Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.4

Performance Restricted Stock Unit Agreement

Flowserve Corporation

2004 Stock Compensation Plan

This Performance Restricted Stock Unit Agreement (the “Agreement”) is made and entered into by
and between Flowserve Corporation, a New York corporation (the “Company”) and «First_Name» «Last_Name» (the “Participant”)
as of                     , 2008 (the “Date of Grant”).

W I T N
E S S E T H

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

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

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

1. Performance Restricted Stock Units

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

2. Vesting and Conversion of Performance Shares into Common Stock

	 	(a)	 	Prior to March 31, 2008, the Committee shall establish a
threshold, target and maximum Performance Goal with respect to the Award, in
accordance with the requirements of Section 6.7 of the Plan, based upon the
Company’s return on net assets for the period beginning January 1, 2008 and
ending December 31, 2010 (the “Performance Cycle”). Following the end of the
Performance Cycle, the Committee shall compare the actual performance of the
Company with the Performance Goal and certify, in writing, whether and to what
extent the Performance Goal has been achieved for such Performance Cycle.
Subject to the provisions of Paragraph 3 below, upon written certification by
the Committee, which shall occur no later than March 31, 2011, whether, and to
what extent, the Performance Goal has been achieved, the Performance Shares
will become vested (the “Vesting Date”) in accordance with the table set forth
below; provided, however, that the Performance Shares shall not vest and shall
be forfeited to the extent the Performance Goal is not achieved for the
Performance
Cycle. The number of Performance Shares vested is contingent upon the
Company’s achievement of the Performance Goal for the Performance Cycle.

 

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

	 	(b)	 	Except as otherwise provided in Paragraph 2(e) below, no later
than the date that is two and a half (2 1/2) months following the close of the
calendar year in which the Performance Shares vest in accordance with the table
set forth in Paragraph 2(a) above, the Company shall convert the vested
Performance Shares into the number of whole shares of Common Stock equal to the
number of vested Performance Shares, subject to the provisions of the Plan and
the Agreement.

	 
	 	(c)	 	Following conversion of the vested Performance Shares into
 shares of Common Stock, such shares of Common Stock will be transferred of
record to the Participant and a certificate or certificates representing said
Common Stock will be issued in the name of such Participant and delivered to
the Participant. The delivery of any shares of Common Stock pursuant to this
Agreement is subject to the provisions of Paragraphs 6 and 8 below.

	 
	 	(d)	 	Each year that this Agreement is in effect, the Participant may
receive credits (“Dividend Equivalents”) based upon the cash dividends that
would have been paid on the number of shares of Common Stock equal to 100% of
the Performance Shares as if such shares of Common Stock were actually held by
the Participant. Dividend equivalents shall be deemed to be reinvested in
additional shares of Common Stock (which may thereafter accrue additional
dividend equivalents). Any such reinvestment shall be at the Fair Market Value
of the Common Stock at the time thereof. Dividend Equivalents may be settled
in cash or shares of Common Stock, or any combination thereof, as determined by
the Committee, in its sole and absolute discretion. Following conversion of
the vested Performance Shares into shares of Common Stock, the Participant also
shall receive a distribution of the Dividend Equivalents accrued with respect
to such Performance Shares prior to the date of such conversion. In the event
any Performance Shares do not vest, the Participant shall forfeit his or her
right to any Dividend Equivalents accrued with respect to such unvested
Performance Shares.

	 
	 	(e)	 	Notwithstanding the foregoing provisions of Paragraphs 2(c) and
2(d), the Committee may, in its sole and absolute discretion, in lieu of
distributing any shares of Common Stock to the Participant, elect to pay the
Participant an amount in cash equal to the Fair Market Value on the date of
conversion of the shares of Common Stock that the Participant otherwise would
be entitled to receive pursuant to this Agreement.

 

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3. Effect of Termination of Employment or Services

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

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

	 
	 	(ii)	 	the Participant terminates employment (or if
the Participant is not an Employee, ceases to perform services for the
Company and its Subsidiaries),

	 	 	 	Then, except as otherwise provided in Paragraphs 3(b) or 3(c) below, the
Performance Shares that have not previously vested in accordance with the
vesting schedule reflected in Paragraph 2(a) above, as of the date of such
termination of employment (or cessation of services, as applicable), shall
be forfeited by the Participant to the Company.

	 
	 	(b)	 	In the event the Participant’s employment with the Company
terminates due to his or her Retirement, Total and Permanent Disability or
death, then on the Vesting Date the Participant (or the Participant’s estate)
shall be entitled to receive a pro-rata portion of the number of shares of
Common Stock that would have been payable to such Participant if he or she had
continued to provide services up to the Vesting Date, based upon the number of
whole years of employment completed during the Performance Cycle. By way of
example, if the Participant Retires on the one year anniversary of the Date of
Grant, such Participant would be entitled to receive 1/3 of the shares of
Common Stock he or she would have received on the Vesting Date had he or she
remained employed through such date. For purposes of this Agreement, the terms
“Retirement” and “Retire” shall mean the termination of a Participant’s
employment with the Company for any reason other than due to the Participant’s
death or Total and Permanent Disability on or after the earlier of (i) the
Participant’s early retirement date (as such term is defined within the
retirement plan in effect and in which such Participant participates on the
date of the Participant’s termination); or (ii) the Participant attaining the
normal retirement date (as such term is defined within the retirement plan in
effect and in which such Participant participates on the date of the
Participant’s termination, or if no such plan is in effect, age 65).

	 
	 	(c)	 	Notwithstanding Paragraphs 2(a) and 3(a) above, upon the
cessation of the Participant’s employment or services (whether voluntary or
involuntary), the Committee may, in its sole and absolute discretion, elect to
accelerate the vesting of some or all of the unvested Performance Shares.

 

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4. Limitation of Rights

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

	 	(a)	 	give the Participant any right to be awarded any further
Performance Shares or any other Award in the future, even if Performance Shares
or other Awards are
granted on a regular or repeated basis, as grants of Performance Shares and
other Awards are completely voluntary and made solely in the discretion of
the Committee;

	 
	 	(b)	 	give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Subsidiary; or

	 
	 	(c)	 	confer upon the Participant the right to continue in the
employment or service of the Company or any Subsidiary, or affect the right of
the Company or any Subsidiary to terminate the employment or service of the
Participant at any time or for any reason.

5. Prerequisites to Benefits

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

6. Data Privacy

By execution of this Agreement, the Participant acknowledges that he/she has read and
understands the Flowserve Corporation Employee Data Protection Policy (the “Policy”). The
participant hereby consents to the collection, processing, transmission, use and electronic and
manual storage of their personal data by the Company, Merrill Lynch & Co., Inc. (“Merrill Lynch”)
and Solium Capital LLC (“Solium”) in order to facilitate Plan administration. The Participant
understands and acknowledges that this consent applies to all personally-identifiable data relevant
to Plan administration, including: name, home address, work email address, job title, GEMS ID,
National Identification Number or Social Security Number, employee status, work location, work
phone number, tax class, previous equity grant transaction data and compensation data.

The Participant understands that for purposes of Plan administration, the Participant’s
personal data will be collected and processed at 5215 N. O’Connor Blvd, Suite 2300, Irving, Texas
(USA), and transferred to Merrill Lynch at 4 World Financial Center, 250 Vesey St., New York, New
York (USA) and Solium at 25900 West Eleven Mile, Suite 140, Southfield, Michigan (USA).

7. Delivery of Shares

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

	 	(a)	 	all the applicable taxes required to be withheld have been paid or withheld in
full;

	 
	 	(b)	 	the approval of any governmental authority required in
connection with this Performance Share, or the issuance of shares of Common
Stock hereunder under has been received by the Company; and

	 
	 	(c)	 	if required by the Committee, the Participant has delivered to
the Committee an “Investment Letter” in form and content satisfactory to the
Company as provided in Paragraph 8 hereof.

 

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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;

	 
	 	(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 laws of the jurisdiction where the Participant is
employed, and, if applicable, the Internal Revenue Code of 1986, as amended
(the “Code”), or its successors, or any other foreign, federal, state or local
tax withholding requirement. When the Company is required to withhold any
amount or amounts under the applicable provisions of any foreign, federal,
state or local requirement or the Code, the Company shall withhold from the
Common Stock to be issued to the Participant a number of shares necessary to
satisfy the Company’s withholding obligations. The number of shares of Common
Stock to be withheld shall be based upon the Fair Market Value of the shares on
the date of withholding.

 

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	 	(b)	 	Notwithstanding Paragraph 9(a) above, if the Participant
elects, and the Committee agrees, the Company’s withholding obligations may
instead be satisfied as follows:

	 	(i)	 	the Participant may direct the Company to
withhold cash that is otherwise payable to the Participant;

	 
	 	(ii)	 	the Participant may deliver to the Company a
sufficient number of shares of Common Stock then owned by the
Participant to satisfy the Company’s withholding obligations, based on
the Fair Market Value of the shares as of the date of withholding;

	 
	 	(iii)	 	the Participant may deliver sufficient cash to
the Company to satisfy its withholding obligations; or

	 
	 	(iv)	 	any combination of the alternatives described
in Paragraphs 9(b)(i) through 9(b)(iii) above.

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

12. 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.

13. Adjustment of Number of Performance Shares

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

14. Non-transferability

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

 

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15. No Right to Stock

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

16. 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.

17. 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.

18. Governing Law

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

19. Definitions

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

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

	 	 	 	 	 
	 	FLOWSERVE CORPORATION

 	 
	 	By:  	
 	 
	 	 	Name:  	Lewis M. Kling 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	«First_Name» «Last_Name»

 	 
	 	Name:  	 	 
	 	 	 	 
	 	 	 	 
	 

 

7Filed by Bowne Pure Compliance

 

Exhibit 10.5

Amendment Number One to the

Performance Restricted Stock Unit Agreement

Flowserve Corporation

2004 Stock Compensation Plan

This Amendment Number One to the Performance Restricted Stock Unit Agreement (the “Amendment”)
is made and entered into by and between Flowserve Corporation, a New York corporation (the
“Company”) and the Participant as of March 27, 2008 for purposes of amending that certain
Performance Restricted Stock Unit Agreement by and between the Company and the Participant dated
March 7, 2008 (the “Agreement”). Terms used in this Amendment with initial capital letters that
are not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement.

W I T N
E S S E T H

WHEREAS, the Company previously granted performance restricted stock units (the “Performance
Shares”) to the Participant subject to the terms of the Agreement and the Flowserve Corporation
2004 Stock Compensation Plan (the “Plan”) that vested upon the achieved of certain performance
goals; and

WHEREAS, the Company and the Participant desire to amend the Agreement to modify the
percentage of Performance Shares that vest upon the achievement of the performance goals described
in the Agreement; and

WHEREAS, Article 9 of the Plan provides that the Company can make amendments that apply to
outstanding awards, provided that the holder of any outstanding award, upon request of the Company,
execute a conforming amendment in the form prescribed by the Company.

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. Section 2(a) of the Agreement is amended by deleting the table set forth in such Section
and substituting in lieu thereof the following new table:

	 	 	 	 	 
	 	 	Percentage of Performance Shares Vested	 
	Performance Goal Achieved	 	and Eligible for Conversion	 
	Less Than Threshold
	 	 	0	%
	Threshold
	 	 	50	%
	Target
	 	 	100	%
	Maximum
	 	 	200	%

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