RESTRICTIVE COVENANTS AGREEMENT
Exhibit 10.2
This Agreement, dated , is by and between Flowserve Corporation. (“the Company”)
and (“Executive”). The parties agree as follows:
1. Executive’s Employment with the Company. The Company hereby employs or continues to
employ Executive through a subsidiary of the Company, subject to the terms and conditions of this
Agreement, Flowserve Corporation’s Code of Business Conduct, and Flowserve’s policies and
procedures. Executive agrees to provide full-time services for the Company during the term of this
Agreement. Executive agrees to devote all of his/her time, energy, skill and best efforts to the
performance of his/her job duties and to the business of the Company, and shall perform his/her
duties in a diligent, trustworthy, and business-like manner, all for the purpose of advancing the
business of the Company. Executive shall not at any time during the term of this Agreement work on
any basis (including part-time or as an independent contractor) for a Competing Business (defined
in Section 3) and shall not participate in any material way in any other business that is
not a Competing Business. Further, Executive’s participation in any business that is not a
Competing Business shall at all times comply with the policies of the Company. Executive’s
employment with the Company is on an at-will basis, meaning that either Executive or the Company
may terminate the employment relationship at any time and for any reason not expressly prohibited
by law. The at-will nature of Executive’s employment cannot be modified orally, but instead may be
modified only by written agreement signed by the Chief Executive Officer of the Company.
| 2. | The Company’s Promise to Provide Confidential Information and Executive’s Non-Disclosure Agreement. |
(a) Confidential Information. Immediately upon Executive’s execution of this
Agreement, and continuing on an ongoing basis during Executive’s employment, the Company agrees to
provide Executive with new Confidential Information (defined below) to which Executive 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
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Exhibit 10.2
(v) Any non-public matter or thing obtained or ascertained by Executive through
Executive’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.
(b) Non-Disclosure. In exchange for the Company’s promise to provide Executive
with Confidential Information, Executive shall not, during the period of Executive’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
Executive’s work for the Company; (ii) required by law; or (iii) directed and authorized in writing
by the Company. Upon the termination of Executive’s employment for any reason, Executive 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 data, including all copies thereof, which belong to the Company or relate to the
Company’s business and which are in Executive’s possession, custody or control, whether prepared by
Executive or others. If at any time after termination of Executive’s employment, for any reason,
Executive determines that Executive has any Confidential Information in Executive’s possession or
control, Executive shall immediately return to the Company all such Confidential Information in
Executive’s possession or control, including all copies and portions thereof.
| 3. | Executive’s Non-Competition, Non-Solicitation, and Non-Recruitment Covenants. |
(a) The Restrictive Covenants. In Section 2, the Company promised to
provide Executive with new and on-going Confidential Information. Executive recognizes and agrees
that: (i) the Company has devoted a considerable amount of time, effort, and expense to develop
its Confidential Information and business goodwill; (ii) the Confidential Information and the
Company’s business goodwill are valuable assets to the Company; and (iii) any unauthorized use or
disclosure of the Company’s Confidential Information would cause irreparable harm to the Company
for which there is no adequate remedy at law, including damage to the Company’s business goodwill.
For these reasons, Executive agrees that to protect the Company’s Confidential Information and
business goodwill, it is necessary to enter into the following restrictive covenants:
Executive, 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 that
during Executive’s employment and for a period of one (1) year following the date on which
Executive’s employment ceases (for whatever reason) (the “Non-Competition Period”),
Executive 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 Executive’s job duties are international in scope, the “Restricted Area” is worldwide.
However, Executive may own, directly or indirectly, solely as an investment, securities of
any business traded on any national securities exchange or NASDAQ, provided that Executive
is not a controlling person of, or member of a group that controls such business, and
provided further that Executive does not, directly or indirectly, own three percent (3%) or
more of any class of securities of such business.
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Exhibit 10.2
(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) Executive contacted, called on, serviced, did business with or
had contact with during Executive’s employment or that Executive attempted to contact, call
on, service, or do business with during Executive’s employment; or (2) Executive became
acquainted with or dealt with, for any reason, as a result of Executive’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, officer or executive officer or any supervisor,
manager, director, vice-president, president, officer or executive officer whose employment
ceased than less than twelve (12) months earlier.
(b) Remedies. Executive acknowledges that the restrictions contained in this
Section 3, in view of the nature of the Company’s business, are reasonable and necessary to
protect the Company’s legitimate business interests and business goodwill and that any violation of
these restrictions would result in irreparable injury to the Company. The existence of any claim
or cause of action by Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of the restrictive
covenants contained in Section 2 or Section 3.
(i) Forfeiture by Executive. If Executive (1) breaches any restriction in
Section 2 or Section 3, then the Company shall be entitled to (i) require
Executive to forfeit all unexercised stock options granted to Executive through Executive’s
2006 Incentive Stock Agreement and/or Executive’s 2006 Nonqualified Stock Option Agreement
(regardless of whether such stock options are vested) and terminate Executive’s 2006
Incentive Stock Agreement and/or 2006 Nonqualified Stock Option Agreement as of the date of
such breach; (ii) require Executive to sell all shares of Flowserve Corporation acquired by
Executive through the exercise of stock options Executive received through Executive’s 2006
Incentive Stock Agreement and/or 2006 Nonqualified Stock Option Agreement for the lesser of
(a) the exercise price paid by Executive for such shares or (b) the fair market value of
such shares on the date of sale to Flowserve Corporation; (iii) require Executive to forfeit
all stock granted to Executive through Executive’s 2006 Restricted Stock Agreement
(regardless of whether such stock is vested); (iv) recover from Executive any gain that
Executive realized on the sale of any shares of Flowserve Corporation acquired by Executive
pursuant to Executive’s 2006 Incentive Stock Agreement, Executive’s 2006 Restricted Stock
Agreement and/or Executive’s 2006 Nonqualified Stock Option Agreement; (v) discontinue
future grants of stock, stock options (whether qualified or nonqualified) or other equity
awards under any equity incentive plan in which Executive may participate; (vi) damages
incurred by the Company as a result of the breach; and, (vii) recover its attorneys’ fees,
costs and expenses incurred in such actions, in addition to any other legal remedies. To
the extent that the provisions of this Section 3(b)(i) are inconsistent with any of
the provisions of Executive’s current or future equity award agreements (including, without
limitation, grants of qualified and nonqualified stock options and restricted stock, granted
prior to or after the date of this Agreement) or the terms and conditions of the Company’s
incentive, bonus or equity plans, the Company and Executive agree that the provisions of
this Section 3(b)(i) shall control and the provisions of any such award agreements
are hereby amended by the terms of this Section 3(b)(i).
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Exhibit 10.2
(ii) Injunctive relief and damages. Executive acknowledges and agrees that a
breach of Section 2 and/or Section 3 will result in irreparable harm and
continuing damage to the Company, and that money damages would be not be a sufficient remedy
to the Company for any such breach or threatened breach. Therefore, Executive agrees that
the Company shall be entitled to a temporary restraining order and injunctive relief
restraining Executive from the commission of any breach of Section 2 or Section
3, and to recover the Company’s attorneys’ fees, costs and expenses related to any
breach or threatened breach of this Agreement. Nothing contained in this Agreement shall be
construed as prohibiting the Company from pursuing any other remedies available to it for
any breach or threatened breach, including, without limitation, the recovery of money
damages, attorneys’ fees, and costs.
(c) Severance Pay. If the Company learns that Executive has accepted or intends to
accept a position which would violate Section 3(a)(i), the Company has the sole discretion to
invoke the requirements of Section 3(a)(i). If that occurs, Executive will be eligible for
Severance Pay while Section 3(a)(i) is in effect. The Company also has the sole discretion to not
invoke, and/or to terminate after invoking, the restrictions in Section (3)(a)(i) in which case the
Severance Pay will also simultaneously terminate. For purposes of this section, “Severance Pay”
means the Company will continue to pay Executive an amount equal to Executive’s base salary as in
effect on his/her date of termination of employment from the Company (less applicable withholdings
and taxes) for the length of time in which Section 3(a)(i) is in effect. Severance Pay does not
include any other form of compensation such as bonuses, commissions, stock grants, stock options,
fringe benefits, company paid cell phone, automobile allowance, health or medical benefits, etc.
Severance Pay will be payable in regular intervals in accordance with the Company’s payroll
practices. The Company will subtract from the Severance Pay the value of any compensation and
benefits (including but not limited to wages, salary, bonuses, allowances, commissions, stock and
stock options) Executive receives from the Competing Business as well as the value of any severance
pay, separation pay and/or separation benefits Executive receives from the Company. This includes
but is not limited to any benefits Executive receives under the Flowserve Corporation Transitional
Executive Security Plan (including but not limited to severance pay, accelerated vesting of stock
and stock options, and health benefits), any benefits Executive receives under the Flowserve
Corporation Reduction-in-Force Severance Benefits Plan and any benefits Executive receives under
similar plans.
(d) Tolling. If Executive violates any of the restrictions contained in this
Section 3, the restrictive period will be suspended and will not run in favor of Executive
until such time that Executive cures the violation to the satisfaction of the Company.
(e) Notice. If Executive, in the future, seeks or is offered employment, or any other
position or capacity with another company or entity, Executive agrees to inform each new employer
or entity, before accepting employment, of the existence of the restrictions in Section 2
and Section 3. Further, before taking any employment position with any person during the
Non-Competition Period, Executive agrees to give prior written notice to the Company of the name of
such person. The Company shall be entitled to advise such person of the provisions of Section
2 and Section 3 and to otherwise deal with such person to ensure that the provisions of
Section 2 and Section 3 are enforced and duly discharged.
4. Non-Disparagement. Executive agrees that the Company’s goodwill and reputation are
assets of great value to the Company which were obtained through great costs, time and effort.
Therefore, Executive agrees that during his/her employment and after the termination of his/her
employment, Executive will not in any way disparage, libel or defame the Company, its business or
business practices, its products or services, or its employees.
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Exhibit 10.2
5. Entire Agreement. This Agreement, Executive’s 2006 Incentive Stock Agreement,
Executive’s 2006 Nonqualified Stock Option Agreement, Executive’s 2006 Restricted Stock Agreement
and Executive’s Employment Agreement (if any) contain the entire agreement between the parties with
respect to the subject matter hereof, and supersede any previous agreements, written or oral,
between Executive and the Company with regard to the subject matter in those Agreement. If any of
the provisions in Executive’s 2006 Incentive Stock Agreement, 2006 Nonqualified Stock Option
Agreement, 2006 Restricted Stock Agreement and/or Employment Agreement conflict, the most
restrictive version will control. This Agreement does not eliminate Executive’s responsibility to
comply with the Flowserve Code of Business Conduct and Flowserve’s other policies and procedures.
6. Partial Invalidity. In the event any court of competent jurisdiction holds any
provision of this Agreement to be invalid or unenforceable, such invalid or unenforceable
portion(s) shall be limited or excluded from this Agreement to the minimum extent required, and the
remaining provisions shall not be affected or invalidated and shall remain in full force and
effect.
7. Reformation. Executive and the Company agree that all of the covenants contained in
Section 2 and Section 3 shall survive the termination or expiration of this Agreement, and
agree further that in the event any of the covenants contained in Section 2 or Section 3
shall be held by any court to be effective in any particular area or jurisdiction only if said
covenant is modified to limit its duration or scope, then the court shall have such authority to so
reform the covenant and the parties hereto shall consider such covenant(s) and/or other provisions
of Section 2 and/or Section 3 to be amended and modified with respect to that particular
area or jurisdiction so as to comply with the order of any such court and, as to all other
jurisdictions, the covenants contained herein shall remain in full force and effect as originally
written. Alternatively, at the sole option of the Company, the Company may consider such
covenant(s) and/or provisions of Section 2 and/or Section 3 to be amended and modified so
as to eliminate therefrom the particular area or jurisdiction as to which such covenants are so
held void or otherwise unenforceable and, as to all other areas and jurisdictions covered
hereunder, the covenants contained herein shall remain in full force and effect as originally
written.
8. Assignment of Rights. This Agreement shall be binding upon and inure to the benefit of
Executive, the Company and any parents, subsidiaries, affiliated companies, successors or assigns
of the Company.
9. Nonwaiver. The Company’s waiver of any provision of the Agreement shall not constitute
(i) a continuing waiver of that provision, or (ii) a waiver of any other provision of this
Agreement.
10. Controlling Law. Any dispute in the meaning, effect, or validity of this Agreement
shall be resolved in accordance with the laws of Texas. This Agreement shall be administered and
governed by the laws of Texas. Venue of any litigation arising from this Agreement shall be in a
federal or state court of competent jurisdiction in Dallas County, Texas.
11. No Previous Restrictive Agreements. Executive represents that, except as disclosed in
writing to the Company, Executive is not bound by the terms of any agreement with any previous
employer or other party to refrain from using or disclosing any trade secret or confidential or
proprietary information
in the course of Executive’s engagement by the Company or to refrain from competing, directly or
indirectly, with the business of such previous employer or any other party. Executive further
represents that Executive’s performance of all the terms of this Agreement and Executive’s work
duties for the Company does not and will not breach any agreement to keep in confidence proprietary
information, knowledge or data acquired by Executive in confidence or in trust prior to Executive’s
employment with the Company. Executive agrees that Executive will not use or disclose any
confidential, proprietary or trade secret information belonging to any former employer or third
party, and Executive will not bring
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Exhibit 10.2
onto the premises of the Company or onto any Company property
any confidential, proprietary or trade secret information belonging to any former employer or third
party without such third parties’ written consent.
EXECUTIVE:
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FLOWSERVE: |
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