def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
FLOWSERVE CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
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FLOWSERVE
CORPORATION
5215 N. OConnor Blvd., Suite 2300
Irving, Texas 75039
April 1, 2010
NOTICE OF 2010
ANNUAL MEETING OF SHAREHOLDERS
The 2010 Annual Meeting of Shareholders (the Annual
Meeting) of Flowserve Corporation (the
Company) will be held on Friday, May 14, 2010
at 11:30 a.m., local time, at the Flowserve Corporation
Learning Resource Center, which is located at 4343 West
Royal Lane, Irving, Texas 75063. Directions to the Annual
Meeting and a map of the area are included in the proxy
materials on the inside back cover and are also available online
at www.proxyvote.com.
Shareholders of record of the Companys common stock, par
value $1.25 per share, at the close of business on
March 19, 2010 are entitled to notice of and to vote at the
Annual Meeting.
At the Annual Meeting, the Company will ask you to:
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elect five directors, with four to serve a term expiring at the
2013 annual meeting of shareholders and one to serve a term
expiring at the 2012 annual meeting of shareholders;
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ratify the appointment of PricewaterhouseCoopers LLP to serve as
our independent registered public accounting firm for
2010; and
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attend to other business properly presented at the Annual
Meeting or any adjournments or postponements thereof.
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The enclosed proxy statement contains other important
information that you should read and consider before you vote.
In accordance with Securities and Exchange Commission rules, we
are furnishing proxy materials to our shareholders on the
Internet, rather than by mail. We believe this
e-proxy
process will expedite our shareholders receipt of proxy
materials, lower our costs and reduce the environmental impact
of our Annual Meeting. The proxy statement and annual report to
shareholders and any other proxy materials are available on our
hosted website at www.proxyvote.com. For additional
related information, please refer to the Important Notice
of Electronic Availability of Materials for the Shareholder
Meeting to be held on May 14, 2010 in the enclosed
proxy statement.
Your vote is important, and whether or not you plan to attend
the Annual Meeting, your prompt cooperation in voting is greatly
appreciated. We encourage you to vote via the Internet. It is
convenient and saves us significant postage and processing
costs. You may also vote via telephone or by mail if you
received paper copies of the proxy materials. Instructions
regarding all three methods of voting are included in the Notice
of Internet Availability of Proxy Materials, the proxy card and
the proxy statement.
Thank you in advance for voting and for your support of the
Company.
By Order of the Board of Directors,
Ronald F. Shuff
Senior Vice President, Secretary and General Counsel
TABLE OF CONTENTS
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ii
FLOWSERVE CORPORATION
5215 N. OConnor Blvd., Suite 2300,
Irving, Texas 75039
Proxy
Statement For The
2010 Annual Meeting of Shareholders
Solicitation
We are providing these proxy materials in connection with the
solicitation by the Board of Directors (the Board)
of Flowserve Corporation, a New York corporation (the
Company), of proxies to be voted at the 2010 Annual
Meeting of Shareholders (the Annual Meeting), which
will be held on Friday, May 14, 2010, and at any
adjournments or postponements of this scheduled meeting. The use
of we, us or our in this
proxy statement refers to the Company.
IMPORTANT NOTICE
OF ELECTRONIC AVAILABILITY OF MATERIALS FOR THE SHAREHOLDER
MEETING TO BE HELD ON MAY 14, 2010
Pursuant to Securities and Exchange Commission (SEC)
rules, we may furnish proxy materials, including this proxy
statement and the Companys annual report for the year
ending December 31, 2009, to our shareholders by providing
access to such documents on the Internet instead of mailing
printed copies. Most shareholders will not receive printed
copies of the proxy materials unless they request them. Instead,
a Notice of Internet Availability of Proxy Materials
(Notice of Internet Availability), which was mailed
to most of our shareholders, will explain how you may access and
review the proxy materials and how you may submit your proxy on
the Internet. If you would like to receive a paper or electronic
copy of our proxy materials, please follow the instructions
included in the Notice of Internet Availability. Shareholders
who requested paper copies of proxy materials or previously
elected to receive proxy materials electronically did not
receive the Notice of Internet Availability and are receiving
the proxy materials in the format requested.
This proxy statement and the Companys annual report for
the year ending December 31, 2009 are available
electronically on our hosted website at www.proxyvote.com.
To access and review the materials made available electronically:
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Go to www.proxyvote.com and input the
12-digit
control number from the Notice of Internet Availability or proxy
card.
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Click the 2010 Proxy Statement in the right column.
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Have your proxy card or voting instructions available.
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We encourage you to review all of the important information
contained in the proxy materials before voting. If you would
like to attend the Annual Meeting in person, please refer to the
inside back cover of this proxy statement or
www.proxyvote.com for directions to the meeting.
The Notice of Internet Availability and the proxy materials are
first being made available to our shareholders on or about
April 1, 2010.
Cost of Proxy
Solicitation
The solicitation of proxies is made by our Board and will be
conducted primarily by mail. Brokerage firms and other
custodians, nominees and fiduciaries are reimbursed by the
Company for reasonable
out-of-pocket
expenses that they incur to send proxy
1
materials to shareholders and solicit their votes. In addition
to this mailing, proxies may be solicited, without extra
compensation, by our officers and employees, by mail, telephone,
facsimile, electronic mail and other methods of communication.
The Company bears the full cost of soliciting proxies. The
Company has also retained Georgeson Inc. to aid in the
solicitation of proxies by mail, telephone, facsimile,
e-mail and
personal solicitation and will request brokerage houses and
other nominees, fiduciaries and custodians to forward soliciting
materials to beneficial owners of the Companys common
stock, par value $1.25 per share (common stock). For
these services, the Company will pay Georgeson Inc. a fee of
$8,000, plus reimbursement for reasonable
out-of-pocket
expenses.
Shareholders Sharing
an Address
To reduce the expenses of delivering duplicate proxy materials,
we deliver one Notice of Internet Availability and, if
applicable, annual report and proxy statement, to multiple
shareholders sharing the same mailing address unless otherwise
requested. We will promptly send a separate annual report and
proxy statement to a shareholder at a shared address upon
request at no cost. Shareholders with a shared address may also
request that we send a single copy in the future if we are
currently sending multiple copies to the same address. Requests
related to delivery of proxy materials may be made by calling
Investor Relations at
(972) 443-6500
or writing to Flowserve Corporation, Attention: Investor
Relations, 5215 N. OConnor Blvd.,
Suite 2300, Irving, Texas 75039. Shareholders who hold
shares in street name (as described below) may
contact their brokerage firm, bank, broker-dealer or similar
organization to request information about this
householding procedure.
Voting
Who May Vote and
Number of Votes
If you are a shareholder of record at the close of business on
March 19, 2010 (the Record Date), you may vote
on the matters proposed in this proxy statement. You have one
vote for each share you own.
Quorum for the
Meeting
A majority of the outstanding shares of the Companys
common stock, par value $1.25 per share (the common
stock), entitled to vote at the Annual Meeting and
represented in person or by proxy, constitutes a quorum. A
quorum is necessary to conduct business at the Annual Meeting.
You are part of the quorum if you have voted.
Shares that the holder abstains from voting on a particular
proposal are counted as present at the meeting for purposes of
determining a quorum.
Broker non-votes are also counted as present for purposes of
determining a quorum. A broker non-vote occurs when
a broker holding shares in street name for a
beneficial owner is represented in person or by proxy at the
meeting but does not vote on a particular proposal because the
broker has not received voting instructions from the beneficial
owner and cannot or chooses not to vote the shares in its
discretion for that particular proposal.
Counting of Votes
Only votes cast count in the voting results, and
withheld votes are not considered votes cast. Members of the
Board are elected by a plurality of affirmative votes cast on
the proposal by holders of shares entitled to vote in the
election. Abstentions and broker non-votes have no effect on the
determination of whether a plurality exists with respect to a
given nominee. The proposal to ratify the appointment of
PricewaterhouseCoopers LLP to serve as the Companys
independent registered public accounting firm for 2010 requires
the affirmative vote of a majority of the votes cast on the
proposal. Abstentions will count as votes cast on this proposal,
but will not count as votes for the proposal and,
therefore, have the same effect as votes against the
proposal. Additionally, broker non-votes will not be considered
to have voted on the proposal and will have no effect on the
proposal.
If your shares are held through a broker, your vote instructs
the broker how you want your shares to be voted. If you vote on
each proposal, your shares will be voted in accordance with your
instructions. Under the rules of the New York Stock Exchange
(NYSE), brokers may vote shares they hold in
street name on behalf of beneficial owners who have
not voted with respect to certain discretionary matters. The
ratification of PricewaterhouseCoopers LLP is considered a
discretionary matter, so brokers may vote shares on this matter
in their discretion if no voting instructions are received.
However, the election of directors is NOT
considered a
2
discretionary matter, so brokers have no discretion to vote
shares where no voting instructions are received, and no vote
will be cast if you do not vote on that item. We therefore
urge you to vote on ALL voting items.
There are no dissenters rights of appraisal with respect
to the matters to be acted upon at the meeting.
At the close of business on the Record Date,
55,806,894 shares of common stock were issued and
outstanding (excluding treasury shares) that may be voted at the
Annual Meeting.
How to Vote
Voting by Proxy Holders for Shares Registered in the
Name of a Brokerage Firm or Bank.
If your shares are held by a
broker, bank or other nominee (i.e., in street
name), you will receive instructions from your nominee,
which you must follow in order to have your shares voted.
Street name shareholders who wish to vote at the
meeting will need to obtain a proxy from the broker, bank or
other nominee that holds their shares to confirm their
shareholder status for entry into the Annual Meeting.
Voting by Proxy Holders for Shares Registered Directly
in the Name of Shareholder. If
you hold your shares in your own name as a holder of record, you
must vote your shares in person at the Annual Meeting or
instruct the proxy holders named on the proxy card how to vote
your shares by either (i) using the Internet website or the
toll-free telephone number set forth below or (ii) if you
received paper copies of the proxy materials, signing, dating
and mailing the enclosed proxy card to our independent proxy
tabulation firm, Broadridge Investor Communications Services
(Broadridge), in the enclosed envelope. Each of
these voting methods is described below:
Vote by Internet. You have
the option to vote via the Internet at the address of
www.proxyvote.com by following the on-screen instructions
that will direct you how to vote your shares. Internet voting is
available 24 hours a day, 7 days a week, until
11:59 p.m., Eastern Time, on May 13, 2010. If you hold
shares in the Flowserve Corporation Retirement Savings Plan,
your Internet vote must be received by 11:59 p.m., Eastern
Time, on May 11, 2010. Have your proxy card available when
you access the Internet website. IF YOU VOTE BY INTERNET, YOU DO
NOT NEED TO RETURN A PROXY CARD.
Vote by Telephone. If you
hold your shares in your name as a holder of record, you may
vote by telephone by calling toll-free to
1-800-690-6903
from the United States and Canada and following the series of
voice instructions that will direct you how to vote your shares.
Have your proxy card available when you place your telephone
call. Telephone voting is available 24 hours a day,
7 days a week, until 11:59 p.m., Eastern Time, on
May 13, 2010. If you hold shares in the Flowserve
Corporation Retirement Savings Plan, your telephone vote must be
received by 11:59 p.m., Eastern Time, on May 11, 2010.
IF YOU VOTE BY TELEPHONE, YOU DO NOT NEED TO RETURN A PROXY CARD.
Vote by Mail. If you
received paper copies of the proxy materials, you may mark the
enclosed proxy card, sign and date it and return it to
Broadridge in the enclosed envelope as soon as possible before
the Annual Meeting. Your signed proxy card must be received by
Broadridge prior to the date of the Annual Meeting for your vote
to be counted at the Annual Meeting.
Vote in Person. If you are
a registered shareholder and attend the Annual Meeting in
person, you may deliver a completed proxy card or vote by ballot
at the Annual Meeting.
Voting by
Participants in the Flowserve Corporation Retirement Savings Plan
If you are a participant in the Flowserve Corporation Retirement
Savings Plan, your vote serves as a voting instruction to the
trustee for this plan.
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To be timely, if you vote your shares in the Flowserve
Corporation Retirement Savings Plan by telephone or Internet,
your vote must be received by 11:59 p.m., Eastern Time, on
May 11, 2010. If you do not vote by telephone or Internet,
please return your proxy card as soon as possible.
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If you vote in a timely manner, the trustee will vote the shares
as you have directed.
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If you do not vote, or if you do not vote in a timely manner,
the trustee will vote your shares in the same proportion as the
shares voted by participants who timely return their cards to
the trustee.
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3
Changing Your Vote
You may revoke your proxy at any time before it has been
exercised at the Annual Meeting by:
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mailing in a revised proxy dated later than the prior submitted
proxy;
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notifying the Corporate Secretary in writing that you are
revoking your proxy;
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casting a new vote by telephone or the Internet; or
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appearing in person and voting by ballot at the Annual Meeting.
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Vote Tabulations
Tabulation of voted proxies will be handled by Broadridge, an
independent firm. Broadridge is the inspector of elections for
the Annual Meeting.
Shareholder
Proposals and Nominations
Pursuant to
Rule 14a-8
under the Securities Exchange Act of 1934 (the Exchange
Act), certain shareholder proposals may be eligible for
inclusion in our 2011 proxy statement. These shareholder
proposals must comply with the requirements of
Rule 14a-8,
including a requirement that shareholder proposals be received
by the Corporate Secretary no later than December 2, 2010.
We strongly encourage any shareholder interested in submitting a
proposal to contact the Corporate Secretary in advance of this
deadline to discuss the proposal. Submitting a shareholder
proposal does not guarantee that we will include it in our proxy
statement. The Corporate Governance and Nominating Committee
reviews all shareholder proposals and makes recommendations to
the Board for action on such proposals.
Alternatively, under the Companys By-laws, if a
shareholder does not want to submit a proposal for inclusion in
our proxy statement but wants to introduce it at our annual
meeting, or intends to nominate a person for election to the
Board directly (rather than by recommending such person as a
candidate to our Corporate Governance and Nominating Committee
as described below under Board of Directors
Committees of the Board Corporate Governance and
Nominating Committee), the shareholder must submit the
proposal or nomination in writing between January 14, 2011
and February 13, 2011. If, however, the 2011 annual meeting
is held more than 30 days before or more than 60 days
after the anniversary of the 2010 Annual Meeting, the
shareholder must submit any such proposal between (i) 120
calendar days prior to the 2011 annual meeting and (ii) the
later of 90 calendar days prior to the 2011 annual meeting or
10 days following the date on which the date of the 2011
annual meeting is publicly announced. The shareholders
submission must be made by a registered shareholder on his or
her behalf or on behalf of a beneficial owner of the shares, and
must include detailed information specified in our By-laws
concerning the proposal or nominee, as the case may be, and
detailed information as to the shareholders interests in
Company securities. We will not entertain any proposals or
nominations at the 2011 annual meeting that do not meet these
requirements.
If the shareholder does not comply with the requirements of
Rule 14a-4(c)(1)
under the Exchange Act, we may exercise discretionary voting
authority under proxies that we solicit to vote in accordance
with our best judgment on any such shareholder proposal or
nomination. The Companys By-laws are posted on our website
at www.flowserve.com under the About
Flowserve Investor Relations
Governance caption. To make a submission or to request a
copy of the Companys By-laws, shareholders should contact
our Corporate Secretary at the following address:
Flowserve Corporation
5215 N. OConnor Blvd., Suite 2300
Irving, Texas 75039
Attention: Corporate Secretary
We strongly encourage shareholders to seek advice from
knowledgeable legal counsel before submitting a proposal or a
nomination.
4
Proposal Number
One: Election of Directors
The Companys Board currently consists of eleven directors.
There are three classes of directors with a minimum of three
members per class, and the members of each class hold office
until the third succeeding annual meeting of shareholders after
which they were elected. The Board has nominated Gayla J. Delly,
Rick J. Mills, Charles M. Rampacek and William C. Rusnack, whose
terms of office as members of the Board are expiring at the 2010
Annual Meeting, to serve a new term that will expire at the 2013
annual meeting of shareholders. The Board has also nominated
Mark A. Blinn, who was appointed to the Board in 2009, to serve
a term that will expire at the 2012 annual meeting of
shareholders. Biographical information regarding each of the
nominees is provided below under the headings Board of
Directors Biographical Information
Nominees to Serve a Term Expiring at the 2013 Annual Meeting of
Shareholders and Nominee to Serve a Term
Expiring at the 2012 Annual Meeting of Shareholders.
Required Vote and
Recommendation
The nominees will be elected by a plurality of affirmative votes
cast in person or represented by proxy. Abstentions and broker
non-votes will have no effect on the determination of whether a
plurality exists with respect to a given nominee. The five
nominees receiving the highest number of affirmative votes will
be elected.
The individuals named as proxies on the enclosed proxy card will
vote your proxy FOR the election of these nominees
unless you instruct otherwise or unless you withhold authority
to vote for any one or more of them. If any director is unable
to stand for re-election, the Board may reduce the number of
directors or choose a substitute. The nominees have indicated
their willingness to serve as directors, and we have no reason
to believe any nominee will not be able to stand for reelection.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF GAYLA J. DELLY, RICK J. MILLS, CHARLES M. RAMPACEK
AND WILLIAM C. RUSNACK TO SERVE AS DIRECTORS FOR A TERM EXPIRING
AT THE 2013 ANNUAL MEETING OF SHAREHOLDERS, AND FOR
THE ELECTION OF MARK A. BLINN TO SERVE AS A DIRECTOR FOR A TERM
EXPIRING AT THE 2012 ANNUAL MEETING OF SHAREHOLDERS.
Board of
Directors
Biographical
Information
Nominees to Serve a
Term Expiring at the 2013 Annual Meeting of Shareholders
Gayla J. Delly, age 50, has served as a
director since January 2008 and serves as a member of the Audit
Committee and as a member of the Finance Committee.
Ms. Delly currently serves as President of Benchmark
Electronics Inc., a company that provides contract
manufacturing, design, engineering, test and distribution
services to manufacturers of computers, medical devices,
telecommunications equipment and industrial control and test
instruments. Ms. Delly is a certified public accountant.
She previously served as Executive Vice President and Chief
Financial Officer of Benchmark Electronics Inc. from 2001 to
2006, and as Corporate Controller and Treasurer from 1995 to
2001. From March 2005 to October 2008, Ms. Delly also
served as a member of the board of directors for Power One, a
provider of power conversion and management solutions.
We believe that Ms. Delly is well qualified to serve as a
director due to her international manufacturing experience, with
specific focus on engineering and technology in emerging
markets, including Asia and Latin America, which provides
valuable insight into the Companys operations and assists
in identifying product portfolio opportunities. In addition to
her board experience, Ms. Delly has valuable executive
leadership experience and financial expertise gained from her
time with Benchmark Electronics Inc.
Rick J. Mills, age 62, has served as a
director since May 2007 and serves as Chairman of the Audit
Committee and as a member of the Corporate Governance and
Nominating Committee. He served as a Vice President of Cummins
Inc., a manufacturer of large diesel engines, and President of
the Components Group at Cummins Inc., from 2005 to March 2008.
He was Vice President and President Filtration
Business from 2000 to 2005 and held other key management
positions with Cummins Inc. from 1970 to 2000, including
Corporate Controller and Chief Accounting Officer from 1996 to
2000. From February 2005 to April 2009, Mr. Mills served as
5
a director for Rohm & Haas, a specialty chemicals
company, which was sold to Dow Chemical in April 2009.
Mr. Mills is also a director and member of the audit
committee of GERDAU Ameristeel, the second largest mini-mill
steel producer in North America.
We believe that Mr. Mills is well qualified to serve as a
director due to his extensive knowledge of industrial
manufacturing and cyclical end-markets, which provides a deep
familiarity with the Companys industrial challenges and
opportunities. Additionally, Mr. Mills has valuable
corporate governance and compliance expertise through his board
of directors and audit committee experience.
Charles M. Rampacek, age 66, has served as a
director since 1998 and serves as the Chairman of the Corporate
Governance and Nominating Committee and as a member of the
Organization and Compensation Committee. Mr. Rampacek is
currently a business and management consultant in the energy
industry. Mr. Rampacek served as the Chairman of the Board,
President and Chief Executive Officer of Probex Corporation
(Probex), an energy technology company providing
proprietary oil recovery services, from 2000 to 2003. From 1996
to 2000, Mr. Rampacek served as President and Chief
Executive Officer of Lyondell-Citgo Refining, L.P., a
manufacturer of petroleum products. From 1982 to 1995, he held
various executive positions with Tenneco Inc. and its energy
related subsidiaries, including President of Tenneco Gas
Transportation Company, Executive Vice President of Tenneco Gas
Operations and Senior Vice President of Refining. In 2005, two
complaints seeking recovery of certain alleged losses were filed
against former officers and directors of Probex, including
Mr. Rampacek, as a result of the bankruptcy of Probex in
2003. These complaints were defended under Probexs
director and officer insurance by AIG, and settlement was
reached and paid by AIG with bankruptcy court approval in the
first half of 2006. An additional complaint was filed in 2005
against noteholders of certain Probex debt, of which
Mr. Rampacek was a party. A settlement of $2,000 was
reached and similarly approved in the first half of 2006.
Since November 2006, Mr. Rampacek has been a member of the
Board of Directors of Enterprise Products GP, LLC, which is the
general partner of Enterprise Products Partners L.P., a
publicly-traded limited partnership that provides mid-stream
services for the oil and gas industry, and serves on its Audit,
Conflicts and Governance Committee. Since December 2009,
Mr. Rampacek has also been a member of the Board of
Directors of Cenovus Energy Inc., a Canadian publicly-traded
company that is involved in natural gas and oil sands production
and North American oil refining. He is a member of Cenovus
Energy Inc.s Nominating and Corporate Governance
Committee, Reserve Committee and Safety, Environment and
Responsibility Committee.
We believe that Mr. Rampacek is well qualified to serve as
a director due to his extensive knowledge of and experience in
the energy industry, including the oil and natural gas markets
and complex energy recovery technology, which provides unique
insight into the Companys end-markets and customer needs.
Mr. Rampacek also has extensive board of directors
experience and knowledge of corporate governance matters.
William C. Rusnack, age 65, has served as a
director since 1997 and serves as Chairman of the Organization
and Compensation Committee and as a member of the Corporate
Governance and Nominating Committee. He is currently a private
investor and independent corporate director. Mr. Rusnack
was President, Chief Executive Officer, Chief Operating Officer
and director of Premcor Inc. from 1998 to 2002. Before joining
Premcor, Inc., Mr. Rusnack served for 31 years with
Atlantic Richfield Company (ARCO), an integrated
petroleum company, most recently as Senior Vice President of
ARCO from 1990 to 1998 and President of ARCO Products Company
from 1993 to 1998. He has also been since October 2001 a
director and member of the governance and executive committees,
as well as chairman of the organization and compensation
committee, of Sempra Energy, an energy services company. Since
January 2002, he has also been a director and member of the
executive committee, as well as chairman of the audit committee,
of Peabody Energy, a coal mining company.
We believe Mr. Rusnack is well qualified to serve as a
director due to his extensive knowledge of the energy industry,
including the oil and natural gas markets, and his experience in
infrastructure operations, which provides an intimate
understanding of the Companys customers and its
operational challenges and opportunities. Mr. Rusnack also
has extensive executive compensation and risk management
expertise through his board experience with Sempra Energy,
Peabody Energy and the Company.
Nominee to Serve a
Term Expiring at the 2012 Annual Meeting of Shareholders
Mark A. Blinn, age 48, has served as a
director and as President and Chief Executive Officer since
October 2009. Mr. Blinn previously served as the
Companys Chief Financial Officer beginning in 2004 and
Senior Vice President, Latin America Operations beginning in
November 2007. Prior to his service with the Company, he was
employed as the Chief Financial Officer of FedEx Kinkos
Office and Print Services, Inc., an international shipping and
printing company, from 2003 to 2004 and as Vice President and
Treasurer of Kinkos, Inc. from 2002 to 2003.
Mr. Blinn also served as Vice President and Chief
Accounting Officer of Centex Corporation, a home building
6
company, from 2000 to 2002 and as Managing Director of Corporate
Finance beginning in 1999. Mr. Blinns employment
agreement with the Company is described in this proxy statement
under Executive Compensation Compensation
Discussion and Analysis Employment Agreements.
We believe Mr. Blinn is well qualified to serve as a
director due to his position as the Companys President and
Chief Executive Officer, which provides the Board with intimate
knowledge of the Companys day to day operations.
Mr. Blinn also brings an international and emerging markets
perspective to the Board from his experience as the
Companys Senior Vice President, Latin America Operations.
Directors Serving a
Term Expiring at the 2012 Annual Meeting of Shareholders
Roger L. Fix, age 56, has served as a
director since April 2006 and serves as a member of the
Organization and Compensation Committee and the Finance
Committee. Mr. Fix is the President and Chief Executive
Officer of Standex International Corporation
(Standex), a publicly-traded diversified
manufacturing and marketing company. He has been its Chief
Executive Officer since 2003, President since 2001 and member of
the board of directors since 2001. He was Standexs Chief
Operating Officer from 2001 to 2002. He has also been a member
of Standexs Executive Committee since 2003. Before joining
Standex, he was employed by Outboard Marine Corporation, a
marine manufacturing company, as Chief Executive Officer and
President from 2000 to 2001 and Chief Operating Officer and
President during 2000. In December 2000, Outboard Marine
Corporation filed for voluntary reorganization under
Chapter 11 of the U.S. Bankruptcy Code. He also served
as a member of its board of directors from 2000 to 2001. He
served as Chief Executive of John Crane Inc., a global
manufacturer of mechanical seals for pump and compressor
applications in the process industry, from 1998 to 2000 and as
its President North America from 1996 to 1998. He
was President of Xomox Corporation, a manufacturer of process
control valves and actuators, from 1993 to 1996. He was also
employed by Reda Pump Company, a manufacturer of electrical
submersible pumping systems for oil production, from 1981 to
1993, most recently as Vice President and General
Manager/Eastern Division. He was also employed by Fisher
Controls Company, a manufacturer of process control valves and
pneumatic and electronic instrumentation, from 1976 to 1981.
We believe that Mr. Fix is well qualified to serve as a
director due to his executive leadership experience, including
with John Crane Inc. and other competitor companies, which
provides extensive knowledge of the Companys products and
valuable insight into the competitive landscape for flow control
products. In addition to his board experience, Mr. Fix also
has international operations experience and corporate
development expertise.
James O. Rollans, age 67, has served as a
director since 1997. Mr. Rollans serves as the
Non-Executive Chairman of the Board of Directors and as a member
of the Audit Committee and the Corporate Governance and
Nominating Committee. He also serves as an alternate director of
all other committees for any committee member not in attendance
at a committee meeting. Mr. Rollans is an independent
corporate director and corporate financial advisor.
Mr. Rollans was President and Chief Executive Officer of
Fluor Signature Services, a subsidiary of Fluor Corporation, a
major engineering, procurement and construction firm, from 1999
to 2001. He served as Senior Vice President of Fluor Corporation
from 1992 to 1999, as its Chief Financial Officer from 1998 to
1999 and from 1992 to 1994, as its Chief Administrative Officer
from 1994 to 1998 and as its Vice President of Corporate
Communications from 1982 to 1992. From February 2002 to February
2009, Mr. Rollans served as a director of Advanced Medical
Optics, Inc., a developer and manufacturer of ophthalmic
surgical and contact lens products. Mr. Rollans is also
currently a director of Encore Credit Corporation, a mortgage
finance company.
We believe that Mr. Rollans is well qualified to serve as a
director due to his executive leadership experience, including
his various leadership roles with a Fortune 500 customer of flow
control products and services, which provide a multi-disciplined
perspective and a profound level of customer intimacy, and also
due to his experience in managing challenging, complex projects
in emerging markets like those faced by the Company.
Mr. Rollans also has strong financial expertise gained from
his financial leadership roles with Fluor Corporation and
extensive board experience with other public companies.
Directors Serving a
Term Expiring at the 2011 Annual Meeting of Shareholders
John R. Friedery, age 53, has served as a
director since August 2007 and serves as a member of the Audit
Committee and the Organization and Compensation Committee. From
January 2008 to January 2010, Mr. Friedery served as Senior
Vice President; President, Metal Beverage Packaging, Americas
and Asia, for Ball Corporation, a provider of metal and plastic
packaging for beverages, foods and household products, and of
aerospace and other technologies services. From January 2004 to
December 2007,
7
he served as Ball Corporations Chief Operating Officer,
Packaging Products Americas, and from April 2000 to May 2004 as
the President, Metal Beverage Container operations, as well as
other leadership roles in Ball Corporation since 1988. Prior to
his employment with Ball Corporation, he served in field
operations for Dresser/Atlas Well Services and in operations,
exploration and production for Nondorf Oil and Gas.
We believe that Mr. Friedery is well qualified to serve as
a director due to his extensive operational experience with an
international industrial manufacturing focus, which provides a
deep understanding of the Companys industry, end-markets
and strategic focus. In addition to his board experience,
Mr. Friedery also has experience with renewables and
sustainability expertise gained from his service with Ball
Corporation.
Joe E. Harlan, age 50, has served as a
director since August 2007 and serves as a member of the Audit
Committee and as a member of the Finance Committee.
Mr. Harlan currently serves as the Executive Vice President
of the Consumer and Office Business of the 3M Company, a
diversified consumer products and office supply provider. From
2005 to 2008, Mr. Harlan served as 3M Companys
Executive Vice President of the Electro and Communications
Business. He served as President and Chief Executive Officer of
Sumitomo 3M Ltd., a diversified technology and products
manufacturer, from 2003 to 2004. Prior to his career with 3M
Company, he spent 20 years with General Electric Company,
holding a number of leadership positions including serving as
Vice President of Finance and Chief Financial Officer for GE
Lighting Group (USA).
We believe that Mr. Harlan is well qualified to serve as a
director due to his strong international experience and
familiarity with emerging markets, including Asian markets,
gained through his various executive leadership roles with 3M
Company. In addition to his board experience, Mr. Harlan
also has experience in engineering and technology service from
his positions with General Electric and 3M Company.
Michael F. Johnston, age 62, has served as a
director since 1997 and serves as Chairman of the Finance
Committee and as a member of the Corporate Governance and
Nominating Committee. Mr. Johnston served as the Chief
Executive Officer, through May 2008, and as the chairman of the
board of directors, from April 2002 to November 2008, of Visteon
Corporation (Visteon), an automotive components
supplier, and has served as Visteons President, Chief
Executive Officer and Chief Operating Officer at various times
since 2000. In May 2009, Visteon filed for voluntary
reorganization under Chapter 11 of the U.S. Bankruptcy
Code. Before joining Visteon, he was employed by Johnson
Controls, Inc., a company serving the automotive and building
services industry, as President of North America/Asia Pacific,
Automotive Systems Group, from 1999 to 2000, President of
Americas Automotive Group from 1997 to 1999 and in other senior
management positions since 1991. Mr. Johnston has also been
since October 2003 a director of Whirlpool Corporation, an
appliance manufacturer.
We believe that Mr. Johnston is well qualified to serve as
a director due to his executive leadership experience with
cyclical manufacturing enterprises, including those serving
multi-national and economically challenged end markets, which
provides a valuable operating perspective. Mr. Johnston
also has extensive board of directors experience that we believe
brings a seasoned, mature corporate governance perspective.
Kevin E. Sheehan, age 64, has served as a
director since 1990 and serves as a member of the Finance
Committee and as a member of the Organization and Compensation
Committee. He also served as non-executive Chairman of the Board
of Directors from August 2005 through May 2009. Mr. Sheehan
also served as the Companys Interim Chairman, President
and Chief Executive Officer from April 2005 to August 2005.
Mr. Sheehan served as a director of Tecumseh Products
Company, an industrial components manufacturer, from January
2007 to August 2007. Mr. Sheehan is currently the Board
Chairman of Contour Hardening, a private company. He is also a
partner in Cambridge Ventures, a venture capital firm focused on
investments in early stage growth companies. Prior to joining
Cambridge Ventures, Mr. Sheehan was a partner at CID
Capital for 12 years and served as a Managing Director
during his last four years. Before joining CID Capital in 1994,
Mr. Sheehan was employed by Cummins Engine Company, a
manufacturer of diesel engines and related components, for
22 years in various management capacities.
We believe that Mr. Sheehan is well qualified to serve as a
director due to his extensive knowledge of industrial
manufacturing and cyclical end-markets that, when combined with
his prior service as the Companys Interim President and
Chief Executive Officer, provides intimate familiarity with
industrial challenges and opportunities faced by the Company. In
addition to his board experience, Mr. Sheehan also has
corporate development expertise, financial markets knowledge and
strategic planning expertise.
8
Director Retired
Prior to the 2010 Annual Meeting of Shareholders
Lewis M. Kling, age 65, served as the
Companys President and Chief Executive Officer from 2005
through October 2009, and as a director from 2005 through
February 2010. He previously served as the Companys Chief
Operating Officer from 2004 to 2005. Before joining the Company,
he served as Group President and Corporate Vice President of SPX
Corporation, a Fortune 500 company that provides flow
technology products, terminal equipment and other industrial
products and services worldwide, from 1999 to 2004 and as a
member of the Board of Directors of Inrange Technologies
Corporation, a designer and manufacturer of switching and
networking products for data and telecommunications networks,
from 2000 to 2003. Mr. Kling also served as President of
Dielectric Communications, a division of General Signal
Corporation, which was purchased by SPX Corporation, from 1997
to 1999. He is also a director of Eastman Chemical Company, a
manufacturer of chemicals, fibers and plastics. Mr. Kling
retired from the Board effective February 28, 2010 upon the
expiration of his employment agreement with the Company, which
is described in this proxy statement under Executive
Compensation Compensation Discussion and
Analysis Employment Agreements. We thank
Mr. Kling for his years of exemplary service to the Board
and the Company.
Role of the
Board; Corporate Governance Matters
It is of utmost importance that the Board fulfills its duty to
oversee the Chief Executive Officer and other senior management
in the competent and ethical operation of the Company on a
day-to-day
basis and ensure that the Companys shareholders best
interests are being served. In its efforts to satisfy this duty,
the Board has established internal guidelines designed to
promote effective oversight of the Companys vital business
affairs that the Board monitors, which it updates as it deems
appropriate.
The guidelines set parameters for the director recruiting
process and the composition of Board committees. They also
determine the formal process for review and evaluation of the
Chief Executive Officer, individual directors and the
Boards performance. The guidelines also establish targets
for director equity ownership. Additionally, these guidelines
require a director to offer his or her resignation when such
directors principal occupation changes during a term of
office. Under such circumstances, the Corporate Governance and
Nominating Committee of the Board will review whether it is
appropriate for the director to continue serving on the Board.
Finally, these guidelines establish maximum term and age limits
for directors, which may be waived by the Board if deemed
appropriate.
Further, the Board has adopted formal Corporate Governance
Guidelines, which, among other things, contain a prescribed set
of qualification standards with respect to the determination of
director independence, which either meet or exceed the
independence requirements of the NYSE. Under the Corporate
Governance Guidelines, only those directors who have no material
relationship with the Company (except as a director) are deemed
independent. The Corporate Governance Guidelines specify the
criteria by which the independence of our directors will be
determined, including strict guidelines for directors and their
immediate families with respect to past employment or
affiliation with the Company or its independent registered
public accounting firm.
The Board has determined that, other than Mark A. Blinn, the
Companys President and Chief Executive Officer, each
member of the Board, including all other persons nominated for
re-election, meet the independence standards set forth in the
applicable rules of the SEC and the NYSE corporate governance
listing standards.
The Boards Corporate Governance Guidelines, as well as the
Companys Code of Ethics and Code of Business Conduct, are
available on the Companys website at www.flowserve.com
under the About Flowserve Investor
Relations Governance caption. These documents
are also available in print at no cost to any shareholder who
submits a written request to: Flowserve Corporation,
5215 N. OConnor Blvd., Suite 2300,
Attention: Investor Relations, Irving, Texas 75039.
Board Leadership
Structure and Risk Oversight
The positions of Chairman of the Board and Chief Executive
Officer have been separated at the Company since 2005. James O.
Rollans, the Companys current non-executive Chairman of
the Board, presides over the meetings of the Board, including
executive sessions of the Board where only non-employee
directors are present. He reviews and approves the agendas for
Board meetings, among his other duties as Chairman of the Board.
He also serves as a member of the Audit Committee, a member of
the Corporate Governance and Nominating Committee and as an
alternate member for all other Board committees.
Mr. Rollans strives to attend all committee meetings when
possible.
9
We currently believe that separating the positions of Chairman
of the Board and Chief Executive Officer is most appropriate for
the Company because it places an independent director in a
position of leadership on the Board. We believe this independent
leadership and the non-executive Chairmans authority to
call meetings of the non-employee directors adds value to our
shareholders by facilitating more efficient exercise of the
Boards fiduciary duties in the current structure. We also
believe the non-executive Chairman further enhances independent
oversight by being responsible for establishing the Boards
annual schedule and collaborating with the Chief Executive
Officer on the agendas for all Board meetings. The separation of
Chairman and Chief Executive Officer also allows the
non-executive Chairman to provide support and advice to the
Chief Executive Officer, reinforcing the reporting relationship,
and accountability, of the Chief Executive Officer to the Board.
The Companys Chief Executive Officer and other members of
senior management are responsible for the ongoing assessment and
management of the risks the Company faces, including risks
relating to capital structure, liquidity and credit, financial
reporting and public disclosure, operations and governance. The
Board and each of the Boards four committees (the Audit
Committee, Finance Committee, Corporate Governance and
Nominating Committee and Organization and Compensation
Committee) oversee senior managements policies and
procedures in addressing these and other risks that fall within
the scope of the Boards and the committees
respective areas of oversight responsibility. For example, the
Board directly oversees risk management relating to strategic
planning, the Finance Committee directly oversees risk
management relating to capital structure and liquidity, the
Corporate Governance and Nominating Committee directly oversees
risk management relating to director independence and corporate
governance and the Organization and Compensation Committee
directly oversees risk management relating to employee
compensation and succession planning. Additionally, the Audit
Committee directly oversees risk management relating to
financial reporting and public disclosure and legal and
regulatory compliance and, in accordance with provisions of the
NYSE Listed Company Manual, reviews and discusses, in a general
manner, the process by which the Board and its committees
oversee senior managements exercise of risk management
responsibilities. The Board is regularly informed through
committee reports of each committees activities in
overseeing risk management within their respective areas of
oversight responsibility.
Meetings of the Board
The Board held eight regular meetings and three special meetings
in 2009. Executive sessions of non-employee directors are
normally held at each regular Board meeting. Any non-employee
director may request that additional executive sessions be
scheduled. Shareholders may communicate with the Companys
non-employee directors by following the instructions set forth
under Shareholder Communications with the
Board below.
Board members customarily have attended the Companys
annual meetings of shareholders. All Board members attended the
Companys 2009 annual meeting of shareholders. In 2009,
each director attended over 75% of the meetings of the Board
held during the period for which he or she has been a director
and the meetings of the Board committees on which he or she
served.
Shareholder
Communications with the Board
Shareholders and other interested parties may communicate with
the Board directly by writing to: James O. Rollans, Chairman of
the Board,
c/o Flowserves
Corporate Secretary, Flowserve Corporation,
5215 N. OConnor Blvd., Suite 2300, Irving,
Texas 75039. All such communications will be delivered to
Mr. Rollans.
Committees of the
Board
The Board maintains an Audit Committee, a Finance Committee, a
Corporate Governance and Nominating Committee (CG&N
Committee) and an Organization and Compensation Committee
(O&C Committee). Only independent directors are
eligible to serve on Board committees.
Each committee is governed by a written charter. The charters of
the Audit Committee, Finance Committee, CG&N Committee and
O&C Committee are available on the Companys website
at www.flowserve.com under the About
Flowserve Investor Relations
Governance caption. These documents are also available in
print at no cost to any shareholder who submits a written
request to: Flowserve Corporation, Attention: Investor
Relations, 5215 N. OConnor Blvd.,
Suite 2300, Irving, Texas 75039.
10
Audit Committee
The Audit Committee is composed of five directors: Rick J. Mills
(Chairman); Gayla J. Delly; Joe E. Harlan; John R. Friedery; and
James O. Rollans. The Board has determined that Mr. Mills
qualifies as an audit committee financial expert under SEC rules
and has accounting or related financial management expertise for
purposes of the NYSE corporate governance listing standards. The
Board has also determined that all members of the Audit
Committee are financially literate, within the meaning of the
NYSE corporate governance listing standards, and meet the
independence standards set forth in the SEC rules and the NYSE
corporate governance listing standards.
The Audit Committee directly engages the Companys
independent auditors, pre-approves the scope of the annual
external audit and pre-approves all audit and non-audit services
to be provided by the independent auditor. The Audit Committee
further approves and directly reviews the results of the
Companys internal audit plan. The Audit Committee also
meets with management and the independent auditors to review the
quality and accuracy of the annual and quarterly financial
statements and considers the reports and recommendations of
independent internal and external auditors pertaining to audit
results, accounting practices, policies and procedures and
overall internal controls. The Audit Committee also reviews and
discusses, in a general manner, the process by which the Board
and the other Board committees oversee senior managements
exercise of risk management responsibilities.
The Audit Committee meets regularly with the external and
internal auditors in executive sessions to discuss their reports
on a confidential basis. In addition, the Audit Committee
prepares and issues the Report of the Audit Committee included
in this proxy statement. The Audit Committee met eight times in
2009.
Finance Committee
The Finance Committee is composed of five directors: Michael F.
Johnston (Chairman); Gayla J. Delly; Roger L. Fix; Joseph E.
Harlan; and Kevin E. Sheehan. The Board has determined that all
members of the Finance Committee meet the independence standards
set forth in the NYSE corporate governance listing standards.
The Finance Committee advises the Board on all corporate
financing and related treasury matters regarding capital
structure and major corporate transactions. The Finance
Committee also approves major capital expenditures made by the
Company and also advises the Board on the Companys pension
fund performance. The Finance Committee met four times in 2009.
Corporate Governance
and Nominating Committee
The CG&N Committee is composed of five directors: Charles
M. Rampacek (Chairman); Michael F. Johnston; Rick J. Mills;
James O. Rollans; and William C. Rusnack. The Board has
determined that all members of the CG&N Committee meet the
independence standards set forth in the NYSE corporate
governance listing standards.
The CG&N Committee is responsible for making
recommendations to the Board for the positions of Chairman of
the Board, President and Chief Executive Officer. The CG&N
Committee is also responsible for recommending candidates for
membership to the Board. Prior to considering nominee director
candidates, the CG&N Committee assesses the appropriateness
of the Boards current size and composition and whether any
vacancies on the Board are expected due to retirement or other
factors. If additional directors are needed or vacancies are
anticipated or otherwise arise, the CG&N Committee utilizes
a variety of methods for identifying and evaluating nominee
director candidates.
The identification and evaluation of director candidates begins
with the Boards Corporate Governance Guidelines, which
establish the criteria for Board membership. As a starting point
under the Guidelines, all prospective Board members must possess
the highest professional and personal ethics. Board members
should have varied professional expertise in fields of
accounting and finance, engineering, industrial sales,
manufacturing, international operations, human resources and
field service. Additionally, all existing and prospective Board
members should have a broad strategic view, possess a global
business perspective and demonstrate relevant and successful
career experience. A Board members service on the boards
of other public companies should be limited to a number that
permits them, given their individual circumstances, to
responsibly perform all director duties and effectively
represent the interests of the shareholders.
The Guidelines further articulate the Boards firm belief
that, underlying the aforementioned criteria, the Boards
members should have a diversity of backgrounds, which is viewed
in comprehensive terms. In evaluating diversity of backgrounds,
the Board considers
11
individual qualities and attributes, such as educational
background, professional skills, business experience and
cultural viewpoint, as well as more categorical diversity
metrics, such as race, age and gender. This consideration is
implemented through the selection process for director nominees,
and the Board assesses its effectiveness in promoting diversity
through an annual self-assessment process that solicits feedback
concerning the appropriateness of the Boards diversity,
among other critical performance factors.
The CG&N Committee considers various potential director
candidates who may come to the attention of the CG&N
Committee through current Board members, professional search
firms, shareholders or other persons. The CG&N Committee
generally retains a national executive-recruiting firm to
research, screen and contact potential candidates regarding
their interest in serving on the Board, although the CG&N
Committee may also use less formal recruiting methods.
A shareholder desiring to recommend a candidate for election to
the Board should submit a written notice, as required by the
Companys By-laws, including the candidates name and
qualifications to our Corporate Secretary, who will refer the
recommendation to the CG&N Committee. The CG&N
Committee may require any shareholder-recommended candidate to
furnish such other information as may reasonably be required to
determine the eligibility of such recommended candidate or to
assist in evaluating the recommended candidate. The CG&N
Committee may require the submission of a fully completed and
signed Questionnaire for Directors and Executive Officers on the
Companys standard form and a written consent by the
shareholder-recommended candidate to serve as a director if so
elected.
All identified candidates, including shareholder-recommended
candidates, are evaluated by the CG&N Committee using
generally the same methods and criteria, although those methods
and criteria may vary from time to time depending on the
CG&N Committees assessment of the Companys
needs and current situation.
The CG&N Committee is also responsible for preparing
materials for the annual Chief Executive Officers
performance review conducted by the Board. Further, the
CG&N Committee reviews and recommends, as deemed
appropriate, changes to the Companys corporate governance
policies consistent with SEC rules and the NYSE corporate
governance listing standards. The CG&N Committee met five
times in 2009.
Organization and
Compensation Committee
The O&C Committee is composed of five directors: William C.
Rusnack (Chairman); Roger L. Fix; John R. Friedery; Charles M.
Rampacek; and Kevin E. Sheehan. The Board has determined that
all members of the O&C Committee meet the independence
standards set forth in the NYSE corporate governance listing
standards.
The O&C Committee is responsible for establishing executive
compensation for officers, including the Chief Executive Officer
and other corporate officers. As further discussed under
Executive Compensation, decisions regarding
compensation are made by the O&C Committee in a manner that
is intended to be internally equitable, externally competitive
and an incentive for effective performance in the best interests
of shareholders. The O&C Committee is the administrator of
the Companys various equity and incentive compensation
plans for key employees. The O&C Committee may, under
certain circumstances, delegate routine or ministerial
activities under these plans to management. The O&C
Committee also reviews the recommendations of the Chief
Executive Officer and the Vice President, Human Resources,
regarding adjustments to the Companys executive
compensation programs. The O&C Committee has retained and
regularly meets with its independent executive compensation
consultant, Lyons, Benenson & Company Inc., which
assists the O&C Committee in evaluating the Companys
compensation programs and adherence to the philosophies and
principles stated below under Executive
Compensation Compensation Discussion and
Analysis. The O&C Committee is also responsible for
reviewing the management succession plan and for recommending
changes in director compensation to the Board. The O&C
Committee periodically reviews the organizational design,
management development plans and managerial capabilities of the
Company. The O&C Committee also prepares and issues the
Organization and Compensation Committee Report included in this
proxy statement. The O&C Committee met eight times in 2009.
Compensation
Committee Interlocks and Insider Participation
During 2009, the members of the O&C Committee included
Messrs. Rusnack, Fix, Friedery, Rampacek and Sheehan. None
of the members of the O&C Committee were at any time during
2009 an officer or employee of the Company. None of our
executive officers serve as a member of the board of directors
or compensation committee of any entity that has one or more
executive officers serving as a member of our Board or O&C
Committee.
12
Executive
Officers
The following sets forth certain information regarding the
Companys executive officers. Information pertaining to
Mr. Blinn, who is both a director and executive officer of
the Company, may be found above under Board of
Directors Biographical Information
Nominee to Serve a Term Expiring at the 2012 Annual Meeting of
Shareholders.
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Name
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Age
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Position With the
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Mark A. Blinn
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48
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President, Chief Executive Officer and Director
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Andrew J. Beall*
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Senior Vice President and Chief Information Officer
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Mark D. Dailey
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Senior Vice President and Chief Administrative Officer
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Thomas E. Ferguson
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Senior Vice President and President, Flow Solutions Group
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Dean P. Freeman
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Senior Vice President Finance and Treasurer, Office of the Chief
Financial Officer
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Richard J. Guiltinan, Jr.
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56
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Senior Vice President Finance and Chief Accounting Officer,
Office of the Chief Financial Officer
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Thomas L. Pajonas
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54
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Senior Vice President and President, Flow Control Division
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Ronald F. Shuff
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57
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Senior Vice President, Secretary and General Counsel
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*
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Retired effective April 1,
2010.
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Andrew J. Beall, who retired April 1, 2010,
served as Senior Vice President from December 2006 and Chief
Information Officer from October 2008 through April 2010. He
served as President of the Companys Flow Solutions
Division from 2003 to December 2009, and he served as Vice
President from 2003 to December 2006. From 1994 to 2003,
Mr. Beall served in a number of key domestic and
international management positions with the Company, including
as Vice President of Flowserve, Pump Division, Flow Solutions
Division and Flow Control Division in Latin America from 1999 to
2003.
Mark D. Dailey has served as Senior Vice President
and Chief Administrative Officer since February 2010. Mr. Dailey
previously served as Senior Vice President, Human Resources from
November 2006 and Chief Compliance Officer from May 2005. He
served as Vice President, Supply Chain and Continuous
Improvement, from 1999 until 2005. Before joining the Company,
Mr. Dailey was Vice President, Supply Chain and held other
supply chain management positions from 1992 to 1999 for the
North American Power Tools Division of The Black and Decker
Corporation.
Thomas E. Ferguson has served as Senior Vice
President since December 2006 and as President of the
Companys Flow Solutions Group since January 2010.
Mr. Ferguson previously served as President of Flowserve
Pump Division from 2003 to December 2009, and he served as Vice
President from 2003 to December 2006. He was President of Flow
Solutions Division from 2000 to 2002, Vice President and General
Manager of Flow Solutions Division North America from 1999
to 2000 and Vice President of Marketing and Technology for Flow
Solutions Division from 1997 to 1999.
Dean P. Freeman serves as a member of the
Companys Office of the Chief Financial Officer, having
served as Senior Vice President Finance since February 2010 and
Treasurer since May 2009. Mr. Freeman previously served as
Vice President Finance from October 2009. Prior to his current
role, and from the time he joined the Company in 2006, he served
as Vice President of Finance for the Flowserve Pump Division.
Prior to joining the Company, Mr. Freeman served as Chief
Financial Officer of European Operations for Stanley Works
Corporation.
Richard J. Guiltinan, Jr. serves as a member
of the Companys Office of the Chief Financial Officer and
is designated the Companys principal financial officer,
having served as Senior Vice President Finance since February
2010 and Chief Accounting Officer since 2004. He was previously
employed as a consultant to Chevron on three multinational
restructuring and merger integration projects in 2002 and 2003.
From 1985 to 2001, Mr. Guiltinan served in accounting,
financial management and operating positions at Caltex
Corporation, a joint venture of Chevron and Texaco, including as
Chief Financial Officer from 2000 to 2001.
Thomas L. Pajonas has served as Senior Vice
President since December 2006 and President of Flow Control
Division since 2004. He served as Vice President from 2004 to
December 2006. He was previously employed as Managing Director
of Alstom Transport, a supplier of rail products, from 2003 to
2004 and Senior Vice President from 1999 to 2003 of the
Worldwide Power Boiler Business of Alstom, Inc. From 1996 to
1999 he served in various capacities as Senior Vice President
and General Manager International Operations and subsequently
Senior Vice President and General Manager Standard Boilers
Worldwide of Asea Brown Boveri.
Ronald F. Shuff has served as Senior Vice
President since December 2006, Secretary since 1989 and General
Counsel since 1988. Prior to his current positions,
Mr. Shuff also served as Vice President of the Company from
1990 to December 2006.
13
Executive
Compensation
Compensation
Discussion and Analysis
The following is an overview and analysis of our executive
compensation program and policies, the material compensation
decisions we have made under our program and policies and the
material factors that we considered in making those decisions.
Following this discussion are presented a series of tables
containing specific information about the compensation earned or
paid in 2009 to our principal executive officer, our principal
financial officer and our three other most highly-compensated
executive officers serving at the end of 2009 (including any
retired executive whose compensation would otherwise have been
required to be disclosed had the executive been serving at the
end of the fiscal year), whom we collectively refer to
throughout this document as our Named Executive
Officers. During 2009, our Named Executive Officers were:
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President and Chief Executive Officer, Mark A. Blinn (principal
executive officer);
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Former President and Chief Executive Officer, Lewis M. Kling,
who transitioned from these roles in October 2009 and retired
February 28, 2010;
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Senior Vice President Finance and Chief Accounting Officer,
Richard J. Guiltinan (principal financial officer);
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Senior Vice President and President of Flow Solutions Group,
Thomas E. Ferguson;
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Senior Vice President and Chief Information Officer, Andrew J.
Beall, who retired April 1, 2010; and
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Senior Vice President and President of Flow Control Division,
Thomas L. Pajonas.
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This Compensation Discussion and Analysis is intended to
facilitate a better understanding of the detailed information
provided in our executive compensation tables that follow by
analyzing such data within the context of our overall
compensation program.
Oversight of the
Executive Compensation Program
Our executive compensation program is administered by the
O&C Committee. Consistent with the NYSE corporate
governance listing standards, the O&C Committee is composed
entirely of independent, non-employee members of the Board. In
addition, the non-executive Chairman of the Board generally
attends the meetings of the O&C Committee.
As reflected in its charter, the O&C Committee has overall
responsibility for setting the compensation for our Chief
Executive Officer and for approving the compensation of our
other executive officers, including the other Named Executive
Officers. The O&C Committee also oversees the alignment of
organizational design and management development in support of
achieving our operational objectives and strategic plans and
monitors the policies, practices and processes designed to
develop our core organizational capabilities and managerial
competencies.
The O&C Committee regularly meets with its independent
executive compensation consultant, Lyons, Benenson &
Company Inc. (LB&Co). LB&Co assists and
advises the O&C Committee on all aspects of our executive
compensation program, and it provides no other services on our
behalf. The services it provides entail, among others, providing
and analyzing competitive compensation data, analyzing the
effectiveness of executive compensation programs and making
recommendations, as appropriate, assisting in the design and
negotiation of certain employment agreements, analyzing the
appropriateness of the comparator high performance peer group
(discussed below), and evaluating how well our compensation
programs adhere to the philosophies and principles stated below
under Our Executive Compensation Principles
and Policies. The O&C Committee is also responsible
for reviewing the management succession plan and for
recommending changes in director compensation to the Board. On
matters pertaining to director compensation, the O&C
Committee also receives data, advice and counsel from
LB&Co. The O&C Committee periodically reviews the
organizational design, management development plans and
managerial capabilities of the Company. The O&C Committee
also prepares and issues the Organization and Compensation
Committee Report included in this proxy statement.
Executive
Compensation Program Objectives
Our key compensation objectives are to attract and retain key
leaders, reward current performance, drive future performance
and align the long-term interests of our executives with those
of our shareholders. As discussed in detail below, we use
several compensation
14
elements to achieve these objectives, including base salary,
annual cash incentives and long-term equity incentives
(including restricted common stock and contingent performance
shares). While the individual compensation elements may differ,
the design of the executive compensation program is based on the
same principles and objectives as the overall compensation
program provided to all of our employees.
Our Executive
Compensation Principles and Policies
The O&C Committee is responsible for establishing the
principles that underlie our executive compensation program and
that guide the design and administration of specific plans,
agreements and arrangements for our executives, including the
Named Executive Officers. Our compensation principles are
intended to attract and retain valuable executive talent and
thereafter motivate our executives to add long-term shareholder
value through improving our financial position and being
personally accountable for the performance of their respective
business units, divisions or functions. Our executive
compensation principles and policies, which are established and
refined from time to time by the O&C Committee, are
described below.
Compensation
Should Reinforce Our Business Objectives and
Values.
Our overarching business objective is to profitably grow our
position as a product and integrated solutions provider in the
flow control industry. Seven strategies for achieving this
objective are communicated to all our employees (and are
referred to in this proxy statement as our seven strategies).
These seven strategies include: profitable diversified growth;
customer intimacy; innovation and portfolio management;
strategic globalization; operational excellence; employee
focused; and sustainable business model. The O&C Committee
considers these strategies, as well as the Companys risk
tolerance, when identifying the appropriate incentive measures
and when assigning individual goals and objectives to the Named
Executive Officers.
Compensation
Should be Performance-Based.
The O&C Committee believes that a significant portion of
our executives total compensation should be tied not only
to how well they perform individually, but also, where
applicable, should be at risk based on how well
their respective divisions (where applicable) and the Company
perform relative to applicable financial and non-financial
objectives. As such, the O&C Committee uses a variety of
targeted performance-based compensation vehicles in our
executive compensation program that are specifically designed to
incorporate performance criteria that promote our annual
operating plan and long-term business strategy and build
long-term shareholder value without encouraging excessive
risk-taking.
As the O&C Committee believes that there should be a strong
correlation between executive pay and Company performance, in
years when our performance exceeds objectives established for
the relevant performance period, executive officers should be
paid more than the established target award. Conversely, when
performance does not meet the established objectives, incentive
award payments should be less than the established target level
or eliminated altogether if performance is below threshold
performance levels.
Performance-Based
Compensation Should be Benchmarked Against Comparative
Companies.
The O&C Committee believes that the use of internal
performance metrics alone yields an incomplete picture of
Company performance. Accordingly, the performance-based element
of our executive compensation program also emphasizes and
evaluates the Companys performance relative to
organizations in a benchmark high performance peer
group of high performance cyclical industrial
manufacturers. This evaluation serves as a means to assess, on a
comparative basis, how well we deliver results that build
long-term shareholder value, which in turn allows us to better
establish the performance expectations of senior management in
leading the Company.
Our high performance peer group is reevaluated on a cyclical
basis by the O&C Committee, and a detailed process is
followed in identifying and evaluating organizations appropriate
for inclusion. The process for establishing the high performance
peer group used for the 2007 through 2009 performance years
began by compiling an initial sample of potential comparator
organizations from the following: current competitors;
industries based on relevant SIC codes; the Fortune 1000
Industrial and Farm Equipment; and the S&P 1500 Industrial.
Once the initial comparator sample was compiled, a top-down,
multi-stage filtering approach was then utilized to distill the
comparator sample and establish the final high performance peer
group. The first filter applied to the initial sample imposed a
revenue requirement of between $750 million and
$15 billion. In order to ensure inclusion of high
performing organizations, a second filter was applied using
minimum key financial performance metrics, including revenue
growth, return on net assets (or RONA),
15
operating cash flow, operating margin and total shareholder
return (or TSR). Three of these four measures were
required by the filter to be above the industrial median.
Finally, in order to ensure the high performance peer group is
focused appropriately from an operations perspective, a third
filter was applied that assessed key operational and strategic
aspects, including debt to equity ratios, net property, plant
and equipment as a percentage of revenue (one of these two
measures was required by the filter to be above the industrial
median), goodwill as a percentage of revenue (greater than
25th percentile), multinational presence (greater than
20%), dividends as a percentage of TSR (less than 50%) and
organic sales growth figures (greater than 50%). Finally, the
O&C Committee considered direct competitors that failed to
pass one or two filters but outperformed the Company in both key
financial metrics and TSR.
As the result of this analysis and for purposes of establishing
certain performance-based components of our executive
compensation program, our high performance peer group for the
performance periods beginning in 2007, 2008 and 2009 consisted
of the following companies:
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Crane Co.
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ITT Industries Inc.
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Curtiss-Wright Corp.
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Lincoln Electric Holdings Inc.
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Danaher Corp.
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Moog Inc.
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Donaldson Co Inc.
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PACCAR Inc.
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Eaton Corp.
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Pentair Inc.
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Gardner-Denver
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Rockwell Automation Inc.
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IDEX Corporation
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Watts Water Technology
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Illinois Tool Works Inc.
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Weir Group Plc
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In the interest of having a more consistent and functional
benchmarking standard, the O&C Committee prefers to keep
the high performance peer group as constant as possible,
following a cyclical review process. A scheduled review of the
high performance peer group was undertaken in late 2009, the
results of which will be utilized beginning in the 2010
performance year.
Compensation
Levels Should be Market Competitive.
To further implement the compensation and performance principles
described above, namely the attraction and retention of
executive talent and building long-term shareholder value, at
least once each year the O&C Committee reviews compensation
survey data compiled and prepared by management and its
consultant, which is also reviewed by LB&Co, to evaluate
how and whether our executive compensation program is market
competitive. The survey data used by the O&C Committee is
gathered from two key sources: (i) information for
comparable executive positions within the high performance peer
group, as identified above, and (ii) information from a
broad group of durable goods manufacturing companies using
Hewitt Associates Total Compensation
Measurementtm
survey (the Hewitt Survey). The O&C
Committee does not limit its market analysis to survey data
relating only to the organizations in our high performance peer
group because of the limited scope of available compensation
data and the recognition that potential candidates for qualified
executives, as well as market opportunities for our current
executives, are not necessarily limited to companies in our
industry sectors.
The O&C Committee uses this survey data to benchmark our
executives base salary, annual bonus opportunities, total
cash compensation, long-term incentive compensation and total
direct compensation. Additionally, the O&C Committee uses
the survey data to evaluate how, for each executive position,
the O&C Committees compensation actions are
appropriate, reasonable and consistent with the Companys
philosophy, practices and policies, considering the various
labor markets in which we compete for executives.
The O&C Committee believes that setting target compensation
levels at the market median balances our interests in
maintaining market competitive compensation and organizational
efficiency. As such, total target-direct compensation (i.e.,
base salary, target annual incentive opportunity and target
long-term incentive compensation) for our executives is
generally set at the 50th percentile base salary and
50th percentile target annual incentive for both the high
performance peer group and the broad market taken from the
Hewitt Survey. Long-term incentive compensation is set at the
50th percentile opportunity of the high performance peer
group and 75th percentile opportunity of the broad market
taken from the Hewitt Survey. As the targets for long-term
incentive compensation are
16
set based on the high performance peer group, the O&C
Committee believes it is appropriate to use a higher percentile
than used when comparing to the broader market. In utilizing and
adhering to these compensation benchmarks, the O&C
Committee thus establishes goals for both absolute and relative
Company performance that may be at or above median performance,
so that performance and compensation may be objectively
determined at the end of the performance period. As discussed,
actual total direct compensation, which may be at, above or
below the competitive median, varies and is determined by
performance against these pre-established measures and
objectives.
Incentive
Compensation Should Represent the Majority of Total
Compensation.
The O&C Committee believes that the proportion of an
executives total compensation that varies, or is at
risk, based on individual, division, function
and/or
corporate performance should increase as the scope and level of
the executives business responsibilities increase.
Accordingly, for 2009, on average 72.1% of the total
target-direct compensation of the Named Executive Officers at
the time of award was tied to our stock price or our
performance. The percentages of each Named Executive
Officers total target-direct compensation for 2009 that
was at risk as of the time of award is presented in the
following table, and are calculated by dividing (i) the sum
of the annual incentive opportunity and target long-term
incentive opportunity by (ii) the sum of the annual
incentive opportunity and target long-term incentive opportunity
and base salary.
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Named Executive Officer
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Fiscal 2009 Pay At Risk (%)
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Lewis M. Kling
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80
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Mark A. Blinn
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80
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Richard J. Guiltinan
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63
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Thomas E. Ferguson
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70
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Andrew J. Beall
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70
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Thomas L. Pajonas
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70
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Incentive
Compensation Should be Balanced Between Short-Term and Long-Term
Performance.
As stated above, the O&C Committee believes that executive
compensation should be linked to building long-term shareholder
value while remaining consistent with our business objectives
and values. Our executive compensation program addresses this
objective by including long-term incentives in the form of
equity-based awards, such as restricted common stock and
contingent performance shares, which serves to include the
performance of the Companys common stock as a targeted
incentive. As discussed in further detail below, we have also
established minimum stock ownership requirements for our
executives that carry associated penalties when our executives
do not comply.
The O&C Committee also recognizes that while stock prices
may relate to corporate performance over the long term, other
factors, such as general economic conditions, industry business
cycles and varying attitudes among investors toward the stock
market in general and specific industries
and/or
companies in particular, may significantly affect stock prices
at any point in time. The influence of these other factors makes
performance of the Companys common stock alone an
incomplete measure of the Companys performance.
Accordingly, the annual cash components of the executive
compensation program, which consist of base salary and annual
cash incentive opportunities, emphasize current or short-term
corporate performance and the realization of defined business
and financial objectives, which tend to be independent of
short-term fluctuations in the price of the Companys
common stock.
Over the past several years, the O&C Committee has
maintained the ratio of base salary and annual cash incentive
opportunity (short-term focus compensation) to long-term
incentive compensation (long-term focus compensation) at
approximately 2:3 for our Chief Executive Officer and
approximately 1:1 for all other Named Executive Officers. The
O&C Committee believes that these ratios appropriately
align the executives total compensation with the
Companys short-term and long-term performance, as they
provide each Named Executive Officer a competitive amount of
cash compensation each year (with the opportunity to increase
that amount if annual incentive objectives are exceeded),
complemented by an opportunity to earn a substantial amount of
additional compensation if the Company and the executives are
successful in achieving the Companys long-term objectives.
The O&C Committee believes the higher proportion of
long-term incentive compensation for the Chief Executive Officer
reflects the global governance and management role and the
accompanying risks of the position.
17
The Mix of
Long-Term Incentives Should Balance Stock- and Financial-Based
Achievements.
In 2009, our long-term incentive awards for the Named Executive
Officers took the form of an equally-weighted mix of restricted
common stock, which generally vest ratably over time, and
contingent performance shares, which generally vest at the
expiration of a
3-year
performance period based on RONA performance. The O&C
Committee has determined that this long-term incentive mix
appropriately encourages long-term equity ownership, promotes a
balance between stock-based and financial-based achievements and
aligns the interests of the Named Executive Officers with the
Companys risk profile and the interests of our
shareholders.
While the O&C Committee approved the guidelines for
determining the value of long-term incentive awards in 2007, the
O&C Committee may in the future make adjustments to this
mix of award types or approve different types of awards as part
of its overall long-term incentive program. Any review of the
long-term incentive program would be undertaken as part of the
established practice of annually approving and granting equity
awards to the long-term incentive plan participants at the
O&C Committees annual compensation review, as
discussed below.
Our Executive
Compensation Program is Reviewed Annually for
Effectiveness.
At the first regular committee meeting following our fiscal year
end, the O&C Committee undertakes a comprehensive review of
all components of our executive compensation program, with the
input of LB&Co, in light of evolving market practices in
the general industry, external regulatory requirements, the
competitive market for executives, our risk management
objectives and our executive compensation philosophy. In
conducting its review, the O&C Committee reviews
information related to each executive officers income and
benefits, including base salary, target incentive, perquisites,
retirement income and health and welfare benefits. This review
and the resulting compensation program changes for 2010 are
described below under Annual Executive
Compensation Program Review and Compensation Risk.
Elements of the
Executive Compensation Program
Overview. The primary
elements of the Companys executive compensation program in
2009 were:
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base salary;
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an annual incentive opportunity, which is paid in cash;
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long-term incentives (including restricted common stock and
contingent performance shares coupled with stock ownership
requirements);
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pension plan;
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severance benefits;
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change-in-control
plan; and
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certain perquisites and other benefits.
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The O&C Committees process of reviewing the executive
compensation program and setting compensation levels for our
Named Executive Officers involves several components. During the
first quarter of each year, the O&C Committee reviews each
Named Executive Officers total compensation. The O&C
Committee members also meet regularly with the Named Executive
Officers at various times during the year, both formally within
Board meetings and informally outside of Board meetings, which
allows the O&C Committee to assess directly each Named
Executive Officers performance. The O&C Committee
also solicits input from all non-employee members of the Board
as to the Chief Executive Officers performance during the
year. Except in years of Chief Executive Officer transition
where the incumbent officer has completed less than one year of
service in this capacity, the O&C Committee further reviews
appraisal forms completed by all Board members, which set forth
the Boards overall annual-performance assessment of the
Chief Executive Officer and are used in considering the
compensation for the Chief Executive Officer. In addition, the
Chief Executive Officer annually presents an evaluation of each
other Named Executive Officer to the O&C Committee, which
includes a review of each officers contributions and
performance over the past year, strengths, weaknesses,
development plans and succession potential. The Chief Executive
Officer also presents compensation recommendations for the
O&C Committees consideration. Following this
presentation and a review of the competitive market for pay, the
O&C Committee makes its own assessments and formulates
18
compensation amounts for each Named Executive Officer with
respect to each of the elements in the Companys executive
compensation program as described below.
Base Salary. During the
first quarter of each year, the O&C Committee reviews and
establishes the base salaries of the Named Executive Officers.
The O&C Committee has established and maintains base salary
market reference points for the Companys various executive
positions indicated by the compensation survey data compiled and
prepared by management and independently reviewed by LB&Co.
For each Named Executive Officer, the O&C Committee takes
into account the scope of his or her responsibilities,
experience and individual performance and then balances these
factors against competitive salary practices. The O&C
Committee also considers internal pay equity on an annual basis
within the Company with respect to the other executives, also
referencing external benchmarks provided by LB&Co. The
O&C Committee did not assign any relative or specific
weights to these factors. Because we are committed to a
pay-for-performance
philosophy, the O&C Committee generally manages base salary
levels to the market median of companies within the high
performance peer group.
In consideration of current market conditions and the general
economic climate at the time of the 2009 annual pay review
cycle, the O&C Committee, with the Named Executive
Officers endorsement, decided to maintain base salaries
for all Named Executive Officers at their 2008 levels. This
decision applied to all Company officers and was consistent with
managements decision to maintain base salaries for all
Company senior management positions at 2008 levels. Following
Mr. Blinns appointment as Chief Executive Officer, he
received an increase to base salary commensurate with the new
position, which is described in further detail under
Chief Executive Officer Compensation in
2009 Mark A. Blinn below.
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Named Executive Officer
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2009 Base Salary Increase %
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Mark A. Blinn
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0
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%
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Lewis M. Kling
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0
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%
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Richard J. Guiltinan
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0
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%
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Thomas E. Ferguson
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0
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%
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Andrew J. Beall
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0
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%
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Thomas L. Pajonas
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0
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%
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The base salaries paid to the Named Executive Officers during
2009 are shown in the Summary Compensation Table
under the Salary column. Mr. Blinns and
Mr. Klings respective base salaries and other
compensation components in 2009 are discussed below in further
detail under Chief Executive Officer
Compensation in 2009.
Annual Incentive Opportunity.
During the first quarter of
each year, the O&C Committee establishes an annual cash
incentive opportunity for each Named Executive Officer under the
Companys Annual Incentive Plan. At that time, the O&C
Committee approves: (i) the overall Company performance
measures for the fiscal year; (ii) the divisional
performance measures for the fiscal year; and (iii) a
target annual incentive opportunity for each Named Executive
Officer.
Setting Company Performance Measures.
The O&C Committee,
working with the Chief Executive Officer and LB&Co, sets
the performance measures for the Company for each fiscal year.
In order to ensure that the primary focus of the Named Executive
Officers was setting the overall strategic direction of the
Company and achieving overall Company results aligned to support
building shareholder value, the O&C Committee evaluated
each Named Executive Officers performance based on the
results of the Company as a whole. As such, the Companys
performance measures, unadjusted for extraordinary events,
established for 2009 were as follows:
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2009 Target
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2009 Performance Measures
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Weighting
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(In millions)
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Operating Income
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75.0
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%
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$
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631.2
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Cash Flows from Operations
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25.0
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%
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$
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314.1
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The metrics presented in the table above were evaluated using
pre-defined internal criteria that coincide in all material
respects with the Companys audited financial results.
Additionally, the O&C Committee may exercise its judgment,
within parameters it establishes at the beginning of the year,
as to whether to exclude the effect of certain specified
developments that occur during the
19
year, such as unanticipated changes in accounting principles or
extraordinary, unusual or unplanned events that have been
reported in our public filings, in determining the extent to
which the performance objectives are met.
Where applicable, annual incentive awards are paid in March for
the prior years performance based upon the O&C
Committees assessment of actual performance during the
prior year against the pre-established Company performance
objectives. For 2009, the performance measures for annual
incentive awards were based on internally-defined metrics based
on operating income and cash flow. The O&C Committee
selected these measures, with input from management, because
these performance metrics support the seven strategies that we
believe drive sustainable and profitable Company growth (as
discussed under Our Executive Compensation
Principles and Policies above). A more in-depth
description of the O&C Committees decisions with
respect to the annual incentive awards paid to each Named
Executive Officer for 2009 follows.
100% of the preliminary annual incentive award determination for
each Named Executive Officer was based upon his performance
against these objectives.
Setting a Target Incentive Opportunity.
Each year, the O&C
Committee establishes a target annual incentive opportunity for
each Named Executive Officer, which is expressed as a percentage
of the executives base salary. For 2009, the target annual
incentive opportunity was set at 100% for the Chief Executive
Officer (both current and former) and 60% for all other Named
Executive Officers except for Mr. Guiltinan, who has a
target of 50%. These targets are agreed upon by the O&C
Committee in consultation with LB&Co and in adherence to
our stated executive compensation principles and policies.
Recognizing Mr. Blinns transition into his role as
Chief Executive Officer in 2009, Mr. Blinns annual
incentive opportunity was pro-rated between his existing target
of 60% and new target of 100% based on his periods of service as
Chief Financial Officer and Chief Executive Officer,
respectively, during 2009.
Measuring Performance and Establishing Payout.
Following the analysis of the
Companys performance compared to all applicable Company
and division performance measures for a given year, the O&C
Committee establishes a payout range around each
executives target annual incentive opportunity. The payout
range ultimately determines the percentage of the target
incentive to be paid, based on a percentage of performance
measure achievement, with an established upper limitation and a
minimum below which no payment will be made.
The 2009 payout range established for each Named Executive
Officer was 0% to 200% of his respective target award
opportunity. The actual payout percentage is determined using a
matrix that compares the Companys performance against the
established performance measures for the year (referred to as
plan). The following table provides example matrix
points of percentage of target award opportunity paid out at
different threshold levels of Company performance against plan.
In addition to Company performance against plan, the Chief
Executive Officer can make a recommendation for each Named
Executive Officer to modify an award positively or negatively by
up to 25% of actual payout based on achievement of individual
performance objectives.
|
|
|
|
Company Performance
|
|
|
% of Target Payout
|
<80% Plan
|
|
|
0%
|
80% Plan
|
|
|
60%
|
100% Plan
|
|
|
100%
|
>122% Plan
|
|
|
200%
|
|
|
|
|
In February 2009, we announced our intent to incur up to
$40 million in realignment costs to reduce and optimize
certain non-strategic manufacturing facilities and our overall
cost structure by improving our operating efficiency, reducing
redundancies, maximizing global consistency and driving improved
financial performance. Additionally, in October 2009, we
announced our intent to incur additional realignment costs to
expand our efforts to optimize assets, reduce our overall cost
structure, respond to reduced orders and drive an enhanced
customer-facing organization. We incurred total charges of
$68.1 million under both realignment programs during 2009.
Within the parameters established by the O&C Committee at
the beginning of 2009 and prior to the realignment charges being
incurred, the O&C Committee decided to exclude the impact
of the realignment programs on the performance measure
achievement for 2009.
After the end of 2009, the O&C Committee reviewed the
Companys actual performance against each of the
performance measures established at the beginning of the year.
The O&C Committee noted that the Companys performance
was strong, even
20
in the challenging environment the Company faced in 2009. This
was evidenced by, among other things, sales of
$4.37 billion, operating income of $629.5 million and
cash flows from operations of $431.2 million. The O&C
Committees earlier decision to exclude the impact of the
realignment programs on the performance measures resulted in the
operating income performance measure increasing by
$65.6 million, and the cash flows from operations
performance measure increasing by $41.3 million. Consistent
with the goal of aligning awards with performance, the O&C
Committee determined the target annual incentive opportunity
percentage payout for each Named Executive Officer in accordance
with the achievement of Company performance measures, as
adjusted to exclude the impact of the realignment programs. As a
result of this analysis, the preliminary annual incentive award
percentage payout for the Chief Executive Officer and all other
Named Executive Officers was 155.5% of their target annual
incentive opportunity.
While 100% of the preliminary annual incentive award
determination is based on the O&C Committees
assessment of performance against our Companys and
divisions performance measures, the O&C Committee may
also modify a Named Executive Officers award based on an
assessment of individual contribution to our performance, as
well as individual performance in relation to any extraordinary
events or transactions. The O&C Committee considers the
aforementioned Chief Executive Officers assessments and
recommendations as to other Named Executive Officers when
determining these adjustments. For 2009, the Board evaluated
each of the Named Executive Officers based on the specific
individual objectives outlined in the following table, which
were established and communicated to the Named Executive
Officers at the beginning of 2009.
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|
Officer
|
|
|
Objectives
|
|
|
|
|
|
|
|
Mark A. Blinn
|
|
|
|
|
|
Refine long-term strategy to reflect market and economic
conditions and to maximize revenue, profits and RONA
|
|
|
|
|
|
|
Maintain continuous involvement with customers, shareholders and
analysts to ensure maximum exposure and credibility of the
Company and its team
|
|
|
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|
|
|
Develop Latin America operations strategy and execute end user
strategy in the region
|
|
|
|
|
|
|
Implement multi-phase realignment strategy
|
|
|
|
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|
|
Continue to accelerate the profitable impact of High
Growth Rate markets
|
|
|
|
|
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|
|
Lewis M. Kling
|
|
|
|
|
|
Support the development and review of candidates for the CEO
succession plan to support a late 2009 selection and ensure a
smooth 2010 transition
|
|
|
|
|
|
|
Refine long-term strategy to reflect market and economic
conditions and to maximize revenue, profits and RONA
|
|
|
|
|
|
|
Maintain continuous involvement with customers, shareholders and
analysts to ensure maximum exposure and credibility of Flowserve
and its team
|
|
|
|
|
|
|
Promote a continuous business portfolio review to assess
investment in strategic business acquisitions and opportunities
to divest non-core strategic assets
|
|
|
|
|
|
|
Implement multi-phase realignment strategy
|
|
|
|
|
|
|
Continue to accelerate the profitable impact of High
Growth Rate markets
|
|
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|
|
|
|
|
Richard J. Guiltinan
|
|
|
|
|
|
Drive cost control and reduction
|
|
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|
|
|
|
Execute operational improvement opportunities
|
|
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|
|
|
|
Implement organization capability improvement processes
|
|
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|
|
|
Thomas E. Ferguson
|
|
|
|
|
|
Implement multi-phase realignment strategy
|
|
|
|
|
|
|
Develop and support a worldwide Sustainability
program, encompassing Environment, Workplace, Community and
Marketplace
|
|
|
|
|
|
|
Accelerate profitable impact of High Growth Rate
markets
|
|
|
|
|
|
|
|
Andrew J. Beall
|
|
|
|
|
|
Implement multi-phase realignment strategy
|
|
|
|
|
|
|
Achieve tactical objectives stated in What will Success
Look Like
|
|
|
|
|
|
|
Accelerate profitable impact of High Growth Rate
markets
|
|
|
|
|
|
|
Champion agreed Strategic ERP systems
|
|
|
|
|
|
|
|
Thomas L. Pajonas
|
|
|
|
|
|
Implement multi-phase realignment strategy
|
|
|
|
|
|
|
Execute strategic objectives including acquisitions, process
excellence and portfolio management
|
|
|
|
|
|
|
|
21
In addition, all Named Executive Officers were tasked with the
following objectives:
|
|
|
|
|
Meet 2009 budget objectives.
|
|
|
Continue to advance our Human Capital programs and processes.
|
|
|
Drive the performance and development of respective
organizations, including leadership training, career development
and succession planning.
|
For 2009, the O&C Committee positively adjusted the
preliminary annual incentive award payouts for
Messrs. Kling, Blinn (with respect to his service as Chief
Financial Officer) and Ferguson based on its assessment of each
such executives performance against the aforementioned
individual objectives and specific objectives that supported our
seven strategies (as discussed above under Our
Executive Compensation Principles and Policies). As a
result, Mr. Klings and Mr. Fergusons
preliminary annual incentive award payouts were adjusted by
8.5%, and Mr. Blinns preliminary annual incentive
award payout was adjusted by 3.5%, recognizing his periods of
service, and separate performance evaluations, as Chief
Financial Officer and Chief Executive Officer during 2009. The
annual incentive awards the Company paid to the Named Executive
Officers for 2009 are reported below in the Summary
Compensation Table under the Non-Equity Incentive
Plan Compensation column.
The O&C Committee believes that the Named Executive
Officers 2009 annual incentive awards are consistent with
the Companys strategy of rewarding its executives for the
achievement of important and challenging business goals. The
O&C Committee feels the annual incentive award calculations
resulted in performance-related bonus annual payments to the
Named Executive Officers that the O&C Committee deemed
clearly earned under objective criteria and reasonable in view
of the Companys 2009 performance.
Long-Term Incentives. Our
long-term incentive program rewards the Named Executive Officers
for the Companys performance over a period of more than
one fiscal year. Beginning in 2007 and continuing through 2009,
our long-term incentive program has consisted of two components:
time-vested restricted common stock awards and contingent
performance shares. The O&C Committee may also award
one-time grants of restricted common stock in its discretion
based on performance or other factors. In 2009, all Named
Executive Officers received their long-term incentive awards in
this form, except for Mr. Kling, who received time-vested
restricted share units and contingent performance common stock,
as more fully discussed under Chief Executive
Officer Compensation in 2009 Lewis M. Kling.
As discussed above, the O&C Committee believes that
long-term incentive compensation is essential to retaining and
motivating executives. The O&C Committee further believes
that providing our executives with long-term incentives will
encourage them to operate the Companys business with a
view towards building long-term shareholder value. Based on
these considerations, the O&C Committee determined that for
2009, an equity award combination consisting of approximately
one-half in value of restricted common stock and one-half in
value of contingent performance shares would best serve the
goals that the O&C Committee sought to achieve for 2009.
The awards are granted subject to a pre-approved total target
pool of restricted share awards available to employees eligible
to participate in the long-term incentive program.
Each year, the O&C Committee establishes a target long-term
incentive opportunity for each Named Executive Officer, which is
expressed as a percentage of the executives base salary.
During the first quarter of each year, the O&C Committee
determines the aggregate equivalent dollar value of the
long-term incentive award for each Named Executive Officer and
then makes annual grants of restricted common stock and
contingent performance shares, as appropriate. The equity awards
are made after the O&C Committee has had an opportunity to
evaluate the Companys operating results for the prior year
and at the same time that the Company is making its major
compensation decisions for the current fiscal year. In 2009, the
O&C Committee used its discretion to increase or decrease a
Named Executive Officers time-vested restricted common
stock award (but not the contingent performance share award)
based on an assessment of the officers individual
contribution to the Companys results and, for Named
Executive Officers other than the Chief Executive Officer, after
considering the recommendations of the Chief Executive Officer.
These adjustments must be based on individual performance
relative to the Companys seven strategies. In addition to
adjustments made to the restricted stock awards of other plan
participants, the O&C Committee will not grant awards in
the aggregate in excess of the pre-approved total target pool of
available restricted shares by more than 10% without specific
O&C Committee advance approval. In 2010, the O&C
Committee has chosen to no longer increase time-vested
restricted common stock awards based on individual contribution,
but it maintains the discretion to decrease the award, if
warranted.
In determining the aggregate equivalent dollar value available
for individual long-term incentive awards, and the aggregate
amount of total awards available for our executives, the
O&C Committee considers both the target dollar value of the
long-term incentive package
22
and the packages potential dilutive effect on the
Companys outstanding shares of common stock. The O&C
Committee first sets the target dollar value of the long-term
incentive package for each Named Executive Officer and, in doing
so, considers data from durable-goods manufacturing companies
using the Hewitt Survey and information from the Companys
high performance peer group, as previously described. We
generally provide long-term incentive awards at target levels
that approximate the 50th percentile of competitive
practice within the high performance peer group and the
75th percentile of durable goods manufacturing companies,
based on the O&C Committees review of high
performance peer group materials and data provided by LB&Co.
Once the target dollar value is set as described above, the
O&C Committee next considers the potential dilutive effect
of awards on the Companys outstanding shares of common
stock. The O&C Committee evaluates shareholder dilution
based on equity compensation burn rates, which
refers to the annual rate at which shares are awarded under our
shareholder approved stock compensation plans as compared to the
total amount of the Companys outstanding common stock. The
O&C Committee then compares the rate to those of the
companies in the high performance peer group, guidelines used by
certain institutional shareholder advisory services and the
advice of LB&Co. Generally, the O&C Committee targets
a maximum Company-wide burn rate of 1.0% of the
Companys outstanding common stock for each annual grant of
long-term incentive awards for all Company employees. Based on
projections of equity awards to be made to employees during the
balance of 2009, the O&C Committee determined that it could
make the proposed awards to the Named Executive Officers and the
projected additional awards to employees and still remain
comfortably within the Companys guideline of an annual
burn rate on the order of 1.0% of the Companys
outstanding common stock.
In past years, the O&C Committee has established the
practice of annually approving and granting equity awards to
long-term incentive plan participants at the O&C
Committees meeting held in the first quarter of the year.
Based on the criteria described above, the O&C Committee
met on February 12, 2009 and approved a target long-term
incentive opportunity of 300% of base salary for the Chief
Executive Officer, 200% of base salary for the Chief Financial
Officer and 165% of base salary for all other Named Executive
Officers, except for Mr. Guiltinan, whose target
opportunity was 90% prior to his designation as principal
financial officer in October 2009. For the 2010 award cycle,
Mr. Guiltinans target opportunity has been adjusted
to 150% in consideration of this designation and his
appointment, along with Dean Freeman, the Companys Senior
Vice President Finance and Treasurer, to the
Office of the Chief Financial Officer. Additionally,
Mr. Fergusons target opportunity has been adjusted to
200% in consideration of his increased responsibilities as
President of the Flow Solutions Group, which he assumed
effective January 1, 2010.
The material terms and conditions of these equity awards are
determined under the provisions of our equity compensation plans
that were approved previously by our shareholders. These plans
are included as exhibits to the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009 filed with the
SEC on February 24, 2010 (the Annual Report),
which can be found on the Companys website at
www.flowserve.com under the About
Flowserve Investor Relations SEC
Filings caption.
Restricted Common Stock Awards.
Starting in 2004, the O&C
Committee began granting restricted common stock awards that
vest ratably over time to replace a portion of the annual cash
long-term incentive opportunities and stock option awards, with
the intent of providing comparable value to our executives. The
O&C Committee believes that providing the restricted common
stock component delivers a better balance for executives between
risk and potential reward, thus serving as a more effective
incentive for our superior executive performers to remain with
the Company and continue such performance.
Target restricted common stock grants to the Named Executive
Officers (except Mr. Kling, who received time-based
restricted share units for the same purpose) in 2009 represented
approximately one-half of the executives total target
long-term incentive opportunity. Target grants were determined
by dividing this portion of the executives long-term
incentive opportunity by the price of the Companys common
stock, which was calculated by taking an average of closing
prices reported on the NYSE during the last twenty trading days
of 2008. The O&C Committee also made the following one-time
grants in 2009: 10,000 shares of restricted common stock
(subject to a three-year cliff vest) to Mr. Beall for his
assumption of the Chief Information Officer role in 2008;
5,000 shares of restricted common stock (subject to a
three-year cliff vest) to Mr. Ferguson in recognition of
the Flowserve Pump Divisions 2008 performance; and 6,000
restricted common stock units (subject to a one-year cliff vest)
to Mr. Kling in recognition of his performance in 2008 and
his upcoming retirement.
Restricted common stock awards (or restricted share units for
Mr. Kling) are only earned by a Named Executive Officer if
the individual continues to be employed by the Company until the
applicable vesting dates of the awards. During the restriction
periods, the Named Executive Officers holding unvested
restricted common stock are entitled to vote the shares and to
receive dividends on the shares, if any, on the same basis as
the Companys shareholders holding unrestricted stock.
Holders of restricted share units, such as Mr. Kling, do
not have voting rights on the units and are entitled to receive
dividend accruals, if any.
23
The grant date fair value in accordance with accounting
principles generally accepted in the United States
(GAAP) of the restricted common stock awards and
restricted common stock units granted to the Named Executive
Officers during 2009 pursuant to Financial Accounting Standards
Board (FASB) Accounting Standards Codification
(ASC) Topic 718, Stock Compensation, are
shown in the Summary Compensation Table under the
Stock Awards column and the accompanying footnotes.
Additional information on the awards granted in 2009 is shown in
the 2009 Grants of Plan-Based Awards table.
Contingent Performance Share Awards.
Contingent performance shares are
restricted share units (or counterpart contingent performance
restricted stock for Mr. Kling) that vest, if at all, based
on the Companys achievement of pre-determined financial
metrics, measured over a three-year performance period, in
relation to the high performance peer groups achievement
of these same financial metrics at the time of measurement.
Until vesting, holders of contingent performance share units do
not have voting rights on the units, and the units are entitled
to receive dividend accruals, if any. Mr. Klings
contingent performance restricted stock is not eligible to
receive dividends and does not have voting rights. The O&C
Committee believes that these performance-based awards, as
compared to restricted common stock that vest ratably over time,
provide a stronger incentive for our executives to achieve
specific performance goals over the performance period that
advance our business strategies, build long-term shareholder
value and encourage executive retention, as these awards are
subject to forfeiture if the executives employment
terminates for any reason other than death, disability,
retirement or
reduction-in-force
before the end of the three-year performance period or if the
performance goals are not reached.
Target contingent performance share grants to the Named
Executive Officers (except Mr. Kling, who received
contingent performance restricted stock for the same purpose) in
2009 represented approximately one-half of the executives
total target long-term incentive opportunity. As with the
restricted common stock grants, target grants were determined by
dividing this portion of the executives long-term
incentive opportunity by the price of the Companys common
stock, which was calculated by taking an average of closing
prices reported on the NYSE during the last twenty trading days
of 2008.
In 2009, the O&C Committee approved contingent performance
share long-term incentive opportunities (or counterpart
contingent performance restricted stock for Mr. Kling) that
will vest in March 2012 based on the Companys achievement
of a three-year RONA performance relative to the high
performance peer groups RONA performance. The O&C
Committee believes that RONA is a financial measure that is more
highly correlated to shareholder value creation than other
financial measures, particularly when compared to the high
performance peer group and the Companys risk profile. The
O&C Committee also believes that tying vesting amounts to
comparisons with the high performance peer group, rather than
the market in general, will help to ensure that performance is
measured in a more transparent manner and will not benefit
disproportionately from general market movement.
Prior to the granting of contingent performance share awards (or
counterpart contingent performance restricted stock for
Mr. Kling) each year, the O&C Committee establishes a
vesting percentage range around each executives target
long-term incentive opportunity allocated to the contingent
performance shares that is based on the Companys RONA
performance relative to the high performance peer group. This
vesting percentage range has an established upper limitation and
a minimum below which no shares will vest. Similar to the annual
cash incentive awards, the percentage vesting range ultimately
determines the amount of contingent performance shares that
actually vest relative to the original award amount.
For 2009, the vesting percentage range established for each
Named Executive Officer was 0% to 200% of his respective target
long-term incentive opportunity allocated to the contingent
performance shares. In order to achieve a target (100%) vesting
percentage, the Company must achieve an average RONA over the
three-year performance period equivalent to 100% of the RONA
average of the high performance peer group. To illustrate, if
the high performance peer group had an average 15.0% RONA over
the performance period, then the Company would have to achieve a
15.0% RONA over the same period to achieve a target vesting
percentage. The following table illustrates the vesting
percentage of the contingent performance shares granted in 2009
at different levels of Company RONA performance relative to the
average RONA performance of the high performance peer group.
|
|
|
|
|
|
Company RONA Performance v. High Performance
Peer Group RONA Performance
|
|
|
Target Vesting %
|
<85% of RONA Avg.
|
|
|
|
0
|
%
|
85% of RONA Avg.
|
|
|
|
50
|
%
|
100% of RONA Avg.
|
|
|
|
100
|
%
|
142% of RONA Avg.
|
|
|
|
200
|
%
|
|
|
|
|
|
|
24
Stock Ownership Requirements.
The executive compensation
program requires that the Companys executives own a
minimum amount of Company common stock. The O&C Committee
believes that this ownership requirement encourages the
executives to act like owners by requiring them to acquire and
maintain a meaningful stake in the Company and thereby promotes
the Companys objective of building long-term shareholder
value.
The stock ownership requirements are designed to maintain
management stock ownership at levels high enough to indicate
managements commitment to share value appreciation to our
shareholders while satisfying an individual executives
prudent needs for personal asset diversification. The stock
ownership requirements are set by the O&C Committee as a
result of a competitive analysis prepared by management and
reviewed by LB&Co, and the requirements are reviewed each
year and updated as necessary. The requirements were last
updated by the O&C Committee in 2009.
The ownership requirements mandate that our executives, over
time, acquire and hold shares of the Companys common stock
equal in value to a multiple of their respective annual base
salaries. The Companys current stock ownership
requirements for the Named Executive Officers and the share
value of these ownership requirements are shown in the following
table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Required Investment at
|
|
|
|
|
|
|
12/31/2009
|
Named Executive Officer
|
|
|
Ownership Requirement
|
|
|
(# of
Shares)(1)
|
Mark A. Blinn
|
|
|
5 x Annual Base
Salary(2)
|
|
|
|
32,780
|
|
Lewis M. Kling
|
|
|
5 x Annual Base Salary
|
|
|
|
61,619
|
|
Richard J. Guiltinan, Jr.
|
|
|
3 x Annual Base
Salary(3)
|
|
|
|
8,695
|
|
Thomas E. Ferguson
|
|
|
3 x Annual Base Salary
|
|
|
|
16,659
|
|
Andrew J. Beall
|
|
|
3 x Annual Base Salary
|
|
|
|
14,330
|
|
Thomas L. Pajonas
|
|
|
3 x Annual Base Salary
|
|
|
|
16,659
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Based on an average price per share of $83.74, which is
calculated using the average closing prices of our common stock
between May 1st and October 31st of 2009, as
reported by the NYSE. Shares have been rounded up to the nearest
whole share.
|
(2)
|
To recognize the increase in requirements due to position
change, Mr. Blinns ownership requirements will remain
at 3 x Annual Base Salary until, through the receipt of
additional long-term incentive awards, he is able to meet the 5
x requirement, on condition that he does not sell any shares
prior to that time.
|
(3)
|
To recognize the increase in requirement due to position change,
Mr. Guiltinans ownership requirements will remain at
2 x Annual Base Salary until, through the receipt of additional
long-term incentive awards, he is able to meet the 3 x
requirement, on condition that he does not sell any shares prior
to that time.
|
The required stock ownership levels are expected to be achieved
within five years from the date the guidelines are first
applicable or within five years of the executive joining the
Company. Recognizing the time required to achieve the ownership
requirements, the O&C Committee approved the establishment
of an interim retention requirement. Executives who do not meet
the ownership requirement must show that they have retained at
least 60% of the vested restricted common stock, vested
contingent performance shares and exercised stock options
granted from the time the ownership guidelines become
applicable. All Named Executive Officers met their required
stock ownership requirements for 2009.
The O&C Committee annually reviews these stock ownership
requirements and periodically monitors the executives
progress toward meeting their respective target ownership
levels. Shares held directly by an executive count toward
satisfying the requirements. The share equivalent of vested and
unexercised stock options and shares held in the Flowserve
Corporation Non-Qualified Deferred Compensation Plan also count
toward satisfying the stock ownership requirements. Unvested
restricted common stock and unvested contingent performance
shares are not counted toward satisfying the stock ownership
requirements.
Flowserve Corporation Pension Plans.
We provide pension benefits to
U.S. salaried employees under the Flowserve Corporation
Pension Plan (the Qualified Plan), which is a
tax-qualified pension plan, subject to funding requirements,
vesting rules and maximum benefit limitations of the Employee
Retirement Income Security Act of 1974, as amended
(ERISA). The Named Executive Officers participate in
the Qualified Plan on the same terms as the rest of our
U.S. salaried employees. Because the Internal Revenue Code
of 1986, as amended (the Code), limits the pension
benefits (based on an annual compensation limit) that can be
accrued under a tax-qualified pension plan, we established and
maintain a partially funded, non-qualified defined benefit
restoration pension plan, the Senior Management Retirement Plan
(the SMRP), for our executives, including the Named
Executive Officers, to
25
compensate these individuals for the reduction in their pension
benefit resulting from this limitation. The SMRP is purely a
restoration plan to provide comparable level retirement benefits
to those provided to other U.S. employees based on a
comparable benefit formula. In addition, we also established and
maintain a second partially-funded, non-qualified supplemental
defined benefit pension plan, the Supplemental Executive
Retirement Plan (the SERP), for our eligible
U.S. executives, including the Named Executive Officers, to
maintain a total retirement benefit level that is competitive
with general industry companies similar in size. These programs
are designed to provide eligible U.S. executives with
income following retirement and to ensure that we are able to
attract and retain executive talent by providing comprehensive
retirement benefits.
Participants in the Qualified Plan and the SMRP accrue
contribution credits based on age and years of service at the
rate of 3% to 7% for eligible earnings up to the Social Security
wage base, and at the rate of 6% to 12% for eligible earnings in
excess of the Social Security wage base. Participants in the
SERP accrue contribution credits at the rate of 5% of all
eligible earnings. Eligible earnings include base salary and
annual incentive award. SERP participants also earn interest on
the accrued cash balance based on the rate of return on
10-year
Treasury bills, with the exception of Mr. Ferguson who,
because of his age and service as of July 1, 1999, was
provided a guaranteed interest rate under a
grandfather provision applicable to similarly
situated U.S. salaried employees.
Our Qualified Plan also confers competitive post-employment
benefits to the executives upon a
change-in-control.
The additional years of credited service and additional age
credit for purposes of determining an individuals benefits
under the Qualified Plan compensate that individual upon his
early termination from the plan.
The actuarial present value of the accumulated pension benefits
of the Named Executive Officers as of the end of 2009, as well
as other information about the Companys defined benefit
pension plans, is shown in the 2009 Pension Benefits
table below. For a discussion regarding the valuation method and
assumptions used in quantifying the present value of the current
accrued pension benefits, see Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations Pension and Postretirement
Benefits Obligations Accrual Accounting and
Significant Assumptions in the Companys Annual
Report.
Review and Assessment of Compensation Under Termination
Scenarios. The O&C
Committee also reviews each Named Executive Officers total
compensation under several scenarios including a
change-in-control
of the Company, termination of employment by management and
resignation or retirement by the executive. Tally sheets setting
forth all of the listed scenarios are prepared by management and
reviewed by the O&C Committee with input from LB&Co.
Based on the O&C Committees review of the tally
sheets, the O&C Committee determined that the potential
payments that would be provided to the Named Executive Officers
were consistent with our executive compensation principles and
policies.
Flowserve Corporation Officer Severance Plan.
In 2006, the Board and the
O&C Committee approved and the Company adopted a revised
severance plan for the Companys senior executive officers
and other corporate officers, which was amended and restated in
2010 (the Officer Severance Plan). The O&C
Committee believes that the Officer Severance Plan is far
superior to individual negotiations with each executive officer
in the event of a termination of employment and adopted the
Officer Severance Plan for that reason. The O&C Committee
determined that the Companys former practice of not
maintaining this type of formal severance program was not
competitive in the current executive labor market.
In addition, to protect the Companys competitive position,
each executive is required to sign an agreement with the Company
that requires the executive to forfeit the proceeds from some or
all of the executives long-term incentive awards if the
executive engages in conduct that is detrimental to the Company.
Detrimental conduct includes working for certain competitors,
soliciting customers or employees after employment ends and
disclosure of confidential information in a manner that may
result in competitive harm to the Company.
Detailed information concerning the Officer Severance Plan,
including the events that trigger benefits and the severance
benefits provided upon the occurrence of such events, is
discussed below under Potential Payments Upon
Termination or
Change-in-Control
Flowserve Corporation Officer Severance Plan.
Flowserve Corporation Executive Officer
Change-in-Control
Severance Plan. To ensure that
the Named Executive Officers receive financial protection in the
event of the loss of their positions following a transaction
that involves a change in the ownership or control of the
Company, and to provide security with respect to their long-term
incentive compensation arrangements, the Flowserve Corporation
Executive
Change-in-Control
Severance Plan (the CIC Plan) provides certain
specified severance benefits to the Named Executive Officers,
including Mr. Kling and Mr. Blinn. The benefits under
the CIC Plan, if payable, are
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in lieu of severance benefits payable to executive officers
under the Officer Severance Plan described above and payable to
Mr. Kling under his employment agreement.
The O&C Committee believes that it is in the best interests
of the Company and its shareholders to offer such a plan to its
Named Executive Officers and other executives. The Company
competes for executives in a highly competitive market in which
companies routinely offer similar benefits to senior employees.
The O&C Committee views these amounts as reasonable and
appropriate for the Named Executive Officers, who may not be in
a position to obtain comparable employment. The O&C
Committee also believes that these benefits are important to
encourage executives to support a
change-in-control
transaction if the Board deems the transaction to be in the best
interest of our shareholders.
Severance benefits under the CIC Plan include, among other
things, the accelerated vesting of all outstanding equity awards
in connection with a
change-in-control
of the Company. In the O&C Committees view, this is
currently a customary and reasonable component of a
comprehensive
change-in-control
benefits program plan, but the O&C Committee will continue
to review this matter. The O&C Committee believes that the
equity awards granted to our executives have been reasonable in
amount and are a substantial part of the value that would be
received by them in the event of a
change-in-control
of the Company, in lieu of benefiting from the likely future
increase in the price of our common stock over the years. The
O&C Committee believes that accelerating vesting is
appropriate since the current executive teams performance
would have been responsible for this anticipated share price
increase and benefit to future shareholder value.
The O&C Committee, in consultation with LB&Co, reviews
the CIC Plan periodically to evaluate both its effectiveness and
competitiveness and to determine the value of potential awards.
Detailed information concerning the CIC Plan, including the
events that trigger benefits and the severance benefits provided
upon the occurrence of such events, is discussed below under
Potential Payments Upon Termination or
Change-in-Control
Flowserve Corporation Executive Officer
Change-in-Control
Severance Plan.
Perquisites and Other Benefits.
Our executive compensation
program includes limited executive perquisites and other
benefits. The aggregate incremental cost of providing
perquisites and other benefits to the Named Executive Officers
is included in the Summary Compensation Table under
the All Other Compensation column and related
footnotes. As previously discussed, the O&C Committee
strives to make our executive compensation program primarily
performance-based, and as such has taken steps to reduce the
perquisites to our executives. The O&C Committee believes
that the perquisites and other executive benefits that we
continue to provide are competitive with the level of benefits
offered by the companies with which we compete for executive
talent, and as such serve to meet our stated objective of
attracting and retaining executive talent. In addition, some of
the perquisites are, in the O&C Committees view,
provided for the Companys benefit notwithstanding any
personal benefit an executive may derive. A discussion and
analysis of perquisites and certain other benefits provided in
2009 follows.
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Personal Use of Corporate
Aircraft. Our
global presence places heightened travel demands on our
executives, and we own a minority interest in a corporate jet
through time-share programs to help meet these demands. Our
corporate aircraft is used primarily for business purposes, and
any personal use of our corporate aircraft must be approved in
advance by the Board. The Board has permitted Mr. Kling,
during his tenure as Chief Executive Officer, limited personal
use of our corporate aircraft, and the value of any personal
travel has been imputed to him as income in accordance with
Internal Revenue Service (IRS) guidelines. No other
Named Executive Officers used our corporate aircraft for
personal use in 2009, and the Board has eliminated all personal
use in 2010.
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Since our interest in the aircraft is time-based, we calculate
the aggregate incremental cost of personal corporate aircraft
usage on a per hour basis, as flight hours used for personal
travel reduce hours available for business travel. Our
methodology calculates an incremental cost per flight hour,
which varies by flight, over a given year, and includes fuel,
crew expenses, on-board catering, landing fees, hangar/parking
fees and smaller variable costs, and multiplies that average
cost by the hours used. This methodology has the effect of
treating certain associated costs as incremental to a greater
extent than would be the case if we owned or leased the aircraft
and treated such costs as fixed or allocated them ratably per
flight. For fiscal 2009, our average incremental cost per flight
hour for this purpose was $4,108.
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Executive Physicals.
All Named Executive Officers were eligible to receive
an annual physical examination. This is a standard benefit
provided by comparative companies.
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Financial Counseling.
The Chief Executive Officer and the Named Executive
Officers were eligible for an annual financial-planning fee
reimbursement benefit of up to $12,500 for the Chief Executive
Officer and $8,500 for all other Named Executive Officers. In an
effort to further align executive compensation with the broader
employee population, this benefit has been removed in 2010.
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Enhanced Vacation.
All Named Executive Officers are eligible to receive
an enhanced vacation benefit. Each officer is eligible for a
minimum of four weeks vacation and may receive more, if the
officers years of service so qualify under the
Companys regular employee vacation award schedule.
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Non-Qualified Deferred Compensation Plan.
Prior to 2008, the Flowserve
Corporation Deferred Compensation Plan (the Deferral
Plan) was available to all U.S. employees who met the
IRS definition of a highly compensated employee. The
Deferral Plan allowed eligible participants, including the Named
Executive Officers, to elect, at their discretion, to defer
payment of a portion of their salary and all or a portion of
their annual incentive award and to have these deferred amounts
treated as if invested in specified hypothetical investment
benchmarks. Participants are entitled to direct the manner in
which their deferral accounts will be deemed to be invested by
selecting among hypothetical investment benchmarks chosen by the
Pension and Investment Committee, the administrators of the
Deferral Plan. Generally, there are no vesting requirements on
deferred amounts or earnings on deferred amounts. The Company
did not make any contributions to the plan.
Effective December 31, 2007, the Deferral Plan was frozen.
Accordingly, no deferrals were made by any executives, including
the Named Executive Officers, in 2009, and no further deferrals
may be made. Existing participant account balances will remain
within the Deferral Plan and remain subject to future
appreciation or depreciation until the balances are distributed
based on the participants distribution election.
With respect to amounts deferred prior to December 31,
2004, participants may voluntarily elect to withdraw all of the
balance in their accounts. If a participant elects to withdraw
such amounts, the Company will pay an amount equal to 90% of the
balance in the participants deferral account in a lump sum
in cash, and the participant will forfeit the remainder of such
deferral account. With respect to amounts deferred after
December 31, 2004, participants may not voluntarily elect
to withdraw any portion of the balance in their accounts.
In prior years, executives may have deferred significant amounts
of their salary and annual incentive awards, which minimized the
reduction in the federal income tax deduction available to the
Company, as the compensation deferred was not subject to
Section 162(m) of the Code limitation until the year paid.
Total deferral account balances as of the end of 2009 are shown
in the 2009 Non-Qualified Deferred Compensation
table below.
Employment Agreements
Consistent with its compensation philosophy, the Company
generally does not enter into employment agreements with its
executives, who are considered to serve at the will of the
Board. The only exceptions to this policy are the individual
employment agreements with the current Chief Executive Officer,
Mark A. Blinn, and the former Chief Executive Officer, Lewis M.
Kling.
Employment Agreement with Mark A. Blinn.
In connection with
Mr. Blinns appointment as President and Chief
Executive Officer, the Company entered into a letter agreement
with Mr. Blinn, dated August 31, 2009. The letter
agreement provides that Mr. Blinns previous
employment agreement with the Company dated May 7, 2007, as
amended, was terminated effective October 1, 2009, and
Mr. Blinns employment with the Company thereafter is
on an at-will basis. The letter agreement sets forth the
following compensatory terms relating to Mr. Blinns
new position: (i) an annual base salary of $915,000,
effective September 1, 2009; (ii) a target bonus
percentage under the Companys Annual Incentive Plan of
100% of eligible earnings, prorated for 2009; (iii) a
target restricted common stock incentive opportunity under the
Companys Long-Term Incentive Plan of 300% of base salary;
and (iv) all existing equity incentive compensation awards
will remain outstanding in accordance with their terms, and
Mr. Blinn will participate or continue to participate in
the Companys various compensation and benefit programs to
the extent he is eligible.
Mr. Blinn, along with all other executive officers,
participates in the Officer Severance Plan and in the CIC Plan.
Former Employment Agreement with Lewis M. Kling.
The Company entered into an
employment agreement with Mr. Kling in connection with his
promotion to President and Chief Executive Officer of the
Company on July 28, 2005. The agreement
28
was for a minimum of three years with automatic renewal for one
year periods. On May 29, 2007, the Company entered into a
renewal employment agreement with Mr. Kling that expired on
February 28, 2010. In connection with Mr. Klings
renewal employment agreement, the Company granted Mr. Kling
a one-time grant of 50,000 shares of performance-based
restricted common stock, half of which will continue to vest
following the completion of the terms of his employment
agreement on the basis of the Companys average RONA
performance over the three-year period ending December 31,
2012, and half of which continue to vest following the
completion of the terms of his employment agreement on the
average TSR for the same period, both as determined by the
O&C Committee. The employment agreement with Mr. Kling
provided for a base salary, an annual target bonus,
participation in the Companys long-term incentive program,
benefits and perquisites on the same level as other executives,
retirement plan benefits and severance benefits in the event of
his termination, as described in greater detail under
Potential Payments Upon Termination or
Change-in-Control
Lewis M. Kling Former Employment Agreement Former
Special Termination Benefits. The employment agreement
also incorporated non-compete and non-solicitation provisions,
which will remain in effect until February 28, 2011.
During the term of Mr. Klings employment agreement,
if Mr. Kling had been terminated by the Company without
cause or if he terminated employment for good reason, as defined
in the agreement, Mr. Kling would have been provided the
following severance benefits: (i) a lump-sum payout equal
to the sum of his annual base salary and the annual bonus that
he earned in the year prior to the year of termination,
(ii) a pro-rated annual bonus award, based on his target
bonus award percentage, (iii) immediate vesting on all
unvested stock-based awards, (iv) a target payout of all
cash-based performance plan awards and (v) full vesting of
his non-qualified pension benefit.
Mr. Kling transitioned from the positions of President and
Chief Executive Officer on October 1, 2009. Pursuant to a
letter agreement, dated August 31, 2009, between
Mr. Kling and the Company, Mr. Kling agreed to
continue as an employee of the Company and as Vice Chairman of
the Companys Board of Directors until February 28,
2010, which is the date Mr. Klings term as President
and Chief Executive Officer expired under his existing
employment agreement. The letter agreement also provided that,
consistent with his employment agreement, Mr. Kling retired
as an employee and resigned from the Board on February 28,
2010. Mr. Klings and the Companys obligations
regarding compensation and term of employment under his
employment agreement remained the same after Mr. Kling
relinquished the titles and responsibilities of President and
Chief Executive Officer.
Mr. Kling did not participate in the Officer Severance
Plan, but he did participate in the CIC Plan.
Tax Implications of
Executive Compensation
Section 162(m) of the Code limits to $1.0 million per
year the federal income tax deduction to public corporations for
compensation paid for any fiscal year to the Companys
Chief Executive Officer and the three other most
highly-compensated executive officers as of the end of the
fiscal year included in the Summary Compensation
Table, unless such compensation meets certain
requirements. Approximately $9.4 million will be subjected
to this limitation for the 2009 tax year and will therefore not
be deductible on the Companys federal income tax return.
The cash-based Annual Incentive Plan was approved by
shareholders at the 2007 annual meeting of shareholders.
Performance-based compensation will be deductible for tax
purposes based on the payments that are anticipated to be made
as a result of performance relating to the Annual Incentive Plan.
Stock options under our existing plans are intended to comply
with the rules under Section 162(m) for treatment as
performance-based compensation. Therefore, we expect to be
allowed to deduct compensation related to options granted under
each of these plans.
The equity based long-term incentive program has been revised to
comply with the rules under Section 162(m) and was approved
at the 2007 annual meeting of shareholders. We expect to be
allowed to deduct performance-based compensation granted under
the equity based long-term incentive program, including the
contingent performance shares, beginning with the grants awarded
in 2007. These grants will be eligible for pay-out beginning in
2010; therefore, the grants should be deductible for tax
purposes beginning in 2010.
The O&C Committee has considered and will continue to
consider tax deductibility in structuring executive compensation
arrangements. However, the O&C Committee retains discretion
to establish executive compensation arrangements that it
believes are consistent with its principles described earlier
and in the best interests of the Company and our shareholders,
even if those arrangements are not fully deductible under
Section 162(m).
29
Accounting
Implications of Executive Compensation
The Company recognizes compensation expense in our financial
statements for all equity-based awards pursuant to the
principles set forth in FASB ASC Topic 718. The O&C
Committee considered the GAAP accounting implications of the
awards in setting the long-term incentive mix and further
determined that the mix of time-vested restricted common stock
and contingent performance shares was appropriate for 2009.
Chief Executive
Officer Compensation in 2009
While the compensation of the Chief Executive Officer was set in
a manner consistent with our compensation philosophy and the
general compensation principles and policies discussed above, in
the interests of providing shareholders with a better
understanding of Mr. Blinns and Mr. Klings
compensation for 2009, we are providing the following discussion
and analysis.
In February 2009, the O&C Committee identified specific
criteria for evaluating the Chief Executive Officers
performance during 2009. These criteria included stock
performance, financial performance, strategic vision and
leadership, including the development of human capital. In
evaluating the Chief Executive Officers performance in
2009, the O&C Committee Chairman gathered input from
individual Board members during the Boards special
executive session. During this session, the O&C Committee
reviewed both the detailed compensation market data prepared by
our Companys compensation consultant and LB&Co. The
O&C Committee discussed and determined the below Chief
Executive Officer compensation changes and awards in executive
session with only O&C Committee members and LB&Co
present. The O&C Committee also followed the principles and
practices earlier discussed during the Boards special
executive session to conduct the Chief Executive Officer
performance review.
The O&C Committee reviews the Chief Executive
Officers total compensation package on an annual basis and
analyzes it in view of competitive data provided by LB&Co,
pay equity relative to the other Named Executive Officers and
the Companys performance for the fiscal year. The O&C
Committee plans to continue to annually disclose its Chief
Executive Officers and Named Executive Officers
compensation adjustments and awards, including the rationale for
these actions, in future proxy statements.
Mark A.
Blinn
Base Salary.
Consistent with the
O&C Committees decision to maintain annual base
salaries for all officers at 2008 levels, Mr. Blinns
base salary remained constant in 2009 until his appointment as
Chief Executive Officer. In September 2009,
Mr. Blinns salary was increased from $527,061 to
$915,000.
Annual Incentive Opportunity.
To recognize
Mr. Blinns performance during 2009, the O&C
Committee approved a cash award under the Annual Incentive Plan
of $830,817. As discussed under Elements of
the Executive Compensation Program
Annual Incentive Opportunity Measuring Performance
and Establishing Payout above, the actual payout
represented 155.5% of Mr. Blinns target annual
incentive opportunity, and was further increased by 3.5% by the
O&C Committee in recognition of Mr. Blinns
performance against his Chief Financial Officer objectives
during 2009. As referenced earlier, Mr. Blinns target
award was pro-rated between his 60% and 100% targets, based on
his tenure as Chief Financial Officer and Chief Executive
Officer, respectively.
Long-Term Incentives.
In accordance with the
principles and practices set forth earlier, the O&C
Committee approved an initial long-term incentive award to
Mr. Blinn consisting of 10,660 contingent performance units
and 12,580 shares of restricted common stock, which vest
ratably over time, at the same time 2009 long-term incentive
awards were made to key managers, including the Named Executive
Officers. Mr. Blinns time-vested restricted common
stock award was increased by the O&C Committee in
recognition of Mr. Blinns 2008 performance
evaluation, consistent with our compensation principles and
policies. As Mr. Blinn did not meet his ownership
requirements for the 2009 grant, his final award was negatively
adjusted by 20%, resulting in a final award of 8,528 contingent
performance units and 10,064 shares of restricted common
stock. Mr. Blinn has since met the ownership requirements.
Lewis M.
Kling
Base Salary.
Mr. Klings
base salary remained constant at $1,032,382 during 2009,
representing no increase over 2008 base salary.
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Annual Incentive Opportunity.
To recognize
Mr. Klings performance during 2009, the O&C
Committee approved a cash award under the Annual Incentive Plan
of $1,605,354. As discussed under Elements of
the Executive Compensation Program Annual Incentive
Opportunity Measuring Performance and Establishing
Payout above, the actual payout represented 155.5% of
Mr. Klings target annual incentive opportunity, and
was further increased by 8.5% in recognition of
Mr. Klings performance against his performance
objectives in 2009.
Long-Term Incentives.
In accordance with the
principles and practices set forth earlier, the O&C
Committee approved a long-term incentive award to Mr. Kling
consisting of 31,330 shares of restricted common stock,
contingent upon performance, and 36,969 restricted common stock
units, which vest ratably over time, at the same time 2009
long-term incentive awards were made to key managers, including
the Named Executive Officers. Mr. Klings time-vested
restricted common stock units award was increased by the
O&C Committee in recognition of Mr. Klings 2008
performance evaluation, consistent with our compensation
principles and policies. Mr. Kling does not have the right
to receive dividends on his contingent performance restricted
common stock. In February 2009, Mr. Kling also received a
special, one-time discretionary grant of 6,000 restricted common
stock units (subject to a one-year cliff vest) in recognition of
his performance in 2008 and his upcoming retirement. Under the
terms of Mr. Klings former employment agreement, all
of his unvested stock-based awards continue to vest according to
their terms following his retirement.
Annual Executive
Compensation Program Review and Compensation Risk
It is the O&C Committees policy to regularly monitor
and annually review our executive compensation program to
determine, in consultation with LB&Co, whether the elements
of the program are consistent with our stated executive
compensation principles and policies. Within this determination
is an evaluation of whether the Companys risk management
objectives are being met with respect to the executive
compensation program and our compensation programs as a whole.
If the elements of the program are determined to be inconsistent
with our principles and policies, or if any incentives are
determined to encourage risks that are reasonably likely to have
a material adverse effect on us, the elements are adjusted as
necessary.
Following the O&C Committees annual review of our
executive and other compensation programs in 2009, in
consultation with LB&Co, the O&C Committee concluded
that no risks arising from our compensation policies and
practices are reasonably likely to have a material adverse
effect on the Company. In reaching this conclusion, the O&C
Committee noted that:
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Our compensation program design provides a balanced mix of base
salary, annual cash incentive compensation and, for eligible
employees, long-term equity incentives, which provides the
incentive to perform at high levels and maximize company
performance without focusing exclusively on compensation
performance metrics to the detriment of other important business
metrics;
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Our incentive compensation metrics are balanced between the
realization of short-term corporate business and financial
objectives, namely annual operating income and cash flows from
operations for the annual cash incentive opportunity, and
long-term stock-based and financial performance objectives,
which are effected through an equally weighted mix of restricted
common stock that generally vests ratably over a three-year
period and contingent performance shares that vest at the end of
a three-year performance period based on indexed RONA
performance;
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We place an emphasis on individual, non-financial performance
metrics in determining final individual compensation amounts,
serving to restrain the influence of formulae and objective
factors on incentive pay and providing the O&C Committee
with discretion to adjust compensation downward if behaviors are
not consistent with our business objectives and values;
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Maximum payout levels for the annual cash incentive opportunity
are capped at 200% of target, with a maximum additional 25%
adjustment for individual performance, and the contingent
performance share award payouts are capped at 200% of target,
which helps avoid excessive total compensation and reduces the
incentive to engage in unnecessarily risky behavior;
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The annual cash incentive opportunity and the contingent
performance share awards have threshold payout levels, which
ensure that incentive compensation is reduced or eliminated
altogether if minimum performance levels are not achieved;
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Our officers are subject to equity ownership guidelines, which
further encourage a long-term focus on sustainable performance
and further aligns our officers interests with those of
our shareholders;
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Our Annual Incentive Plan and our long term incentive program
are the same for all eligible employees; and
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Our Annual Incentive Plan and our long term incentive program
have been in place and structured around the same metrics for
several years, and we have seen no evidence that they encourage
unnecessary or excessive risk-taking.
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In addition, following the annual review of our executive
compensation program in 2009, in consultation with LB&Co,
the O&C Committee decided to eliminate in 2010 the personal
use of corporate aircraft and financial counseling benefit
referenced under Compensation Discussion and
Analysis Perquisites and Other Benefits above.
The O&C Committee concluded that these two benefits were no
longer appropriate in light of evolving market practices and
therefore not in line with our compensation principles and
policies. With the exception of these changes, the O&C
Committee concluded that all other elements of the executive
compensation program were consistent with our executive
compensation principles and policies.
Organization and
Compensation Committee Report
The Organization and Compensation Committee of the Board of
Directors of the Company is currently comprised of five
independent directors, William C. Rusnack (Chairman), Roger L.
Fix, John R. Friedery, Charles M. Rampacek and Kevin E. Sheehan.
The Organization and Compensation Committee has reviewed and
discussed the Compensation Discussion and Analysis, set forth
above in this proxy statement, with management. Based on this
review and discussion, the Organization and Compensation
Committee recommended to the Board of Directors that this
Compensation Discussion and Analysis be included in this proxy
statement and incorporated by reference in the Companys
Annual Report on
Form 10-K
filed with the Securities and Exchange Commission for the fiscal
year ended December 31, 2009.
William C. Rusnack, Chairman
Roger L. Fix
John R. Friedery
Charles M. Rampacek
Kevin E. Sheehan
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Summary
Compensation Table
The following table sets forth compensation information for
2009, 2008 and 2007 for our Named Executive Officers
the individuals who served during 2009 as principal executive
officer and principal financial officer of the Company
(including any retired executive whose compensation would
otherwise have been required to be disclosed had the Named
Executive been serving at the end of the fiscal year) and the
three other most highly compensated executive officers of the
Company serving at the end of 2009.
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Change in
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Pension Value
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and Non-
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Qualified
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Non-Equity
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Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
Name and Principal Position
|
|
|
Year
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)(4)
|
|
|
($)(5)
|
|
|
($)
|
Mark A.
Blinn(6)
|
|
|
|
2009
|
|
|
|
|
652,139
|
|
|
|
|
1,009,174
|
(7)
|
|
|
|
830,817
|
|
|
|
|
199,933
|
|
|
|
|
85,064
|
|
|
|
|
2,777,127
|
|
President and Chief
|
|
|
|
2008
|
|
|
|
|
527,061
|
|
|
|
|
1,216,738
|
|
|
|
|
1,467,139
|
|
|
|
|
149,367
|
|
|
|
|
96,457
|
|
|
|
|
3,456,762
|
|
Executive Officer
|
|
|
|
2007
|
|
|
|
|
472,846
|
|
|
|
|
997,776
|
|
|
|
|
740,892
|
|
|
|
|
115,276
|
|
|
|
|
45,678
|
|
|
|
|
2,372,468
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lewis M.
Kling(8)
|
|
|
|
2009
|
|
|
|
|
1,032,372
|
|
|
|
|
3,989,856
|
(9)
|
|
|
|
1,741,809
|
|
|
|
|
628,304
|
|
|
|
|
272,541
|
|
|
|
|
7,664,882
|
|
Former President and Chief
|
|
|
|
2008
|
|
|
|
|
1,043,144
|
|
|
|
|
3,696,507
|
|
|
|
|
5,032,532
|
|
|
|
|
531,009
|
|
|
|
|
438,130
|
|
|
|
|
10,741,322
|
|
Executive Officer
|
|
|
|
2007
|
|
|
|
|
932,308
|
|
|
|
|
5,819,170
|
|
|
|
|
2,312,256
|
|
|
|
|
343,467
|
|
|
|
|
87,812
|
|
|
|
|
9,495,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Guiltinan,
Jr.(10)
|
|
|
|
2009
|
|
|
|
|
364,043
|
|
|
|
|
391,902
|
(11)
|
|
|
|
283,044
|
|
|
|
|
119,561
|
|
|
|
|
40,135
|
|
|
|
|
1,198,685
|
|
Vice President Finance and
|
|
|
|
2008
|
|
|
|
|
366,922
|
|
|
|
|
379,413
|
|
|
|
|
616,444
|
|
|
|
|
93,916
|
|
|
|
|
45,420
|
|
|
|
|
1,502,115
|
|
Chief Accounting Officer
|
|
|
|
2007
|
|
|
|
|
280,978
|
|
|
|
|
283,352
|
|
|
|
|
280,978
|
|
|
|
|
60,187
|
|
|
|
|
52,466
|
|
|
|
|
957,961
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Ferguson
|
|
|
|
2009
|
|
|
|
|
465,000
|
|
|
|
|
1,189,818
|
(12)
|
|
|
|
470,722
|
|
|
|
|
269,104
|
|
|
|
|
44,961
|
|
|
|
|
2,439,605
|
|
Senior VP and President of
|
|
|
|
2008
|
|
|
|
|
463,328
|
|
|
|
|
823,235
|
|
|
|
|
1,241,508
|
|
|
|
|
216,651
|
|
|
|
|
43,796
|
|
|
|
|
2,788,518
|
|
Flow Solutions Group
|
|
|
|
2007
|
|
|
|
|
383,569
|
|
|
|
|
611,325
|
|
|
|
|
662,552
|
|
|
|
|
170,624
|
|
|
|
|
34,615
|
|
|
|
|
1,862,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew J.
Beall(13)
|
|
|
|
2009
|
|
|
|
|
400,000
|
|
|
|
|
1,333,117
|
(14)
|
|
|
|
373,200
|
|
|
|
|
180,100
|
|
|
|
|
56,471
|
|
|
|
|
2,342,888
|
|
Senior VP and CIO
|
|
|
|
2008
|
|
|
|
|
398,931
|
|
|
|
|
713,538
|
|
|
|
|
924,934
|
|
|
|
|
143,300
|
|
|
|
|
50,642
|
|
|
|
|
2,231,345
|
|
|
|
|
|
2007
|
|
|
|
|
330,985
|
|
|
|
|
566,704
|
|
|
|
|
500,558
|
|
|
|
|
105,009
|
|
|
|
|
45,898
|
|
|
|
|
1,549,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas L. Pajonas
|
|
|
|
2009
|
|
|
|
|
465,000
|
|
|
|
|
918,418
|
(15)
|
|
|
|
433,845
|
|
|
|
|
186,536
|
|
|
|
|
46,985
|
|
|
|
|
2,050,784
|
|
Senior VP and President of
|
|
|
|
2008
|
|
|
|
|
468,368
|
|
|
|
|
882,613
|
|
|
|
|
1,288,246
|
|
|
|
|
151,067
|
|
|
|
|
48,535
|
|
|
|
|
2,838,829
|
|
Flow Control Division
|
|
|
|
2007
|
|
|
|
|
414,555
|
|
|
|
|
718,438
|
|
|
|
|
634,625
|
|
|
|
|
108,692
|
|
|
|
|
45,895
|
|
|
|
|
1,922,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Salary reported for 2009 represents
amounts earned by the executive officers in 2009.
|
|
(2)
|
|
Represents the grant date fair
value of long-term equity incentive awards under the
Companys long-term incentive program computed in
accordance with FASB ASC Topic 718. The incentive awards are
granted in the form of restricted common stock (or restricted
stock units for Mr. Kling), which generally vest ratably
over a three-year period, and contingent performance share units
(or contingent performance shares for Mr. Kling). The
performance criteria for the contingent performance share awards
is based on the Companys average RONA over a three-year
period compared to the average RONA of the Companys high
performance peer group for the same period, as described in
further detail under Elements of the Executive
Compensation Program Long-Term
Incentives Contingent Performance Share Awards
above. The reported value of the contingent performance awards
is computed based on the grant date estimate of compensation
cost to be recognized over the three-year period, which was
100%, or target. Payout for the contingent
performance awards can range from 0 shares to a maximum of
200% of target. Assumptions used in the valuations are discussed
in Note 6 to the Companys audited consolidated
financial statements for the year ended December 31, 2009
in the Annual Report.
|
|
(3)
|
|
The 2009 amounts in this column
represent an annual cash incentive bonus for 2009 under the
Companys Annual Incentive Plan that was earned in 2009.
These amounts were accrued in the Companys 2009 financial
statements but were not actually paid to Messrs. Blinn,
Kling, Guiltinan, Ferguson, Beall and Pajonas until March 2010.
|
|
(4)
|
|
There were no above-market or
preferential earnings with respect to any deferred compensation
balances.
|
33
|
|
|
(5)
|
|
The following table shows the
components of this column for the Named Executive Officers,
calculated at the aggregate incremental cost to the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
|
|
|
|
Dividends on
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Insurance
|
|
|
Restricted
|
|
|
Financial
|
|
|
|
|
|
|
Name
|
|
|
Contributions
|
|
|
Premiums(A)
|
|
|
Stock
|
|
|
Counseling
|
|
|
Other
|
|
|
Total
|
Mark A. Blinn
|
|
|
|
$11,025
|
|
|
|
|
$16,279
|
(B)
|
|
|
|
$52,522
|
|
|
|
|
$2,200
|
|
|
|
|
$3,037
|
(C)
|
|
|
|
$85,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lewis M. Kling
|
|
|
|
11,025
|
|
|
|
|
25,542
|
(D)
|
|
|
|
21,807
|
|
|
|
|
|
|
|
|
|
214,167
|
(E)
|
|
|
|
272,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Guiltinan
|
|
|
|
8,798
|
|
|
|
|
15,383
|
|
|
|
|
7,454
|
|
|
|
|
8,500
|
|
|
|
|
|
|
|
|
|
40,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Ferguson
|
|
|
|
11,025
|
|
|
|
|
13,797
|
|
|
|
|
18,661
|
|
|
|
|
|
|
|
|
|
1,478
|
(F)
|
|
|
|
44,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew J. Beall
|
|
|
|
11,025
|
|
|
|
|
15,933
|
(B)
|
|
|
|
21,013
|
|
|
|
|
8,500
|
|
|
|
|
|
|
|
|
|
56,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas L. Pajonas
|
|
|
|
11,025
|
|
|
|
|
12,920
|
|
|
|
|
14,700
|
|
|
|
|
8,340
|
|
|
|
|
|
|
|
|
|
46,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
Includes annual premiums for group
term life insurance, the Companys portion of annual
premiums for medical, dental and vision benefits and the
Companys portion of disability premiums.
|
(B)
|
|
Includes $10,886 attributable to
the Companys portion of annual premiums for medical,
dental and vision benefits.
|
(C)
|
|
Includes $2,500 attributable to an
annual physical exam and $537 attributable to spousal travel.
|
(D)
|
|
Includes $10,494 attributable to
annual premiums for group term life insurance.
|
(E)
|
|
Represents the aggregate
incremental cost to the Company of Mr. Klings
44.4 hours of corporate aircraft personal use in the amount
of $182,374. The valuation methodology for the $4,108 per hour
rate used for this purpose is more fully described under
Elements of the Executive Compensation
Program Perquisites and Other Benefits above.
Also includes $1,800 attributable to an annual physical exam and
$29,993 attributable to spousal travel.
|
(F)
|
|
Attributable to spousal travel.
|
|
|
|
(6)
|
|
Mr. Blinn was appointed
President and Chief Executive Officer effective October 1,
2009. Prior to that date, he served as the Companys Senior
Vice President, Chief Financial Officer and Latin America
Operations. In connection with Mr. Blinns promotion,
the Company entered into a letter agreement with Mr. Blinn
on August 31, 2009, which is more fully described under
Employment Agreements Employment
Agreement with Mark A. Blinn above. The letter agreement
terminated Mr. Blinns existing employment agreement
with the Company dated May 7, 2007, as amended, effective
October 1, 2009.
|
|
(7)
|
|
Calculated using a price per share
of $54.28, the closing market price of the Companys common
stock as reported by the NYSE on February 12, 2009, the
date of grant. Includes 10,064 shares ($546,274) of
restricted stock and 8,528 contingent performance units
($462,900), which represents the target award. The maximum
potential value of the performance award, assuming the highest
level of performance conditions, is 17,056 shares, or
$925,800 at the date of grant.
|
|
(8)
|
|
Mr. Kling transitioned from
his positions as President and Chief Executive Officer (but not
from employment by the Company) effective October 1, 2009.
Pursuant to a letter agreement, dated August 31, 2009,
between Mr. Kling and the Company, Mr. Kling agreed to
continue as an employee of the Company and as Vice Chairman of
the Companys Board of Directors until February 28,
2010, the date Mr. Klings term as President and Chief
Executive Officer was to expire under his previous letter
agreement dated May 29, 2007, as amended, which is more
fully described under Employment
Agreements Former Employment Agreement with Lewis M.
Kling above. Consistent with the terms of his agreement,
Mr. Kling retired as an employee and resigned from the
Board of Directors on February 28, 2010.
|
|
(9)
|
|
Calculated using a price per share
of $53.70, the closing market price of the Companys common
stock as reported by the NYSE on February 13, 2009, the
date of grant. Includes 42,969 shares ($2,307,435) of
restricted stock units and 31,330 contingent performance shares
($1,682,421), which represents the target award. The maximum
potential value of the performance award, assuming the highest
level of performance conditions, is 62,660 shares, or
$3,364,842 at the date of grant.
|
|
(10)
|
|
Mr. Guiltinan was designated
the Companys principal financial officer on
October 20, 2009.
|
|
(11)
|
|
Calculated using a price per share
of $54.28, the closing market price of the Companys common
stock as reported by the NYSE on February 12, 2009, the
date of grant. Includes 3,910 shares ($212,235) of
restricted stock and 3,310 contingent performance units
($179,667), which represents the target award. The maximum
potential value of the performance award, assuming the highest
level of performance conditions, is 6,620 shares, or
$359,334 at the date of grant.
|
|
(12)
|
|
Calculated using a price per share
of $54.28, the closing market price of the Companys common
stock as reported by the NYSE on February 12, 2009, the
date of grant. Includes 14,160 shares ($768,605) of
restricted stock and 7,760 contingent performance units
($421,213), which represents the target award. The maximum
potential value of the performance award, assuming the highest
level of performance conditions, is 15,520 shares, or
$842,426 at the date of grant.
|
|
(13)
|
|
Mr. Beall retired from his
positions with the Company effective April 1, 2010.
|
|
(14)
|
|
Calculated using a price per share
of $54.28, the closing market price of the Companys common
stock as reported by the NYSE on February 12, 2009, the
date of grant. Includes 17,880 shares ($970,526) of
restricted stock and 6,680 contingent performance units
($362,590), which represents the target award. The maximum
potential value of the performance award, assuming the highest
level of performance conditions, is 13,360 shares, or
$725,180 at the date of grant.
|
|
(15)
|
|
Calculated using a price per share
of $54.28, the closing market price of the Companys common
stock as reported by the NYSE on February 12, 2009, the
date of grant. Includes 9,160 shares ($479,205) of
restricted stock and 7,760 contingent performance units
($421,213), which represents the target award. The maximum
potential value of the performance award, assuming the highest
level of performance conditions, is 15,520 shares, or
$842,426 at the date of grant.
|
34
2009 Grants of
Plan-Based Awards
The following table sets forth certain information with respect
to 2009 plan-based awards granted to the Named Executive
Officers for the year ended December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
Payouts Under
|
|
|
Estimated Future Payouts
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Grant Date
|
|
|
|
|
|
|
Non-Equity
|
|
|
Under Equity Incentive
|
|
|
Number of
|
|
|
Number of
|
|
|
or
|
|
|
Fair Value
|
|
|
|
|
|
|
Incentive Plan Awards
|
|
|
Plan
Awards(1)
|
|
|
Shares of
|
|
|
Securities
|
|
|
Base Price
|
|
|
of Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock or
|
|
|
Underlying
|
|
|
of Option
|
|
|
and Option
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Units
|
|
|
Options
|
|
|
Awards
|
|
|
Awards
|
Name
|
|
|
Grant Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
($)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark A. Blinn
|
|
|
|
2/12/2009
|
(3)
|
|
|
|
314,760
|
|
|
|
|
524,600
|
|
|
|
|
1,049,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,264
|
|
|
|
|
8,528
|
|
|
|
|
17,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
462,900
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,064
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
546,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lewis M. Kling
|
|
|
|
2/13/2009
|
(3)
|
|
|
|
619,429
|
|
|
|
|
1,032,382
|
|
|
|
|
2,064,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/13/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,665
|
|
|
|
|
31,330
|
|
|
|
|
62,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,682,421
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/13/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,969
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,985,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/13/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
322,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Guiltinan
|
|
|
|
2/12/2009
|
(3)
|
|
|
|
109,213
|
|
|
|
|
182,022
|
|
|
|
|
364,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,655
|
|
|
|
|
3,310
|
|
|
|
|
6,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
179,667
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,910
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Ferguson
|
|
|
|
2/12/2009
|
(3)
|
|
|
|
167,400
|
|
|
|
|
279,000
|
|
|
|
|
558,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,880
|
|
|
|
|
7,760
|
|
|
|
|
15,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
421,213
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,160
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
497,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
271,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew J. Beall
|
|
|
|
2/12/2009
|
(3)
|
|
|
|
144,000
|
|
|
|
|
240,000
|
|
|
|
|
480,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,340
|
|
|
|
|
6,680
|
|
|
|
|
13,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
362,590
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,880
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
427,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
542,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas L. Pajonas
|
|
|
|
2/12/2009
|
(3)
|
|
|
|
167,400
|
|
|
|
|
279,000
|
|
|
|
|
558,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,880
|
|
|
|
|
7,760
|
|
|
|
|
15,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
421,213
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,160
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
497,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The number of shares listed
represents long-term equity incentive awards in the form of
contingent performance share units (or contingent performance
shares for Mr. Kling) under the Companys long-term
incentive program. The performance criteria for these awards is
based on the Companys average RONA over the three-year
period ending December 31, 2011 compared the average RONA
of the Companys high performance peer group for the same
period, as described in further detail under
Elements of the Executive Compensation
Program Long-Term Incentives Contingent
Performance Share Awards above.
|
|
(2)
|
|
These amounts represent the fair
value, as determined under FASB ASC Topic 718, of the stock
awards based on the grant date fair value estimated by the
Company for financial reporting purposes.
|
|
(3)
|
|
Under the Annual Incentive Plan,
the primary performance measures are internally defined metrics
based on operating income and cash flow. Actual amounts payable
under the Annual Incentive Plan can range from 60% (Threshold)
to 200% (Maximum) of the target amounts for the Named Executive
Officers based upon the extent to which performance under the
foregoing criteria meets, exceeds or is below the target and can
be further increased or decreased based on achievement of
individual performance objectives.
|
|
(4)
|
|
Represents the fair value on the
date of grant, as described in footnote (2), of the
target award. During the performance period, as
described in footnote (1), earned and unearned compensation
expense is adjusted based on changes in the expected achievement
of the performance targets. As of December 31, 2009, the
Company estimated vesting of, and therefore expensed, this award
at 200% of the target award based on expected
achievement of performance targets.
|
|
(5)
|
|
The amounts shown reflect the
numbers of shares of restricted common stock (or restricted
stock units for Mr. Kling) granted to each Named Executive
Officer pursuant to the Flowserve Corporation 2004 Stock
Compensation Plan.
|
|
(6)
|
|
Represents a one-time grant of
restricted common stock units to Mr. Kling pursuant to the
Flowserve Corporation 2004 Stock Compensation Plan in
recognition of his performance in 2008 and his upcoming
retirement. The award was subject to a one-year cliff vest.
|
|
(7)
|
|
Represents a one-time grant of
restricted common stock to Mr. Ferguson pursuant to the
Flowserve Corporation 2004 Stock Compensation Plan in
recognition of the Flowserve Pump Divisions 2008
performance. The award was subject to a three-year cliff vest.
|
|
(8)
|
|
Represents a one-time grant of
restricted common stock to Mr. Beall pursuant to the
Flowserve Corporation 2004 Stock Compensation Plan in
recognition of his assumption of the Chief Information Officer
role. The award was subject to a three-year cliff vest.
|
35
Outstanding
Equity Awards at Year-End 2009
The following table sets forth certain information with respect
to outstanding equity awards as of December 31, 2009 with
respect to the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Number of
|
|
|
Value of
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
Securities
|
|
|
Number of
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Shares,
|
|
|
Shares, Units
|
|
|
|
Underlying
|
|
|
Securities
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
Units or
|
|
|
or Other
|
|
|
|
Unexercised
|
|
|
Underlying
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Stock that
|
|
|
Stock that
|
|
|
Other Rights
|
|
|
Rights that
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Have Not
|
|
|
that Have
|
|
|
Have Not
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested(1)
|
|
|
Not Vested
|
|
|
Vested(1)
|
Name
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
Mark A. Blinn
|
|
|
|
3,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30.95
|
|
|
|
|
07/13/15
|
|
|
|
|
18,196
|
(3)
|
|
|
|
1,720,068
|
|
|
|
|
8,956
|
(4)
|
|
|
|
846,611
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52.25
|
|
|
|
|
12/14/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,219
|
(5)
|
|
|
|
493,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,624
|
(6)
|
|
|
|
815,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lewis M.
Kling(2)
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48.17
|
|
|
|
|
02/15/16
|
|
|
|
|
67,830
|
(7)
|
|
|
|
6,411,970
|
|
|
|
|
25,740
|
(4)
|
|
|
|
2,433,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,990
|
(5)
|
|
|
|
1,417,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,330
|
(6)
|
|
|
|
2,961,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(8)
|
|
|
|
2,363,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(9)
|
|
|
|
2,363,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Guiltinan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,367
|
(10)
|
|
|
|
601,873
|
|
|
|
|
2,487
|
(4)
|
|
|
|
235,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,627
|
(5)
|
|
|
|
153,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,347
|
(6)
|
|
|
|
316,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Ferguson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,263
|
(11)
|
|
|
|
1,820,931
|
|
|
|
|
6,036
|
(4)
|
|
|
|
570,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,530
|
(5)
|
|
|
|
333,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,847
|
(6)
|
|
|
|
741,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew J. Beall
|
|
|
|
6,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48.17
|
|
|
|
|
02/15/16
|
|
|
|
|
22,585
|
(12)
|
|
|
|
2,134,960
|
|
|
|
|
5,087
|
(4)
|
|
|
|
480,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,060
|
(5)
|
|
|
|
289,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,755
|
(6)
|
|
|
|
638,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas L. Pajonas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,040
|
(13)
|
|
|
|
1,421,731
|
|
|
|
|
6,449
|
(4)
|
|
|
|
609,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,786
|
(5)
|
|
|
|
357,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,847
|
(6)
|
|
|
|
741,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Calculated using a price per share
of $94.53, the closing market price of the Companys common
stock as reported by the NYSE on December 31, 2009, the end
of the Companys last completed fiscal year. The contingent
performance share unit amounts (or restricted stock units for
Mr. Kling) include regularly declared dividends accrued on
the target award, which will vest only to the same
extent as the underlying award, if at all. Mr. Klings
contingent performance restricted stock is not eligible to
receive dividends. Concerning all contingent performance awards,
the amounts of shares or units used in calculating the payout
values are based on the Company achieving target
performance goals, which share or unit amounts are presented in
the table.
|
|
(2)
|
|
Amounts shown are awards held by
The Lewis Mark Kling Trust, of which Mr. Kling is a trustee.
|
|
(3)
|
|
3,472 shares vested on
February 22, 2010, 2,330 shares vested on
March 7, 2010 and 3,355 shares vested on
February 12, 2010. Mr. Blinns remaining shares
of restricted common stock vest as follows: 2,330 shares on
March 7, 2011; 3.355 shares on February 12, 2011;
and 3,354 shares on February 12, 2012.
|
|
(4)
|
|
These shares represent target
long-term equity incentive awards in the form of contingent
performance share units (or contingent performance restricted
common stock for Mr. Kling) under the Companys
long-term incentive program. The target set for this plan is
based on the Companys average RONA over the three-year
period ending December 31, 2009 as a percentage of the
average RONA of the Companys high performance peer group
for the same period. Payouts can range from 0 shares to a
maximum of 200% of the shares granted. In the event of death,
disability or retirement, the award payout will occur at the
vesting date based on the participants performance through
the number of whole years of employment completed during the
performance cycle. As of December 31, 2009, the Company
estimated vesting of, and therefore expensed, these awards at
200% of the target shares presented based on expected
achievement of performance targets.
|
|
(5)
|
|
These shares represent target
long-term equity incentive awards in the form of contingent
performance share units (or contingent performance restricted
common stock for Mr. Kling) under the Companys
long-term incentive program. The target set for this plan is
based on the Companys average RONA over the three-year
period ending December 31, 2010 as a percentage of the
average RONA of the Companys high performance peer group
for the same period. Payouts can range from 0 shares to a
maximum of 200% of the target. In the event of death, disability
or retirement, the award payout will occur at the vesting date
based on the
|
36
|
|
|
|
|
participants performance
through the number of whole years of employment completed during
the performance cycle. As of December 31, 2009, the Company
estimated vesting of, and therefore expensed, these awards at
200% of the target shares presented based on expected
achievement of performance targets.
|
|
(6)
|
|
These shares represent target
long-term equity incentive awards in the form of contingent
performance share units (or contingent performance restricted
common stock for Mr. Kling) under the Companys
long-term incentive program. The target set for this plan is
based on the Companys average RONA over the three-year
period ending December 31, 2011 as a percentage of the
average RONA of the Companys high performance peer group
for the same period. Payouts can range from 0 shares to a
maximum of 200% of the target. In the event of death, disability
or retirement, the award payout will occur at the vesting date
based on the participants performance through the number
of whole years of employment completed during the performance
cycle. As of December 31, 2009, the Company estimated
vesting of, and therefore expensed, these awards at 200% of the
target shares presented based on expected achievement of
performance targets.
|
|
(7)
|
|
9,438 shares vested on
February 22, 2010, 7,296 shares vested on
March 7, 2010 and 18,323 shares vested on
February 13, 2010. Mr. Klings remaining shares
of restricted common stock and units vest as follows:
7,296 shares on March 7, 2011; 12,323 shares on
February 13, 2011; and 12,323 shares on
February 13, 2012.
|
|
(8)
|
|
The vesting of the
25,000 shares of performance-based restricted common stock
is tied to the Companys RONA performance relative to the
high performance peer group. The three-year earn-out period for
this award is 50% for 2008 2010; 30% for
2009 2011 and 20% for 2010 2012. This
cost was recognized in accordance with FASB ASC Topic 718 over
Mr. Klings service period ending February 28,
2010.
|
|
(9)
|
|
The vesting of the
25,000 shares of performance-based restricted common stock
is tied to the Companys TSR performance relative to the
high performance peer group. The three-year earn-out period for
this award is 50% for 2008 2010; 30% for
2009 2011 and 20% for 2010 2012. This
cost was recognized in accordance with FASB ASC Topic 718 over
Mr. Klings service period ending February 28,
2010.
|
|
(10)
|
|
1,004 shares vested on
February 22, 2010, 727 shares vested on March 7,
2010 and 1,304 shares vested on February 12, 2010.
Mr. Guiltinans remaining shares of restricted common
stock vest as follows: 726 shares on March 7, 2011;
1,303 shares on February 12, 2011; and
1,303 shares on February 12, 2012.
|
|
(11)
|
|
1,950 shares vested on
February 22, 2010, 1,577 shares vested on
March 7, 2010 and 3,054 shares vested on
February 12, 2010. Mr. Fergusons remaining
shares of restricted common stock vest as follows:
1,576 shares on March 7, 2011; 3,053 shares on
February 12, 2011; and 8,053 shares on
February 12, 2012.
|
|
(12)
|
|
1,972 shares vested on
February 22, 2010, 1,367 shares vested on
March 7, 2010 and 2,627 shares vested on
February 12, 2010. Mr. Bealls remaining shares
of restricted common stock that would have vested following his
April 1, 2010 retirement have been forfeited.
|
|
(13)
|
|
2,500 shares vested on
February 22, 2010, 1,690 shares vested on
March 7, 2010 and 3,054 shares vested on
February 12, 2010. Mr. Pajonas remaining shares
of restricted common stock vest as follows: 1,690 shares on
March 7, 2011; 3.053 shares on February 12, 2011
and 3,053 shares on February 12, 2012.
|
2009 Option
Exercises and Stock Vested
The following table sets forth certain information with respect
to stock option exercises and restricted common stock vesting
during the fiscal year ended December 31, 2009 with respect
to the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Stock Awards
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
|
Acquired on
|
|
|
|
Value Realized
|
|
|
|
Acquired on
|
|
|
|
Value Realized
|
|
|
|
|
Exercise
|
|
|
|
on Exercise
|
|
|
|
Vesting
|
|
|
|
on Vesting
|
|
Name
|
|
|
(#)
|
|
|
|
($)
|
|
|
|
(#)(1)
|
|
|
|
($)
|
|
Mark A. Blinn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,802
|
|
|
|
|
3,748,889
|
|
Lewis M. Kling
|
|
|
|
29,900
|
|
|
|
|
1,585,504
|
|
|
|
|
35,105
|
|
|
|
|
1,764,078
|
|
Richard J. Guiltinan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,731
|
|
|
|
|
349,062
|
|
Thomas E. Ferguson
|
|
|
|
9,867
|
|
|
|
|
153,496
|
|
|
|
|
7,127
|
|
|
|
|
357,145
|
|
Andrew J. Beall
|
|
|
|
7,075
|
|
|
|
|
268,430
|
|
|
|
|
6,172
|
|
|
|
|
307,650
|
|
Thomas L. Pajonas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,190
|
|
|
|
|
195,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The number of shares reported
includes shares that were forfeited during the fiscal year ended
December 31, 2009 to pay for taxes upon the vesting of
restricted common stock.
|
37
2009 Pension
Benefits
The following table sets forth certain information as of
December 31, 2009 with respect to potential payments under
our pension plans for each Named Executive Officer. Please refer
to Elements of the Executive Compensation
Program Flowserve Corporation Pension Plans
above for a narrative description of the material factors
necessary to an understanding of our pension plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value of
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years
|
|
|
|
Accumulated
|
|
|
|
Payments During
|
|
|
|
|
|
|
|
Credited Service
|
|
|
|
Benefit
|
|
|
|
Last Fiscal Year
|
|
Name
|
|
|
Plan Name
|
|
|
(#)
|
|
|
|
($)
|
|
|
|
($)
|
|
Mark A. Blinn
|
|
|
Qualified Cash
Balance(1)
|
|
|
|
5.1
|
|
|
|
|
76,600
|
|
|
|
|
|
|
|
|
|
Non-Qualified SMRP
|
|
|
|
5.1
|
|
|
|
|
293,761
|
|
|
|
|
|
|
|
|
|
Non-Qualified SERP
|
|
|
|
5.1
|
|
|
|
|
254,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lewis M. Kling
|
|
|
Qualified Cash
Balance(1)
|
|
|
|
5.4
|
|
|
|
|
124,498
|
|
|
|
|
|
|
|
|
|
Non-Qualified SMRP
|
|
|
|
5.4
|
|
|
|
|
1,259,786
|
|
|
|
|
|
|
|
|
|
Non-Qualified SERP
|
|
|
|
5.4
|
|
|
|
|
674,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Guiltinan
|
|
|
Qualified Cash
Balance(1)
|
|
|
|
5.5
|
|
|
|
|
100,356
|
|
|
|
|
|
|
|
|
|
Non-Qualified SMRP
|
|
|
|
5.5
|
|
|
|
|
158,571
|
|
|
|
|
|
|
|
|
|
Non-Qualified SERP
|
|
|
|
2.6
|
(2)
|
|
|
|
82,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Ferguson
|
|
|
Qualified Cash
Balance(1)
|
|
|
|
22.1
|
|
|
|
|
384,829
|
|
|
|
|
|
|
|
|
|
Non-Qualified SMRP
|
|
|
|
22.1
|
|
|
|
|
444,306
|
|
|
|
|
|
|
|
|
|
Non-Qualified SERP
|
|
|
|
22.1
|
(3)
|
|
|
|
730,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew J. Beall
|
|
|
Qualified Cash
Balance(1)
|
|
|
|
15.9
|
|
|
|
|
197,103
|
|
|
|
|
|
|
|
|
|
Non-Qualified SMRP
|
|
|
|
15.9
|
|
|
|
|
267,238
|
|
|
|
|
|
|
|
|
|
Non-Qualified SERP
|
|
|
|
15.9
|
(4)
|
|
|
|
397,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas L. Pajonas
|
|
|
Qualified Cash
Balance(1)
|
|
|
|
5.7
|
|
|
|
|
103,449
|
|
|
|
|
|
|
|
|
|
Non-Qualified SMRP
|
|
|
|
5.7
|
|
|
|
|
293,468
|
|
|
|
|
|
|
|
|
|
Non-Qualified SERP
|
|
|
|
5.7
|
|
|
|
|
239,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The Company sponsors cash balance
designed pension plans for eligible employees. Each executive
accumulates a notional amount derived from the plan provisions;
each Named Executive Officers account balances as of
December 31, 2009 are presented above. We believe that this
is the best estimate of the present value of accumulated
benefits.
|
|
(2)
|
|
Mr. Guiltinan became eligible
to participate in the SERP as of May 16, 2007.
|
|
(3)
|
|
Mr. Ferguson became an
executive officer and eligible to participate in the SERP as of
July 18, 2002. At the time he became eligible to
participate in the SERP, he was provided with a special plan
enhancement, per SERP provisions, crediting him with additional
SERP benefits based on his years of service to the Company prior
to becoming an executive officer.
|
|
(4)
|
|
Mr. Beall became an executive
officer and eligible to participate in the SERP as of
May 5, 2003. At the time he became eligible to participate
in the SERP, he was provided with a special plan enhancement,
per SERP provisions, crediting him with additional SERP benefits
based on his years of service to the Company prior to becoming
an executive officer.
|
38
2009
Non-Qualified Deferred Compensation
The following table sets forth certain information concerning
the non-qualified deferred compensation plans during the fiscal
year (FY) ended December 31, 2009 with respect
to the Named Executive Officers. Please refer to
Elements of the Executive Compensation
Program Non-Qualified Deferred Compensation
Plan above for a narrative description of the material
factors necessary to an understanding of the non-qualified
deferred compensation plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
|
Registrant
|
|
|
|
Aggregate
|
|
|
|
Aggregate
|
|
|
|
Aggregate
|
|
|
|
|
Contributions
|
|
|
|
Contributions
|
|
|
|
Earnings
|
|
|
|
Withdrawals/
|
|
|
|
Balance at
|
|
|
|
|
in Last FY
|
|
|
|
in Last FY
|
|
|
|
in Last FY
|
|
|
|
Distribution
|
|
|
|
Last FYE
|
|
Name
|
|
|
($)
|
|
|
|
($)
|
|
|
|
($)
|
|
|
|
($)
|
|
|
|
($)
|
|
Mark A. Blinn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lewis M. Kling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Guiltinan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Ferguson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
296,076
|
(1)
|
|
|
|
|
|
|
|
|
871,717
|
(2)
|
Andrew J. Beall
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas L. Pajonas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Aggregate earnings represent the
change in investment value of the non-qualified plans
balances, plus interest earned and dividends paid or accrued on
the plans balances, during the 2009 fiscal year. There
were no above-market or preferential earnings with respect to
the deferred compensation, and therefore none of the earnings
with the respect to the deferred compensation were reported in
the Summary Compensation Table.
|
|
(2)
|
|
Aggregate balance represents
deferred amounts from prior years and any accrued interest or
dividends thereon.
|
Potential
Payments upon Termination or
Change-in-Control
The information below describes certain compensation that would
have been paid under existing plans and contractual arrangements
to the Named Executive Officers in the event of a termination of
such executives employment with the Company or
change-in-control
of the Company, assuming such events occurred on
December 31, 2009. Amounts shown thus include amounts
earned through such time and are estimates of the amounts that
would have been paid out to the executives upon their
termination or a
change-in-control
(based upon the executives compensation and service levels
as of such date and the closing price of the Companys
common stock on December 31, 2009 of $94.53). The actual
amounts to be paid out can only be determined at the time of a
change-in-control
or such executives termination of employment with the
Company. Upon any termination of employment, each of the Named
Executive Officers would also be entitled to the vested amounts
and contributions shown in the 2009 Pension Benefits
and 2009 Non-Qualified Deferred Compensation tables
above.
As of December 31, 2009, the Company had an existing
employment agreement with Mr. Kling, which expired on
February 28, 2010. As such, the following description and
presentation of assumed amounts payable to Mr. Kling at
December 31, 2009 are included for reference only, and are
no longer accurate representations of Company obligations. The
Company also sponsors the Officer Severance Plan covering the
Named Executive Officers, in which Mr. Kling did not
participate, and the CIC Plan covering the Named Executive
Officers, in which Mr. Kling did participate. In addition,
the Company sponsors several non-qualified pension plans and
equity and non-equity incentive compensation plans that provide
the Named Executive Officers with additional compensation in
connection with a
change-in-control
or termination of employment under certain circumstances. The
following is a description of the compensation payable to the
Named Executive Officers in connection with a termination of
employment
and/or
change-in-control
under these arrangements and a table summarizing the estimated
payouts assuming that a termination of employment
and/or
change-in-control
occurred on December 31, 2009.
Lewis M. Kling
Former Employment Agreement Former Special
Termination Benefits
The employment agreement with Mr. Kling provided the
following severance benefits in the event his employment with
the Company was terminated either by the Company without
cause or by him for good reason:
(i) a lump sum payment within 30 days following the
date of termination equal to the sum of: (A) his annual
base salary at the time of termination, (B) the annual
bonus earned by him for the year preceding the year in which his
employment terminates and (C) a pro-rata portion of his
target bonus for the year of termination based on the number of
days of service during such year occurring prior to termination
of employment; (ii) full vesting acceleration with respect
to all stock-based awards held by him as of the date of
termination; (iii) a lump sum payment within 30 days
39
following the date of termination equal to his target payout
under all cash-based long-term incentive compensation programs
in which he participated at the time of termination; and
(iv) full vesting of his non-qualified pension benefits.
The employment agreement with Mr. Kling also provided the
following benefits if his employment was terminated by reason of
his death or disability: (i) full vesting acceleration with
respect to all stock-based awards held by him as of the date of
termination; (ii) a lump sum payment equal to his target
payout under all cash-based long-term incentive compensation
programs in which he participated at the time of termination;
and (iii) full vesting of his non-qualified pension
benefits. Mr. Klings employment agreement did not
provide for any additional payments or benefits upon a
termination of employment by the Company for cause or upon his
resignation other than for good reason.
For purposes of Mr. Klings employment agreement, the
term cause meant: (i) the executives
continuing substantial failure to perform his duties for the
Company (other than as a result of incapacity due to mental or
physical illness) after a written demand is delivered to him by
the Board; (ii) the executives willful engaging in
illegal conduct or gross misconduct that is materially and
demonstrably injurious to the Company; (iii) the
executives conviction of a felony or his plea of guilty or
nolo contendere to a felony, or (iv) the executives
willful and material breach of the confidentiality covenant
contained in the employment agreement.
For purposes of Mr. Klings employment agreement, the
term good reason meant: (i) the involuntary
removal of the executive from his position as President and
Chief Executive Officer of the Company without cause;
(ii) the Companys (A) assignment of
responsibilities to him that are materially inconsistent with
his position with the Company or (B) actions resulting in a
material diminution of his responsibilities or position;
(iii) the Companys material failure to comply with
any provision of the employment agreement; or (iv) the
Companys termination of his employment, other than as
permitted by the employment agreement.
The receipt of benefits following termination under
Mr. Klings employment agreement was contingent upon
him (i) executing and not revoking a general release in
favor of the Company, (ii) complying with the perpetual
confidentiality and non-disparagement covenants contained in the
employment agreement and (iii) refraining from engaging in
any direct or indirect competition with the Company for a period
of one year following his termination of employment.
In consideration for agreeing to serve as President and Chief
Executive Officer beyond the expiration of his original
employment agreement, the Company agreed in
Mr. Klings renewal employment agreement to grant
Mr. Kling the following grants: (i) a one-time grant
of 50,000 shares of performance-based restricted common
stock, half of which vest on the basis of the Boards
assessment of the Companys average RONA performance for
2010, 2011 and 2012, and half of which vest on the Boards
assessment of the Companys average TSR for the same
period; and (ii) annual grants during his employment with
the Company of performance-based restricted common stock,
vesting based on the Companys performance over a
three-year period, and restricted stock units, vesting equally
over a three-year period beginning on the first anniversary of
the grant date. In the event that Mr. Klings
employment with the Company was terminated under certain
circumstances (for example, prior to February 28, 2010 by
the Company without cause or due to his disability or death)
prior to vesting of these awards, the performance-based
restricted common stock awards would have continued to vest
following his termination of employment in accordance with the
terms of the awards, and Mr. Kling would have been entitled
to payment based on the actual performance achieved at the end
of the performance period; the vesting of the restricted stock
units would have been accelerated in full. However, with respect
to both the performance-based restricted common stock and the
time-based vesting restricted stock units, if
Mr. Klings employment had been terminated for
cause or Mr. Kling voluntarily terminated,
other than following the assignment to him of duties materially
inconsistent with his position or a material diminution in his
position or duties, all unvested shares would have been
forfeited.
Flowserve
Corporation Officer Severance Plan
All of the Named Executive Officers, other than Mr. Kling,
participated in the Companys Officer Severance Plan as of
December 31, 2009, as described under
Elements of the Executive Compensation
Program above. Under the Officer Severance Plan, the
Companys officers are provided the following benefits for
a termination of employment as a result of a reduction in force
or if the executive is terminated without cause: (i) two
years of the officers current base salary, paid on a
bi-weekly basis in accordance with the Companys regular
salary payments and (ii) a lump sum payment, payable at the
time annual incentive awards are paid to officers still employed
by the Company, substantially equivalent to the annual incentive
plan payment, at target, the officer would have otherwise
received under the Companys annual incentive plan if the
officer had been employed at the end of the applicable
performance period and was otherwise eligible for a payment
under the annual incentive plan. In addition, in order to
receive such payments, the executive must execute a release and
covenant not to sue and must continue to comply with a one year
non-competition and non-solicitation agreement following his
termination of employment. No benefits are payable under the
Officer Severance Plan to any officer who
40
receives benefits under the CIC Plan. The Officer Severance Plan
does not provide for any additional payments or benefits upon a
termination of employment by the Company for cause, upon the
executives resignation for any reason (including
good reason or constructive termination)
or upon the executives death or disability.
For purposes of the Officer Severance Plan, the term
cause means the covered executives
(i) willful and continued failure to perform basic job
duties after written demand for substantial performance is
delivered to the executive by the Board, which specifically
identifies the manner in which the Board believes that the
executive has not substantially performed the executives
duties, or (ii) willful engagement in conduct materially
and demonstrably injurious to the Company, monetarily or
otherwise.
In addition, to protect the Companys competitive position,
each executive is required to sign an agreement with the Company
that requires the executive to forfeit the proceeds from some or
all of the executives long-term incentive awards if the
executive engages in conduct that is detrimental to the Company.
Detrimental conduct includes working for certain competitors,
soliciting customers or employees after employment ends and
disclosure of confidential information in a manner that may
result in competitive harm to the Company.
Flowserve
Corporation Executive Officer
Change-in-Control
Severance Plan
All of the Named Executive Officers, including Mr. Kling,
participated in the Companys CIC Plan as of
December 31, 2009 as described under
Elements of the Executive Compensation
Program above. Benefits under the CIC Plan are triggered
if, within two years following a
change-in-control
of the Company (as defined in the CIC Plan and discussed below),
the employment of the Named Executive Officer is terminated
involuntarily other than for cause, death or disability, or for
reasons constituting a constructive termination. In
addition, benefits are triggered when a Named Executive Officer
is terminated within the
90-day
period immediately prior to a
change-in-control
if such termination (i) occurs after the initiation of
discussions leading to such
change-in-control
and (ii) can be demonstrated to have occurred at the
request or initiation of parties to such
change-in-control.
Upon the occurrence of the
change-in-control
and without a requirement that the Named Executive
Officers employment be terminated, all then-outstanding
unvested equity awards (including stock options, restricted
common stock and contingent performance share awards) will fully
vest.
The severance benefits provided upon a termination of employment
covered under the CIC Plan include:
|
|
|
|
|
A target bonus or target annual incentive award in effect at the
time of termination (or if higher, at the time of the
change-in-control),
pro-rated based on the number of days the Named Executive
Officer was employed during the performance period.
|
|
|
|
A lump sum cash payment equal to three times the sum of the
executives then-current annual base salary and target
bonus or other annual incentive award. For purposes of this
calculation, the base salary is the highest of: (i) the
highest-annualized monthly base salary during the twelve months
preceding the termination; (ii) the base salary in effect
on the date of termination; and (iii) the base salary in
effect on the date of the
change-in-control.
For purposes of this calculation, the target bonus or annual
incentive award is the higher of the target bonus or annual
incentive award in effect on (i) the date of termination or
(ii) the date of the
change-in-control.
|
|
|
|
Payment of awards granted under the long-term incentive program
and any other stock option or other stock-based long-term
incentive award that have been earned and not yet paid, pursuant
to the terms of the applicable plan.
|
|
|
|
Full vesting at target of each stock option or other stock-based
long-term incentive award. Named Executive Officers have
90 days following the date of employment termination to
exercise vested stock options.
|
|
|
|
Continuation of participation in the life insurance, medical,
health and accident benefit plans for a period of up to three
years following the date of termination.
|
|
|
|
Calculation of benefits under the Companys defined benefit
pension plan including supplemental retirement plan benefits
with three years added to the executives years of service
and age for retirement purposes.
|
|
|
|
A tax
gross-up
payment sufficient to compensate the executive for the amount of
any excise tax imposed by Section 4999 of the Code and for
any taxes imposed on such additional payment.
|
41
The potential tax
gross-up
payment under the CIC Plan, while potentially substantial and
possibly resulting in the Companys loss of a tax deduction
of compensation expense, is only applicable in the event of a
change-in-control.
The potential tax
gross-up
payment will change from time to time based on several factors,
including the executives
W-2
earnings, unvested equity value and our stock price.
The benefits under the CIC Plan, if payable, are in lieu of
severance benefits payable to Mr. Kling under his
employment agreement and the Officer Severance Plan.
For purposes of the CIC Plan,
change-in-control
generally means the occurrence of any of the following events:
|
|
|
|
|
any person acquires more than 30% of the Companys total
voting power represented by the Companys then outstanding
voting securities;
|
|
|
|
a majority of the members of Board are replaced in any
12-month
period other than in specific circumstances;
|
|
|
|
the consummation of a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation
in which either (i) the holders of the Companys
outstanding shares of common stock and outstanding voting
securities immediately prior to such merger or consolidation
receive securities possessing at least 50% of the total voting
power represented by the outstanding voting securities of the
surviving entity (or parent thereof) immediately after such
merger or consolidation, or (ii) the officers of the
Company immediately prior to such merger or consolidation
constitute at least three-quarters of the officers of the
surviving entity (or parent thereof) immediately after such
merger or consolidation, the elected members of the Board
immediately prior to such merger or consolidation constitute at
least three-quarters of the board of directors of the surviving
entity (or parent thereof) immediately after such merger or
consolidation and the positions of Chairman of the Board, Chief
Executive Officer and President of the corporation resulting
from merger or consolidation are held by individuals with the
same positions at the Company as of immediately prior to such
merger or consolidation; or
|
|
|
|
any person acquires more than 50% of the total gross fair market
value of the assets of the Company.
|
For purposes of the CIC Plan, the term cause means:
(i) the willful and continued failure by a covered
executive to substantially perform his duties with the Company
(other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for
substantial performance is delivered to the covered executive by
the Board that specifically identifies the manner in which the
Board believes that he has not substantially performed his
duties, or (ii) the willful engaging by the covered
executive in conduct materially and demonstrably injurious to
the Company, monetarily or otherwise. Notwithstanding the
forgoing, with respect to Mr. Kling, the term
cause for purposes of the CIC Plan had the same
meaning as such term had under his employment agreements.
For purposes of the CIC Plan, the term constructive
termination generally means the occurrence of any one of
the following events without the express written consent of the
covered executive:
|
|
|
|
|
the Companys assignment to the covered executive of any
duties inconsistent with his position, duties, responsibilities
and status with the Company immediately prior to a
change-in-control,
or a change in the covered executives reporting
responsibilities, titles or offices as in effect immediately
prior to a
change-in-control,
or any removal of the covered executive from or any failure to
re-elect the covered executive to any of such positions;
|
|
|
|
a material reduction by the Company of the covered
executives base salary;
|
|
|
|
the relocation (without the covered executives consent) of
the covered executives principal place of employment by
more than 35 miles from its location immediately prior to a
change-in-control;
or
|
|
|
|
any other material failure of the Company to honor all the terms
and provisions of the CIC Plan.
|
A constructive termination shall only occur if the
covered executive provides notice to the Company of the
occurrence of an event that constitutes constructive
termination within 30 days of the initial occurrence
of such event, the Company fails to cure such event within the
first 30 days following the receipt of such notice, and the
covered executive terminates his employment in the first
30 days following the end of the Companys opportunity
to cure.
The receipt of benefits following termination under the CIC Plan
is contingent upon the covered executive executing a
confidentiality and non-competition agreement and release in
favor of the Company.
42
The Companys supplemental pension and incentive plans for
senior management contain provisions that serve to implement the
provisions of the CIC Plan. Our Qualified Plan also confers
competitive post-employment benefits to the executives upon a
change-in-control.
The additional years of credited service and additional age
credit for purposes of determining an individuals benefits
under the plan compensate that individual upon his early
termination from the plan.
Quantification of
Potential Payments
The following tables set forth the estimated value of the
potential payments to each of the Named Executive Officers,
assuming the executives employment had terminated on
December 31, 2009. For the events of termination involving
a
change-in-control,
we assumed that the
change-in-control
also occurred on that date. In addition to the payments set
forth in the following tables, the Named Executive Officers may
receive certain payments upon their termination or a
change-in-control
pursuant to our Deferral Plan, Qualified Plan, SERP and SMRP.
Previously vested amounts and contributions made to such plans
by each Named Executive Officer are disclosed in the 2009
Non-Qualified Deferred Compensation and 2009 Pension
Benefits tables above. In addition and as described above,
the Companys existing employment agreement with
Mr. Kling expired on February 28, 2010. As such, the
following presentation of the estimated value of potential
payments to Mr. Kling at December 31, 2009 are
included for reference only and no longer accurately represent
Company obligations.
Mark A.
Blinn
|
|
|
|
|
|
|
|
|
Triggering Event
|
|
|
Compensation Component
|
|
|
Payout($)
|
|
Death
|
|
|
Life insurance benefit (1.5x base salary; third party payment)
|
|
|
|
1,372,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
1,372,500
|
|
|
Disability
|
|
|
Short-term and long-term disability benefit to age 65 (third
party payment)
|
|
|
|
4,363,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
4,363,042
|
|
|
Termination Without Cause
|
|
|
Termination payment (2x base salary)
|
|
|
|
1,830,000
|
|
by the Company or For Good
|
|
|
Target annual incentive award
|
|
|
|
915,000
|
|
|
|
|
|
|
|
|
|
|
Reason by the Employee
|
|
|
Total
|
|
|
|
2,745,000
|
|
|
Change-in-Control
|
|
|
Immediate vesting of restricted
stock(1)
|
|
|
|
3,875,223
|
|
|
|
|
|
|
|
|
|
|
Employment Continues
|
|
|
Total
|
|
|
|
3,875,223
|
|
|
Change-in-Control
|
|
|
Termination payment (3x base salary)
|
|
|
|
2,745,000
|
|
Termination Without Cause
|
|
|
Termination payment (3x target annual incentive award)
|
|
|
|
2,745,000
|
|
by the Company or
|
|
|
Prorated target annual incentive award
|
|
|
|
915,000
|
|
Constructive Termination
|
|
|
Immediate vesting of restricted
stock(1)
|
|
|
|
3,875,223
|
|
|
|
|
Supplemental pension benefit
|
|
|
|
829,122
|
|
|
|
|
Health & welfare benefit
|
|
|
|
48,839
|
|
|
|
|
Excise Tax and gross-up
payment(2)
|
|
|
|
2,488,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
13,646,532
|
|
|
|
|
|
(1)
|
|
These amounts are calculated
assuming that the market price per share of the Companys
common stock on the date of termination of employment was equal
to the closing price of the Companys common stock on
December 31, 2009 ($94.53).
|
|
(2)
|
|
For purposes of computing the
excise tax and
gross-up
payments, base amount calculations are based on taxable wages
for the years 2004 through 2008 and annualized for the year in
which the executive commenced employment with the Company (if
after 2002).
|
43
Lewis M.
Kling Former Potential
Payments(1)
|
|
|
|
|
|
|
|
|
Triggering Event
|
|
|
Compensation Component
|
|
|
Payout($)
|
|
Death
|
|
|
Life insurance benefit (1.5x base salary; third party payment)
|
|
|
|
1,558,573
|
|
|
|
|
Immediate vesting of restricted
stock(2)
|
|
|
|
18,027,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
19,586,248
|
|
|
Disability
|
|
|
Short-term disability for 6 mo. and long-term disability for 30
months (third party payment)
|
|
|
|
909,720
|
|
|
|
|
Immediate vesting of restricted
stock(2)
|
|
|
|
18,027,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
18,937,395
|
|
|
Termination Without Cause
|
|
|
Termination payment (1x base salary)
|
|
|
|
1,032,382
|
|
by the Company or For Good
|
|
|
Prior year incentive award plus prorated target annual incentive
award
|
|
|
|
3,515,064
|
|
Reason by the Employee
|
|
|
Immediate vesting of restricted
stock(2)
|
|
|
|
18,027,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
22,575,121
|
|
|
Change-in-Control
|
|
|
Immediate vesting of restricted
stock(2)
|
|
|
|
18,027,675
|
|
|
|
|
|
|
|
|
|
|
Employment Continues
|
|
|
Total
|
|
|
|
18,027,675
|
|
|
Change-in-Control
|
|
|
Termination payment (3x base salary)
|
|
|
|
3,097,146
|
|
Termination Without Cause
|
|
|
Termination payment (3x target annual incentive award)
|
|
|
|
3,097,146
|
|
by the Company or
|
|
|
Prorated target annual incentive award
|
|
|
|
1,032,382
|
|
Constructive Termination
|
|
|
Immediate vesting of restricted
stock(2)
|
|
|
|
18,027,675
|
|
|
|
|
Supplemental pension benefit
|
|
|
|
1,293,908
|
|
|
|
|
Health & welfare benefit
|
|
|
|
76,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(3)
|
|
|
|
26,624,882
|
|
|
|
|
|
(1)
|
|
Mr. Kling retired from the
Company on February 28, 2010 upon the expiration of his
employment agreement.
|
|
(2)
|
|
These amounts are calculated
assuming that the market price per share of the Companys
common stock on the date of termination of employment was equal
to the closing price of the Companys common stock on
December 31, 2009 ($94.53).
|
|
(3)
|
|
For 2009, Mr. Klings
total payments were within the safe harbor amount
prescribed under Section 280G of the Code and, as such, no
excise tax and
gross-up
payment would be necessary.
|
44
Richard J.
Guiltinan
|
|
|
|
|
|
|
|
|
Triggering Event
|
|
|
Compensation Component
|
|
|
Payout($)
|
Death
|
|
|
Life insurance benefit (1.5x base salary; third party payment)
|
|
|
|
546,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
546,065
|
|
|
Disability
|
|
|
Short-term and long-term disability benefit to age 65 (third
party payment)
|
|
|
|
2,327,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
2,327,692
|
|
|
Termination Without Cause
|
|
|
Termination payment (2x base salary)
|
|
|
|
728,086
|
|
by the Company or For Good
|
|
|
Target annual incentive award
|
|
|
|
182,022
|
|
|
|
|
|
|
|
|
|
|
Reason by the Employee
|
|
|
Total
|
|
|
|
910,108
|
|
|
Change-in-Control
|
|
|
Immediate vesting of restricted
stock(1)
|
|
|
|
1,307,149
|
|
|
|
|
|
|
|
|
|
|
Employment Continues
|
|
|
Total
|
|
|
|
1,307,149
|
|
|
Change-in-Control
|
|
|
Termination payment (3x base salary)
|
|
|
|
1,092,129
|
|
Termination Without Cause
|
|
|
Termination payment (3x target annual incentive award)
|
|
|
|
546,066
|
|
by the Company or
|
|
|
Prorated target annual incentive award
|
|
|
|
182,022
|
|
Constructive Termination
|
|
|
Immediate vesting of restricted
stock(1)
|
|
|
|
1,307,149
|
|
|
|
|
Supplemental pension benefit
|
|
|
|
287,865
|
|
|
|
|
Health & welfare benefit
|
|
|
|
46,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(2)
|
|
|
|
3,461,380
|
|
|
|
|
|
(1)
|
|
These amounts are calculated
assuming that the market price per share of the Companys
common stock on the date of termination of employment was equal
to the closing price of the Companys common stock on
December 31, 2009 ($94.53).
|
|
(2)
|
|
For 2009, Mr. Guiltinans
total payments were within the safe harbor amount
prescribed under Section 280G of the Code and, as such, no
excise tax and
gross-up
payment would be necessary.
|
Thomas E.
Ferguson
|
|
|
|
|
|
|
|
|
Triggering Event
|
|
|
Compensation Component
|
|
|
Payout($)
|
Death
|
|
|
Life insurance benefit (1.5x base salary; third party payment)
|
|
|
|
697,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
697,500
|
|
|
Disability
|
|
|
Short-term and long-term disability benefit to age 65 (third
party payment)
|
|
|
|
2,919,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
2,919,787
|
|
|
Termination Without Cause
|
|
|
Termination payment (2x base salary)
|
|
|
|
930,000
|
|
by the Company or For Good
|
|
|
Target annual incentive award
|
|
|
|
279,000
|
|
|
|
|
|
|
|
|
|
|
Reason by the Employee
|
|
|
Total
|
|
|
|
1,209,000
|
|
|
Change-in-Control
|
|
|
Immediate vesting of restricted
stock(1)
|
|
|
|
3,467,035
|
|
|
|
|
|
|
|
|
|
|
Employment Continues
|
|
|
Total
|
|
|
|
3,467,035
|
|
|
Change-in-Control
|
|
|
Termination payment (3x base salary)
|
|
|
|
1,395,000
|
|
Termination Without Cause
|
|
|
Termination payment (3x target annual incentive award)
|
|
|
|
837,000
|
|
by the Company or
|
|
|
Prorated target annual incentive award
|
|
|
|
279,000
|
|
Constructive Termination
|
|
|
Immediate vesting of restricted
stock(1)
|
|
|
|
3,467,035
|
|
|
|
|
Supplemental pension benefit
|
|
|
|
711,687
|
|
|
|
|
Health & welfare benefit
|
|
|
|
41,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(2)
|
|
|
|
6,731,114
|
|
|
|
|
|
(1)
|
|
These amounts are calculated
assuming that the market price per share of the Companys
common stock on the date of termination of employment was equal
to the closing price of the Companys common stock on
December 31, 2009 ($94.53).
|
|
(2)
|
|
For 2009, Mr. Fergusons
total payments were within the safe harbor amount
prescribed under Section 280G of the Code and, as such, no
excise tax and
gross-up
payment would be necessary.
|
45
Andrew J.
Beall Former Potential
Payments(1)
|
|
|
|
|
|
|
|
|
Triggering Event
|
|
|
Compensation Component
|
|
|
Payout($)
|
Death
|
|
|
Life insurance benefit (1.5x base salary; third party payment)
|
|
|
|
600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
600,000
|
|
|
Disability
|
|
|
Short-term and long-term disability benefit to age 65 (third
party payment)
|
|
|
|
2,893,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
2,893,060
|
|
|
Termination Without Cause
|
|
|
Termination payment (2x base salary)
|
|
|
|
800,000
|
|
by the Company or For Good
|
|
|
Target annual incentive award
|
|
|
|
240,000
|
|
|
|
|
|
|
|
|
|
|
Reason by the Employee
|
|
|
Total
|
|
|
|
1,040,000
|
|
|
Change-in-Control
|
|
|
Immediate vesting of restricted
stock(2)
|
|
|
|
3,543,596
|
|
|
|
|
|
|
|
|
|
|
Employment Continues
|
|
|
Total
|
|
|
|
3,543,596
|
|
|
Change-in-Control
|
|
|
Termination payment (3x base salary)
|
|
|
|
1,200,000
|
|
Termination Without Cause
|
|
|
Termination payment (3x target annual incentive award)
|
|
|
|
720,000
|
|
by the Company or
|
|
|
Prorated target annual incentive award
|
|
|
|
240,000
|
|
Constructive Termination
|
|
|
Immediate vesting of restricted
stock(2)
|
|
|
|
3,543,596
|
|
|
|
|
Supplemental pension benefit
|
|
|
|
415,581
|
|
|
|
|
Health & welfare benefit
|
|
|
|
47,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(3)
|
|
|
|
6,166,975
|
|
|
|
|
|
(1)
|
|
Mr. Beall retired from the
Company on April 1, 2010.
|
|
(2)
|
|
These amounts are calculated
assuming that the market price per share of the Companys
common stock on the date of termination of employment was equal
to the closing price of the Companys common stock on
December 31, 2009 ($94.53).
|
|
(3)
|
|
For 2009, Mr. Bealls
total payments were within the safe harbor amount
prescribed under Section 280G of the Code and, as such, no
excise tax and
gross-up
payment would be necessary.
|
Thomas L.
Pajonas
|
|
|
|
|
|
|
|
|
Triggering Event
|
|
|
Compensation Component
|
|
|
Payout($)
|
Death
|
|
|
Life insurance benefit (1.5x base salary; third party payment)
|
|
|
|
697,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
697,500
|
|
|
Disability
|
|
|
Short-term and long-term disability benefit to age 65 (third
party payment)
|
|
|
|
2,775,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
2,775,733
|
|
|
Termination Without Cause
|
|
|
Termination payment (2x base salary)
|
|
|
|
930,000
|
|
by the Company or For Good
|
|
|
Target annual incentive award
|
|
|
|
279,000
|
|
|
|
|
|
|
|
|
|
|
Reason by the Employee
|
|
|
Total
|
|
|
|
1,209,000
|
|
|
Change-in-Control
|
|
|
Immediate vesting of restricted
stock(1)
|
|
|
|
3,131,034
|
|
|
|
|
|
|
|
|
|
|
Employment Continues
|
|
|
Total
|
|
|
|
3,131,034
|
|
|
Change-in-Control
|
|
|
Termination payment (3x base salary)
|
|
|
|
1,395,000
|
|
Termination Without Cause
|
|
|
Termination payment (3x target annual incentive award)
|
|
|
|
837,000
|
|
by the Company or
|
|
|
Prorated target annual incentive award
|
|
|
|
279,000
|
|
Constructive Termination
|
|
|
Immediate vesting of restricted
stock(1)
|
|
|
|
3,131,034
|
|
|
|
|
Supplemental pension benefit
|
|
|
|
418,732
|
|
|
|
|
Health & welfare benefit
|
|
|
|
38,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(2)
|
|
|
|
6,099,527
|
|
|
|
|
|
(1)
|
|
These amounts are calculated
assuming that the market price per share of the Companys
common stock on the date of termination of employment was equal
to the closing price of the Companys common stock on
December 31, 2009 ($94.53).
|
|
(2)
|
|
For 2009, Mr. Pajonas
total payments were within the safe harbor amount
prescribed under Section 280G of the Code and, as such, no
excise tax and
gross-up
payment would be necessary.
|
46
Certain
Relationships and Related Transactions
The Company has adopted a written policy for approval of
transactions between the Company and its directors, director
nominees, executive officers, greater-than-5% beneficial owners
and their respective immediate family members, where the amount
involved in the transaction exceeds or is expected to exceed
$120,000 in a single calendar year.
The policy provides that the CG&N Committee reviews
transactions subject to the policy and determines whether or not
to approve or ratify those transactions. In doing so, the
CG&N Committee takes into account, among other factors it
deems appropriate, whether the transaction is on terms that are
no less favorable to the Company than terms generally available
to an unaffiliated third-party under the same or similar
circumstances and the extent of the related persons
interest in the transaction. In addition, the Board has
delegated authority to the Chairman of the CG&N Committee
to pre-approve or ratify transactions where the aggregate amount
involved is expected to be less than $1 million. A summary
of any new transactions pre-approved by the Chairman is provided
to the full CG&N Committee for its review in connection
with each regularly scheduled CG&N Committee meeting.
The CG&N Committee has considered and adopted standing
pre-approvals under the policy for limited transactions with
related persons. Pre-approved transactions include:
|
|
|
|
|
business transactions with other companies in which a related
persons only relationship is as an employee, director or
less-than-10% beneficial owner if the amount of business falls
below the thresholds in the NYSEs listing standards and
the Companys director independence standards; and
|
|
|
|
charitable contributions, grants or endowments to a charitable
organization where a related person is an employee if the
aggregate amount involved does not exceed the greater of
$1 million or 2% of the organizations total annual
receipts.
|
The CG&N Committee was not requested to and did not approve
any such transactions in 2009.
2009 Director
Compensation
The following table sets forth certain information with respect
to our non-employee director compensation for the fiscal year
ended December 31, 2009. Compensation information for
Mr. Blinn and Mr. Kling is set forth above in the
Summary Compensation Table. Neither Mr. Blinn
nor Mr. Kling received any compensation solely for service
as a director.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Stock
|
|
|
|
|
|
|
Paid in Cash
|
|
|
Awards
|
|
|
Total
|
Name
|
|
|
($)
|
|
|
($)(2)(3)
|
|
|
($)
|
Gayla J. Delly
|
|
|
|
56,250
|
|
|
|
|
100,016
|
|
|
|
|
156,266
|
|
Roger L. Fix
|
|
|
|
71,687
|
(4)(5)
|
|
|
|
100,016
|
|
|
|
|
171,703
|
|
John R. Friedery
|
|
|
|
64,687
|
(4)
|
|
|
|
100,016
|
|
|
|
|
164,703
|
|
Joe E. Harlan
|
|
|
|
63,250
|
(5)
|
|
|
|
100,016
|
|
|
|
|
163,266
|
|
Diane C.
Harris(1)
|
|
|
|
20,380
|
|
|
|
|
|
|
|
|
|
20,380
|
|
Michael F. Johnston
|
|
|
|
82,250
|
(4)(6)
|
|
|
|
100,016
|
|
|
|
|
182,266
|
|
Rick J. Mills
|
|
|
|
71,875
|
(4)
|
|
|
|
100,016
|
|
|
|
|
171,891
|
|
Charles M. Rampacek
|
|
|
|
99,500
|
(7)
|
|
|
|
100,016
|
|
|
|
|
199,516
|
|
James O. Rollans
|
|
|
|
147,250
|
(4)(6)(8)
|
|
|
|
100,016
|
|
|
|
|
247,266
|
|
William C. Rusnack
|
|
|
|
70,000
|
|
|
|
|
100,016
|
|
|
|
|
170,016
|
|
Kevin E. Sheehan
|
|
|
|
95,055
|
(6)(9)
|
|
|
|
100,016
|
|
|
|
|
195,071
|
|
|
|
|
|
(1)
|
|
Ms. Harris retired from the
Board effective as of the 2009 annual meeting of shareholders.
|
|
(2)
|
|
Eligible directors received an
annual equity grant of 1,478 shares of common stock on
May 14, 2009, the date of the Companys 2009 annual
meeting of shareholders. The amounts shown in this column
reflect the grant date fair value of the awards computed in
accordance with FASB ASC Topic 718, and are calculated using a
price per share of $67.67, the closing market price of the
Companys common stock as reported by the NYSE on the date
of grant. Assumptions used in the valuations are discussed in
Note 6 to the Companys audited consolidated financial
statements for the year ended December 31, 2009 in the
Annual Report.
|
|
(3)
|
|
The current directors each had
1,478 shares of restricted common stock outstanding at
December 31, 2009. No director had stock option awards
outstanding at December 31, 2009.
|
47
|
|
|
(4)
|
|
Amount reported includes a 15%
premium to actual fees triggered by the election to defer
cash-retained payments in the form of Company common stock under
the Companys director stock deferral plan.
|
|
(5)
|
|
Includes $7,000 in Board-approved
special additional compensation relating to service in 2008 and
2009 on the CEO Selection Committee at a pre-established rate of
$3,500 per day.
|
|
(6)
|
|
Includes $1,750 in Board-approved
special additional compensation relating to service in 2008 and
2009 on an ad hoc committee at a pre-established rate of $3,500
per day.
|
|
(7)
|
|
Includes $29,500 in Board-approved
special additional compensation relating to
Mr. Rampaceks service in 2008 and 2009 as Chairman of
the CEO Selection Committee at a pre-established rate of $3,500
per day.
|
|
(8)
|
|
Includes $62,772 representing a
pro-rated annual retainer for Mr. Rollans service as
the non-executive Chairman of the Board beginning in May 2009.
|
|
(9)
|
|
Includes $37,055 representing a
pro-rated annual retainer for Mr. Sheehans service as
the non-executive Chairman of the Board through May 2009.
|
Non-Executive
Chairman of the Board Compensation
Mr. Rollans receives $100,000 annually for his service as
non-executive Chairman of the Board. This payment is in addition
to Mr. Rollans basic annual retainer and committee
service fee compensation that he receives for serving as a Board
member and a committee member. Mr. Rollans receives this
additional compensation on a quarterly basis, in accordance with
the pre-established director compensation cycles. In 2009, this
additional compensation was prorated between Mr. Rollans
and Mr. Sheehan, as Mr. Sheehan served as
non-executive Chairman from January 2009 through May 2009, and
Mr. Rollans began serving as non-executive Chairman in May
2009.
2009 Director
Compensation
In 2009, non-employee directors received, as applicable:
(a) an annual cash retainer of $50,000; (b) an annual
cash committee service fee of $5,000; (c) an annual cash
committee chairman service fee of $10,000; and (d) equity
compensation with a target value of $100,000 per year. Directors
are also eligible to receive special additional compensation
when performing services that have been determined by the full
Board to be well above and beyond the normal director service
requirements. The Board has set a compensatory rate of $3,500
per day for such services. These compensation arrangements were
established by the Board after review of data prepared by
LB&Co, the O&C Committees independent
consultant, showing competitive director compensation levels for
the Companys high performance peer group, which is
discussed under Executive Compensation.
Pursuant to the Companys cash and stock director deferral
plans and equity compensation plans, directors may elect to
defer all or a portion of their annual cash compensation and
equity compensation. The annual cash compensation may be
deferred in the form of cash or in the form of an equivalent
value of Company common stock. Compensation deferred in the form
of cash accrues interest while deferred, and it does not accrue
above market rates or preferential earnings. If a director
elects to defer cash compensation in the form of Company common
stock, the director receives a 15% premium on the cash amount
originally deferred.
The equity portion of non-employee director compensation is
provided in the form of restricted common stock of the Company
having a $100,000 fair market valuation at the time of grant,
which is established on the date of the annual meeting of
shareholders of the applicable year. Voting rights accompany
such restricted common stock, which fully vest after one year
from the date of grant, upon the termination of the
directors service due to death or disability or upon a
change in control. This restricted common stock is also subject
to a holding period prohibiting resale of the stock for the
lesser of five years from the date of grant or one year after
the director ceases service on the Board.
48
Security
Ownership of Directors and Certain Executive Officers
The following table sets forth as of March 19, 2010
ownership of Company common stock by members of the Board, each
Named Executive Officer of the Company listed in the
Summary Compensation Table individually and all
members of the Board and executive officers as a group. Except
pursuant to applicable community property laws and except as
otherwise indicated, each shareholder identified possesses sole
voting and investment power with respect to his or her shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and nature of
|
|
|
Percent of
|
Name of Beneficial Owner
|
|
|
beneficial
ownership(1)
|
|
|
class(2)
|
|
Andrew J. Beall
|
|
|
|
29,876(3
|
)
|
|
|
|
|
*
|
Mark A. Blinn
|
|
|
|
106,232(4
|
)
|
|
|
|
|
*
|
Gayla J. Delly
|
|
|
|
2,616(5
|
)
|
|
|
|
|
*
|
Thomas E. Ferguson
|
|
|
|
55,608(6
|
)
|
|
|
|
|
*
|
Roger L. Fix
|
|
|
|
9,236(7
|
)
|
|
|
|
|
*
|
John R. Friedery
|
|
|
|
4,275(8
|
)
|
|
|
|
|
*
|
Richard J. Guiltinan
|
|
|
|
23,020(9
|
)
|
|
|
|
|
*
|
Joe E. Harlan
|
|
|
|
3,148(10
|
)
|
|
|
|
|
*
|
Michael F. Johnston
|
|
|
|
34,213(11
|
)
|
|
|
|
|
*
|
Lewis M. Kling
|
|
|
|
90,358(12
|
)
|
|
|
|
|
*
|
Rick J. Mills
|
|
|
|
6,083(13
|
)
|
|
|
|
|
*
|
Thomas L. Pajonas
|
|
|
|
33,416(14
|
)
|
|
|
|
|
*
|
Charles M. Rampacek
|
|
|
|
33,245(15
|
)
|
|
|
|
|
*
|
James O. Rollans
|
|
|
|
34,758(16
|
)
|
|
|
|
|
*
|
William C. Rusnack
|
|
|
|
17,036(17
|
)
|
|
|
|
|
*
|
Kevin E. Sheehan
|
|
|
|
38,628(18
|
)
|
|
|
|
|
*
|
|
All members of the Board and executive officers as a group
(18 individuals)
|
|
|
|
543,358(19
|
)
|
|
|
|
|
*
|
|
|
|
|
*
|
|
Less than 1%.
|
|
(1)
|
|
Beneficial ownership has been
determined in accordance with
Rule 13d-3
under the Exchange Act and, unless otherwise indicated,
represents securities for which the beneficial owner has sole
voting and investment power. Any securities held in the name of
and under the voting and investment power of a spouse of an
executive officer or director have been excluded.
|
|
(2)
|
|
Calculated based on
55,806,894 shares of Company common stock outstanding on
March 19, 2010, plus, for each person or group, any
securities that person or group has the right to acquire within
60 days pursuant to stock options under certain Company
stock option and incentive plans.
|
|
(3)
|
|
Includes 10,174 shares of
common stock that Mr. Beall has the right to acquire within
60 days pursuant to contingent performance share units.
|
|
(4)
|
|
Includes 33,500 and
17,912 shares of common stock that Mr. Blinn has the
right to acquire within 60 days pursuant to stock options
and contingent performance share units, respectively.
|
|
(5)
|
|
Represents compensational shares
that have been deferred under the director stock deferral plan
and/or a Company stock plan. Ms. Delly does not possess any
voting or investment power over these deferred shares.
|
|
(6)
|
|
Includes 12,072 shares of
common stock that Mr. Ferguson has the right to acquire
within 60 days pursuant to contingent performance share
units. Also includes 4,116 compensational shares that have been
deferred under the Deferral Plan. Mr. Ferguson does not
possess any voting or investment power over these deferred
shares.
|
|
(7)
|
|
Represents compensational shares
that have been deferred under the director stock deferral plan
and/or a Company stock plan. Mr. Fix does not possess any
voting or investment power over these deferred shares.
|
|
(8)
|
|
Includes 4,260 compensational
shares that have been deferred under the director stock deferral
plan and/or a Company stock plan. Mr. Friedery does not
possess any voting or investment power over these deferred
shares.
|
|
(9)
|
|
Includes 4,974 shares of
common stock that Mr. Guiltinan has the right to acquire
within 60 days pursuant to contingent performance share
units.
|
|
(10)
|
|
Represents compensational shares
that have been deferred under the director stock deferral plan
and/or a Company stock plan. Mr. Harlan does not possess
any voting or investment power over these deferred shares.
|
|
(11)
|
|
Represents compensational shares
that have been deferred under the director stock deferral plan
and/or a Company stock plan. Mr. Johnston does not possess
any voting or investment power over these deferred shares.
|
|
(12)
|
|
Shares are held by The Lewis Mark
Kling Trust, of which Mr. Kling is a trustee. Includes
51,840 shares of common stock that The Lewis Mark Kling
Trust has the right to acquire within 60 days pursuant to
contingent performance shares.
|
49
|
|
|
(13)
|
|
Represents compensational shares
that have been deferred under the director stock deferral plan
and/or a Company stock plan. Mr. Mills does not possess any
voting or investment power over these deferred shares.
|
|
(14)
|
|
Includes 12,898 shares of
common stock that Mr. Pajonas has the right to acquire
within 60 days pursuant to contingent performance share
units.
|
|
(15)
|
|
Includes 32,745 compensational
shares that have been deferred under the director stock deferral
plan and/or a Company stock plan. Mr. Rampacek does not
possess any voting or investment power over these deferred
shares.
|
|
(16)
|
|
Represents compensational shares
that have been deferred under the director stock deferral plan
and/or a Company stock plan. Mr. Rollans does not possess
any voting or investment power over these deferred shares.
|
|
(17)
|
|
Includes 15,358 compensational
shares that have been deferred under the director stock deferral
plan and/or a Company stock plan. Mr. Rusnack does not
possess any voting or investment power over these deferred
shares. Also includes 200 shares held in a family trust
under which Mr. Rusnack shares voting power with his spouse.
|
|
(18)
|
|
Represents compensational shares
that have been deferred under the director stock deferral plan
and/or a Company stock plan. Mr. Sheehan does not possess
any voting or investment power over these deferred shares.
|
|
(19)
|
|
Includes 47,700 and
79,490 shares of common stock that members of this group
have the right to acquire within 60 days pursuant to stock
options and contingent performance share units, respectively,
under certain Company stock incentive plans. Also includes
225,864 compensational shares that have been deferred under
various Company plans for which no member of the group possesses
voting power.
|
Security
Ownership of Certain Beneficial Owners
The following shareholders reported to the SEC that they
beneficially own more than 5% of the Companys common
stock. The information is presented as of December 31, 2009
and is based on stock ownership reports on Schedule 13G
filed with the SEC and subsequently provided to us. We know of
no other shareholder holding 5% or more of the Companys
common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and nature of
|
|
|
|
|
|
Name and Address of Beneficial Owner
|
|
|
beneficial
ownership(1)
|
|
|
|
Percent of
class(2)
|
|
BlackRock, Inc.
40 East 52nd Street
New York, NY 10022
|
|
|
|
4,914,467(3
|
)
|
|
|
|
8.81
|
%
|
The Vanguard Group, Inc.
100 Vanguard Blvd.
Malvern, PA 19355
|
|
|
|
2,930,153(4
|
)
|
|
|
|
5.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Beneficial ownership has been
determined in accordance with
Rule 13d-3
under the Exchange Act and, unless otherwise indicated,
represents securities for which the beneficial owner has sole
voting and investment power.
|
|
(2)
|
|
Calculated based on
55,806,894 shares of Company common stock outstanding on
March 19, 2010, plus, for each person or group, any
securities that person or group has the right to acquire within
60 days pursuant to stock options under certain Company
stock option and incentive plans.
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(3)
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|
Based on a Schedule 13G filed
with the SEC on January 29, 2010. The filing indicates sole
voting power for 4,914,467 shares, shared voting power for
0 shares, sole dispositive power for 4,914,467 shares
and shared dispositive power for 0 shares.
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(4)
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Based on a Schedule 13G filed
with the SEC on February 8, 2010. The filing indicates sole
voting power for 89,477 shares, shared voting power for
0 shares, sole dispositive power for 2,849,976 shares
and shared dispositive power for 80,177 shares.
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50
Equity
Compensation Plan Information
The following table provides certain information about our
common stock that may be issued upon the exercise of options
granted under the Flowserve Corporation 2004 Stock Compensation
Plan (the 2004 Plan), the Flowserve Corporation 1999
Stock Option Plan (the 1999 Plan) and the Flowserve
Corporation 1997 Stock Option Plan (the 1997 Plan),
as of December 31, 2009. The 1999 Plan and the 1997 Plan
have expired. In 2009, the Company adopted, and the
Companys shareholders approved, the Flowserve Corporation
Equity and Incentive Compensation Plan (the 2010
Plan), effective January 1, 2010. As such, the 2010
Plan had not been used as of December 31, 2009. No options
were granted under any plan in 2009.
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Number of
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Securities
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Remaining Available
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Number of Securities
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|
for Future Issuance
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to Be Issued Upon
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Weighted-Average
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Under Equity
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Exercise of
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Exercise Price of
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Compensation Plans
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Outstanding
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|
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Outstanding
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|
(Excluding Securities
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|
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Options, Warrants
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|
Option, Warrants
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|
Reflected in the
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Plan Category
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and
Rights(1)
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and
Rights(2)
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First
Column)(3)
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Equity compensation plans approved by securities holders
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206,815
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$
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42.58
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3,570,581
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Equity compensation plans not approved by securities holders
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Total
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|
206,815
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|
|
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$
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42.58
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|
|
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|
3,570,581
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|
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(1)
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All shares of common stock included
in this column underlie stock options awarded under the 1997
Plan, the 1999 Plan and the 2004 Plan.
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(2)
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These amounts represent the
weighted average exercise price for the total number of
outstanding options.
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(3)
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The shares of common stock
reflected in this column include 2,900,000 shares available
for issuance under the 2010 Plan. The shares of common stock
reflected in this column also include 670,581 shares that
were available for issuance under the 2004 Plan at
December 31, 2009. This column does not reflect shares that
were the subject of outstanding awards under the 2004 Plan at
December 31, 2009.
|
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the
Companys directors, executive officers and any person
beneficially owning more than 10% of the Companys common
stock to file reports of ownership and any changes in ownership
with the SEC. Based solely on the Companys review of
reports furnished to the Company and representations provided to
the Company by persons required to file reports under
Section 16 of the Exchange Act, the Companys
directors, executive officers and greater than ten-percent
beneficial owners properly and timely complied with their
Section 16(a) filing requirements during the fiscal year
ended December 31, 2009.
Proposal Number
Two: Ratification of Appointment of PricewaterhouseCoopers LLP
to Serve as Our Independent Registered Public Accounting Firm
For 2010
The Audit Committee has approved PricewaterhouseCoopers LLP
(PwC) to serve as our independent registered public
accounting firm for 2010.
We are asking our shareholders to ratify the appointment of PwC
as our independent registered public accounting firm. Although
shareholder ratification is not required by our By-laws or
otherwise, the Board is submitting this proposal for
ratification because we value our shareholders views on
the Companys independent registered public accounting firm
and as a matter of good corporate practice. In the event that
our shareholders fail to ratify the selection, it will be
considered as a direction to the Audit Committee to consider the
selection of a different firm. Even if the selection is
ratified, the Audit Committee in its discretion may select a
different independent registered public accounting firm at any
time during the year if it determines that such a change would
be in the best interests of the Company and its shareholders.
51
Required Vote and
Recommendation
The proposal to ratify the appointment of PwC to serve as the
Companys independent registered public accounting firm for
2010 requires the affirmative vote of at least a majority of the
votes cast in favor of or against this proposal. Abstentions
will count as votes cast on this proposal, but will not count as
votes for the proposal, and therefore will have the
same effect as votes against the proposal.
Additionally, broker non-votes will not be considered to have
voted on this proposal, and therefore will have no effect on the
proposal. The individuals named as proxies on the enclosed proxy
card will vote your proxy FOR ratifying the
appointment of PwC unless you instruct otherwise on the proxy or
unless you withhold authority to vote.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP TO
SERVE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
2010.
Report of the
Audit Committee
The Audit Committee of the Board of Directors of the Company is
comprised of five independent directors, Rick J. Mills
(Chairman), Gayla J. Delly, John R. Friedery, Joseph E. Harlan
and James O. Rollans. The Audit Committee operates under a
written charter adopted by the Board. The Audit Committee met
eight times in 2009.
Management has primary responsibility for the Companys
internal controls and the financial reporting process. The
independent auditors are responsible for performing an
independent audit of the Companys consolidated financial
statements in accordance with generally accepted auditing
standards and issuing a report on this audit. The Audit
Committees responsibility is to monitor and oversee this
process, including the engagement of the independent auditors,
the pre-approval of their annual audit plan and the review of
their annual audit report.
In this context, the Audit Committee has met and held detailed
discussions with management on the Companys consolidated
financial statements. Management represented to the Audit
Committee that the Companys consolidated financial
statements were prepared in accordance with accounting
principles generally accepted in the United States and that
these statements fairly present the financial condition and
results of operations of the Company for the period described.
The Audit Committee has relied upon this representation without
any independent verification, except for the work of PwC, the
Companys independent registered public accounting firm.
The Audit Committee also discussed these statements with PwC,
both with and without management present, and has relied upon
their reported opinion on these financial statements.
The Audit Committee further discussed with PwC matters required
to be discussed by Statement on Auditing Standards No. 114
(The Auditors Communication With Those Charged With
Governance), as amended, as adopted by the Public Company
Accounting Oversight Board (PCAOB). In addition, the
Audit Committee received from PwC the written disclosures and
letter required by applicable requirements of the PCAOB
regarding PwCs communications with the Audit Committee
concerning its independence, and has discussed with PwC its
independence from the Company and its management.
Based on these reviews and discussions, including the Audit
Committees specific review with management of the
Companys Annual Report and based upon the representations
of management and the report of the independent auditors to the
Audit Committee, the Audit Committee recommended to the Board
that the audited consolidated financial statements be included
in the Companys Annual Report filed with the SEC.
Rick J. Mills, Chairman
Gayla J. Delly
John R. Friedery
Joseph E. Harlan
James O. Rollans
52
Other Audit
Information
Relationship with
Independent-Registered Public Accounting Firm
The Audit Committee appointed PwC to serve as the Companys
independent registered public accounting firm for the fiscal
year ending December 31, 2009. In this role, PwC audits the
financial statements of the Company. Representatives from PwC
will be present at the Annual Meeting and will be available to
respond to appropriate questions from shareholders. They will
have the opportunity to make a statement if they desire to do so.
Audit and
Non-Audit Fees and Services
The following table summarizes the aggregate fees (excluding
value added taxes) for professional services incurred by the
Company for the audits of its 2009 and 2008 financial statements
and other fees billed to the Company by PwC in 2009 and 2008. In
general, the Company retains PwC for services that are logically
related to or natural extensions of the Companys annual
audit.
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2009
|
|
|
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2008
|
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AUDIT FEES
|
|
|
$
|
9,244,000
|
|
|
|
$
|
10,323,000
|
|
AUDIT RELATED FEES
|
|
|
|
338,000
|
|
|
|
|
919,000
|
|
TOTAL AUDIT RELATED FEES
|
|
|
|
9,582,000
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|
|
|
|
11,242,000
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TAX FEES
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|
|
|
|
|
|
|
|
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Compliance
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|
|
|
246,000
|
|
|
|
|
108,000
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|
Consulting/Advisory
|
|
|
|
106,000
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|
|
|
|
655,000
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|
TOTAL TAX FEES
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352,000
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|
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763,000
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ALL OTHER FEES
|
|
|
|
157,000
|
|
|
|
|
119,000
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|
|
TOTAL FEES
|
|
|
$
|
10,091,000
|
|
|
|
$
|
12,124,000
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|
|
The Audit Committee pre-approved all of the audit and non-audit
fees described above for the years ended December 31, 2009
and December 31, 2008 in accordance with its approval
policy discussed below.
Audit Committee
Approval Policy
The Audit Committee approves all proposed services and related
fees to be rendered by the Companys independent registered
public accounting firm prior to their engagement. Services to be
provided by the Companys independent registered public
accounting firm generally include audit services, audit-related
services and certain tax services. All fees for the annual audit
or audit-related services to be performed by the Companys
independent registered public accounting firm are itemized for
the purposes of approval. The Audit Committee approves the scope
and timing of the external audit plan for the Company and
focuses on any matters that may affect the scope of the audit or
the independence of the Companys independent registered
public accounting firm. In that regard, the Audit Committee
receives certain representations from the Companys
independent registered public accounting firm regarding their
independence and permissibility under the applicable laws and
regulations of any services provided to the Company outside the
scope of those otherwise allowed. The Audit Committee also
approves the internal audit plan for the Company.
The Audit Committee may delegate its approval authority to the
Chairman of the Audit Committee to the extent allowed by law. In
the case of any delegation, the Chairman must disclose all
approval determinations to the full Audit Committee as soon as
possible after such determinations have been made.
Other
Matters
The Company knows of no other matters to be submitted to the
shareholders at the Annual Meeting. If any other matters
properly come before the shareholders at the Annual Meeting, it
is the intention of the persons named on the enclosed proxy card
to vote the shares represented thereby on such matters in
accordance with their best judgment.
53
Map and Driving
Directions to
The Flowserve Corporation Learning Resource Center
Instructions from
Dallas/Fort Worth International Airport (DFW):
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Take the north exit from the airport to John Carpenter Freeway
(Highway 114) heading east
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Exit Esters Boulevard and turn left onto Esters Boulevard
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The Flowserve Corporation Learning Resource Center is on the
northeast corner of Esters Boulevard and West Royal Lane
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Instructions from
Downtown Dallas:
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Take Interstate Highway 35E heading north
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|
|
Take the left fork onto Highway 183 toward IRVING (Highway
114)/DFW AIRPORT
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|
Take the right fork onto John W. Carpenter Freeway (Highway
114) toward GRAPEVINE/DFW AIRPORT NORTH ENTRY and continue
west in one of the outside lanes until you reach the Esters
Boulevard exit
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Exit Esters Boulevard and turn right onto Esters Boulevard
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The Flowserve Corporation Learning Resource Center is on the
northeast corner of Esters Boulevard and West Royal Lane
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54
YOUR VOTE IS IMPORTANT
Regardless of whether you plan to attend the
2010 Annual Meeting of Shareholders, you can be sure
your shares are represented at the meeting by voting
online or promptly returning your proxy in the enclosed
envelope.
Proxy card must be signed and dated on the reverse side.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
2010 ANNUAL MEETING OF SHAREHOLDERS
May 14, 2010
The undersigned shareholder(s) hereby acknowledge(s) receipt of the Notice of 2010 Annual
Meeting of Shareholders dated April 1, 2010 and the accompanying Flowserve Corporation Proxy
Statement, and hereby appoint(s) MARK A. BLINN and JAMES O. ROLLANS, and each of them, with
full power to act without the other, as proxies with full power of substitution, to represent
and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock
of Flowserve Corporation that the shareholder(s) is/are entitled to vote at the 2010 Annual
Meeting of Shareholders of Flowserve Corporation to be held at
11:30 a.m. Central Time on Friday, May 14, 2010,
at the Flowserve Corporation Learning Resource Center, 4343 West Royal Lane, Irving, Texas 75063,
and any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED SHAREHOLDER(S).
IF NO SUCH DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED BY THE PROXIES IN THEIR DISCRETION FOR
SUCH DISCRETIONARY MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE
Address
changes/Comments:
(if you noted any address Changes/Comments above, please mark corresponding box on the reverse side.)
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
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VOTE BY INTERNET - www.proxyvote.com Use the Internet to
transmit your voting instructions and for
electronic delivery of information up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy
card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic
voting instruction form. |
FLOWSERVE CORPORATION C/O PROXY SERVICES P.O. BOX 9142 FARMINGDALE, NY 11735
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ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER
COMMUNICATIONS
If you would like to reduce the costs incurred by Flowserve Corporation
in mailing proxy materials, you can consent to receiving all future
proxy statements, proxy cards and annual reports electronically
via e-mail or the Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the Internet and,
when prompted, indicate that you agree to receive or access
shareholder communications electronically in future years. |
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VOTE BY
PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions until 11:59 P.M. Eastern Time the day before the cut-off date
or meeting date. Have your proxy card in hand when you call
and then follow the instructions. |
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VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Flowerserve Corporation,
c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
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FLOWSERVE CORPORATION |
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THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR ITEMS
1 AND 2. |
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Vote on Directors |
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For
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Withhold |
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For All |
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To withhold
authority to vote for any individual nominee(s), mark For All Except
and write the number(s) of the nominee(s) on the line below.
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1. |
ELECTION OF DIRECTORS |
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All |
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All |
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Except |
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Nominees: |
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01) Gayla J. Delly 2013 |
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02) Rick J. Mills 2013 |
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0 |
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0 |
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0 |
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03) Charles M. Rampacek
2013 |
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04) William C. Rusnack
2013 |
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05) Mark A. Blinn 2012 |
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For |
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Against |
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Abstain |
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Vote on Proposals |
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2. |
Ratify the appointment of PricewaterhouseCoopers LLP to serve as the Companys independent
registered public accounting firm for 2010.
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0 |
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0 |
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0 |
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3. |
In their discretion, upon such other matters that may properly come before the meeting or any
adjournment or postponement thereof.
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The shares represented by this proxy when properly executed will be voted in the manner directed
herein by the undersigned Shareholder(s). If no direction is made, this proxy will be voted FOR
items 1 and 2. If any other matters properly come before the meeting, or if cumulative voting is
required, the person named in this proxy will vote in their discretion.
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For address changes and/or comments, please check
this box and write them on the back where indicated. |
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0 |
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Yes |
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No |
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Please indicate if you plan to attend this meeting. |
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0 |
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0 |
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Please sign your name exactly as it appears hereon. When signing as attorney, executor,
administrator, trustee or guardian, please add your title as such. When signing as joint tenants,
all parties in the joint tenancy must sign. If a signer is a corporation, please sign in full
corporate name by duly authorized officer. |
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Signature
[PLEASE SIGN WITHIN BOX] |
Date |
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Signature (Joint
Owners) |
Date |
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