Document:

exv10w59

 

Exhibit 10.59

RESTRICTED STOCK AGREEMENT

FLOWSERVE CORPORATION

2004 STOCK COMPENSATION PLAN

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

W I T N E S S E T H

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

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

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

     1. Restricted
Stock   

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

     2. Restrictions on Transfer Before Vesting

	 	(a)	 	The Restricted Stock will be transferred of record to the
Participant and a certificate or certificates representing said Restricted
Stock will be issued in the name of the Participant immediately upon the
execution of this Agreement. Each of such Restricted Stock certificates will
bear a legend as provided by the Company, conspicuously referring to the terms,
conditions and restrictions as permitted under Section 15.9 of the Plan. The
Company may either deliver such Restricted Stock certificate(s) to the
Participant, retain custody of such Restricted Stock certificate(s) prior to
vesting (the “Restriction Period”) or require the Participant o enter into an
escrow arrangement under which such Restricted Stock certificate(s) will be
held by an escrow agent. The delivery of any shares of Restricted Stock
pursuant to this Agreement is subject to the provision so Paragraph 9 below.
	 
	 	(b)	 	Absent prior written consent of the Committee, the shares of
Restricted Stock granted hereunder to the Participant may not be sold,
assigned, transferred, pledged or otherwise encumbered, whether voluntarily or
involuntarily, by operation of law or otherwise, from the Date of Grant until
said shares shall have become vested in the Participant over the three year
period following the Date of Grant in accordance with the following table, or
as otherwise provided in Paragraph 3:

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	 	 	Aggregate Percentage of Shares of Restricted
	Date	 	Stock Granted herein which are Vested
	Insert Date

	 	331/3%
	Insert Date

	 	662/3%
	Insert Date

	 	100% 

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

     3. Effect of Termination of Employment or Services

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

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

	 	 	 	then the shares of Restricted Stock that have not previously vested in
accordance with the vesting schedule reflected in Paragraph 2(b) above, as
of the date of such termination of employment (or cessation of services, as
applicable), shall be forfeited by the Participant to the Company.
	 
	 	(b)	 	Notwithstanding Paragraph 3(a) above, upon the cessation of the
Participant’s employment or services (whether voluntary or involuntary), the
Committee may, in its sole and absolute discretion, elect to accelerate the
vesting of some or all of the unvested shares of Restricted Stock.

     4. Forfeiture and Disgorgement Upon Competition

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

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	 	(i)	 	the shares of Restricted Stock shall
immediately cease to vest and all shares of Restricted Stock that have
not previously vested in accordance with the vesting schedule reflected
in Paragraph 2(b) above, as of the date of such violation, shall be
forfeited by the Participant to the Company;
	 
	 	(ii)	 	this Agreement (other than the provisions of
this Paragraph 4) will be terminated on the date of such violation;
	 
	 	(iii)	 	the Participant will immediately sell to the
Company all shares of Restricted Stock acquired by the Participant
pursuant to this Agreement that had previously vested in accordance
with the vesting schedule reflected in Paragraph 2(b) above and are
still owned by the Participant on the date of such violation for the
lesser of (a) the price paid by the Participant for such Restricted
Stock or (b) the Fair Market Value of such Restricted Stock on the date
of sale to the Company;
	 
	 	(iv)	 	the Participant will immediately pay to the
Company any gain that the Participant realized on the sale of shares of
Restricted Stock acquired pursuant to this Agreement and sold within
the 180-day period preceding the date of the violation and the one-year
period following such date; and
	 
	 	(v)	 	the Company shall be entitled to payment by the
Participant of its attorneys’ fees incurred in enforcing the provisions
of this Paragraph 4, in addition to any other legal remedies.

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

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

	 	(i)	 	Non-Competition
	 
	 	 	 	Become employed by,
advise, perform services or otherwise engage in any capacity with a
Competing Business in the Restricted Area. For purposes of this
Agreement, “Competing Business” means any entity or business that is in
the business of providing flow management products and related repair
and/or replacement services. Because the scope and nature of the
Company’s business is international in scope and the Participant’s job
duties are international in scope, the “Restricted Area” is worldwide.
However, the Participant may own, directly or indirectly, solely as an
investment, securities of any business traded on any national
securities exchange or NASDAQ, provided that the Participant is not a
controlling person of, or member of a group that controls such
business, and provided further that the Participant does not, directly
or indirectly, own three percent (3%) or more of any class of
securities of such business.
	 
	 	(ii)	 	Non-Solicitation
	 
	 	 	 	Solicit business
from, attempt to transact business with, or transact business with any
customer or prospective customer of the Company with whom the Company
transacted business or solicited within the preceding twenty-four (24)
months, and which either: (1) the Participant contacted, called on,
serviced, did business with or had

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	 	 	 	contact with during the Participant’s employment or that the
Participant attempted to contact, call on, service, or do business
with during the Participant’s employment; or (2) the Participant
became acquainted with or dealt with, for any reason, as a result of
the Participant’s employment with the Company. This restriction
applies only to business that is in the scope of services or products
provided by the Company.
	 
	 	(iii)	 	Non-Recruitment
	 
	 	 	 	Hire, solicit for
employment, induce or encourage to leave the employment of the Company,
or otherwise cease their employment with the Company, on behalf of
himself/herself or any current supervisor, manager, director,
vice-president, president or officer of the Company or any supervisor,
manager, director, vice-president, president or officer whose
employment ceased than less than twelve (12) months earlier.

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

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

	 	(d)	 	Non-Disclosure
	 
	 	 	 	In exchange for the Company’s promise
to provide Participant with Confidential Information, Participant shall not,
during the period of Participant’s employment or at any time thereafter,
disclose to anyone, or publish, or use for any purpose, any Confidential
Information, except as: (i) required in the ordinary course of the Company’s
business or the Participant’s work for the Company; (ii) required by law; or
(iii) directed and authorized in writing by the Company. Upon the termination
of Participant’s employment for any reason, Participant shall immediately
return and deliver to the Company any and all Confidential Information,
computers, hard-drives, papers, books, records, documents, memoranda, manuals,
e-mail, electronic or magnetic recordings or

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	 	 	 	data, including all copies thereof, which belong to the Company or relate to
the Company’s business and which are in Participant’s possession, custody or
control, whether prepared by Participant or others. If at any time after
termination of Participant’s employment, for any reason, Participant
determines that Participant has any Confidential Information in
Participant’s possession or control, Participant shall immediately return to
the Company all such Confidential Information in Participant’s possession or
control, including all copies and portions thereof.
	 
	 	(e)	 	By execution of this Agreement, the Participant agrees that the
provisions of this Paragraph 4 shall apply to all grants (including, without
limitation, grants of incentive stock options, nonqualified stock options and
restricted stock) made to the Participant pursuant to the Plan in 2006 and, to
the extent the provisions of such grants are inconsistent with any of the
provisions of this Paragraph 4, the Company and the Participant agree that (x)
the provisions of this Paragraph 4 shall control and (y) the provisions of any
such award agreements are hereby amended by the terms of this Paragraph 4.

5. Limitation
of Rights

     Nothing in this Agreement or the Plan shall be construed to:

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

6. Prerequisites
to Benefits   

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

7. Rights
as a Stockholder   

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

8. Successors
and Assigns   

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

9. Securities
Act   

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

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

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

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

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

     10. Federal and State Taxes

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

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

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

11. Governing
Law   

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

12. Definitions
  

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

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

	 	 	 	 	 
	 	 	FLOWSERVE CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 

	 	Date:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	[INSERT PARTICIPANT’S NAME]
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Date:	 	 
	 

	 	 	 	 

7exv10w60

 

Exhibit 10.60

INCENTIVE STOCK OPTION AGREEMENT

FLOWSERVE CORPORATION

2004 STOCK COMPENSATION PLAN

     This Incentive Stock Option Agreement (the “Agreement”) is made and entered into by and
between Flowserve Corporation, a New York corporation (the “Company”) and                                          (the “Participant”)
as of                      (the “Date of Grant”).

W I T N E S S E T H

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

     WHEREAS, Organization and Compensation Committee of the Board of Directors of Flowserve
Corporation believes that the granting of the Stock Option described herein to the Participant is
consistent with the stated purposes for which the Plan was adopted; and

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

     1. Grant of Stock Option 

     The Company hereby grants to the Participant the right and option (the “Stock Option”) to
purchase an aggregate of                     shares (the “Shares”) (such number being subject to
adjustment as provided in Paragraph 10 hereof) of the Common Stock of the Company (the “Common
Stock”) on the terms and conditions herein set forth. This Stock Option may be exercised in whole
or in part and from time to time hereinafter. This Stock Option is intended to qualify as an
“incentive stock option” within the meaning of section 422 of the Internal Revenue Code of 1986, as
amended. Therefore, the Participant will be required to satisfy the holding period requirements
that apply with respect to the Common Stock issuable upon exercise of the Stock Option in order to
be eligible for the beneficial tax treatment afforded such a grant. To the extent the requisite
holding period requirements are not satisfied, this Stock Option shall be deemed a Nonqualified
Stock Option (as defined in Section 2.17 of the Plan).

     2. Exercise Price

   The price at which the Participant shall be entitled to purchase the Common Stock covered by
the Stock Option shall be $                     per share.

     3. Term of Stock Option

   The Stock Option granted hereby shall be and remain in force and effect during the “Option
Period”, which shall begin on the Date of Grant and end (the “Expiration Date”) on the first to
occur of:

	 	(a)	 	the date that is ten (10) years from the Date of Grant, or
	 
	 	(b)	 	in the case of termination of employment with the Company or a
Subsidiary, any other date specified in Paragraph 7.

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     4. Exercise of Stock Option

     This Stock Option shall vest and become exercisable over the three year period following the
Date of Grant in accordance with the following table; provided, however, that this Stock Option
shall cease to vest following the Participant’s termination of employment and shall cease to be exercisable with
respect to any portion that has been previously exercised or when the Stock Option lapses:

	 	 	 
	 	 	Aggregate Percentage of Shares Subject to this
	Date	 	Stock Option which are Vested and Exercisable
	Insert Date
	 	331/3%
	Insert Date
	 	662/3%
	Insert Date
	 	100%

     5. Method of Exercising Stock Option

	 	(a)	 	Subject to the terms and conditions of this Agreement, this
Stock Option may be exercised by delivering written notice to the Organization
and Compensation Committee of the Board of Directors of Flowserve Corporation,
or any officer or officers delegated with the authority to act on such
committee’s behalf pursuant to Section 3.3 of the Plan (the “Committee”),
setting forth:

	 	(i)	 	the number of shares of Common Stock with
respect to which the Stock Option is to be exercised,
	 
	 	(ii)	 	the Exercise Date,
	 
	 	(iii)	 	the Social Security number of the Participant,
	 
	 	(iv)	 	the method of payment elected (see Paragraph 6 hereof), and
	 
	 	(v)	 	the exact name in which the shares will be
registered.

	 	(b)	 	The notice described in Paragraph 5(a) above must be signed by
the Participant and shall be accompanied by payment of the purchase price of
such Shares. If the Stock Option is exercised by a person or persons other
than the Participant pursuant to Paragraph 7 hereof, such notice must be signed
by such other person or persons and must be accompanied by proof acceptable to
the Committee of the legal right of such person or persons to exercise the
Stock Option.

     6. Method of Payment for the Stock Option

	 	(a)	 	As a general rule, the full purchase price for the Shares
purchased upon the exercise of the Stock Option (i.e., the number of shares
being purchased multiplied by the price per shares) must be paid in cash. The
Committee may, however, in its discretion, allow the Participant to pay for the
Common Stock:

	 	(i)	 	in an equivalent acceptable to the Committee,
	 
	 	(ii)	 	by assigning and delivering to the Company shares of Common Stock owned by the Participant or by surrendering
another Award, or
	 
	 	(iii)	 	by combination of cash, Common Stock or one or
more Awards equal in value to the purchase price.

In addition, at the request of the Participant and to the extent permitted
by applicable law, the Committee may approve an arrangement with a brokerage
firm, under which the brokerage firm, on behalf of the Participant, will pay
for shares of Stock purchased upon the exercise of the Stock Option.

	 	(b)	 	For purposes of this Agreement, any Common Stock used or Award
surrendered to pay all or a part of the purchase price of the Stock Option will
be valued at the 

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	 	 	 	Fair Market Value on the exercise date. Further, such payment
must be accompanied by an assignment of such Common Stock on a duly executed
stock power, which is on a form separate from the certificate(s) for the Common
Stock, authorizing the transfer of such shares to the Company.

     7. Termination of Employment

   Subject to the provisions of Paragraph 9 hereof, the Option Period will end and the Stock
Option, whether or not then exercisable, will lapse upon the termination of employment of a
Participant as follows:

	 	(a)	 	If the termination of employment is due to any reason other
than Cause (as defined in Paragraph 7(b)), death, Disability (as defined in
Paragraph 7(c)) or Retirement (as defined in Paragraph 7(d)), the Participant
may continue to exercise the Stock Option, in whole or in part, until the
earliest of:

	 	(i)	 	the date specified in Paragraph 3(a); or
	 
	 	(ii)	 	the date which is six (6) months following the
latter of the last date of active employment or the release or lapse of
trading restrictions, provided, however, that to the extent the
exercise date is more than three (3) months after the last date of
active employment, the Stock Option will be a non-qualified Stock
Option.

	 	(b)	 	If the termination of employment is due to Cause (as defined in
this paragraph 7(b)), the Option Period shall end, and the Stock Option shall
cease to be exercisable, as of the date of termination of the Participant’s
employment. “Cause” shall in all cases be determined by the Committee, in its
sole and absolute discretion, and shall mean the willful and continued failure
to substantially perform the duties of employment (other than due to death or
Disability), willful conduct that is injurious to the Company or a Subsidiary,
any act of dishonesty, the commission of a felony or violation of any legal
duty to the Company or a Subsidiary.
	 
	 	(c)	 	In the event of the Participant’s death or total and permanent
disability (“Disability”), the Participant (or in the case of death, the
Participant’s designated beneficiary) may continue to exercise the Stock
Option, in whole or in part, until the earliest of:

	 	(i)	 	the date specified in Paragraph 3(a); or
	 
	 	(ii)	 	the date which is one (1) year following the
Participant’s death or Disability (as determined by the Committee).

	 	(d)	 	In the event of the Participant’s Retirement (as defined in
this paragraph 7(d)), the Participant may continue to exercise the Stock
Option, to the extent then vested, in whole or in part, until the earlier of:
(i) the expiration of the term of the Stock Option (as specified in paragraph
3) or (ii) five (5) years after the Participant’s Retirement date, but only if,
and so long as, the Participant shall refrain from competing against the
Company or any Subsidiary. To the extent not exercised within three (3) months
after the Participant’s retirement, the Stock Option will cease to be treated
as an incentive stock option (unless, under the law governing incentive stock
options as then in effect, the Stock Option may continue to be accorded
incentive stock option treatment for a period longer or shorter than three (3)
months after retirement). “Retirement” shall in all cases be determined by the
Committee, in its sole and absolute discretion, and shall mean the
Participant’s termination of employment with the Company and all Subsidiaries
after reaching age sixty (60) with at least ten (10) years of service with the
Company or a Subsidiary.

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     8. Forfeiture and Disgorgement Upon Competition

	 	(a)	 	Notwithstanding any provisions in this Agreement to the
contrary, in the event either (i) the Participant violates the provisions of
Paragraph 8(b) or the provisions of any confidentiality, non-competition,
non-solicitation and/or non-recruitment agreement by and between the Company
and the Participant or (B) the Participant or anyone acting on the Participant’s behalf brings
a claim against the Company seeking to declare any term of this Paragraph 8
void or unenforceable or the provisions of any other confidentiality,
non-competition, non-solicitation and/or non-recruitment agreement by and
between the Company and the Participant void or unenforceable, then:

	 	(i)	 	the Stock Option shall immediately cease to
vest and shall no longer be exercisable as of the date of such
violation;
	 
	 	(ii)	 	both the vested and unvested portion of the
unexercised Stock Option shall be immediately forfeited and the Stock
Option and this Agreement (other than the provisions of this Paragraph
8) will be terminated on the date of such violation;
	 
	 	(iii)	 	the Participant will immediately sell to the
Company all Shares acquired by the Participant within the 180-day period
preceding the date of such violation pursuant to the exercise of the
Stock Option that are still owned on the date of such violation for the
lesser of (a) the exercise price paid by the Participant for such Shares or
(b) the Fair Market Value of such Shares on the date of sale to the
Company;
	 
	 	(iv)	 	the Participant will immediately pay to the Company
any gain that the Participant realized on the sale of the Shares acquired
pursuant to the exercise of the Stock Option and sold within the
180-day period preceding the date of the violation and the one-year
period following such date; and
	 
	 	(v)	 	the Company shall be entitled to payment by the
Participant of its attorneys’ fees incurred in enforcing the provisions of
this Paragraph 8, in addition to any other legal remedies.

The provisions of this Paragraph 8 shall survive the termination or
expiration of this Agreement.

	 	(b)	 	By execution of this Agreement, the Participant, either individually
or as a principal, partner, stockholder, manager, agent, consultant,
contractor, employee, lender, investor, volunteer or as a director or officer
of any corporation or association, or in any other manner or capacity
whatsoever, agrees to the following from the date of grant until the date one
(1) year immediately following the his or her termination of employment (for
any reason):

The Participant shall not, whether directly or indirectly, without the express
prior written consent of the Company:

	 	(i)	 	Non-Competition
	 
	 	 	 	Become employed by,
advise, perform services or otherwise engage in any capacity with a
Competing Business in the Restricted Area. For purposes of this
Agreement, “Competing Business”

4

 

	 	 	 	means any entity or business that is in the business of providing
flow management products and related repair and/or replacement
services. Because the scope and nature of the Company’s business is
international in scope and the Participant’s job duties are international
in scope, the “Restricted Area” is worldwide. However, the Participant
may own, directly or indirectly, solely as an investment, securities
of any business traded on any national securities exchange or NASDAQ,
provided that the Participant is not a controlling person of, or member of
a group that controls such business, and provided further that the
Participant does not, directly or indirectly, own three percent (3%) or
more of any class of securities of such business.

	 	(ii)	 	Non-Solicitation
	 
	 	 	 	Solicit business
from, attempt to transact business with, or transact business with any
customer or prospective customer of the Company with whom the Company
transacted business or solicited within the preceding twenty-four (24)
months, and which either: (1) the Participant contacted, called on,
serviced, did business with or had contact with during the Participant’s
employment or that the Participant attempted to contact, call on, service,
or do business with during the Participant’s employment; or (2) the Participant
became acquainted with or dealt with, for any reason, as a result of
the Participant’s employment with the Company. This restriction applies
only to business that is in the scope of services or products provided
by the Company.
	 
	 	(iii)	 	Non-Recruitment
	 
	 	 	 	Hire, solicit for
employment, induce or encourage to leave the employment of the Company,
or otherwise cease their employment with the Company, on behalf of
himself/herself or any other person or entity, any current supervisor,
manager, director, vice-president, president or officer of the Company
or any supervisor, manager, director, vice-president, president or
officer whose employment ceased than less than twelve (12) months
earlier.

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

	 	(i)	 	Information concerning customers, clients,
marketing, business and operational methods of the Company and their
customers or clients, contracts, financial or other data, technical
data, e-mail and other correspondence or any other confidential or
proprietary information possessed, owned or used by any of the Company;
	 
	 	(ii)	 	Business records, product construction, product
specifications, financial information, audit processes, pricing,
business strategies, marketing and promotional practices (including
internet-related marketing) and management methods and information;
	 
	 	(iii)	 	Financial data, strategies, systems, research,
plans, reports, recommendations and conclusions;

5

 

	 	(iv)	 	Names, arrangements with, or other information
relating to, any of the Company’s customers, clients, suppliers,
financiers, owners, representatives and other persons who have business
relationships with the Company or who are prospects for business
relationships with the Company; and
	 
	 	(v)	 	Any non-public matter or thing obtained or
ascertained by the Participant through the Participant’s association with the
Company, the use or disclosure of which might reasonably be construed
to be contrary to the best interests of any the Company.

	 	(d)	 	Non-Disclosure
	 
	 	 	 	In exchange for the Company’s promise
to provide the Participant with Confidential Information, the Participant shall not,
during the period of the Participant’s employment or at any time thereafter,
disclose to anyone, or publish, or use for any purpose, any Confidential
Information, except as: (i) required in the ordinary course of the Company’s
business or the Participant’s work for the Company; (ii) required by law; or (iii)
directed and authorized in writing by the Company. Upon the termination of the
Participant’s employment for any reason, the documents, memoranda, manuals, e-mail,
electronic or magnetic recordings or data, including all copies thereof, which
belong to the Company or relate to the Company’s business and which are in the
Participant’s possession, custody or control, whether prepared by the Participant or
others. If at any time after termination of the Participant’s employment, for any
reason, the Participant determines that the Participant has any Confidential Information
in the Participant’s possession or control, the Participant shall immediately return to
the Company all such Confidential Information in the Participant’s possession or
control, including all copies and portions thereof.
	 
	 	(e)	 	By execution of this Agreement, the Participant agrees that the
provisions of this Paragraph 8 shall apply to all grants (including, without
limitation, grants of incentive stock options, nonqualified stock options and
restricted stock) made to the Participant pursuant to the Plan in 2006 and, to the
extent the provisions of such grants are inconsistent with any of the
provisions of this Paragraph 8, the Company and the Participant agree that (x) the
provisions of this Paragraph 8 shall control and (y) the provisions of any such
award agreements are hereby amended by the terms of this Paragraph 8.

     9. Non-transferability

   The Stock Option granted by this Agreement may only be exercisable during the term of the
Option Period provided in Paragraph 3 hereof and, except as provided in Paragraph 7, only by the
Participant during the Participant’s lifetime. No Stock Option granted by this Agreement is
transferable by the Participant other than by will or pursuant to applicable laws of descent and
distribution. The Stock Option and any rights and privileges in connection therewith, cannot be
transferred, assigned, pledged or hypothecated by operation of law, or otherwise, and is not
otherwise subject to execution, attachment, garnishment or similar process. In the event of such
occurrence, this Agreement will automatically terminate and will thereafter be null and void.

6

 

     10. Adjustments in Number of Shares and Option Price; Change in Control

   Except as provided below, in the event that the outstanding Common Stock of the Company is
increased, decreased, or exchanged for a different number or kind of shares or other securities, or
if additional, new or different shares or securities are distributed with respect to the Common
Stock through merger, consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, stock dividend, stock split, reverse stock split or other
distribution with respect to such Common Stock, each remaining share of Common Stock subject to
this Stock Option will be substituted utilizing the principles set forth in section 424(a) of the
Code.

     11. Delivery of Shares

   No shares of Common Stock shall be delivered to the Participant upon the exercise of the Stock
Option until:

	 	(a)	 	the purchase price is paid in full in the manner herein
provided, if applicable;
	 
	 	(b)	 	all the applicable taxes required to be withheld have been paid
or withheld in full;
	 
	 	(c)	 	the approval of any governmental authority required in
connection with the Stock Option, or the issuance of shares thereunder, has
been received by the Company; and
	 
	 	(d)	 	if required by the Committee, the Participant has delivered to
the Committee an “Investment Letter” in form and content satisfactory to the
Company as provided in Paragraph 12 hereof.

     12. Securities Act

   The Company will not be required to deliver any shares of Common Stock pursuant to the
exercise of all or any part of the Stock Option if, in the opinion of counsel for the Company, such
issuance would violate the Securities Act of 1933, as amended (the “Securities Act”) or any other
applicable federal or state securities laws or regulations. The Committee may require that the
Participant, prior to the issuance of any such shares pursuant to exercise of the Stock Option sign
and deliver to the Company a written statement (“Investment Letter”):

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

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

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

Such Investment Letter shall be in form and content acceptable to the Committee, in its sole
discretion.

     13. Federal and State Taxes

	 	(a)	 	Upon the exercise of the Stock Option, or any part thereof, the
Participant may incur certain liabilities for federal, state or local taxes and
the Company may be required by law to withhold such taxes for payment to taxing
authorities. Upon a determination by the Company that an amount is required to
be withheld in order to satisfy federal, state or local taxes, absent an
election described in by the Participant to the contrary, the Company shall
withhold from the Common Stock to be issued to the Participant a number of shares necessary
to satisfy the Company’s withholding obligations. The number of shares of Common Stock to

7

 

	 	 	 	be withheld shall be based upon the Fair Market Value of the shares on the
date of withholding.

	 	(b)	 	Notwithstanding Paragraph 13(a) above, if the Participant
elects, and the Committee agrees, the Company’s withholding obligations may
instead be satisfied as follows:

	 	(i)	 	the Participant may direct the Company to
withhold cash that is otherwise payable to the Participant;
	 
	 	(ii)	 	the Participant may deliver to the Company a
sufficient number of shares of Common Stock then owned by the
Participant to satisfy the Company’s withholding obligations, based on
the Fair Market Value of the shares as of the date of withholding; or
	 
	 	(iii)	 	the Participant may deliver sufficient cash to
the Company to satisfy its withholding obligations.
	 
	 	(iv)	 	any combination of the alternatives described
in Paragraphs 13(b)(i) through 13(b)(iii) above.

	 	(c)	 	Authorization of the Participant to the Company to withhold
taxes pursuant to one or more of the alternatives described in Paragraph 13(b)
above must be in a form and content acceptable to the Committee. The payment
or authorization to withhold taxes by the Participant shall be completed prior
to the delivery of any shares pursuant to this Agreement. An authorization to
withhold taxes pursuant to this provision will be irrevocable unless and until
the tax liability of the Participant has been fully paid.

     14. Definitions; Copy of Plan

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

     15. Administration

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

     16. Continuation of Employment

   This Agreement shall not be construed to confer upon the Participant any right to continued
employment with the Company or a Subsidiary and shall not limit the right of the Company or a
Subsidiary (as applicable), in its sole discretion, to terminate the employment of the Participant
at any time.

     17. No Right to Stock

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

8

 

     18. Obligation to Exercise

   The Participant shall have no obligation to exercise any Stock Option granted by this
Agreement.

     19. Notice

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

     20. Governing Law

   This Agreement shall be interpreted and administered under the laws of the State of Texas.

     21. Amendments

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

     22. Termination

   The Company may terminate the Plan at any time; however, such termination will not modify the
terms and conditions of the Stock Option granted hereunder without the Participant’s consent.

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

	 	 	 	 	 	 	 
	 	 	FLOWSERVE CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 	 	[INSERT PARTICIPANT’S NAME]	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 

	 	 

9

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