Performance Restricted Stock Agreement Flowserve Corporation 2004 Stock Compensation Plan

Exhibit 10.1

Performance Restricted Stock Agreement

Flowserve Corporation
2004 Stock Compensation Plan

This Performance Restricted Stock Agreement (the “Agreement”) is made and entered into by and between Flowserve Corporation, a New York corporation (the “Company”) and Xxxxx Xxxxx (the “Participant”) as of March 7, 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 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

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 (the “Performance Shares”), subject to the conditions and restrictions set forth below and in the Plan.

2. Vesting of Performance Shares

(a) Prior to March 30, 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 Restricted
Achieved		Stock Vested
Less Than Threshold			0	%
Threshold			25	%
Target			100	%
Maximum			200	%

	(b)		Immediately following the execution of this Agreement, the Performance Shares will be transferred of record to the Participant and a certificate or certificates representing said Performance Shares will be issued in the name of the Participant. Each of such Performance Share certificates will bear a legend as provided by the Company, conspicuously referring to the terms, conditions and restrictions as permitted under Section 15.9 of the Plan. The Company either shall retain custody of such Performance Share certificate(s) prior to vesting or require the Participant to enter into an escrow arrangement under which such Performance Share certificate(s) will be held by an escrow agent. Certificates for shares of Common Stock free of restriction under this Agreement and the Plan shall be delivered to the Participant promptly after, and only after, the Committee has certified that the Performance Goals were met. The delivery of any shares of Restricted Stock pursuant to this Agreement is subject to the provisions of Paragraph 9 below. The Participant, by his or her acceptance of this Agreement, shall irrevocably grant to the Company a power of attorney to transfer any shares forfeited pursuant to Paragraph 3 and agrees to execute any documents requested by the Company in connection with such forfeiture and transfer. The provisions of this Paragraph 2 shall be specifically performable by the Company in a court of equity or law.
	(c)		Absent prior written consent of the Committee, the Performance Shares 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.
	(d)		Consistent with the foregoing, except as contemplated by Paragraph 5, 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 8, 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.

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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 vesting schedule reflected in Paragraph 2(a) above, as long as the Participant remains employed by the Company or a Subsidiary. The Performance Shares granted pursuant to this Agreement shall cease vesting and shall be immediately forfeited upon the date the Participant terminates employment, unless:

	(i)		the Company and its Subsidiaries terminate the Participant’s employment prior to February 28, 2010 without “cause” (as such term is defined in the Participant’s existing employment agreement);
	(ii)		the Participant’s employment terminates prior to February 28, 2010 by reason of his “disability” (as such term is defined in the Participant’s existing employment agreement) or his death;
	(iii)		the Participant resigns his employment with the Company prior to February 28, 2010 upon the appointment of a successor Chief Executive Officer of the Company; or
	(iv)		the Participant terminates his employment with the Company prior to February 28, 2010 following the assignment to the Participant of duties materially inconsistent with his positions with the Company or following any actions by the Company resulting in a material diminution of his position or duties;

in which case, 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 shall continue to vest as if the Participant continued to provide services to the Company up to the Vesting Date.

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.

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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, Xxxxxxx Xxxxx & Co., Inc. (“Xxxxxxx Xxxxx”) 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 0000 X. X’Xxxxxx Xxxx, Xxxxx 0000, Xxxxxx, Xxxxx (XXX), and transferred to Xxxxxxx Xxxxx at 4 World Financial Center, 000 Xxxxx Xx., Xxx Xxxx, Xxx Xxxx (XXX) and Solium at 00000 Xxxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx (XXX).

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 Performance Shares, 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;
	(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.

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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.
	(b)		Notwithstanding Paragraph 10(a) above, if the Participant elects, and the Committee agrees, the Company’s withholding obligations may instead be satisfied as follows:

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

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

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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. No Right to Stock

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

15. Notice

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

16. Amendments

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

17. Governing Law

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

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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:	/s/ Xxxxxxx X. Xxxxxxx
		Name:	Xxxxxxx X. Xxxxxxx
		Title:	Chairman, Organization and Compensation Committee
	Xxxxx Xxxxx
	Name:	/s/ Xxxxx X. Xxxxx

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