The purpose of the Finance Committee (the “Committee”) of the Board of Directors (the “Board”) of Flowserve Corporation (the “Company”) is to (i) advise the Board on all corporate financing and related treasury matters regarding capital structure and major corporate transactions with the goal of accomplishing the Company’s objectives and operating strategies while maintaining sound fiscal health and (ii) monitor corporate risk management and information technology programs.
The Committee must have at least three members. All Committee members must have been determined by the Board to be independent, as defined and to the extent required in the applicable New York Stock Exchange listing standards, as they may be amended from time to time. Committee members and the Committee Chairman shall be appointed by and may be removed by the Board on the recommendation of the Corporate Governance and Nominating Committee.
The Committee has all powers necessary to carry out its purpose and discharge its responsibilities. These include the power, without additional approval from the Board, to directly retain outside legal counsel, financial advisors, consultants and other advisors as the Committee determines necessary to perform its responsibilities, and the power to investigate any matter within the scope of its duties, with full access to books, records, facilities and personnel necessary to do so. The Company shall provide appropriate funding, as determined by the Committee, for payment of compensation to any advisors retained by the Committee.
The Committee does not have authority to declare dividends or to approve equity offerings.
Among its duties and responsibilities, the Committee shall:
- Review and make recommendations to the Board regarding financial philosophy, policies (such as capital structure and the amount and timing of dividends) and strategies, including major sources and uses of cash.
- Review key financial implications and management’s evaluation process of acquisitions, divestitures, major new “grass roots” facilities requests, as well as capital expenditures related to major new product justifications. Recommend actions on such matters to the Board and review post-audit analyses of these matters prepared by management.
- Review and approve yearly capital expenditures budget for financial soundness as well as for consistency against the long-term objectives and strategies of the Company. Review and approve any capital expenditure, which includes cumulative cash flows related to leases, and any merger, acquisition, sale or divestiture of a line of business or joint venture transaction with a value in excess of $5,000,000 but not in excess of $25,000,000. For capital expenditures in excess of $25,000,000, review and recommend for Board approval. Review post-audit analyses of major capital justifications prepared by management.
- Review and approve any product or service sales transactions entered into in the ordinary course of business with a value in excess of $25,000,000.
- Review and approve new or refinanced debt issues with a value not in excess of $100,000,000. For debt issues in excess of $100,000,000, review and recommend for Board approval. Review and recommend for Board approval the terms of offerings or repurchases of common stock, preferred stock and other types of equity securities. Review and approve short-term and long-term financing policies and plans and review specific financing practices, including credit facility revisions, amendments and debt maturity schedules.
- Review periodic reports to determine that the Company is in compliance with various covenants in debt instruments, including rating agency reports.
- Periodically review the scope, cost and basic terms of the Company’s insured risk management programs, including general liability, D&O, property and other insurance policies.
- Review foreign currency and interest rate exposure on a periodic basis and review the financial instruments used to hedge (neutralize) the position both in type of instrument and value.
- Annually review, and as necessary approve, the Company’s policy election to be exempt from mandatory clearing of over-the-counter derivatives pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.
- Review pension fund status, including current and projected funding needs, funding assumptions and payment requirements; review non-qualified and non-funded post retirement benefit liabilities on a global basis.
- Review the security, capabilities, development and strategy of the Company’s information technology infrastructure.
- Review corporate tax rate status, risks and strategies, including applicable tax planning.
- Review and reassess the adequacy of this Charter at least annually.
- Conduct an annual performance review of the Committee.
The Committee shall meet at least four times per year, either in person or telephonically, at such times and places as the Committee shall determine. The Committee shall report regularly to the full Board with respect to its activities, but not less frequently than quarterly. A majority of the Committee members shall constitute a quorum.
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