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                                                                   EXHIBIT 10.32

                               AMENDMENT NO. 2 TO
                              FLOWSERVE CORPORATION
                             1999 STOCK OPTION PLAN

Effective January 1, 2001, the Flowserve Corporation 1999 Stock Option Plan is
hereby amended in the following respects:

1.   Definitions

     The following definition is added to Section 2:

         (s) "Mature Shares" means Shares acquired by a Holder which have been
         held for at least six months.

         The other subsections of Section 2 shall be re-lettered so that all
         definitions appear in alphabetical order.

2.   Shares Subject to the Plan

     The fourth sentence of Section 3(a) is amended by replacing both references
     to "Shares" with "Mature Shares."

     The fifth sentence of Section 3(a) is amended to read as follows:

         "Furthermore, if payment for tax withholding is made by the Holder in
         part through the Company's retaining Shares under Section 7(d), then
         such retained Shares shall be additionally available for issuance,
         subject to option, under the Plan.

     The sixth sentence of Section 3(a) is deleted in its entirety.

3.   Exercise of Options

     Section 7(b) is amended by replacing all references in the third sentence
     to "Shares" with "Mature Shares" and by deleting the last sentence of this
     Section 7(b) in its entirety.

     Section 7(c) is deleted in its entirety.

     Section 7(d) is amended in its entirety to read as follows:

         "(d) Special Payment Provisions for Nonqualified Options; Withholding
         Taxes. The Grantee of a Nonqualified Option may elect to have the
         Company retain from the Shares to be issued upon his exercise of such
         option Shares having a Current Market Value on the date of exercise
         equal to all or any part of the Company's minimum statutory withholding
         for federal, state and local tax payments to be made by the Grantee
         with respect to the exercise of the option in lieu of making such
         payments in cash."

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     The first sentence of Section 7(e) is amended by replacing all references
     to "Shares" with "Mature Shares."

     The second sentence of Section 7(e) is amended by adding the words "and the
     date the Payment Shares were acquired by the Holder" after the words
     "confirms that the Holder" is the owner of the Payment Shares."

4.   Director Options

     The third sentence of Section 9(c) is amended by replacing all references
     in this sentence to "Shares" with "Mature Shares."

     The fourth sentence of Section 9(c) is amended in its entirety to read as
     follows:

         "Payment of the option price in Shares can be made by the delivery of
         Mature Shares already owned by the Holder."

     The fifth sentence of Section 9(c) is amended by replacing the reference to
     "Shares" with "Mature Shares."

5.   Non-Transferability

     The last sentence of Section 10(e) is amended by replacing references to
     "mandatory withholding tax [or taxes] payable by the Grantee" with "the
     Company's mandatory statutory withholding tax payable by the Grantee."

6.   Issuance of Share Units in Lieu of Shares Upon Exercise of NQSO's

     Section 18(d)(3) is amended by replacing the reference to "Shares" with
     "Mature Shares."

The remainder of the Plan shall remain unchanged and in full force and effect.

                               FLOWSERVE CORPORATION

                               By: /s/ Ronald F. Shuff
                                   ---------------------------------------------
                                   Ronald F. Shuff
                                   Vice President, Secretary and General Counsel

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                                                                   EXHIBIT 10.37

                               AMENDMENT NO. 3 TO
                              FLOWSERVE CORPORATION
                           1998 RESTRICTED STOCK PLAN

Effective October 1, 2000, the Flowserve Corporation 1998 Restricted Stock Plan
is amended to provide exclusively for the settlement of account by delivery of a
fixed number of shares. The number of shares is fixed at the date of award and
equals the number of shares held in the Participant's account for deferred
restricted shares. Any cash received from the payment of dividends as of
September 30, 2000 shall be deemed held pursuant to the 1998 Restricted Stock
Dividend Plan.

         1.       Paragraph (d) of Section 2 of Article V "Accounts for Deferred
                  Shares" is amended to read as follows:

                  (d)      Any dividends paid on the Deferred Shares in a
                           Participant's account ("Dividends") will be credited
                           to a Participant's deferred cash account established
                           pursuant to the Flowserve Corporation 1998 Restricted
                           Stock Dividend Plan.

         2.       The first and second sentences of Paragraph (e) of Section 2
                  of Article V "Accounts for Deferred Shares" are amended to
                  read as follows:

                  (e)      Any Deferred Shares of a Participant and any amount
                           credited to the Deferred Shares Trust accounts of a
                           Participant will represent only an unsecured promise
                           of the Company to pay or deliver the amount so
                           credited in accordance with the terms of this Article
                           of the Plan. Neither a Participant nor any
                           beneficiary of a Participant will acquire any right,
                           title or interest in any asset of the Company as a
                           result of any Deferred Shares credited to a
                           Participant's account or accounts.

         3.       Paragraph (a) of Section 3 of Article V "Distribution of
                  Deferred Shares" is amended as follows:

                  (a)      Deferred Shares will be distributed only in
                           accordance with the following sections, pursuant to
                           the election for a lump sum or installment in kind
                           distribution specified by the Participant.

                           (i)      In the event a Participant ceased to be a
                                    director or employee of the Company, as the
                                    case may be, for any reason, any Deferred
                                    Shares (other than Deferred Shares, if any,
                                    that are forfeited) previously or currently
                                    credited to his/her account will be
                                    distributed commencing within 60 calendar
                                    days of his/her termination in accordance
                                    with the method of in kind distribution
                                    elected by the Participant.

                           (ii)     The Participant may elect to receive such
                                    distributions in a lump sum, in equal annual
                                    installments (not exceeding ten), or in some
                                    designated combination thereof.

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                  (iii)    If the election is a lump sum, the entire Deferred
                           Shares account balance will be transferred in kind,
                           to the Participant within 60 days of his/her
                           termination.

                  (iv)     If installments have been elected, the aggregate
                           number of Deferred Shares held in the separate
                           account for Deferred Shares will be divided by the
                           number of installments elected and allocated in equal
                           whole number proportions to be distributed with each
                           such installment payment (with any remainder after
                           such equal division to be included in the first
                           installment). All Deferred Shares so allocated will
                           be distributed in kind and the first payment made
                           within 60 days of termination. The second and all
                           subsequent payments shall be made between January 1
                           and 30 of each following year. Certificates
                           representing the applicable amount of Deferred Shares
                           held for the then longest time in the Deferred Shares
                           account of the Trust will be delivered with each
                           installment, where applicable.

                  (v)      If any portion of a Participant's deferred account
                           remains unpaid at his/her death, then after his/her
                           death such amount will be paid (i) to his/her
                           beneficiary(ies) in accordance with the method of
                           distribution elected by the Participant (following
                           the procedures for lump sum and installment payments
                           set forth above) or (ii) if the beneficiary
                           predeceases the Participant, to the Participant's
                           estate in a lump sum. Should a beneficiary die after
                           the Participant has terminated service, but before
                           the entire Deferred Shares have been disbursed, the
                           Deferred Shares benefit will be transferred to the
                           beneficiary's estate in kind.

                  (vi)     Notwithstanding anything to the contrary above, no
                           Deferred Shares shall be paid to the Participant
                           until expiration or termination of the applicable
                           Restriction Period or, if earlier, until the
                           provisions of Article I, Section 5 (a) cease to apply
                           to such Shares, and until satisfaction of applicable
                           performance-related conditions, if any.

         4.       Paragraph (b) of Section 3 of Article V "Distribution of
                  Deferred Shares" is deleted in its entirety to eliminate any
                  discretion by the Committee to consent to the sale of any or
                  all Deferred Shares held for the account of a Participant.

The remainder of the Plan shall remain unchanged and in full force and effect.

                               FLOWSERVE CORPORATION

                               By: /s/ Ronald F. Shuff
                                   ---------------------------------------------
                                   Ronald F. Shuff
                                   Vice President, Secretary and General Counsel

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