UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 11, 2005
FLOWSERVE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
New York 1-13179 31-0267900
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
5215 N. O'Connor Blvd., Suite 2300, Irving, Texas 75039
(Address of Principal Executive Offices) (Zip Code)
(972) 443-6500
(Registrant's telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 Entry into a Material Definitive Agreement.
Transitional Executive Security Plan
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A search for a new chief executive officer is being conducted by a
transition committee of Flowserve Corporation's (the "Company") Board of
Directors following the previously announced joint agreement between the Board
and C. Scott Greer, President and Chief Executive Officer, not to renew Mr.
Greer's employment agreement with the Company. The Board of Directors has
adopted a Transitional Executive Security Plan (the "Plan"), effective as of
March 14, 2005, to promote continuity in management during this transition
period. The Board concluded that the Plan is appropriate and desirable to
promote management stability while the Company is experiencing increased
bookings and stronger business conditions in many of its markets. The Board is
optimistic about the Company's business prospects and decided to adopt the
Plan as a special incentive to retain and motivate the senior management staff
during the chief executive officer search period.
The Plan provides for two mutually exclusive benefits. First, the
Company will pay a cash lump sum equal to twelve (12) months base pay to any
participant who remains employed by the Company through the first anniversary
of the date as of which a new Chief Executive Officer commences employment
with the Company. Second, the Company will pay a cash lump sum equal to
eighteen (18) months base pay to any participant whose employment is
terminated by the Company without cause (as defined in the Plan) before such
date (unless such participant is entitled to benefits under a change in
control severance plan maintained by the Company). In addition, for any
participant who is eligible for such a severance payment under the Plan, the
Company will provide continued welfare benefits for nine (9) months (reduced
by benefits from any subsequent employer), and all outstanding equity awards
granted to the Participant will immediately vest in full and generally remain
exercisable (if applicable) for a period of 180 days following termination of
employment. In either case, the payment of benefits is conditioned upon a
customary release of claims by the Participant.
The following executive officers of the Company participate in the
Plan: Lew Kling, Ron Shuff, Mark Blinn, Cheryl Thompson, Linda Jojo, and John
Jacko. Certain other officers of the Company also participate in the Plan, and
the Company's Organization and Compensation Committee (which administers the
Plan) may name additional participants from time to time.
The foregoing brief summary of the Plan is qualified in its entirety
by the copy of the Plan that is attached hereto as Exhibit 10.1 and
incorporated herein by reference.
2004 Annual Incentive Plan Awards and 2005 Salary Adjustments
-------------------------------------------------------------
Effective March 11, 2005, the Company's Organization and Compensation
Committee approved 2004 Annual Incentive Plan ("AIP") awards to certain
executive officers in the amounts set forth in the chart below. The chart also
sets out the base salaries of those executives as adjusted for 2005.
Executive Salary AIP Award
--------- ------ ---------
Scott Greer $810,000.00 $917,700.00
Lew Kling $520,000.00 $256,468.85
Ron Shuff $310,500.00 $194,683.50
Mark Blinn $406,500.00 $42,983.60
Cheryl Thompson $264,500.00 $154,698.00
Linda Jojo $258,500.00 $61,968.03
John Jacko $253,000.00 $145,521.00
The AIP awards noted above were calculated and granted pursuant to
the AIP formula which was established and approved by the Organization and
Compensation Committee in early 2004. This formula contained target metrics
for corporate cash flow and operating income. The Company announced on
February 7, 2005 that it had generated sufficient cash to repay debt totaling
$210 million, which was far above the AIP target. In calculating operating
income under the AIP formula, certain special compliance costs relating to the
Sarbanes-Oxley Act of 2002 were excluded, since these were deemed to be, for
the purposes of the AIP, unusual expenses outside the AIP formula. The Company
also announced on February 7, 2005 that it had incurred approximately $16
million of increased costs for Sarbanes-Oxley compliance in 2004.
The AIP awards for Mr. Kling, Mr. Blinn and Ms. Jojo noted above were
reduced on a pro-rata basis to reflect the fact that they joined the Company
during 2004 and thus reflect their actual months of Company service during the
year.
ITEM 9.01. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
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Exhibit 10.1 Flowserve Corporation Transitional Executive Security Plan
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FLOWSERVE CORPORATION
Dated: March 17, 2005 By: /s/ Ronald F. Shuff
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Ronald F. Shuff
Vice President, Secretary and
General Counsel
EXHIBIT INDEX
Exhibit No. Description
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Exhibit 10.1 Flowserve Corporation Transitional Executive Security Plan