares of the
Company.

     Section 2.19 Participant means an Employee chosen by the Committee to participate in
the Plan as provided for in Article 4 herein.

     Section 2.20 Performance Period means the twelve (12) month period beginning January
1st and ending December 31st over which performance is measured for purposes of determining Final
Awards, or such other period determined by the Committee in its sole and absolute discretion.

     Section 2.21 Plan means the Flowserve Corporation Annual Incentive Plan, as set forth
herein.

     Section 2.22 Retirement shall mean the termination of a Participant’s employment for
any reason other than for Cause on or after the earlier of:

     (a) the Participant’s Early Retirement Date (as such term is defined within the
retirement plan of the Company in effect and in which such Participant participates on the
date of the Participant’s termination;

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     (b) retirement set by local law or the participant’s employment agreement; or

     (c) the Participant attaining sixty-five (65) years of age.

     Section 2.23 Subject Person shall have the meaning ascribed in Section 2.5(b)(v).

     Section 2.24 Target Incentive Award means the award to be paid to Participants when
the Company meets targeted performance results, as established by the Committee. This award is
based on the Employee’s Eligible Earnings and his or her level of responsibility.

     Section 2.25 Voting Securities means the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of directors.

ARTICLE 3.

ADMINISTRATION

     Section 3.1 The Committee. The Plan shall be administered by the Organization &
Compensation Committee of the Board, or its delegate. Membership on the Committee shall be limited
to those members of the Board who are “outside directors” under Section 162(m) of the Code and
shall be composed entirely of independent directors as required by the New York Stock Exchange
(“NYSE”) rules.

     Section 3.2 Authority of the Committee.

     (a) Except as limited by law or by the certificate of incorporation or bylaws of the
Company and subject to the provisions herein, the Committee or its delegate shall have full
power to:

     (i) select Employees who shall participate in the Plan;

     (ii) determine the size and types of Award Opportunities and Final Awards;

     (iii) determine the terms and conditions of Award Opportunities in a manner
consistent with the Plan;

     (iv) construe and interpret the Plan and any agreement or instrument entered
into under the Plan;

     (v) establish, amend, or waive rules and regulations for the Plan’s
administration;

     (vi) amend the terms and conditions of any outstanding Award Opportunity to the
extent such terms and conditions are within the discretion of the Committee as
provided in the Plan; and

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     (vii) to the extent permitted by law, delegate the authority described herein.

     (b) The Committee, or its delegate, shall also make all other determinations which may
be necessary or advisable for the administration of the Plan.

     Section 3.3 Decisions Binding. All determinations and decisions of the Committee as to
any disputed question arising under the Plan, including questions of construction and
interpretation, shall be final, binding and conclusive upon all parties.

     Section 3.4 Indemnification.

     (a) Each person who is or shall have been a member of the Committee or the Board, or
its delegate, shall be indemnified and held harmless by the Company against and from any
loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or
her in connection with or resulting from any claim, action, suit, or proceeding to which he
or she may be a party, or in which he or she may be involved by reason of any action taken
or failure to act under the Plan and against and from any and all amounts paid by him or her
in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of
any judgment in any such action, suit, or proceeding against him or her, provided he or she
shall give the Company an opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or her own behalf.

     (b) The foregoing right of indemnification shall not be exclusive of any other rights
of indemnification to which such persons may be entitled under the Company’s certificate of
incorporation or bylaws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.

ARTICLE 4.

ELIGIBILITY AND PARTICIPATION

     Section 4.1 Eligibility. Only Employees shall be eligible to participate in the Plan.
Independent contractors and employees of third parties who are performing work on behalf of the
Company, whether part-time, full-time, or temporary, shall not be eligible to participate in the
Plan. Employees who participate in a sales incentive plan are ineligible to participate in this
Plan.

     Section 4.2 Participation.

     (a) Participation in the Plan is Discretionary and shall be determined on an annual
basis by the Committee. Participants shall be notified of their participation in the Plan in
writing and shall be apprised of the terms of the Plan as soon as practical following the
Committee’s Discretionary determination.

     (b) Participation in the Plan and the receipt of an award under the Plan requires that
a Participant be in an employment relationship with the Company or an

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Affiliate or
Subsidiary of the Company on December 31st of the respective year to which the award or
benefit relates.

     Section 4.3 Partial Performance Period Participation. An Employee who becomes eligible
to participate in the Plan after the beginning of a Performance Period may participate on a pro
rata basis in the Plan for that Performance Period. The Committee, in its sole discretion, retains
the right to increase or decrease the number of days the Employee participates in the Plan for the
initial Performance Period of eligibility.

     Section 4.4 No Right to Participate. No Employee shall at any time have a right to
participate in the Plan for any Performance Period, despite having previously participated in the
Plan. All awards and other benefits granted under the Plan are of a voluntary nature. The grant of
an award or the benefit of participating in the Plan shall not create a claim for future awards,
benefits or participation in the Plan even if awards or benefits have been granted to a Participant
repeatedly over previous Plan years.

ARTICLE 5.

AWARD DETERMINATION

     Section 5.1 Performance Measures and Performance Goals.

     (a) Prior to the beginning of each Performance Period, or as soon as practicable
thereafter (and no later than 90 days after the commencement of the Performance Period, or
if the Performance Period is less than twelve (12) months, no later than before 25% of the
Performance Period has been completed), the Committee shall select performance measures and
shall establish performance goals for that Performance Period. These performance measures
shall include one or more business criteria which, where applicable, shall be within the
meaning of Section 162(m) of the Code and consist of one or more or any combination of the
following:

     (i) Income measures (including, but not limited to, gross profit, operating
income, income before or after taxes, or earnings per share);

     (ii) Return measures (including, but not limited to, return on assets,
investment, equity, or sales);

     (iii) Cash flow measures (including, but not limited to, operating cash flow
and cash flow return on investments);

     (iv) Sales;

     (v) Economic value added;

     (vi) Share price (including, but not limited to, growth measures and total
shareholder return);

     (vii) Inventory turnover;

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     (viii) On-time delivery measures; and

     (ix) Individual performance criteria.

     (b) The performance goals may be based on any combination of objective corporate,
divisional, group and/or local facility and/or individual performance measures. The
Committee may establish objective individual performance goals for each Participant and may
provide that upon the achievement of such individual performance goals such Participant
shall be entitled to an additional Award Opportunity of up to twenty-five percent (25%) of
the Participant’s Final Award.

     (c) The performance goals for each Performance Period shall be set forth on Exhibit
A hereto. Exhibit A shall include all of the following information for the
Performance Period: (i) the method for computing the amount of compensation payable to each
Participant if the performance goals are obtained (or exceeded) for the Performance Period
in terms of an objective formula or standard; (ii) the specific performance goals that must
be achieved with the respect to the Performance Period; and (iii) the maximum amount of
compensation that can be paid to any employee with respect to the Award Opportunities for
the Performance Period.

     Section 5.2 Award Opportunities. Prior to the beginning of each Performance Period, or
as soon as practicable thereafter (and no later than 90 days after the commencement of the
Performance Period, or if the Performance Period is less than twelve (12) months, no later than
before 25% of the Performance Period has been completed), the Committee shall establish, in
writing, Award Opportunities (including a Participant’s Target Incentive Award) which correspond to
various levels of achievement of the pre-established performance goals. In the event a Participant
changes job levels during a Performance Period, the Participant’s Award Opportunity may be adjusted
to reflect the amount of time at each job level during the Performance Period. The extent to which
any applicable performance goals have been achieved shall be conclusively determined in writing by
the Committee prior to payment of any Award Opportunity. Notwithstanding anything to the contrary
contained herein, in no event may any Participant receive a payout pursuant to an Award Opportunity
for any Performance Period that exceeds $4,000,000.

     Section 5.3 Adjustment of Performance Goals, Award Opportunities and Final Awards.

     (a) Once established performance goals normally shall not be changed during the
Performance Period, except as otherwise provided in this Section 5.3. However, if the
Committee determines that external changes or other unanticipated business conditions have
materially affected the fairness of the goals, then the Committee may approve
appropriate adjustments to the performance goals (either up or down) during the
Performance Period as such goals apply to the Award Opportunities of specified Participants.

     (b) Notwithstanding any other provision of this Plan, in the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction, such

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as any
merger, consolidation, separation, including a spin-off, or other distribution of stock or
property of the Company, any reorganization (whether or not such reorganization comes within
the definition of such term in Section 368 of the Code), or any partial or complete
liquidation of the Company that affects the fair value of an Award Opportunity, the
Committee shall adjust any or all of the following so that the fair value of the Award
Opportunity immediately after the transaction or event is equal to the fair value of the
Award Opportunity immediately prior to the transaction or event, provided that such
adjustment will not cause adverse tax consequences to any Participant under Section 409A of
the Code: (i) the performance measures or performance goals related to the then-current
Performance Periods or (ii) the amount payable pursuant to the Award Opportunities for the
then-current Performance Periods.

     (c) At the end of each Performance Period the Committee or its delegate, will compute
Final Awards. Except as provided by this Section 5.3(d) below, the Committee or its delegate
shall have the authority to reduce or eliminate the amount of the Final Award determination
by up to twenty-five percent (25%) of the Participant’s Final Award, for each Participant
based upon such Participant’s individual performance during the Performance Period or upon
any other objective or subjective criteria it deems appropriate. With respect to any Award
Opportunity that is not intended to satisfy the requirements of Section 162(m) of the Code,
the Committee or its delegate shall have the authority to increase the amount of the Final
Award determination by up to twenty-five percent (25%) of the Participant’s Target Incentive
Award, for each Participant based upon such Participant’s individual performance during the
Performance Period or upon any other objective or subjective criteria it deems appropriate.

     (d) Notwithstanding the foregoing, with respect to any Award Opportunity granted to an
Executive Officer that is intended to satisfy the requirements of Section 162(m) of the
Code, the Committee may not make any adjustments to any performance goals or the amount of
any Final Award payable to an Executive Officer that would result in an increase above the
Award limit described in Section 5.4.

     (e) The Company shall deny payment of calculated Final Awards under the Plan for any
Participant who the Committee or its delegate, in their sole and absolute discretion,
determines has failed to meet expectations as determined through the annual performance
management process for any Performance Period; provided, however, the Committee or its
delegate, in its sole and absolute discretion, may elect to waive the application of this
Section 5.3(d) based on the particular facts and circumstances with respect to any
Participant for any Performance Period. The Company shall reduce a calculated Final Award
under the Plan by fifty percent (50%) for any Participant who the Committee or its delegate,
in their sole and absolute discretion, determines needs improvement as determined through
the annual performance management process for any
Performance Period; provided, however, the Committee or its delegate, in its sole and
absolute discretion, may elect to waive the application of this Section 5.3(d) based on the
particular facts and circumstances with respect to any Participant for any Performance
Period.

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     Section 5.4 Award Limit. The Committee will establish guidelines governing the maximum
Final Awards that may be earned by Participants (either in the aggregate, by Employee class, or
among individual Participants) in each Performance Period. The guidelines may be expressed as a
percentage of Company-wide goals or financial measures, or such other measures as the Committee
shall from time to time determine. The guidelines for each Performance Period will be set forth on
Exhibit A attached hereto.

     Section 5.5 Threshold Levels of Performance. The Committee may establish minimum
levels of performance goal achievement, below which no payouts of Final Awards shall be made to any
Participant.

ARTICLE 6.

PAYMENT OF FINAL AWARDS

     Section 6.1 Form and Timing of Payment. Each Participant’s Final Award shall be paid
in one lump sum, between the 17th day of the third month and the 17th day of
the fourth month following the end of the Performance Period; provided, however, that the payment
of a Final Award may be reduced or otherwise offset to satisfy any outstanding debt or obligation
owed by the Participant to the Company or an Affiliate.

     Section 6.2 Unsecured Interest. No Participant or any other party claiming an interest
in amounts earned under the Plan shall have any interest whatsoever in any specific asset of the
Company. To the extent that any party acquires a right to receive payments under the Plan, such
right shall be equivalent to that of an unsecured general creditor of the Company.

ARTICLE 7.

TERMINATION OF EMPLOYMENT

     Section 7.1 Termination of Employment Due to Death, Disability, or Retirement. In the
event a Participant’s employment is terminated within the Performance Period by reason of death,
Disability, or Retirement, the Final Award determined in accordance with Section 5.4 herein shall
be calculated to reflect participation prior to termination only. In the case of a Participant’s
Disability, the employment termination shall be deemed to have occurred on the date that the
Committee determines the definition of Disability to have been satisfied. The Final Award paid
under this Section 7.1 shall be paid in accordance with Section 6.1.

     Section 7.2 Termination of Employment for Reasons Other than Death, Disability, Retirement
or in Connection with a Change-in-Control. In the event Participant’s employment is terminated
and therefore a Participant ceases to be an Employee, within the Performance Period, for any reason
other than death, Disability, Retirement or a Change-In-Control (of which the Committee shall be
the sole judge), all of the Participant’s rights to a Final Award for the Performance Period then
in progress shall be forfeited. However, except in the event of an involuntary employment
termination for Cause, the Committee, in its sole discretion, may pay an
award for the portion of the Performance Period that the Participant was employed by the
Company, computed as determined by the Committee.

ARTICLE 8.

RIGHTS OF PARTICIPANTS

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     Section 8.1 Employment. Nothing in the Plan shall be construed as giving any
Participant the right to be retained in the employ of the Company or any right to any payment
whatsoever, except to the extent of the benefits provided for by the Plan.

     Section 8.2 Nontransferability. No right or interest of any Participant in the Plan
shall be assignable or transferable, or subject to any lien, directly, by operation of law or
otherwise, including, but not limited to, execution, levy, garnishment, attachment, pledge and
bankruptcy.

ARTICLE 9.

CHANGE-IN-CONTROL

     In the event of a Change-In-Control, each Participant, who is not eligible for benefits
pursuant to a Company change-in-control plan, shall be entitled to a pro rata payment of his or her
Target Incentive Award for the Performance Period during which such Change-In-Control occurs. The
pro rata Target Incentive Award payment shall be calculated by dividing the number of months within
the Performance Period prior to the effective date of the Change-In-Control by the annual twelve
(12) month period. In order to prorate a Target Incentive Award pursuant to the preceding sentence,
the month in which the Change-In-Control occurs will not be considered a month within the
Performance Period prior to the Effective Date of the Change-In-Control unless the
Change-In-Control occurred after the fifteenth (15th) day of such month. Such amount shall be paid
to each Participant within forty-five (45) days after the effective date of the Change-In-Control
and such payment will be made in lieu of any other payment to be made to a Participant for such
Performance Period.

ARTICLE 10.

AMENDMENTS

     The Company reserves the right, at anytime and by action of the Board or the Committee, to
amend or terminate this Plan in whole or in part and from time to time; provided, however that any
action that would otherwise be adverse to a Participant shall be made on a prospective basis only.

ARTICLE 11.

MISCELLANEOUS

     Section 11.1 Governing Law and Proper Venue. The Plan and all provisions hereunder,
shall be governed by and construed in accordance with the laws of the state of Texas without giving
effect to principles of conflict of laws. The proper place of venue to enforce any terms or
conditions of this Plan shall be Dallas County, Texas. Furthermore, any legal proceeding against
the Company arising out of or in connection with this Plan shall be brought in the district courts
of Dallas County, Texas, or the United States District Court for the Northern District of Texas,
Dallas Division.

     Section 11.2 Withholding Taxes. The Company, or the applicable Affiliate or
Subsidiary, shall have the right to deduct from all payments under the Plan any federal, state,
local, or other taxes required by applicable law to be withheld with respect to such payments.

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     Section 11.3 Compliance with Section 409A of the Code. This Plan is intended to comply
with, or be exempt from, and shall be administered in a manner that is intended to comply with, or
be exempt from, Section 409A of the Code and shall be construed and interpreted in accordance with
such intent. Each Award Opportunity shall be awarded and/or issued or paid in a manner that will
comply with, or be exempt from, Section 409A of the Code, including proposed, temporary or final
regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue
Service with respect thereto. Any provision of this Plan that would cause an Award Opportunity to
fail to satisfy Section 409A of the Code shall have no force and effect until amended to comply
with Section 409A of the Code (which amendment may be retroactive to the extent permitted by
applicable law).

     Section 11.4 Non-Pensionable Status of Payments under the Plan. Unless otherwise
expressly and specifically provided in a pension plan or local law, payments under the Plan shall
not taken into account for purposes of calculating an employee’s pension benefits under any
applicable pension plans.

     Section 11.5 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine, the plural shall include the singular
and the singular shall include the plural.

     Section 11.6 Severability. In the event that any provision of the Plan shall be
declared or adjudicated illegal, invalid or unenforceable for any reason whatsoever, then the
illegal, invalid or unenforceable provision shall be deemed excised herefrom and the remaining
parts of the Plan shall continue and remain in full force and effect and the Plan shall be
construed and enforced as if such illegal, invalid or unenforceable provision had not been included
herein.

     Section 11.7 Costs of the Plan. All costs of implementing and administering the Plan
shall be borne by the Company and its Subsidiaries and Affiliates.

     Section 11.8 Successors. All obligations of the Company under the Plan shall be
binding upon and inure to the benefit of any successor to the Company, whether the existence of
such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise,
of all or substantially all of the business and/or assets of the Company.

     The Company has caused this Plan to be executed on February 22, 2010 and effective as of
January 1, 2010, except as otherwise stated herein.

	 	 	 	 	 
	 	FLOWSERVE CORPORATION

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

General Counsel 	 

14exv10w32

Exhibit 10.32

FLOWSERVE CORPORATION

AMENDED AND RESTATED OFFICER SEVERANCE PLAN

Effective January 1, 2010

 

 

FLOWSERVE CORPORATION

AMENDED AND RESTATED OFFICER SEVERANCE PLAN

Article I

Introduction

     Flowserve Corporation (the “Company”) established and adopted the Flowserve Corporation
Officer Severance Plan (the “Plan”), effective as of January 1, 2007, to provide financial and
transitional assistance to Eligible Officers who separate from the Company or an Affiliate due to a
Reduction-in-Force or due to a termination of employment without Cause (as defined herein) in order
to assure the Company of the continued attention and dedication to duty of Eligible Officers and to
ensure the continued availability of service by Eligible Officers during periods of work force
reduction or reorganization. The Company hereby amends and restates the Plan as set forth herein
effective as of January 1, 2010 (the “Effective Date”). This Plan is intended to constitute an
“employee welfare benefit plan,” as defined in Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended.

     Except as otherwise provided below, as of the Effective Date, the Plan replaces any and all
severance pay plans, policies, practices, arrangements or programs, written or unwritten, that the
Company may have had in effect for its Eligible Officers from time to time prior to the Effective
Date; any Eligible Officer whose employment is terminated on or after the Effective Date shall not
be entitled to any severance benefits other than those set forth herein. Notwithstanding the
foregoing, nothing in this Plan shall adversely affect the rights an individual Eligible Officer
may have to severance payments under the Flowserve Corporation Executive Officer Change in Control
Severance Plan (or any successor plan thereto) (the “CIC Plan”) or any written agreement executed
by and between the Employer and that Eligible Officer (a “Severance Agreement”), including, without
limitation, any Restrictive Covenant Agreement by and between the Company and an Eligible Officer;
provided, however, that in the event any Eligible Officer that is a party to a Severance Agreement
or who is eligible for benefits under the CIC Plan suffers a termination of employment and is
entitled to and is receiving the severance benefits intended to be provided under his or her
Severance Agreement or the CIC Plan, such Eligible Officer shall not be entitled to receive
severance benefits pursuant to this Plan, unless such Eligible Officer is entitled to severance
benefits pursuant to a Restrictive Covenant Agreement, in which case, such Eligible Officer shall
receive benefits under such agreement first, and then shall be eligible for benefits under this
Plan to the extent such benefits are not duplicative of the benefits previously paid pursuant to
such agreement, with the maximum severance benefits payable to such Eligible Officer under both the
Plan and such agreement equal to the maximum aggregate benefit payable to such Eligible Officer
under this Plan.

Article II

Definitions

     The words used in this Plan shall have the respective meanings set forth below unless the
context clearly indicates otherwise. Except as otherwise indicated by the context, any masculine
terminology used herein also includes the feminine and vice versa, and the definition of any term
herein in the singular shall also include the plural, and vice versa.

     Section 2.1 Administrator means the Senior Vice President, Human Resources, or, if the
claim for benefits hereunder affects the Senior Vice President, Human Resources, such entity or
individual as may be designated by the Organization and Compensation Committee.

 

 

     Section 2.2 Affiliate means any Subsidiary or Parent of the Company that has been
designated to participate in the Plan by the Administrator, and has adopted the Plan pursuant to
Article V hereof.

     Section 2.3 Appeals Administrator means the Chief Executive Officer of the
Company, or, if the claim for benefits hereunder affects the Chief Executive Officer, such entity
or individual as may be designated by the Organization and Compensation Committee.

     Section 2.4 Cause means: (a) the willful and continued failure by an Eligible Officer
to substantially perform his or her duties with the Company (other than any such failure resulting
from incapacity due to physical or mental illness), after a written demand for substantial
performance is delivered to the Eligible Officer by the Company’s board of directors (the
“Board”) which specifically identifies the manner in which the Board believes that he or
she has not substantially performed his or her duties; or (b) the willful engaging by an Eligible
Officer in conduct materially and demonstrably injurious to the Company, monetarily or otherwise;
provided, however, that if the Eligible Officer has entered into an employment agreement that is
binding as of the date of the event or action otherwise determined to be “Cause,” and if such
employment agreement defines “Cause,” such definition of “Cause” shall apply. No act, or failure
to act, shall be considered “willful” if, in the Eligible Officer’s sole judgment, the action or
omission was done, or omitted to be done, in good faith and with a reasonable belief that his or
her action or omission was in the best interest of the Company. Notwithstanding the foregoing, the
Eligible Officer shall not be deemed to have terminated for Cause unless and until there shall have
been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire authorized membership of the Board, at a meeting of the Board,
called and held for the purpose (after reasonable notice to the Eligible Officer and an opportunity
for the Eligible Officer, together with counsel, to be heard before the Board), finding that in the
good faith opinion of the Board the Eligible Officer was guilty of conduct set forth above in
clause (a) or (b) of this Section 2.3, and specifying the particulars thereof in detail.

     Section 2.5 Code means the Internal Revenue Code of 1986, as amended

     Section 2.6 Company means Flowserve Corporation.

     Section 2.7 Disability means a long-term disability as defined in and meeting the
terms and conditions of the appropriate plan of the Company that provides long-term disability
benefits to the Company’s eligible employees (or, as set forth in any successor plans), as
applicable to the Eligible Officer, or, if no long-term disability plan is in place or is
applicable to the Eligible Officer, a physical or mental condition resulting from bodily injury,
disease, or mental disorder which prevents the Eligible Officer from performing his or her duties
of employment for a period of six (6) continuous months, as determined in good faith by the
Administrator, based upon medical reports or other evidence satisfactory to the Administrator.

     Section 2.8 Eligible Officer means an Officer who:

     (a) is terminated by the Company or an Affiliate in connection with a
Reduction-in-Force, or

     (b) is terminated by the Company or an Affiliate without Cause.

     Section 2.9 ERISA means the Employee Retirement Income Security Act of 1974, as
amended.

2

 

     Section 2.10 Officer means senior executive officers or other corporate officers of
the Company or an Affiliate.

     Section 2.11 Organization and Compensation Committee means the committee designated by
the Board of Directors.

     Section 2.12 Parent means an entity which directly or indirectly holds a majority of
the voting power or profits or capital interest of the Company.

     Section 2.13 Plan means the Flowserve Corporation Officer Severance Plan.

     Section 2.14 Reduction-in-Force means the separation of an Officer from employment
with the Company or an Affiliate because of a work force reduction, restructuring, or other cost
containment or business decision as designated by the Administrator, in its sole and absolute
discretion, from time to time.

     Section 2.15 Retirement means the termination of an Eligible Officer’s employment for
any reason other than for Cause, due to the Participant’s death or Disability, or due to a
Reduction-in-Force, or on or after the earlier of (i) the Eligible Officer’s Early Retirement Date
(as such term is defined within the retirement plan in effect and in which such Eligible Officer
participates on the date of the Eligible Officer’s termination); or (ii) the Eligible Officer
attaining the normal retirement date (as such term is defined within the retirement plan in effect
and in which such Eligible Officer participates on the date of the Eligible Officer’s termination,
or if no such plan is in effect, age 65).

     Section 2.16 Separation from Service means a termination of services provided by an
Eligible Officer to the Company whether voluntarily or involuntarily, other than for death or
Disability, as determined by the Administrator in accordance with Treas. Reg. § 1.409A-1(h). In
determining whether an Eligible Officer has experienced a Separation from Service, the following
provisions shall apply:

     (a) A Separation from Service shall occur when such Eligible Officer has experienced a
termination of employment with the Company. An Eligible Officer shall be considered to have
experienced a termination of employment when the facts and circumstances indicate that the
Eligible Officer and the Company reasonably anticipate that either (i) no further services
will be performed for the Company after a certain date, or (ii) that the level of bona fide
services the Eligible Officer will perform for the Company after such date (whether as an
employee or as an independent contractor) will permanently decrease to no more than twenty
percent (20%) of the average level of bona fide services performed by such Eligible Officer
(whether as an employee or an independent contractor) over the immediately preceding
thirty-six (36) month period (or the full period of services to the Company if the Eligible
Officer has been providing services to the Company less than thirty-six (36) months).

     (b) If an Eligible Officer is on military leave, sick leave, or other bona fide leave
of absence, the employment relationship between the Eligible Officer and the Company shall
be treated as continuing intact, provided that the period of such leave does not exceed six
(6) months, or if longer, so long as the Eligible Officer retains a right to reemployment
with the Company under an applicable statute or by contract. If the period of a military
leave, sick leave, or other bona fide leave of absence exceeds six (6) months and the
Eligible Officer does not retain a right to reemployment under an applicable statute or by
contract, the employment relationship shall be considered to be terminated for purposes of
this Plan as of the first day immediately following the end of such six (6) month period.
In applying the provisions of this

3

 

Section 2.16, a leave of absence shall be considered a bona fide leave of absence only
if there is a reasonable expectation that the Eligible Officer will return to perform
services for the Company.

     Section 2.17 Severance Benefit means a benefit to which an Eligible Officer may become
entitled pursuant to Article III hereof.

     Section 2.18 Specified Employee means any Eligible Officer 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 Administrator in accordance with
Treas. Reg. § 1.409A-1(i). In determining whether an Eligible Officer is a Specified Employee, the
following provisions shall apply:

     (a) The Administrator’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 twelve (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 (i) any safe harbor
provided in Treas. Reg. § 1.415(c)-2(d), (ii) any of the special timing rules provided in
Treas. Reg. § 1.415(c)-2(e), and (iii) any of the special rules provided in Treas. Reg. §
1.415(c)-2(g); and

     (b) Each Eligible Officer who is among the individuals identified as a “key employee”
in accordance with part (a) of this Section 2.18 shall be treated as a Specified Employee
for purposes of this Plan if such Eligible Officer experiences a Separation from Service
during the twelve (12) month period that begins on the April 1st following the applicable
identification date.

     Section 2.19 Subsidiary means any entity in which the Company, directly or indirectly,
holds a majority of the voting power or profits or capital interest of such entity.

Article III

Severance Benefits

     Section 3.1 Eligibility for Severance Benefits.

     (a) An Eligible Officer shall be entitled to receive a Severance Benefit in accordance
with this Article III only if the Administrator, in its reasonable discretion, determines
that:

     (i) the Eligible Officer’s employment with the Company or an Affiliate has been
involuntarily terminated as the result of a Reduction-in-Force or without Cause.
For purposes of clarity, an Eligible Officer shall be entitled to receive a
Severance Benefit only if such termination constitutes an involuntary Separation
from Service.

     (ii) the Severance Benefit described herein is not otherwise duplicative of
payments already owed to the Eligible Officer under an employment, pre-existing
retention, severance, change-in-control, or other special compensation agreement or
pursuant to any applicable laws.

     (iii) the Eligible Officer has not otherwise received and accepted an offer of
employment with (A) the Company, (B) an Affiliate, (C) another company providing

4

 

services to the Company or an Affiliate, or (D) any other company that entered
into an agreement with the Company or an Affiliate to purchase, acquire, or transfer
the stock or assets of the Company, an Affiliate, or a group, function or part of
the Company or an Affiliate.

     (iv) the Eligible Officer has not otherwise declined an offer of employment,
the terms of which would have permitted the Eligible Officer to continue employment
within fifty (50) miles of the location in which the Eligible Officer performed
substantially all of his or her services immediately prior to the
Reduction-in-Force, with (A) the Company, (B) an Affiliate, (C) another company
providing services to the Company or an Affiliate, or (D) any other company that
entered into an agreement with the Company or an Affiliate to purchase, acquire, or
transfer the stock or assets of the Company, an Affiliate, or a group, function or
part of the Company or an Affiliate.

     (v) the Eligible Officer has not terminated from the Company or an Affiliate
for any of the following reasons:

     (A) death,

     (B) Disability,

     (C) resignation,

     (D) Retirement, or

     (E) discharge for Cause.

     (vi) the Eligible Officer continues to comply with the provisions of any
written agreement in effect between the Eligible Officer and the Company (or any of
its Affiliates) that contains non-competition, confidentiality and/or
non-solicitation provisions, including, without limitation, the terms and conditions
of any Restrictive Covenant Agreement by and between the Company and the Eligible
Officer.

     (vii) the Eligible Officer has executed and timely provided a release and
covenant not to sue in a form reasonably satisfactory to the Company.

     (b) Notwithstanding anything herein to the contrary, if an Eligible Officer has
otherwise satisfied the criteria described in Section 3.1(a) above and is rehired by the
Company or an Affiliate, such Eligible Officer’s entitlement to further Severance Benefit
payments shall cease immediately, unless the Administrator, in its sole and absolute
discretion, determines that the relationship between the former Eligible Officer and the
Company or Affiliate for whom services are being provided constitutes a non-employee
consulting relationship and that continued payment of such benefits is permitted by
applicable law without adverse consequences to either the Company or the Eligible Officer,
including, without limitation, Section 409Aof the Code, as determined by the Administrator
in its sole discretion. Regardless of the nature of a former Eligible Officer’s relationship
with the Company or Affiliate, if such former Eligible Officer provides services to or for
the Company or an Affiliate following a Reduction-in-Force, such former Eligible Officer
shall not be obligated to repay any Severance Benefits that have been paid pursuant to this
Plan.

5

 

     Section 3.2 Salary Continuation.

     (a) Salary continuation benefits paid to an Eligible Officer who has satisfied the
applicable requirements reflected in Section 3.1 above shall be based upon the amounts
determined under Section 3.2(b) below and shall continue until the earlier of:

     (i) the date that is twenty-four (24) months following the Eligible Officer’s
termination of employment, or

     (ii) the date the Eligible Officer fails to comply with the provisions of any
written agreement in effect between the Eligible Officer and the Company (or any of
its Affiliates) that contains non-competition, confidentiality and/or
non-solicitation provisions, including, without limitation, the terms and conditions
of any Restrictive Covenant Agreement by and between the Company and the Eligible
Officer.

     (b) The amount of each salary continuation benefit payment that shall be paid to an
Eligible Officer during the applicable salary continuation period described in Section
3.2(a) above, shall be calculated by the Administrator, in its sole and absolute discretion,
by dividing the Eligible Officer’s annual base salary (excluding all bonuses and financial
perquisites) immediately prior to the Eligible Officer’s termination of employment by the
number of regularly scheduled paydays on which the Eligible Officer would have otherwise
been paid during the year if a termination of employment had not occurred; provided,
however, that if an Eligible Officer is on an approved short-term disability leave or on
designated leave pursuant to the Family and Medical Leave Act or other similar law, such
Eligible Officer’s salary continuation benefits shall be based upon the Eligible Officer’s
salary immediately preceding the inception of the leave.

     (c) Salary continuation benefits shall commence on the date that would have otherwise
been the Eligible Officer’s next regularly scheduled payday following the later of (i) the
Eligible Officer’s termination of employment or (ii) the expiration of the revocation period
provided in the release executed by the Eligible Officer in connection with this Plan.
Notwithstanding the foregoing, if the Eligible Officer is a Specified Employee, to the
extent any amount payable pursuant to this Section 3.2 is subject to, and not otherwise
exempt from the requirements of Section 409A of the Code, no payment of such amount shall be
made before the first day after the end of the six (6) month period immediately following
the date on which the Eligible Officer experiences a Separation from Service, or if earlier,
on the date of the Eligible Officer’s death.

     (d) Notwithstanding anything in Section 3.2(b) above to the contrary, to the extent an
Eligible Officer is on an approved short-term disability leave or on designated leave
pursuant to the Family and Medical Leave Act or other similar law, such Eligible Officer’s
salary continuation benefits shall be based upon the Eligible Officer’s salary or regular
hourly wage immediately preceding the inception of the leave.

     (e) Each amount that is paid to an Eligible Officer pursuant to this Section 3.2 shall
be treated as a separate payment for purposes of Section 409A of the Code.

     Section 3.3 Annual Incentive Plan Bonus.

     (a) In addition to the salary continuation benefit described in Section 3.2 above, each
Eligible Officer who is terminated by the Company or an Affiliate in connection with a
Reduction-in-Force or without Cause shall be entitled to receive a lump-sum payment

6

 

substantially equivalent to the annual incentive payment such Eligible Officer would
have otherwise received under the Company’s annual incentive plan if (i) the Company
satisfied the targeted performance results established under the Flowserve Corporation
annual incentive plan for the performance period in which the Eligible Officer’s termination
of employment occurs, and (ii) the Eligible Officer had been employed at the end of such
performance period and otherwise eligible for a payment under the Company’s annual incentive
plan.

     (b) Payment of annual target incentive payments described in Section 3.3(a) above,
shall be made at the same time as payments are made under the Company’s annual incentive
plan; provided, however, if the Eligible Officer is a Specified Employee, to the extent any
amount payable pursuant to this Section 3.3 is subject to, and not otherwise exempt from the
requirements of Section 409A of the Code, no payment of such amount shall be made before the
first day after the end of the six (6) month period immediately following the date on which
the Eligible Officer experiences a Separation from Service, or if earlier, on the date of
the Eligible Officer’s death.

     Section 3.4 Stock Plan Participation

     (a) In addition to the salary continuation benefit described in Section 3.2 above and
the Annual Incentive Plan Bonus described in Section 3.3 above, each Eligible Officer who is
terminated by the Company or an Affiliate in connection with a Reduction-in-Force or without
Cause shall be entitled to continue to remain eligible to receive any performance shares
granted under the Long Term Incentive Plan (“LTIP”) for the 2007-2009, 2008-2010 and
2009-2011 performance cycles if the vesting date of such award is within 180 calendar days
after the employee’s termination date. Whether the performance shares ultimately vest on
the vesting date will be determined by the Flowserve Corporation Board of Directors in its
normal course of business in accordance with the terms and conditions of the LTIP.

     (b) Each Eligible Officer who is terminated by the Company or an Affiliate in
connection with a Reduction-in-Force or without Cause who has an outstanding restricted
stock award that would otherwise vest within 90 calendar days after the Eligible Officer’s
termination date will be eligible to receive a cash payment in lieu of such restricted stock
award. The cash payment in lieu of the restricted stock award will be calculated by
multiplying (1) the number of shares that would otherwise vest within 90 calendar days after
the employee’s termination date by (2) the average price of the Company’s Common Stock
during the last 20 trading days in the month preceding the Eligible Officer’s termination
date. The amount payable pursuant to this Section 3.4 shall be paid in a lump sum within 60
days of the Eligible Officer’s date of termination.

Article IV

Claims Procedures

     Section 4.1 Initial Claim. If an individual makes a written request alleging a right
to receive benefits under this Plan or alleging a right to receive an adjustment in benefits being
paid under the Plan, the Administrator shall treat it as a claim for benefits. All claims for
benefits under the Plan shall be sent in writing to the Administrator and must be received within
thirty (30) days after the effective date of the Eligible Officer’s termination of employment. If
the Administrator, in its sole and absolute discretion, determines that a claimant is not entitled
to receive all or any part of the benefits claimed, the Administrator will inform the claimant in
writing of its determination and an explanation regarding the reason for its determination.

7

 

     Section 4.2 Initial Claim Determination.

     (a) Once the Administrator makes a determination regarding a claim, the Administrator
will send, by means of the U.S. mail, hand delivery or e-mail, a written notice providing:

     (i) the Administrator’s determination,

     (ii) the basis for the determination (along with appropriate references to
pertinent provisions on which the denial is based),

     (iii) a description of any additional material or information necessary to
perfect the claim and an explanation of why such material is necessary, and

     (iv) the procedure that must be followed to obtain a review of the
determination, including a description of the appeals procedure and how to bring a
civil action for benefits under section 502(a) of ERISA.

     (b) The initial claim determination notice described above will be provided within a
reasonable period of time, but no later than 90 days from the day the Administrator received
the claim, unless grounds for an extension (reflected in Section 4.2(c) below) exist.

     (c) Grounds for an extension may arise in certain instances when the Administrator, for
reasons beyond its control, cannot make a determination within the initial 90-day period.
In such situations, the Administrator, acting in its sole and absolute discretion, may
extend the initial 90-day period for up to an additional 90 days (for a total of 180 days);
provided the Administrator:

     (i) determines that an extension is necessary due to matters beyond its
control, and

     (ii) provides the claimant with written notice (which may be communicated by
mail, hand delivery, or e-mail) prior to the expiration of the initial determination
period that:

     (A) an extension is necessary,

     (B) the reason for the extension, and

     (C) when a determination is expected to be rendered.

     Section 4.3 Appeal of a Denied Claim.

     (a) If a claim for benefits is denied, either in whole or in part, and the claimant
wants to contest such denial, the claimant must appeal the Administrator’s denial by
requesting a review of the claim by the Appeals Administrator. A claimant has the following
rights if a claim for benefits is denied (whether in whole or in part):

     (i) an opportunity to request an appeal,

8

 

     (ii) the ability to submit written comments, documents, records and other
information in connection with the appeal, and

     (iii) reasonable access to, and copies of, all documents, records, and other
information relevant to the denied claim at no charge.

     (b) If a claimant chooses to file an appeal of a claim that was denied in whole or in
part, the request for review must be received within 60 days of the date in which the
claimant received notice from the Administrator indicating that the initial claim was
denied.

     (c) The review of an initial adverse determination by the Appeals Administrator will
take into account all comments, documents, records and other information that has been
submitted, without regard to whether such information was submitted and considered by the
Administrator in the initial determination.

     (d) In reviewing appeals, no deference will be given to an initial adverse benefit
determination by the Administrator, and the review itself will be conducted by an
appropriate named fiduciary who is neither the individual who made the adverse benefit
determination that is the subject of the appeal nor the subordinate of such individual.

     (e) If, following an appeal, a claim is denied, either in whole or in part, after a
review of the appeal and any additional information that a claimant has submitted, a notice
containing the following information (which will be provided in writing by U.S. mail, hand
delivery, or e-mail) will be provided within a reasonable period of time, but not later than
sixty (60) days from the date that a request for a review was received, unless grounds for
an extension reflected in Section 4.3(f) below exist:

     (i) the specific reason or reasons for the decision, including any adverse
determinations,

     (ii) references to the specific provisions on which the determination was
based,

     (iii) a statement describing how to request reasonable access to, and copies
of, all documents, records, and other information that is relevant to the denied
claim (free of charge),

     (iv) a description of any voluntary appeals procedure, if any, and how to
obtain information about such procedure, and

     (v) the ability to bring a cause of action for benefits under section 502(a) of
ERISA.

     (f) Grounds for an extension may arise in certain instances when, due to events beyond
the Appeals Administrator’s control, a decision cannot be made within the initial 60-day
period. In such situations, the initial 60-day period may be extended for up to an
additional 60 days (for a total of 120 days); provided:

     (i) a determination is made that an extension is necessary due to matters
beyond the Appeals Administrator’s control, and

9

 

     (ii) the claimant is provided with written notice (which may be communicated by
mail, hand delivery, or e-mail) prior to the expiration of the initial determination
period that:

     (A) an extension is necessary,

     (B) the reason for the extension, and

     (C) when a determination is expected to be rendered.

Article V

Adoption of the Plan by Affiliates

     This Plan may be adopted by any Affiliate of the Company if the Organization and Compensation
Committee or its delegate approves such adoption. Upon such adoption, the provisions of the Plan
shall be fully applicable to the Eligible Officers of that Affiliate. At any time that an
Affiliate ceases to qualify as an Affiliate, it shall no longer be eligible to participate
hereunder and any Eligible Officers in its employ shall no longer be eligible to receive benefits
under this Plan.

Article VI

Duration, Amendment and Termination

     Section 6.1 Duration. This Plan shall continue in full force and effect from the
Effective Date until December 31, 2011 unless extended or earlier terminated by action of the
Organization and Compensation Committee or its delegate.

     Section 6.2 Termination and Amendment. Although the Company hopes and expects to
continue the Plan for a five (5) year period, the Plan may be amended, changed, replaced, extended
or terminated by the Organization and Compensation Committee or its delegate at any time, in its
sole and absolute discretion. The Organization and Compensation Committee or its delegate shall
have full authority to amend any provision of the Plan to reduce, eliminate or alter benefits
payable hereunder, or to alter, in any way, the criteria for eligibility to participate herein.

     Section 6.3 Form of Amendment. The form of any Amendment of the Plan shall be a
written instrument signed by any person authorized to sign by the Organization and Compensation
Committee or its delegate. An Amendment of the Plan in accordance with the terms hereof shall
automatically effect a corresponding amendment to the rights of all Eligible Officers hereunder.

Article VII

Miscellaneous

     Section 7.1 Employment Status. This Plan does not constitute a contract of employment
or impose upon the Company or any Affiliate any obligation to retain the Eligible Officer as an
employee, to change or not change the status of the Eligible Officer’s employment, or to change the
Company’s policies or those of its Affiliates regarding termination of employment.

     Section 7.2 Validity and Severability. The invalidity or unenforceability of any
provision of the Plan shall not affect the validity or enforceability of any other provision of the
Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

10

 

     Section 7.3 Governing Law. To the extent not preempted by ERISA, the validity,
interpretation, construction and performance of the Plan shall in all respects be governed by the
laws of Texas, without reference to principles of conflict of law.

     Section 7.4 Funding. The Plan is funded through the general assets of the Company and
all payments of Severance Benefits with respect to a particular Eligible Officer shall be paid from
the general assets of the Company. Neither the Company nor the Administrator shall have any
obligation to establish a trust or fund for the payment of benefits under the Plan or to insure any
of the benefits under the Plan. None of the officers, members of the Board of Directors, or agents
of the Company, any Affiliate or the Administrator guarantees in any manner the payment of benefits
hereunder.

Article VIII

General Information

	 	 	 	 	 
	Section 8.1

	 	Official Plan Name.
	 	Flowserve Corporation Officer

Severance Plan
	 
	 	 	 	 
	Section 8.2

	 	Plan Sponsor and Plan Administrator.
	 	Flowserve Corporation

5215 N. O’Connor Blvd.

Irving, TX 75039

(972) 443-6500
	 
	 	 	 	 
	Section 8.3

	 	Employer Identification Number.
	 	31-0267900
	 
	 	 	 	 
	Section 8.4

	 	Plan Number.
	 	504
	 
	 	 	 	 
	Section 8.5

	 	Plan Year.
	 	January 1 through December 31
	 
	 	 	 	 
	Section 8.6

	 	Type of Plan.
	 	Welfare benefit plan providing severance benefits to certain officers in
the event of a reduction-in-force or termination without Cause.
	 
	 	 	 	 
	Section 8.7

	 	Type of Administration.
	 	The Plan is administered by the Plan Administrator.
	 
	 	 	 	 
	Section 8.8

	 	Claims Administrator.
	 	The Plan Administrator for the

Flowserve Corporation Officer

Severance Plan

Flowserve Corporation

5215 N. O’Connor Blvd.

Irving, TX 75039

(972) 443-6500
	 
	 	 	 	 
	Section 8.9

	 	Agent for Service of Legal Process.
	 	Flowserve Corporation

General Counsel

5215 N. O’Connor Blvd.

Irving, TX 75039

(972) 443-6500

11

 

	 	 	 	 	 
	Section 8.10

	 	Funding.
	 	The Plan is funded through the
general assets of the Company.

     IN WITNESS WHEREOF, the Company has caused this instrument to be executed this 23rd day of
February, 2010.

	 	 	 	 	 
	 	FLOWSERVE CORPORATION

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

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