125,000,000

FLOWSERVE CORPORATION, a publicy-traded corporation organized and existing under the laws of the State of New York and having its address at 5215 N. O’Connor Blvd., Suite 2300, Irving, Texas USA 75039, as Original LG User and Guarantor (the “Company”);

THE SUBSIDIARIES of the Company listed in Part I (The Original LG Users) of Schedule 1 (The Original Parties) as Original LG Users (together with the Company as Original LG User, the “Original LG Users”);

CALYON, a French “société anonyme”, having a share capital of EUR 6,055,504,839, and its registered office at 9, Quai du Président Paul Doumer, 92920 Paris La Défense cedex, France, registred under the no. 304 187 701 with the Registre du Commerce et des Sociétés of Nanterre (France), as mandated lead arranger (the “Arranger”);

THE FINANCIAL INSTITUTIONS listed in Part II (The Original Participating Banks) of Schedule 1 (The Original Parties) as Participating Banks (the “Original Participating Banks”);

CALYON, a French “société anonyme”, having a share capital of EUR 6,055,504,839, and its registered office at 9, Quai du Président Paul Doumer, 92920 Paris La Défense cedex, France, registred under the no. 304 187 701 with the Registre du Commerce et des Sociétés of Nanterre (France), as administrative agent of the Finance Parties (the “Administrative Agent”); and

CALYON, a French “société anonyme”, having a share capital of EUR 6,055,504,839, and its registered office at 9, Quai du Président Paul Doumer, 92920 Paris La Défense cedex, France, registred under the no. 304 187 701 with the Registre du Commerce et des Sociétés of Nanterre (France), as issuing bank (the “Issuing Bank”).

with respect to the financial statements of Flowserve Group Member incorporated in the United States of America, the United States of America generally accepted accounting principles applied on a consistent basis (hereafter, in this definition, a “Recommendation”), and when a matter is not covered by a Recommendation, other accounting principles that either:

are generally accepted by virtue of their use in similar circumstances by a significant number of profit-oriented entities in the United States of America; or

are consistent with the Recommendations and are developed through the exercise of professional judgment and the application of the concepts described in the accounting principles referred to above,

provided that, in the case of either subparagraph (i) or (ii) above, the Auditors will have concurred in the use of such other accounting principles; and

with respect to the financial statements of any other Flowserve Group Member, generally accepted accounting principles applicable to that person and in effect from time to time in the jurisdiction of incorporation of that person.

the Base Currency Amount of its participation in any outstanding Letter of Credit; and

in relation to any proposed Utilisation, the Base Currency Amount of its participation in any other Utilisations that are due to be made on or before the proposed Issuance Date,

any agreement, deed, indenture or other document providing for or evidencing Indebtedness for Borrowed Money;

a letter of credit facility (including a facility in respect of documentary letters of credit), letter of guarantee facility or facility for the issue of similar instruments (but not including any facility for the issuance of bonds by a surety or an insurance company); and

any agreement, deed, indenture or other document providing for the issue of any guarantee or indemnity in respect of any liability under or relating to any of the foregoing.

(in relation to any date for payment or purchase of a currency other than euro) the principal financial centre of the country of that currency; or

(in relation to any date for payment or purchase of euro) any TARGET Day.

direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the government of the United States of America or an Eligible Country (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America or an Eligible Country, as the case may be), in each case maturing within one year of the date of acquisition;

marketable general obligations issued by any state of the United States of America or any state or territory of an Eligible Country or any political subdivision of any such province, state or territory or any corporation or public instrumentality thereof maturing within one year of the date of acquisition and having a credit rating of at least A-1 from S&P or P-1 from Moody’s;

investments in commercial paper or other similar marketable promissory notes maturing no longer than twelve (12) Months from the date of acquisition and having a credit rating of at least A-1 from S&P or P-1 from Moody’s;

investments in certificates of deposit, banker’s acceptance and time deposits of the United States of America or an Eligible Country maturing within twelve (12) Months of the date of acquisition, issued, guaranteed by or placed with, and money market deposit accounts issued by any commercial bank or trust company organized or licensed under the laws of the United States of America or an Eligible Country, or any province, state or territory thereof, in each case having a credit rating of at least A-1 from S&P or P-1 from Moody’s; and

investments in money market funds or other mutual funds that invest in, or repurchase obligations that are comprised of the types of Cash Equivalent Investments described in paragraphs (a) to (d) above and which themselves have a credit rating rated at least equal to that applicable to the relevant type of Cash Equivalent Investments referred to in paragraphs (a) to (d) above which are comprised in such fund.

in relation to an Original Participating Bank, the amount in the Base Currency set opposite its name under the heading “Commitment” in Part II (The Original Participating Banks) of Schedule 1 (The Original Parties) and the amount of any other Commitment transferred to it under this Agreement; and

in relation to any other Participating Bank, the amount in the Base Currency of any Commitment transferred to it under this Agreement,

any Flowserve Group Member or any of its advisers, or

another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any Flowserve Group Member or any of its advisers,

is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of Clause 39 (Confidentiality); or

is identified in writing at the time of delivery as non-confidential by any Obligor, any Flowserve Group Member or any of its advisers; or

is known by that Finance Party before the date the information is disclosed to it in accordance with paragraphs (a) or (b) above or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with the Obligors or the Flowserve Group and which, in either case, as far as that Finance Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality.

which has repudiated its obligations under a Finance Document in violation of the provisions of the Finance Documents;

with respect to which an Insolvency Event has occurred and is continuing; or

has failed to make (or has notified the Administrative Agent that it will not make) a payment to be made by it under Clause 10.3 (Participating Banks’ Liabilities) or Clause 19.4 (Indemnity to the Administrative Agent) or any other payment to be made by it under the Finance Documents to or for the account of any other Finance Party in its capacity as Participating Bank by the due date for payment;

its failure to pay is caused by:

administrative or technical error; or

a Disruption Event; and

payment is made within 5 Business Days of its due date; or

the Participating Bank is disputing in good faith whether it is contractually obliged to make the payment in question.

a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facility (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or

the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:

from performing its payment obligations under the Finance Documents; or

from communicating with other Parties in accordance with the terms of the Finance Documents,

any country, other than the United States of America, which is a member of the OECD; or

any member state of the European Union that has adopted the Base Currency as its lawful currency in accordance with EMU Legislation,

any action to address the on-or off-site presence, Release of, or exposure to, Hazardous Materials;

permitting and licensing, administrative oversight, insurance premiums and financial assurance requirements;

any personal injury (including death), property damage (real or personal) or natural resource damage; and

the compliance or non-compliance with any Environmental Law.

any “reportable event,” as defined in Section 4043 of ERISA, with respect to a Plan (other than an event for which the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043);

the failure to make a required contribution to any Plan that would result in the imposition of a lien or other encumbrance or the provision of security under Section 412 or 430 of the Code or Section 302, 303, or 4068 of ERISA, or the arising of such a lien or encumbrance; the failure with respect to any Plan to satisfy the minimum funding requirement of Section 412 of the Code or Section 302 of ERISA, whether or not waived; the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for, or the receipt of, a waiver of the minimum funding standard under such sections of the Code or ERISA with respect to any Plan or Multiemployer Plan, or that such failing may be made; or a determination that any Plan is, or is expected to be, in at-risk status under Title IV of ERISA;

the incurrence by the Company, any of its Subsidiaries, or any ERISA Affiliate of any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA);

the receipt by the Company, any of its Subsidiaries, or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, or the filing of any such notice; the occurrence of an event or condition which could reasonably be expected to constitute grounds for the institution of proceedings, by the PBGC under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan.

the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 307 of ERISA;

the receipt by the Company, any of its Subsidiaries, or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Company, any of its Subsidiaries, or any ERISA Affiliate of any notice, that a Multiemployer Plan is in endangered or critical status under Section 305 of ERISA; the complete or partial withdrawal of the Company, any of its Subsidiaries, or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal; or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA;

the occurrence of a “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA) with respect to which the Company, any of its Subsidiaries, or any ERISA Affiliate incurs any liability; or

any Foreign Benefit Event.

the applicable Screen Rate; or

(if no Screen Rate is available for the relevant period) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Administrative Agent at its request quoted by the Reference Banks to leading banks in the European interbank market,

in respect of a Participating Bank or the Issuing Bank, the office notified by that Participating Bank or the Issuing Bank to the Administrative Agent in writing on or before the date it becomes a Participating Bank or the Issuing Bank (or, following that date, by not less than five Business Days’ written notice) as the office through which it will perform its obligations under this Agreement; or

in respect of any other Finance Party, the office in the jurisdiction in which it is resident for tax purposes.

the existence of unfunded liabilities in excess of the amount permitted under any Applicable Law, or in excess of the amount that would be permitted absent a waiver from a Governmental Authority;

the failure to make the required contributions or payments, under any Applicable Law, on or before the due date for such contributions or payments;

the receipt of a notice by a Governmental Authority relating to the intention to terminate any such Foreign Pension Plan or to appoint a trustee or similar official to administer any such Foreign Pension Plan, or alleging the insolvency of any such Foreign Pension Plan; and

the incurrence of any liability in excess of $10,000,000 (or the Dollar Equivalent thereof if in another currency) by the Company or any of its Subsidiaries under Applicable Law on account of the complete or partial termination of such Foreign Pension Plan or the complete or partial withdrawal of any participating employer therein, or

the occurrence of any transaction that is prohibited under any Applicable Law that results in the incurrence of any liability by the Company or any of its Subsidiaries, or the imposition on the Company or any of its Subsidiaries of any fine, excise tax or penalty resulting from any noncompliance with any Applicable Law, in each case in excess of $10,000,000 (or if in another currency, its Dollar Equivalent).

it has failed to make (or has notified a Party that it will not make) a payment required to be made by it under the Finance Documents by the due date for payment;

the Administrative Agent otherwise repudiates its obligations under a Finance Document in violation of the provisions of the Finance Documents;

(if the Administrative Agent is also a Participating Bank) it is a Defaulting Participating Bank under paragraph (a) or (d) of the definition of “Defaulting Participating Bank”; or

an Insolvency Event has occurred and is continuing with respect to the Administrative Agent;

its failure to pay is caused by:

administrative or technical error; or

a Disruption Event; and

the Administrative Agent is disputing in good faith whether it is contractually obliged to make the payment in question.

deposits and financial leasing;

any letter of credit, letter of guarantee, bond, guarantee or similar instrument securing financial accommodation;

promissory notes, certificates of deposit or like instruments (whether negotiable or otherwise);

acceptance credit, note purchase or bill acceptance or discounting facilities; or

like arrangements entered into by any person in order to enable it to finance its operations or capital requirements;

an order is made that such person be wound up (other than in connection with a permitted consolidation, amalgamation or merger), and such proceeding shall remain undismissed or unstayed for 30 days; or

an order appointing a liquidator, an administrator or a provisional liquidator in respect of such person is made, or one of them is appointed; or

a receiver, receiver and manager, statutory manager, trustee, sequestrator or similar official, is appointed in respect of such person or all or substantially all of its assets; or

the person enters into, or resolves to enter into, an arrangement or reconstruction or composition with, or assignment for the benefit of, all or any class of its creditors, or it enters into a reorganization, moratorium or other administration involving any of them for reasons relating to financial difficulty; or

the person suspends making payments on all or any class of its debts or announces an intention to do so, or a moratorium is declared with respect to any part of its indebtedness without the consent of the relevant creditors; or

the person (i) is declared in a final judgement to be, (ii) is, or is deemed for the purposes of any law to be, (iii) states that it is, insolvent or unable to pay its debts generally when they fall due or (iv) for person located in France such person is in state of “cessation des payments”; or

the person resolves to wind itself up, assigns itself into bankruptcy (including by filing a voluntary petition under Title 11 of the United States Code) or in any other similar legislation of any jurisdiction applicable to such person, or gives notice of its intention to do so for reasons relating to insolvency; or

the commencement of an involuntary proceeding against the person (i) seeking bankruptcy, liquidation, reorganization, dissolution, winding up, a composition or arrangement with creditors, a readjustment of debts, or other relief with respect to it or its debts under any bankruptcy laws or other customary insolvency actions or (ii) seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its assets, the issuance of a writ of attachment, execution, or similar process, or like relief if, in each such case mentioned in (i) or (ii) above, none of subparagraphs (b), (c) or (d) of this subsection (i) apply and such involuntary proceeding shall remain undismissed and unstayed for a period of thirty (30) days,

for the purposes of this paragraph (h), the occurrence any of the events mentioned in subparagraphs (i) to (iii) below shall not constitute an Insolvency Event:

a vexatious or frivolous petition or filing presented against a Finance Party by a creditor or other step against a Finance Party which is being contested by such Finance Party in good faith and with due diligence and is discharged or struck out within 60 days; or

any other petition or filing presented against a Finance Party by a creditor or other step against a Finance Party in relation to a claim for an amount of less than three (3) percent of the shareholders’ fund ; and

any action against a Finance Party taken as part of a solvent winding-up, administration, dissolution or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise),

an order for relief is entered against the person under applicable insolvency, bankruptcy or fraudulent conveyance laws, or similar statutes or common law, including, without limitation, as applicable, Title 11 of the United States Code as now or hereafter in effect, or

the filing by the person of an answer admitting the material allegations of a petition filed against it in any involuntary proceeding (of the type referred to in sub-paragraph (i) but not of the type referred to in sub-paragraphs (h)(i), (ii) or (iii)) commenced against it, or

consent by the person to any relief referred to in this subsections (i) to (j) above or to the appointment of or taking possession by any such official in any involuntary proceeding (of the type referred to in sub-paragraph (i)) commenced against it; or

anything analogous or having a substantially similar effect to any of the events specified above happens under the Law of any applicable jurisdiction.

for the purposes of (i) paragraph (a) of Clause 38.1 (Required consents) in the context of a waiver in relation to a proposed Utilisation (other than a Utilisation on the Closing Date) of the condition in Clause 3.2 (Conditions Precedent), a Participating Bank or Participating Banks whose Commitments aggregate more than 66²/3 per cent. of the Total Commitment; and

(in any other case), a Participating Bank or Participating Banks whose Commitments aggregate more than 66²/3 per cent. of the Total Commitment (or, if the Total Commitment have been reduced to zero, whose participations in the outstanding Utilisations aggregated more than 66²/3 per cent. of the Total Commitments immediately prior to that reduction).

an Obligor (other than the Company); or

a Subsidiary of the Company which is:

listed in Schedule 12 (Material Subsidiaries); or

whose total assets represent more than 10 per cent of Flowserve Group’s combined assets; or

whose total sales and operating revenues represent more than 10 per cent of Flowserve Group’s combined sales and operating revenues; or

if the aggregate assets or sales and operating revenues of the Company and all Material Subsidiaries at any time is less than 80 per cent of the combined assets or combined sales and operating revenues of the Flowserve Group (as applicable) (the “80 per cent. Test”), the next largest Subsidiaries of the Company by assets and/or sales and operating revenues (in order) will, until the 80 per cent. Test is satisfied, be deemed to be Material Subsidiaries.

if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar Month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day; and

if there is no numerically corresponding day in the calendar Month in which that period is to end, that period shall end on the last Business Day in that calendar Month.

whose long term unsecured debt rating falls below A- or A3 by the relevant Rating Agency or has ceased to be rated by a relevant Rating Agency; or

is a Defaulting Participating Bank.

in relation to the Company, (i) the audited consolidated financial statements for its Financial Year ended 31 December 2008 and (ii) the unaudited consolidated financial statements for the Financial Semester ended 30 June 2009; and

in relation to each other Obligor, its audited unconsolidated financial statements for its Financial Year ended 31 December 2008.

any Participating Bank mentioned as “Original Participating Bank” in Error! Reference source not found. (Error! Reference source not found.); and

any bank, financial institution, trust, fund or other entity which has become a Party as a Participating Bank in accordance with Clause 27 (Changes to the Participating Banks),

such acquisition was not preceded by an unsolicited tender offer for such Capital Stock or other equity interest by, or proxy contest initiated by, the Company or any Subsidiary;

the Acquired Entity shall be a going concern, shall be in a similar line of business as that of the Company and the Subsidiaries as conducted during the current and most recent Financial Year and shall have had positive Consolidated EBITDA over the twelve month period preceding the acquisition; and

at the time of such transaction:

both before and after giving effect thereto, no Default shall have occurred and be continuing;

the Company would be in compliance with the covenants set forth in paragraph (i) of Clause 24.2 (Financial condition) and the Leverage Ratio shall be at least 25 basis points below the maximum Leverage Ratio permitted at the time pursuant to paragraph (ii) of Clause 24.2 (Financial condition), in each case as of the most recently completed period of four consecutive fiscal quarters ending prior to such transaction for which the Annual Consolidated Financial Statements or the Semester Consolidated Financial Statement required pursuant to Clause 23.1(a) and the certificates required pursuant Clause 23.1(b) have been delivered or for which comparable financial statements have been filed with the Securities and Exchange Commission, after giving pro forma effect to such transaction and to any other event occurring after such period as to which pro forma recalculation is appropriate (including any other transaction described in this definition occurring after such period) as if such transaction had occurred as of the first day of such period;

after giving effect to such acquisition, there must be at least $60,000,000 (or the Dollar Equivalent thereof if in another currency) of unused and available revolving credit commitments under the Bank of America Credit Agreement; and

the aggregate of the consideration paid in connection with all such acquisitions (including any Indebtedness of the Acquired Entity that is assumed by the Company or any Subsidiary following such acquisition) shall not exceed:

if the Company’s Leverage Ratio calculated as provided under clause (c)(ii) above is greater than 3.0 to 1.0, $50,000,000 (or the Dollar Equivalent thereof if in another currency) in any Financial Year of the Company,

if the Company’s Leverage Ratio calculated as provided under clause (c) (ii) above is equal to or less than 3.0 to 1.0 but greater than 2.0 to 1.0, $100,000,000 (or the Dollar Equivalent thereof if in another currency) in any Financial Year of the Company,

if the Company’s Leverage Ratio calculated as provided under paragraph (c)(ii) above is equal to or less than 2.0 to 1.0, $150,000,000 (or the Dollar Equivalent thereof if in another currency) in any Financial Year of the Company, and

$500,000,000 (or the Dollar Equivalent thereof if in another currency) for all such acquisitions,

provided, that the amounts may be increased by the amount of consideration for any such acquisition consisting solely of, or paid from the issuance of, common stock of the Company.

direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, one of the three highest credit ratings obtainable from S&P or from Moody’s;

investments in certificates of deposit, banker’s acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any agent or any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000;

fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria of clause (c) above;

investments in “money market funds” within the meaning of Rule 2a-7 of the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (d) above; and

other short-term investments utilized by a Subsidiary of the Company incorporated in a jurisdiction other than the United States of America in accordance with normal investment practices for cash management in investments of a type analogous to the foregoing.

any Security existing at the time of acquisition on any asset acquired by any Flowserve Group Member after the Signing Date and not created in contemplation of that acquisition and any substitute Security created on that asset in connection with the refinancing of the Indebtedness for Borrowed Money secured on that asset (but in any such case the principal amount secured by any such Security may not be increased);

any Security securing indebtedness consisting of Capital Lease Obligations being Security over the asset which is the subject of the relevant capital lease and created for the sole purpose of financing all or any part of the acquisition of that asset and provided that the amount secured shall not exceed the Capital Lease Obligations and provided also that such Security is created substantially contemporaneously with the relevant capital lease (provided that the principal amount secured by any such Security may not be increased);

any Security subsisting over any asset of any Subsidiary of the Company prior to the date of such Subsidiary becoming a Subsidiary and not created in contemplation of such Subsidiary becoming a Subsidiary and any substitute Security created on that asset in connection with the refinancing of the Indebtedness for Borrowed Money secured on that asset (but in any such case the principal amount secured by such Security may not be increased);

any Security (other than a floating charge over assets) arising by reason solely of the consolidation, amalgamation or merger of any Obligor with any other corporation as permitted pursuant to Clause 23 (Information Undertakings) or of any Subsidiary of any Obligor with any other corporation, and in any such case arising automatically by operation of mandatory statutory provisions of law or (in the case of the consolidation, amalgamation or merger of Obligors, of Subsidiaries an Obligor, or of any Obligor with any Subsidiary of an Obligor, present or future) arising by virtue of the provisions of any Security outstanding immediately prior to such consolidation, amalgamation or merger, not being, in any such case, Security created, or provisions in relation thereto entered into, in contemplation of such consolidation, amalgamation or merger (but the principal amount secured by such Security may not be increased);

any Security created in the ordinary course of business in connection with any arrangement (whether a deferred purchase, sale and purchase, sale and leaseback, leasing or other arrangement), the direct or indirect purpose of which is to allow the purchaser or user of a product marketed by any Flowserve Group Member to finance the acquisition or rental thereof, in whole or in part, provided that such Security is created on the product the acquisition or rental of which is so financed or on the rights of the Flowserve Group Member under any lease or other agreements relating to such products or arrangements;

in relation to Flowserve Hamburg GmbH, a pledge over bank accounts held with a German bank in Germany in favour of the relevant account holding bank arising under the general terms and conditions (Allgemeine Geschaeftsbedingungen) of the account holding bank, provided that such pledge relates to Indebtedness for Borrowed Money permitted under this Agreement and limited to Euros 10,000,000 at any time;

in relation to Flowserve B.V., a pledge over bank accounts held with a bank in The Netherlands in favour of the relevant account holding bank arising under the general conditions drawn up by the Netherlands Bankers’ Association (Nederlandse Vereniging van Banken) and the Consumers Union (Consumentbond) of the account holding bank, provided that such pledge relates to Indebtedness for Borrowed Money permitted under this Agreement and limited to Euros 10,000,000 at any time;

a Statutory Security;

any Security not falling within any of paragraphs (a) to (e) above existing on the Signing Date (including the Guarantees listed in Error! Reference source not found. (Error! Reference source not found.) (the “Existing Guarantees")) to secure Indebtedness for Borrowed Money and any substitute Security created in connection with the refinancing of the Indebtedness for Borrowed Money secured by such Security including, but not limited to, any Security existing or granted under the Bank of America Credit Agreement provided that no new Security over shares or other participation interest is granted in connection with the refinancing of the Bank of America Credit Agreement and provided further that the principal amount of the Indebtedness for Borrowed Money secured by any substitute Security does not exceed the initial principal amount of Indebtedness for Borrowed Money (including unfunded commitments) secured by Security granted under the Bank of America Credit Agreement before the date of such refinancing.

(if the currency is sterling) one day before the first day of that period (or such day);

(if the currency is euro) one TARGET Day before the first day of that period (or such day); or

(for any other currency) one Business Day before the first day of that period (or such day),

its jurisdiction of incorporation; and

any jurisdiction where it conducts its business.

any dividend, share premium or share capital repayment, or other distribution (whether made in cash, securities or other property) declared or paid on or with respect to any shares of Capital Stock of the Company (including any payment in connection with any merger or consolidation by any person other than a Flowserve Group Member with or into the Company), except for any dividend or distribution payable solely in shares of Qualified Capital Stock of the Company;

the purchase, repurchase, redemption, acquisition or retirement for value of any Capital Stock of the Company (other than (i) from the Company or a Subsidiary of the Company, or (ii) in respect of dissenters’ rights as determined in accordance with Applicable Law) or any securities exchangeable for or convertible into any such Capital Stock, including the exercise of any option to exchange any Capital Stock (other than for or into Qualified Capital Stock of the Company);

the purchase, repurchase, redemption, acquisition or retirement for value, prior to the date for any scheduled maturity, sinking fund or amortization or other instalment payment, of any Subordinated Debt; or

any loan, advance, subscription, purchase or other provision of funds howsoever constituted, as a result of which, and to extent that, a Flowserve Group Member becomes a creditor in respect of Indebtedness for Borrowed Money of, or under other Banking Facilities with, any non-Flowserve Group Member.

any Security arising by operation of law on assets for taxes, assessments or other governmental charges or levies or in favour of workmen’s compensation board or similar agencies:

which liabilities are not yet due; or

which liabilities are due, but the validity of such tax, assessment, charge or levy is being contested diligently and in good faith by or on behalf of the person allegedly liable and for which such person has set aside appropriate reserves in its books as and if required by the Accounting Principles,

and provided that, in each case, no enforcement action has been taken in respect of such Security; or

any Security arising by operation of law for any judgment rendered or claim filed against a person, which such person (or others on its behalf) will be contesting diligently and in good faith, and for which such person has set aside appropriate reserves on its books, as and if required by the Accounting Principles.

is unsecured, is not guaranteed by any person, has a maturity date that falls after the Maturity Date and is fully and effectively subordinated in point of priority, in all relevant jurisdictions, to the obligations of the Obligors towards the Finance Parties under the Finance Documents by written agreement between the creditor concerned and the Administrative Agent (acting on the instructions of the Majority Participating Banks acting reasonably) which written agreement provides that:

such Indebtedness for Borrowed Money may not be enforced against the relevant Flowserve Group Member or its assets during any period (a “Blockage Period”) whilst an Event of Default is continuing;

interest on such Indebtedness for Borrowed Money is not payable during a Blockage Period; and

the creditors in respect of such Indebtedness for Borrowed Money are required to hold on trust for and turn over to the Finance Parties, any amounts received by them from the Obligors during a Blockage Period; or

is mandatorily or automatically convertible into non-redeemable share capital of the relevant Flowserve Group Member, including on the bankruptcy or insolvency of that Flowserve Group Member.

the proposed Transfer Date specified in the relevant Transfer Agreement; and

the date on which the Administrative Agent executes the relevant Transfer Agreement.

Unless a contrary indication appears, a reference in this Agreement to:

the “Administrative Agent”, any “Arranger”, any “Finance Party”, the “Issuing Bank”, any “Participating Bank”, any “Obligor”, any “Party” or any other person shall be construed so as to include its successors in title, permitted assigns and permitted transferees in accordance with the Finance Documents;

a document in “agreed form” is a document which is previously agreed in writing by or on behalf of the Company and the Administrative Agent;

“assets” includes present and future properties, revenues and rights of every description;

a “Finance Document” or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended, novated, supplemented, extended or restated;

“gross negligence” means “faute lourde”;

a “guarantee” includes any guarantee, any “cautionnement”, “aval”, any “garantie” and any indemnity or similar assurance against loss which is independent from the debt to which it relates;

“indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

“merger” includes any “fusion” implemented in accordance with articles L.236-1 to L.236.24 of the French Code de commerce or any equivalent provision under any Applicable Law (including, without limitation, Luxembourg law);

a Participating Bank’s “participation” in relation to a Letter of Credit, shall be construed as a reference to the relevant amount that is or may be payable by a Participating Bank in relation to that Letter of Credit;

a “person” includes any individual, firm, company, corporation, government, state or agency of a state or any grouping (whether or not having separate legal personality);

a “regulation” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organization;

a “security interest” includes any type of security (“sûreté réelle”) and transfer by way of security;

“trustee, fiduciary and fiduciary duty” has in each case the meaning given to such term under any Applicable Law;

“wilful misconduct” means “dol”;

a provision of law is a reference to that provision as amended or re-enacted; and

unless a contrary indication appears, a time of day is a reference to Paris time.

Section, Clause and Schedule headings are for ease of reference only.

Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

A LG User providing “cash cover” for a Letter of Credit means a LG User (or the Company):

paying an amount in the currency of the Letter of Credit to an interest-bearing account opened in the name of the LG User (or the Company) and the following conditions being met: (x) the account is with the Issuing Bank or the Administrative Agent and (y) the LG User (or the Company on its behalf) has executed a security document over that account, in form and substance reasonably satisfactory to the Administrative Agent, creating a first ranking security interest over that account; or

providing to the Issuing Bank letter(s) letter(s) of credit (in form and substance satisfactory for and in favour of the Issuing Bank) issued by Acceptable Bank(s),

in each case subject to paragraphs (c) and (d) of Clause 11.1 (Cash cover by LG User in the event of occurrence of an Event of Default), until no amount is or may be outstanding under that Letter of Credit, withdrawals from the account mentioned in paragraph (i) above or call under the letter(s) of credit mentioned in paragraph (ii) above may only be made to pay a Finance Party amounts due and payable to it under this Agreement in respect of that Letter of Credit.

A Default is “continuing” if it has not been remedied or waived.

A LG User “repaying” or “prepaying” a Letter of Credit means:

that LG User (or the Company) providing cash cover for that Letter of Credit;

the maximum amount payable under the Letter of Credit being reduced or cancelled in accordance with its terms; or

the Issuing Bank being satisfied that it has no further liability under that Letter of Credit,

An outstanding amount of a Letter of Credit at any time is the maximum amount that is or may be payable by the Issuing Bank in respect of that Letter of Credit.

Where the character or amount of any asset, liability or indebtedness or item of income or expense, or any consolidation or other accounting computation is required to be made for any purpose hereunder, it shall be done in accordance with the Accounting Principles with respect to the Financial Covenants, as in effect on the Signing Date, and for all other purposes, as in effect on the date of, or at the end of the period covered by, the financial statements from which such asset, liability, item of income, or item of expense, is derived, or, in the case of any such computation, as in effect on the date as of which such computation is required to be determined; provided, however, that any concepts that would not be included in or excluded from such term as used herein will be deemed to include or exclude such amounts, items or concepts as set forth herein, and provided, further, that references to “combined”, “consolidated” or “consolidation”, as the case may be, shall in all events mean as defined with reference solely to the Accounting Principles.

Except the Company to the extent provided for in the Finance Documents, each Obligor shall have obligations hereunder only for itself and for its Subsidiaries and is not jointly and severally liable (obligation conjointe et non solidaire) with the other Obligors.

The obligations of each Finance Party under the Finance Documents are several (conjointes et non solidaires). Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.

The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor shall be a separate and independent debt.

A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.

Each Obligor (other than the Company) by its execution of this Agreement or an Accession Letter irrevocably appoints the Company to act on its behalf as its agent (“mandataire”) in relation to the Finance Documents and irrevocably authorises:

the Company on its behalf to supply all information concerning itself contemplated by this Agreement to the Finance Parties and to give all notices and instructions (including, in the case of a LG User, Issuance Requests), to execute on its behalf any Accession Letter, to make such agreements and to effect the relevant amendments, supplements and variations capable of being given, made or effected by any Obligor notwithstanding that they may affect the Obligor (including, without limitation, by increasing the obligations of such Obligor howsoever fundamentally, whether by increasing the liabilities guaranteed by it or otherwise), without further reference to or the consent of that Obligor; and

each Finance Party to give any notice, demand or other communication to that Obligor pursuant to the Finance Documents to the Company,

and in each case the Obligor shall be bound as though the Obligor itself had given the notices and instructions (including, without limitation, any Issuance Requests) or executed or made the agreements or effected the amendments, supplements or variations, or received the relevant notice, demand or other communication.

Every act, omission, agreement, undertaking, settlement, waiver, amendment, supplement, variation, notice or other communication given or made by the Obligors’ Administrative Agent or given to the Obligors’ Administrative Agent under any Finance Document on behalf of another Obligor or in connection with any Finance Document (whether or not known to any other Obligor and whether occurring before or after such other Obligor became an Obligor under any Finance Document) shall be binding for all purposes on that Obligor as if that Obligor had expressly made, given or concurred with it. In the event of any conflict between any notices or other communications of the Obligors’ Administrative Agent and any other Obligor, those of the Obligors’ Administrative Agent shall prevail.

the relevant LG User (or the Company on its behalf) has delivered a duly completed Issuance Request;

the Administrative Agent has received evidence that the fees, costs and expenses then due by the Company and/or the relevant LG Users to the Finance Parties have been paid or will be paid on the Issuance Date;

in the case of a Letter of Credit to be renewed in accordance with Clause 5 (Extension of a Letter of Credit) no Event of Default is continuing or would result from the proposed Utilisation and, in the case of any other proposed issuance of an Utilisation, no Default is continuing or would result from the proposed Utilisation; and

in relation to any Utilisation on the Closing Date, all the representations and warranties in Clause 22 (Representations) or, in relation to any other Utilisation, the Repeating Representations to be made by each Obligor are true and correct in all material respects.

Each Issuance Request for a Letter of Credit is irrevocable and will not be regarded as having been duly completed unless:

it identifies the LG User of that Letter of Credit;

the proposed Issuance Date is a Business Day within the Availability Period;

the currency and amount of the Letter of Credit comply with Clause 4.5 (Currency and amount);

the maximum aggregate Base Currency Amount of all Letters of Credit issued and outstanding does not exceed the Total Commitment at any time;

the amount in the Base Currency of the proposed Letter of Credit does not exceed the Available Facility;

the Expiry Date of the Letter of Credit falls on or before the Maturity Date;

the delivery instructions for the Letter of Credit are specified; and

the identity of the Beneficiary and the country in which the Beneficiary is registered are approved by the Issuing Bank and in conformity with the restrictions defined under the European Union embargo list or any similar list issued by application of the Third Anti-Money Laundering European Directive..

Only the issuance of one Letter of Credit may be requested in each Issuance Request.

The number of Letters of Credit issued in a Month may not exceed 30.

Each Letter of Credit shall provide that, unless the Issuing Bank has agreed in advance upon the transferee of such Letter of Credit, the rights of a Beneficiary under such Letter of Credit may not be assigned or otherwise transferred.

If the details and instructions in the Issuance Request are not sufficiently specific, the Issuing Bank shall inform the Company within two (2) Business Days following receipt of the Issuance Request and the Letter Credit will not be issued unless and until the Issuing Bank is satisfied that it has received the necessary additional details and instructions.

A currency will constitute an Optional Currency in relation to a Utilisation if:

it is readily available in the amount required and freely convertible into the Base Currency in the Relevant Interbank Market on the Quotation Day and the Issuance Date for that Utilisation; and

is Dollars, Pounds Sterling or has been approved by the Administrative Agent on or prior to receipt by the Administrative Agent of the relevant Issuance Request for that Utilisation and for which the Administrative Agent provides a rate of exchange with Euros.

If the Administrative Agent has received a written request from the Company for a currency to be approved under paragraph (a)(ii) above, the Administrative Agent will confirm to the Company by the Specified Time:

whether or not the Participating Banks have granted their approval; and

if approval has been granted, the minimum amount for any subsequent Utilisation in that currency.

The currency specified in an Issuance Request must be the Base Currency or an Optional Currency.

Subject to paragraph (c) below, the amount of the proposed Letter of Credit must be an amount whose Base Currency Amount is not more than the Available Facility and which is:

if the currency selected is the Base Currency, a minimum of €500,000 or, if less, the Available Facility; or

if the currency selected is U.S. dollars, a minimum of $600,000 or, if less, the Available Facility; or

if the currency selected is Pound Sterling, a minimum of GBP 400,000 or, if less, the Available Facility; or

if the currency selected is an Optional Currency other than Dollars or Pound Sterling, the minimum amount specified by the Administrative Agent pursuant to Clause 4.4(b)(ii) (Conditions relating to Optional Currencies) or, if less, the Available Facility.

The maximum aggregate Base Currency Amount of all Letters of Credit shall not exceed the Total Commitment at any time.

If the conditions set out in this Agreement have been met and the form of the Letter of Credit has been agreed by the Issuing Bank and the Administrative Agent, at their discretion, the Issuing Bank shall issue the Letter of Credit on the Issuance Date.

The amount of each Participating Bank’s participation in each Letter of Credit will be equal to its Proportion and for the avoidance of doubt a Participating Bank’s participation in a Letter of Credit shall not exceed its Available Commitment.

The Administrative Agent shall determine the Base Currency Amount of each Letter of Credit which is to be issued in an Optional Currency and shall notify the Issuing Bank and each Participating Bank of the details of the requested Letter of Credit and its participation (which shall equal its Proportion) in that Letter of Credit by the Specified Time.

As from the Closing Date, the Administrative Agent shall send to each Participating Bank, on a monthly basis, a report containing the following information in respect of the Letters of Credit issued during the preceding month: (i) name of the LG Users for the account of which such Letters of Credit have been issued, (ii) Issuance Date, Term, internal reference, amount and currency of such Letters of Credit, (iii) type of such Letter of Credit and (iv) name and address of the Beneficiaries of such Letters of Credit.

A LG User (or the Company on its behalf) may request that any Letter of Credit (other than an Existing Letter of Credit) issued on behalf of that LG User be extended by delivery to the Administrative Agent of an Extension Request by the Specified Time.

The Finance Parties shall treat any such Extension Request in the same way as an Issuance Request.

The terms of each extended Letter of Credit shall be the same as those of the relevant Letter of Credit immediately prior to its extension, except that:

its amount may be less than the amount of the Letter of Credit immediately prior to its extension; and

its Term shall end on the proposed Expiry Date specified in the relevant Extension Request.

If the conditions set out in this Agreement have been met, the Issuing Bank shall amend any Letter of Credit pursuant to the relevant Extension Request.

If, on the proposed Utilisation Date of a Letter of Credit, any of the Participating Banks under the Facility is a Non-Acceptable Participating Bank and:

either:

the Issuing Bank has not required the LG Users to provide cash cover pursuant to Clause 11.2; or

the LG Users have failed to provide cash cover to the Issuing Bank in accordance with Clause 11.2,

the Issuing Bank may reduce the amount of that Letter of Credit by an amount equal to the amount of the participation of that Non-Acceptable Participating Bank in respect of that Letter of Credit and that Non-Acceptable Participating Bank shall be deemed not to have any participation (or obligation to indemnify the Issuing Bank) in respect of that Letter of Credit for the purposes of the Finance Documents.

The Issuing Bank shall notify the Administrative Agent of each reduction made pursuant to this Clause 6.

This Clause 6 shall not affect the participation of each other Participating Bank in that Letter of Credit.

If any Letters of Credit are denominated in an Optional Currency, the Administrative Agent shall at three monthly intervals after the Signing Date recalculate the Base Currency Amount of each Letter of Credit by notionally converting into the Base Currency the outstanding amount of that Letter of Credit on the basis of the Administrative Agent’s Spot Rate of Exchange on the date of calculation.

The Company shall, if requested by the Administrative Agent, within 3 Business Days of any calculation under paragraph (a) above, ensure that sufficient Letters of Credits are prepaid by providing cash cover in accordance with Clause 1.2(d)(i) or in accordance with Clause 1.2(d)(ii) to prevent the Base Currency Amount of the Letters of Credits exceeding the Total Commitment following any adjustment to a Base Currency Amount under paragraph (a) of this Clause 7.

Error! Reference source not found. (Error! Reference source not found.) hereto contains on the Signing Date a description of certain letters of credit issued (or deemed issued) under the Existing Credit Agreement under which the Issuing Bank and Deutsche Bank AG, New-York branch, in their capacity as participating banks under the Existing Credit Agreement, have remaining liabilities and which shall be outstanding on the Signing Date (and setting forth, with respect to each such letters of credit, (i) the letters of credit number, (ii) the name(s) of the account party or account parties, (iii) the face amount (including the currency in which such letters of credit is denominated), (iv) the name of the beneficiary, (v) the amounts of Calyon and Deutsche Bank AG, New-York branch participations (expressed in the Base Currency) in such letters of credit and (vi) the expiry date thereof) (each, an “Existing Letter of Credit”). As a consequence of the Existing Letters of Credit, Error! Reference source not found. (Error! Reference source not found.) hereto identifies the Available Commitment of each Participating Bank on the Signing Date.

Thereafter, on a monthly basis, the Administrative Agent shall, on the basis of information provided by The Royal Bank of Scotland Plc, revise Error! Reference source not found. (Error! Reference source not found.) in compliance with mutatis mutandis the calculation method described in Clause 7(a) above.

Upon receipt of such monthly update the Administrative Agent shall send the update to Calyon and to Deutsche Bank AG — Paris Branch. Within five (5) Business Days of such receipt, and save if Calyon disagrees with the calculations set forth in such monthly update within such time period, the Administrative Agent shall recalculate the Available Commitment as at such date for each Participating Bank as follows:

Calyon’s Available Commitment shall be increased by an amount representing the share of Calyon (as determined by the Administrative Agent on the basis of the above mentioned monthly update) in the repayment or payment of all or part of the Existing Letters of Credit which occurred during the monthly period to which relates the above mentioned monthly update. Deutsche Bank AG — Paris Branch’s Available Commitment shall be increased by an amount representing the share of Deutsche Bank AG — Paris Branch (as determined by the Administrative Agent on the basis of the above mentioned monthly update) in the repayment or payment of all or part of the Existing Letters of Credit which occurred during the monthly period to which relates the above mentioned monthly update. The other Participating Banks Available Commitments shall, simultaneously, each be increased in such an amount so that the Proportion of each Participating Bank be the same as it was immediately before making the adjustments provided for in this paragraph.

In case Calyon has objected to the calculation set forth in the above mentioned monthly update, Calyon will provide the Administrative Agent and the Company with a revised update. Such update shall be conclusive, save manifest error.

After the Signing Date, the Administrative Agent shall at a three monthly interval send to each Participating Bank (other than Calyon) an update of its Available Commitment.

For the purpose of this Clause, “repayment” or “payment” of an Existing Letter of Credit shall be construed in accordance with, mutatis mutandis, paragraphs (d) and (f) of Clause 1.2 (Construction).

For the sake of clarity, the Commitment of a Participating Bank shall not be increased by any adjustment made to Calyon’s Available Commitment in accordance with this Clause 8 (Existing Letters of Credit). However, the Parties acknowledge that their Proportion (expressed as a percentage) as at the Signing Date set out in item 2 (Error! Reference source not found.) of paragraph Part II of Error! Reference source not found. (Error! Reference source not found.) may vary following an adjustment made to Calyon’s Available Commitment and Deutsche Bank AG - Paris Branch’s Available Commitment in accordance with this Clause 8 (Existing Letters of Credit).

The Company may, by notice to the Administrative Agent (which shall promptly deliver a copy thereof to each Participating Bank) not less than 45 days and not more than 60 days before the end of the Availability Period, request that the Availability Period be extended to the date which is 364 days after the end of the Availability Period.

Upon receipt of the notice of the Company, each Participating Bank shall, within twenty-five (25) days before the end of the Availability Period, notify the Administrative Agent, of its decision to approve or reject, in its sole discretion, the proposed extension of the Availability Period. Any Participating Bank who fails to notify the Administrative Agent, within such time period, shall be deemed to have rejected the proposed extension of the Availability Period.

The Administrative Agent shall notify the Company of the decision of each Participating Bank no later than twenty (20) days before the end of the Availability Period.

Subject to the provisions of Clause 38.4 (Replacement of Participating Banks), if any Participating Bank rejects the proposed extension of the Availability Period, such request shall be deemed to have been rejected.

If all Participating Banks have agreed to the proposed extension of the Availability Period, the Administrative Agent and the Company shall, within ten (10) days before the end of the Availability Period, negotiate the terms and conditions and the legal documentation required for the extension of the Availability Period; provided further that the term of the Flowserve Corporation Guarantee shall be extended to the satisfaction of the Participating Banks.

No provision of this Clause 9 shall oblige a Participating Bank to agree on a proposed extension of the Availability Period. In considering whether or not to approve such an extension, each Participating Bank shall make its own independent appraisal of the creditworthiness of the Company and each Obligor and its own independent investigation and assessment into the financial condition and affairs of the Company.

Each of the Parties irrevocably and unconditionally authorises the Issuing Bank to pay any claim made or purported to be made under a Letter of Credit requested under this Agreement and which appears on its face to be in order (a “Claim”).

Each of the Parties acknowledges that the Issuing Bank:

is not obliged to carry out any investigation or seek any confirmation from any other person before paying a Claim; and

deals in documents only and will not be concerned with the legality of a Claim or any underlying transaction or any available set-off, counterclaim or other defence of any person.

If a Letter of Credit or any amount outstanding under a Letter of Credit becomes due and payable, the LG User that requested (or on behalf of which the Company requested) the issue of that Letter of Credit (the “Affected LG User”) shall repay or prepay that amount immediately in the manner set out below.

Upon receipt by the Issuing Bank from a Beneficiary of any notice of Claim under a Letter of Credit, the Issuing Bank shall promptly send to the Affected LG User, the Guarantor, the Administrative Agent and the Participating Banks a notice (a “Claim Notification”) setting out:

the amount and currency of the payment which the Issuing Bank is required to make under that Letter of Credit (the “Amount of the Claim”); and

the latest date on which such payment must be made (the “Payment Date”).

The Affected LG User shall by no later than 10:00 a.m. on the later of:

the Business Day preceding the Payment Date;

the second Business Day following the receipt by the Affected LG User of the Claim Notification,

pay to the Administrative Agent, for the account of the Issuing Bank, the Amount of the Claim.

The obligations of the Affected LG User under this Clause 10.2 will not be affected by:

the sufficiency, accuracy or genuineness of any Claim or any other document; or

any incapacity of, or limitation on the powers of, any person signing a Claim or other document.

In the event of a failure of the Affected LG User to reimburse the Issuing Bank in full for the amount of any Claim pursuant to Clause 10.2 (Obligors’ Liabilities) above, the Issuing Bank shall promptly notify the Administrative Agent and, upon receipt of such notice, the Administrative Agent shall promptly notify each Participating Bank of the unreimbursed amount by the Affected LG User (the “Unreimbursed Amount”), the amount of such Participating Bank’s Proportion thereof and the date on which payment must be made by such Participating Bank, which date shall not be less than five (5) Business Days of the date of such notice.

Each Participating Bank shall, upon any notice pursuant to paragraph (a) above, pay to the Administrative Agent for the account of the Issuing Bank an amount equal to its Proportion of any Unreimbursed Amount not later than the day specified in the notice sent by the Administrative Agent pursuant to (a) above. Upon making any such payment to the Issuing Bank pursuant to Clause 10.1(b) above, each Participating Bank shall be deemed to have taken, on the date such Letter of Credit is issued (or if later, on the date the Participating Bank’s participation in the Letter of Credit is transferred or assigned to the Participating Bank in accordance with the terms of this Agreement), an undivided interest and participation in such Letter of Credit in an amount equal to its Proportion of that Letter of Credit.

The Affected LG User shall, within five (5) Business Days as from the receipt a notice of the Administrative Agent to that effect, reimburse the Administrative Agent (for the account of such Participating Bank) for any payment it made to the Issuing Bank under paragraph (b) of this Clause 10.3 in respect of a Letter of Credit. In this respect, each Obligor shall be deemed to incur a direct obligation and liability vis-à-vis each Participating Bank up to the amounts paid by each such Participating Bank in accordance with paragraph (b) above. Each Participating Bank shall promptly notify the Issuing Bank and the Administrative Agent upon receiving any payment from the Affected LG User pursuant to this paragraph (c).

Whenever the Issuing Bank receives a payment of a reimbursement obligation from the Affected LG User or the Guarantor for which it has received payments from the Administrative Agent (for the account of such Participating Bank) pursuant to paragraph (b) above, the Issuing Bank shall pay to the Administrative Agent for the account of each such Participating Bank which has paid its Proportion thereof (and which has not been reimbursed directly by the Affected LG User or the Guarantor therefore pursuant to paragraph (c) above) an amount equal to such Participating Bank’s share (based upon the proportionate aggregate amount originally funded by such Participating Bank to the aggregate amount funded by all Participating Banks) of the principal amount of such reimbursement obligation and interest thereon accruing after the purchase of the respective participations in accordance with paragraph (b) above.

To the effect of this Clause, each Participating Bank as primary obligor, guarantees the due performance by each relevant LG User of its payment obligations in respect of each Letter of Credit issued for the account of such LG User. The obligations of each Participating Bank under this Clause are continuing obligations and will extend to the ultimate balance of sums payable by that Participating Bank pursuant to paragraph (b) above in respect of any Letter of Credit, regardless of any intermediate payment or discharge in whole or in part.

The Affected LG User shall, within 10 Business Days as from any notice of the Administrative Agent to that effect, indemnify the Issuing Bank against any cost, loss or liability incurred by the Issuing Bank (otherwise than by reason of the Issuing Bank’s gross negligence or wilful misconduct) in acting as the Issuing Bank under any Letter of Credit requested by (or on behalf of) the Affected LG User.

Each Participating Bank shall (according to its Proportion), within 5 Business Days as from any notice of the Administrative Agent to that effect and unless the Issuing Bank has been reimbursed by the Affected LG User or the Guarantor pursuant to the Flowserve Corporation Guarantee, indemnify the Issuing Bank against any cost, loss or liability incurred by that Issuing Bank (including, without limitation, any losses as a result of the failure of an Affected LG User or the Guarantor to reimburse the Issuing Bank in full for the amount of any Claim pursuant to Clause 10.3(a) (otherwise than by reason of the Issuing Bank’s gross negligence or wilful misconduct) in acting as the Issuing Bank under any Letter of Credit.

The Affected LG User shall immediately on demand reimburse any Participating Bank for any payment it makes to the Issuing Bank under this Clause in respect of a Letter of Credit.

The obligations of any Participating Bank or an Obligor under this Clause will not be affected by any act, omission, matter or thing which, but for this Clause, would reduce, release or prejudice any of its obligations under this Clause (without limitation and whether or not known to it or any other person) including:

any time, waiver or consent granted to, or composition with, any Obligor, any Beneficiary or any other person;

the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor or any member of the Flowserve Group;

the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor, any Beneficiary or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor, any Beneficiary or any other person;

any amendment (however fundamental) or replacement of a Finance Document, any Letter of Credit or any other document or security;

any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document, any Letter of Credit or any other document or security;

any insolvency or similar proceedings;

the existence of any claim, setoff, defense, counterclaim or other right which an Obligor or any member of the Flowserve Group may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any person for whom any such transferee may be acting), the Administrative Agent, any Participating Bank, or any other person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Affected LG User, the Guarantor or any member of the Flowserve Group;

the occurrence of any Default.

Upon the occurrence of an Event of Default, the LG Users shall within two (2) Business Days from the notice sent by the Administrative Agent pursuant to Clause 26.19 (Prepayment and cancellation) provide cash cover in accordance with Clause 1.2(d)(i) to the Issuing Bank (for the account of the Finance Parties) in an amount equal to all the amount owed by the LG Users to the Finance Parties under the Finance Documents as set forth in Clause 26.19 (Prepayment and cancellation).

Alternatively, upon the occurrence of an Event of Default, the Company may in accordance with Clause 1.2(d)(ii) provide to the Issuing Bank letter(s) of credit (in form and substance satisfactory for the Issuing Bank) issued by Acceptable Bank(s) to guarantee to the Issuing Bank the payment of all amounts due by the LG Users to the Finance Parties under the Finance Documents as set forth in Clause 26.19 (Prepayment and cancellation).

If cash cover has been provided in accordance with Clause 1.2(d)(i) and that no amount is or may be outstanding under the relevant Letters of Credit, the Company may by notice to the Administrative Agent request that an amount equal to the amount of the cash provided by the LG Users standing to the credit of the relevant account held with the Issuing Bank or the Administrative Agent in accordance with paragraph (a) above, be returned to the LG Users and the Issuing Bank (or the Administrative Agent on its behalf) shall pay that amount to the LG Users within 10 Business Days after the request from the Company (and shall cooperate with the Company in order to procure that the relevant security or collateral arrangement is released and discharged).

Alternatively, if cash cover has been provided in accordance with Clause 1.2(d)(ii) and that no amount is or may be outstanding under the relevant Letters of Credit, the Company may by notice to the Administrative Agent request that such letter(s) of credit are returned to the LG Users and the Issuing Bank (or the Administrative Agent on its behalf) shall return such letter(s) of credit to the LG Users within 10 Business Days after the request from the Company.

If, at any time, a Participating Bank is or becomes a Non-Acceptable Participating Bank and that Non-Acceptable Participating Bank’s Commitment and Proportion of the outstanding amount of the outstanding Letters of Credit have not been transferred and assigned to an Acceptable Participating Bank in accordance with the provisions of Clause 38.6 (Replacement of a Non-Acceptable Participating Bank), and the Issuing Bank notifies the Company (with a copy to the Administrative Agent) that it requires the LG Users to provide cash cover in accordance with Clause 1.2(d)(i) or in accordance with Clause 1.2(d)(ii) in an amount equal to that Non-Acceptable Participating Bank’s Proportion of the outstanding amount of the outstanding Letters of Credit and in the currency of each such Letter of Credit, then the LG Users shall do so within 10 Business Days after the notice is given.

If the relevant Participating Bank’s obligations in respect of the relevant Letter(s) of Credit are transferred to an Acceptable Bank in accordance with Clause 27 (Changes to the Participating Banks, the Issuing Bank :

may, in the event that a cash cover has been provided in accordance with Clause 1.2(d)(i), agree to the withdrawal of amounts from the relevant account up to the level of that cash cover; or

may, in the event that a cash cover has been provided in accordance with Clause 1.2(d)(ii), agree to return the relevant letter(s) of credit it received under such Clause 1.2(d)(ii) to the LG Users.

To the extent that the LG Users have complied with their obligations to provide cash cover in accordance with this Clause 11.2, the relevant Participating Bank’s Proportion in respect of the relevant Letter(s) of Credit will remain (but that Participating Bank’s obligations in relation to each such Letter of Credit may be satisfied in accordance with paragraph (d)(ii) of Clause 1.2 (Construction)). However, the LG Users’ obligation to pay any Letter of Credit fee in relation to the relevant Letter of Credit to the Administrative Agent (for the account of that Participating Bank) in accordance with paragraph (b) of Clause 16.4 will be reduced proportionately as from the date on which it complies with that obligation to provide cash cover (and for so long as the relevant amount of cash cover continues to stand as collateral).

The Issuing Bank shall promptly notify the Administrative Agent of the extent to which the LG Users provides cash cover pursuant to this Clause 11.2 and of any change in the amount of cash cover so provided.

Each Participating Bank under the Facility shall notify the Administrative Agent, the Issuing Bank and the Company:

on the Signing Date or on any later date on which it becomes such a Participating Bank in accordance with Clause 27 (Changes to the Participating Banks) whether it is a Non-Acceptable Participating Bank; and

as soon as practicable upon becoming aware of the same, that it has become a Non-Acceptable Participating Bank,

and an indication in Part II (The Original Participating Banks) of Schedule 1 (The Original Parties) or in a Transfer Agreement to that effect will constitute a notice under paragraph (d)(i) to the Administrative Agent and, upon delivery in accordance with Clause 27.6 (Copy of Transfer Agreement to Company), to the Company.

Any notice received by the Administrative Agent pursuant to paragraph (e) above shall constitute notice to the Issuing Bank of that Participating Bank’s status and the Administrative Agent shall, upon receiving each such notice, promptly notify the Issuing Bank of that Participating Bank’s status as specified in that notice.

If a Participating Bank is or becomes a Non-Acceptable Participating Bank, its Available Commitment, upon notification by the Issuing Bank in accordance with paragraph (a) of this Clause 11.2, shall be reduced to zero and the Total Commitment shall be reduced by an amount equal to such reduction of such Available Commitment.

that Participating Bank, shall promptly notify the Administrative Agent upon becoming aware of that event;

upon the Administrative Agent notifying the Company, the Commitment of that Participating Bank will be immediately cancelled; and

each LG User and/or the Company shall repay that Participating Bank’s participation in the outstanding relevant Letters of Credit made to that LG User within five (5) Business Days after the Administrative Agent has notified the Company or, if earlier, the date specified by the Participating Bank in the notice delivered to the Administrative Agent (being no earlier than the last day of any applicable grace period permitted by law).

the Issuing Bank shall promptly notify the Administrative Agent upon becoming aware of that event;

upon the Administrative Agent notifying the Company, the Issuing Bank shall not be obliged to issue any Letter of Credit;

the Company shall (and shall procure that each other Obligor shall) use its best endeavours to procure the release of each Letter of Credit issued by the Issuing Bank and outstanding at such time; and

unless any other Participating Bank has agreed to be an Issuing Bank pursuant to the terms of this Agreement, the Facility shall cease to be available for the issue of Letters of Credit.

The Company may, if it gives the Administrative Agent not less than 10 Business Days’ (or such shorter period as the Majority Participating Bank may agree) prior notice, cancel the whole or any part (being, if in part, a minimum amount of €5,000,000 and a multiple of €1,000,000) of the Available Facility.

Any cancellation under this Clause 13.3 shall reduce the Commitments of the Participating Banks rateably under the Facility.

If:

any sum payable to any Participating Bank by an Obligor is required to be increased under paragraph (c) of Clause 17.2 (Tax gross-up); or

any Participating Bank claims indemnification from an Obligor under Clause 17.3 (Tax indemnity) or Clause 18.1 (Increased costs),

the Company may, whilst the circumstance giving rise to the requirement for increased payment or indemnification continues, give the Administrative Agent notice of cancellation of the Commitment of that Participating Bank and its intention to procure the repayment of that Participating Bank’s participation in the Letters of Credit issued.

On receipt of a notice referred to in paragraph (a) above in relation to a Participating Bank, the Commitment of that Participating Bank shall immediately be reduced to zero.

Within five (5) Business Days as from the giving of the notice referred to in paragraph (a) above by the Company in relation to a Participating Bank (or, if earlier, the date specified by that Obligor in that notice), each LG User to which a Letter of Credit is outstanding shall repay that Participating Bank’s participation in that Utilisation together with all interest and other amounts accrued under the Finance Documents.

If any Participating Bank becomes a Defaulting Participating Bank, the Company may, at any time whilst the Participating Bank continues to be a Defaulting Participating Bank, give the Administrative Agent 5 Business Days’ prior notice of cancellation of the Available Commitment of that Participating Bank.

On the notice referred to in paragraph (a) above becoming effective, the Commitment of that Defaulting Participating Bank shall immediately be reduced to zero.

Within five (5) Business Days as from the giving of the notice referred to in paragraph (a) above by the Company in relation to a Participating Bank (or, if earlier, the date specified by the Company in that notice), each LG User to which a Letter of Credit is outstanding shall repay that Participating Bank’s participation in that Utilisation together with all interest and other amounts accrued under the Finance Documents.

The Administrative Agent shall as soon as practicable after receipt of a notice referred to in paragraph (a) above, notify all the other Participating Banks.

If all or part of a Letter of Credit under the Facility is repaid or prepaid and is not available for redrawing (other than by operation of Clause 3.2 (Conditions Precedent to each Utilisation), an amount of the Commitments (equal to the Base Currency Amount of the amount of the Letter of Credit which is repaid or prepaid) will be deemed to be cancelled on the date of repayment or prepayment. For the sake of clarity, except as otherwise provided for in this Agreement, the Commitments of the Participating Banks shall not be reduced rateably by the amounts of any repayment or prepayment of the Facility made during the Availability Period.

Save in the circumstances contemplated in Clauses 11.2 (Cash Cover by LG Users in case of a Non-Acceptable Participating Bank) 13.1 (Illegality in relation to Participating Banks), 13.2 (Illegality in relation to Issuing Bank), 13.5 (Right of cancellation and repayment in relation to a single Participating Bank ) and 13.6 (Right of cancellation and repayment in relation to a Defaulting Participating Bank), any cancellation under this Clause 14.6 shall reduce the Commitments of the Participating Banks rateably.

Interest shall accrue on any Unpaid Sum to the fullest extent permitted by law on the amount of such Unpaid Sum from the date the payment is due up to the date of actual payment (both before and after judgment) at a rate per annum which is the sum, from time to time, of two (2) per cent plus EONIA and the Mandatory Cost during the period of non-payment. Any interest accruing under this Clause 15.1 shall be immediately payable by the Obligor on demand by the Administrative Agent.

Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount in accordance with article 1154 of the French Code Civil.

The Company shall pay to the Administrative Agent (for the account of each Participating Bank) a fee in the Base Currency computed at the rate of 0.40 per cent. per annum on that Participating Bank’s Commitment for the Availability Period.

The accrued commitment fee is payable on the first day of each March, June, September and December in each year (the first of which shall be the first such day after the date hereof) from the Signing Date until the last day of the Availability Period.

No commitment fee is payable to the Administrative Agent (for the account of a Participating Bank) on any Available Commitment of that Participating Bank for any day on which that Participating Bank is a Defaulting Participating Bank.

The Company shall pay to the Issuing Bank (who shall transfer such amounts to the Administrative Agent) (for the account of each Participating Bank) a Letter of Credit fee in the Base Currency (computed at the rate per annum equal to 1.35 per cent. per annum) on the outstanding amount of each Letter of Credit requested by the LG Users for the period from the issue of that Letter of Credit until its full repayment. This fee shall be distributed according to each Participating Bank’s Proportion of that Letter of Credit.

The accrued Letter of Credit fee on a Letter of Credit shall be payable on the first day of each March, June, September and December in each year, the first of which shall be the first such day after the Issuance Date of that Letter of Credit.

In this Agreement:

“Protected Party” means a Finance Party or any Affiliate of a Finance Party which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.

“Qualifying Participating Bank” means a Participating Bank which:

has its Facility Office in the jurisdiction of residence of the Company or, as the case may be, of the relevant Obligor; or

fulfils the conditions imposed by Applicable Law in order for a payment not to be subject to (or as the case may be, to be exempt from) any Tax Deduction; or

is a Treaty Participating Bank.

is treated as resident of a Treaty State for the purpose of the Treaty;

does not carry on business in the jurisdiction in which the Company or, as the case may be, the relevant Obligor is resident through a permanent establishment with which that Participating Bank’s participation in the Facility is effectively connected;

is acting from a Facility Office situated in its jurisdiction of incorporation; and

fulfils any other conditions which must be fulfilled under the Treaty by residents of the Treaty State for such residents to obtain exemption from Tax imposed by the jurisdiction in which the Company or, as the case may be, the relevant Obligor is resident subject to the completion of any necessary procedural formalities.

“Treaty State” means a jurisdiction having a double taxation agreement with the jurisdiction in which the Company or, as the case may be, the relevant Obligor is resident (the “Treaty”), which makes provision for full exemption from Tax imposed by that jurisdiction on payments under a Finance Document.

Unless a contrary indication appears, in this Clause 17 a reference to “determines” or “determined” means a determination made in the absolute discretion of the person making the determination and applying the relevant tax law and regulations.

The Company or the relevant Obligor shall make all payments to be made by it under the Finance Documents without any Tax Deduction, unless a Tax Deduction is required by law.

The Company or the relevant Obligor’s Administrative Agent shall promptly upon becoming aware that the Company or the relevant Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Administrative Agent accordingly. Similarly, a Participating Bank or the Issuing Bank shall notify the Administrative Agent on becoming so aware in respect of a payment payable to that Participating Bank or to the Issuing Bank. If the Administrative Agent receives such notification from a Participating Bank or from the Issuing Bank it shall notify the Company and that Obligor.

If a Tax Deduction is required by law to be made by the Company or the relevant Obligor (or, as the case may be, by the Administrative Agent), the amount of the payment due from the Company or that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

A payment shall not be increased under paragraph (c) above by reason of Tax Deduction on account of Tax, if on the date on which the payment falls due:

the payment could have been made to the relevant Participating Bank without a Tax Deduction if the Participating Bank had been a Qualifying Participating Bank, but on that date that Participating Bank is not or has ceased to be a Qualifying Participating Bank other than as a result of any change after the date it became a Participating Bank under this Agreement in (or in the interpretation, administration, or application of) any law or double taxation agreement, or any published practice or published concession of any relevant taxing authority; or

the relevant Participating Bank is a Treaty Participating Bank and the Company or the relevant Obligor making the payment is able to demonstrate that the payment could have been made to the Participating Bank without the Tax Deduction had that Participating Bank complied with its obligations under paragraph (g) below.

If the Company or, as the case may be, the relevant Obligor is required to make a Tax Deduction, the Company or that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction to the relevant taxing authority within the time allowed and in the minimum amount required by law.

Within thirty days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Company or the relevant Obligor making that Tax Deduction shall deliver to the Administrative Agent for the Finance Party entitled to the payment certified copies of tax receipts evidencing such payment or, if the practice or the relevant taxing authority is not to supply such receipts, evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

A Treaty Participating Bank and the Company or the relevant Obligor which makes a payment to which that Treaty Participating Bank is entitled shall co-operate in completing any procedural formalities necessary for that Obligor to obtain authorisation to make that payment without a Tax Deduction; provided, however, that nothing in this Clause 17.2 (g) (Tax gross-up) shall require a Treaty Participating Bank to disclose any confidential information (including, without limitation, its tax returns or its calculations).

The Company shall (within three Business Days of demand by the Administrative Agent) pay (or procure that the relevant Obligor pays) to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.

Paragraph (a) above shall not apply:

with respect to any Tax assessed on a Finance Party:

under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or

under the law of the jurisdiction in which that Finance Party’s Facility Office is located in respect of amounts received or receivable in that jurisdiction,

to the extent a loss, liability or cost:

is compensated for by an increased payment under Clause 17.2 (Tax gross-up); or

would have been compensated for by an increased payment under Clause 17.2 (Tax gross-up) but was not so compensated solely because one of the exclusions in paragraph (d) of Clause 17.2 (Tax gross-up) applied.

A Protected Party making, or intending to make a claim under paragraph (a) above shall promptly notify the Administrative Agent of the event which will give, or has given, rise to the claim, following which the Administrative Agent shall notify the Guarantor.

A Protected Party shall, on receiving a payment from an Obligor under this Clause 17.3, notify the Administrative Agent.

a Tax Credit is attributable either to an increased payment of which that Tax Payment forms part; or

that Finance Party has obtained, utilised and retained that Tax Credit,

All amounts set out, or expressed in a Finance Document to be payable by any Party to a Finance Party which (in whole or in part) constitute the consideration for a supply or supplies for VAT purposes shall be deemed to be exclusive of any VAT which is such supply or supplies, and accordingly, subject to paragraph (b) below, if VAT is or becomes chargeable on any supply made by any Finance Party to any Party under a Finance Document, that Party shall pay to the Finance Party (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of such VAT (and such Finance Party shall promptly provide an appropriate VAT invoice to such Party).

If VAT is or becomes chargeable on any supply made by any Finance Party (the “Supplier”) to any other Finance Party (the “Recipient”) under a Finance Document, and any Party other than the Recipient (the “Subject Party”) is required by the terms of any Finance Document to pay an amount equal to the consideration for such supply to the Supplier (rather than being required to reimburse the Recipient in respect of that consideration), such Party shall also pay to the Supplier (in addition to and at the same time as paying such amount) an amount equal to the amount of such VAT (and such Finance Party shall promptly provide an appropriate VAT invoice to such Party). The Recipient will promptly pay to the Subject Party an amount equal to any credit or repayment obtained by the Recipient from the relevant tax authority which the Recipient reasonably determines in respect of such VAT.

Where a Finance Document requires any Party to reimburse or indemnify a Finance Party for any cost or expense, that Party shall reimburse or indemnify (as the case may be) such Finance Party for the full amount of such cost or expense, including such part thereof as represents VAT, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant tax authority in respect of the VAT (and such Finance Party shall promptly provide an appropriate VAT invoice to such Party).

Subject to Clause 18.3 (Exceptions) the Company shall, within three Business Days of a demand by the Administrative Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the Signing Date.

In this Agreement “Increased Costs” means:

a reduction in the rate of return from the Facility or on a Finance Party’s (or its Affiliate’s) overall capital;

an additional or increased cost; or

a reduction of any amount due and payable under any Finance Document,

which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitment or funding or performing its obligations under any Finance Document or Letter of Credit.

A Finance Party intending to make a claim pursuant to Clause 18.1 (Increased costs) shall notify the Administrative Agent of the event giving rise to the claim, following which the Administrative Agent shall promptly notify the Company.

Each Finance Party shall, as soon as practicable after a demand by the Administrative Agent, provide a certificate confirming the amount of its Increased Costs.

Clause 18.1 (Increased costs) does not apply to the extent any Increased Cost is:

attributable to a Tax Deduction required by law to be made by an Obligor;

compensated for by Clause 17.3 (Tax indemnity) (or would have been compensated for under Clause 17.3 (Tax indemnity) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 17.3 (Tax indemnity) applied); or

compensated for by the payment of the Mandatory Cost; or

attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation.

In this Clause 18.3 reference to a “Tax Deduction” has the same meaning given to the term in Clause 17.1 (Definitions).