Document:

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                                                                   EXHIBIT 10.10

                 FLOWSERVE CORPORATION LONG-TERM INCENTIVE PLAN
                AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 2000

Flowserve Corporation (the "Company") established the Flowserve Corporation
Long-Term Incentive Plan (the "Plan) as amended and restated November 1, 1993
and has been operating thereunder. Effective October 1, 2000 ("Effective Date"),
the Plan has been amended and restated into two separate plans:

               1)   Flowserve Corporation Long-Term Stock
                    Incentive Plan ("Stock Incentive Plan").

               2.   Flowserve Corporation Long-Term Cash
                    Incentive Plan ("Cash Incentive Plan").

Each Participant in any Plan Year may participate in the Stock Incentive Plan or
the Cash Incentive Plan or both the Stock Incentive Plan and the Cash Incentive
Plan. Participation in the Plans is permitted on a pro rata basis so that total
participation in both Plans equals 100%.

As of the Effective Date, all deferred stock awards from the predecessor Plan
are transferred to the Stock Incentive Plan and all deferred cash awards are
transferred to the Cash Incentive Plan. The distribution of any stock
transferred to the Stock Incentive Plan shall only be made in kind.

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                                                 Effective Date: October 1, 2000

                              FLOWSERVE CORPORATION
                         LONG-TERM STOCK INCENTIVE PLAN

I.       PURPOSE

         The purpose of the Flowserve Corporation Long-Term Stock Incentive Plan
         (hereinafter referred to as the "Plan") is (i) to attract and retain
         employees of experience and ability by providing incentives to those
         who contribute to the successful operation of the business and affairs
         of the Company and its Divisions and Subsidiaries; (ii) to increase the
         identity of interests of such employees with those of the Company's
         shareholders; (iii) to encourage and reward achievement of the Company
         and its Divisions and Subsidiaries' long-term goals and objectives; and
         (iv) to reward longer term decisions in the first year of a Cycle which
         produce outstanding results over the full term of the Cycle.

II.      DEFINITIONS

         A.       "AWARD" - A Performance Unit or Units contingently awarded
                  under the Plan.

         B.       "BOARD" - The Company's Board of Directors.

         C.       "COMMITTEE" - The Compensation Committee of the Board.

         D.       "COMPANY" - Flowserve Corporation, a New York Corporation, and
                  its successors in interest.

         E.       "DIVISION" - An unincorporated separated business unit of the
                  Company.

         F.       "FISCAL-YEAR" - The Company's fiscal year ended December 31.

         G.       "PARTICIPANT" - An employee who is selected by the Committee
                  to receive an Award under the plan.

         H.       "PERFORMANCE CYCLE" OR "CYCLE" - The period of years selected
                  by the Committee during which the performance of the Company
                  and its Divisions and Subsidiaries is measured for the purpose
                  of determining the extent to which an award has been earned.
                  (See Attachment A.)

         I.       "PERFORMANCE GOALS" - The objectives for the Company and its
                  Divisions and Subsidiaries established by the Committee for
                  the purpose of determining the extent to which Performance
                  Units which have been contingently awarded for a Cycle are
                  earned.

         J.       "PERFORMANCE UNITS" - An Award granted in the form of a number
                  of units at a fixed dollar value per unit.

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         K.       "SUBSIDIARY" - Any entity of which more than 50 percent of the
                  voting control is owned, directly or indirectly, by the
                  Company.

III.     ADMINISTRATION

         The Plan will be administered by the Committee. No member of the
         Committee win be eligible to be granted an Award while he is a member
         of the Committee or with respect to any Fiscal Year during which a
         Performance Cycle was established and he was a member of the Committee.
         The Committee's power of Plan administration shall include the ability
         to amend the Plan, except for amendments which affect the Awards which
         may be earned by or payable to the Company's Chief Executive Officer.
         No such amendment shall retroactively affect the benefit rights or
         other entitlement of any Award granted to or earned by a Participant.

IV.      ELIGIBILITY AND ELECTION TO PARTICIPATE

         Employees eligible to participate in the Plan are those full-time
         salaried executives of the Company and its Subsidiaries who are in a
         position to contribute, in a substantial measure, to the long-term
         strategies, performance and profitability of the Company and its
         Subsidiaries. The Company's Chief Executive Officer will, from time to
         time, propose to the Committee eligible employees for participation in
         the Plan. Generally, only executives who are at the Division/Subsidiary
         President or Company Officer level will be eligible for participation,
         although the Committee in its discretion may admit other employees as
         Participants. If the Participant elects to participate in the Plan, the
         Participant must so elect on a form ("Attachment F") to be delivered to
         and be subject to acceptance by the Committee or the CEO, CAO or other
         persons designated by the Committee prior to the end of the Cycle with
         such election irrevocable after the completion of the Cycle.

V.       OPERATION OF THE PLAN

         A.       AUTHORITY OF THE COMMITTEE - The Committee will have the sole
                  authority to determine the eligible employees who will become
                  Participants, the number of Performance Units each Participant
                  will receive, the value of each Performance Unit for each
                  Performance Cycle and the duration of each Performance Cycle.
                  There may be more than one Performance Cycle in existence at
                  any one time, and the duration of Performance Cycles may
                  differ from each other. (See Attachment A for an example of a
                  series of Performance Cycles.) Each Award of Performance Units
                  will be confirmed by a Performance Unit offer executed by the
                  Company and sent to the Participant, which shall be deemed to
                  have been accepted by the Participant and thus have become a
                  binding agreement, unless the Participant objects in writing
                  within seven (7) days after receipt. (See Attachment B for an
                  example of the basis for Performance Unit Awards.)

         B.       PERFORMANCE GOALS - The Committee will establish Performance
                  Goals for each Cycle on the basis of such criteria and to
                  accomplish such objectives as the Committee may from time to
                  time select. During any Cycle, the Committee may adjust the
                  Performance Goals for such Cycle as it deems equitable in

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                  recognition of unusual or non-recurring events affecting the
                  Company or changes in applicable tax laws or accounting
                  principles.

         C.       COMPUTATION OF PERFORMANCE UNIT AWARDS EARNED - The Committee
                  will determine the number of Performance Units which have been
                  earned at the end of each Performance Cycle, based upon the
                  Company's performance in relation to the established
                  Performance Goals. A Participant's earned Award for any
                  Performance Cycle shall be contingent upon the Company's
                  achieving such percentage of the Performance Goals for that
                  Cycle as may be specified by the Committee. If the Company
                  achieves 100% of such goals, the Participant will receive the
                  target Award. If the Company's performance falls short of or
                  exceeds such goals, the actual Award may be less than or
                  exceed the target Award by such amount as may be specified by
                  the Committee, but the actual Award shall in no event exceed
                  200% of the target Award. (See Attachment C for an example of
                  the proportional allocation of an Award.)

         D.       PAYMENTS OF PERFORMANCE UNITS - Payment of Performance Units
                  will be in shares of the common stock of the Company
                  ("Shares"). A Participant may also elect to defer payment of
                  Shares ("deferred Shares") under the provisions of Section X.
                  Any Award so elected by the Participant to be paid in the form
                  of Shares or deferred Shares shall be increased by fifteen per
                  cent (15%). Except as may be provided for such "deferred
                  Shares, any issuance of Shares as such payment shall be based
                  upon a determination of the Share's "Current Market Value" on
                  the February 1 next following the end of the applicable
                  Performance cycle or such other date as is selected by the
                  Committee. "Current Market Value" shall mean the average of
                  the last sale prices of a Share during the period beginning
                  thirty-one days prior to and ending on the date that the value
                  of the Share is to be determined, as reported by the National
                  Association of Securities Dealers, Inc. through NASDAQ or, in
                  the event that the Shares are listed on an exchange, the
                  average of the last sale prices of a Share on such exchange
                  during such period. The issuance or delivery of Shares
                  pursuant to the Plan shall be subject to, and shall comply
                  with, any applicable requirements of federal and state
                  securities laws, rules and regulations (including, without
                  limitation, the provisions of the Securities Act of 1933, the
                  Securities Exchange Act of 1934 and the rules and regulations
                  promulgated thereunder), any securities exchange upon which
                  the Shares may be listed and any other law or regulation
                  applicable thereto. The Company shall not be obligated to
                  issue or deliver any Shares pursuant to the Plan if such
                  issuance or delivery would, in the opinion of the Committee,
                  violate any such requirements. The foregoing shall not,
                  however, be deemed to require the Company to effect any
                  registration of Shares under any such law or regulation,
                  although the Company may elect to do so. Payment or deferral
                  of Performance Units will be made as soon as practicable after
                  the determination of the value of a Share, where applicable,
                  and the completion of the Performance Cycle during which the
                  Awards were earned.

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VI.      TERMINATION OF EMPLOYMENT

         A.       TERMINATION DUE TO RETIREMENT - Performance Units will be paid
                  at the end of each Performance Cycle; provided, however, the
                  value of an Award made for the Fiscal Year in which a
                  Participant retires will be prorated by twelfths as of the
                  date of retirement, based upon the number of whole months from
                  January 1 of such Fiscal Year to the date of retirement and
                  counting as a whole month the month of retirement if the date
                  of retirement is after the 15th of the month. The retirement
                  of a Participant subsequent to the end of a Fiscal Year shall
                  not affect the value of or his entitlement to an Award
                  previously made for such Fiscal Year.

         B.       TERMINATION DUE TO DEATH OR DISABILITY - Performance Units
                  shall be paid at the end of each Performance Cycle; provided,
                  however, the value of an Award made for the Fiscal Year in
                  which a Participant dies or becomes disabled shall be prorated
                  by twelfths as of the date of death or disability, based upon
                  the number of whole months from January 1 of such Fiscal Year
                  to the date of death or disability and counting as a whole
                  month the month of death or disability if the date of death or
                  disability is after the 15th of the month. The death or
                  disability of a Participant subsequent to the end of a Fiscal
                  Year shall not affect the value of or his entitlement to an
                  Award previously made for such Fiscal Year. In the event of a
                  Participant's death, any amount payable with respect to his
                  Performance Units shall be paid to his beneficiary(ies).
                  Should a beneficiary die after the Participant but before the
                  benefit is disbursed, the benefit will be paid to the
                  beneficiary's estate.

         C.       REASSIGNMENT TO A NON-PARTICIPATING POSITION - Performance
                  Units shall be paid at the end of each Performance Cycle;
                  provided, however, the value of an Award made for the Fiscal
                  Year in which a Participant is reassigned to a
                  non-participating position shall be prorated by twelfths as of
                  the date of the reassignment, based upon the number of whole
                  months from January 1 of such Fiscal Year to the date of
                  reassignment and counting as a whole month the month of
                  reassignment if the date of reassignment is after the 15th of
                  the month.

         D.       TERMINATION FOR ANY OTHER REASON - All Awards not yet earned
                  upon a Participant's termination of employment for any reason
                  other than those set forth in Section VI. A.-C., above, will
                  be forfeited. The Committee may, but is not obligated to, make
                  whole or partial payments of Performance Units to a terminated
                  Participant at its discretion if it deems such action to be in
                  the best interest of Company.

VII.     DESIGNATION OF THE BENEFICIARY

         Each Participant, at the beginning of each Performance Cycle, will
         designate one or more beneficiaries to whom the Company will make any
         distribution to be made after the Participant's death. This designation
         will be made in writing on a form filed with the Company's Vice
         President, Secretary and General Counsel (or other

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         officer designated by the President). If a Participant does not
         designate a beneficiary, or if the beneficiary predeceases the
         Participant, the distribution shall be made to the Participant's
         estate. Should a beneficiary die after the Participant but before
         distribution is made, the distribution shall be made to the
         beneficiary's estate. A Participant may change his designated
         beneficiary(ies) at any time. (See Attachment D for a copy of the
         Beneficiary Designation.)

VIII.    AMENDMENT, SUSPENSION OR TERMINATION OF PLAN

         In addition to the Committee's aforementioned limited power of Plan
         amendment, the Board may at any time amend, suspend or terminate this
         Plan; provided, however, that no amendment, suspension or termination
         will affect the rights of Participants to receive distribution of
         awards already vested but not paid nor retroactively eliminate or
         reduce any Award granted to or earned by any Participant. For purposes
         of the foregoing, an award shall be considered to have been vested upon
         the expiration of the first Fiscal Year of the Performance Cycle to
         which the award relates.

IX.      GENERAL

         A.       All expenses of administering the Plan, including reasonable
                  compensation to the members of the Committee, will be borne by
                  the Company.

         B.       No rights under the Plan, contingent or otherwise, will be
                  transferable, assignable or subject to any encumbrance, pledge
                  or charge of any nature.

         C.       Neither the adoption of the Plan nor its operation will in any
                  way affect the right and power of the Company to dismiss or
                  discharge any employee at any time.

         D.       The Board, the Committee and the Chief Executive Officer may
                  rely upon any information supplied to them by an officer of
                  the Company or by the Company's independent public accountants
                  and may rely upon the advice of such accountants or of counsel
                  in connection with the administration of the Plan and will be
                  fully protected in relying upon such information or advice.

X.       DEFERRED PAYMENT OF PERFORMANCE UNITS

         Awards under the Plan shall be paid in kind in Shares or deferred
         Shares or a combination thereof for a Performance Cycle.

         A.       SHARE AWARDS - Shares Awards will be paid in full as soon as
                  practicable after the end of the Performance Cycle.

         B.       ELECTION TO DEFER - Each Participant may elect to defer
                  distribution of a Share Award or a portion thereof. The
                  Participant's election to defer must be made either at or
                  before August 31 of the applicable Plan Year. Such election
                  may not be changed after August 31 of the applicable Plan
                  Year. Attachment E is a copy of the election to defer,
                  although the Committee may elect to honor any

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                  written communication statement from a Participant which
                  communicates substantially the same election intention. The
                  Committee, in its absolute discretion, may elect to accept any
                  such election applicable to the Plan Year beginning January 1,
                  1990, January 1, 1991, January 1, 1992 or January 1, 1993
                  where the Committee (or the Chief Administrative Officer on
                  behalf of the Committee, except in cases involving the Chief
                  Administrative Officer) determines in its absolute discretion
                  that the Participant submitted in good faith an irrevocable
                  election to defer a possible award prior to the commencement
                  of the applicable Plan Year, regardless of the content of any
                  election form or notice.

         C.       PARTICIPANTS' ACCOUNTS FOR DEFERRED SHARES AWARD - The Company
                  will establish a separate account for each Participant whose
                  Shares Award is deferred, in which the number of Shares of the
                  Participant's deferred Shares Award will be maintained. The
                  Company will create this account through a trust established
                  by the Company with the applicable trustee (the "Trustee")
                  maintaining such Shares pursuant to the trust. The Company
                  reserves the right to fund such account by providing the then
                  cash equivalent of the applicable Share Award (including, if
                  applicable, the fifteen percent (15%) premium noted in Section
                  V(D)) to such Trustee with instructions to such Trustee to
                  purchase such Shares for this account on the open market with
                  the Company paying or reimbursing the Trustee for any
                  brokerage or other transaction fees. Any dividends paid on the
                  Shares in this account will be credited to a deferred cash
                  account of the Participant established pursuant to the
                  Long-Term Cash Incentive Plan. The Trustee shall have all
                  voting rights on deferred Shares.

         D.       UNSECURED ACCOUNT - Any amount credited to the account of a
                  Participant as a deferred Award will represent only an
                  unsecured promise of the Company to pay the amount so credited
                  in accordance with the terms 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 amount credited to a Participant's account. At
                  all times, a Participant's rights with respect to the amount
                  credited to his account will be only those of an unsecured
                  creditor of the Company. The Company will not be obligated or
                  required in any manner to restrict the use of any of its
                  assets as a result of any amount credited to a Participant's
                  account.

         E.       DEFERRED PAYMENTS - Deferred Awards will be distributed only
                  in accordance with the following sections.

                  (i)      Termination of Employment. In the event a Participant
                           ceases to be employed by the Company or a Subsidiary
                           for any reason other than death or retirement, any
                           deferred Shares Award (earned in respect of any Cycle
                           ending prior to the Cycle in which such termination
                           occurs), credited to his account will be distributed
                           in kind in a lump sum payment within 60 days of his
                           termination of employment.

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                  (ii)     Retirement. In the event a Participant retires under
                           a retirement plan of the Company or a Subsidiary, any
                           deferred Shares Award will be distributed commencing
                           within 60 calendar days of his retirement in
                           accordance with the method of distribution elected by
                           the Participant. If the election is a lump sum, the
                           entire deferred Shares Award will be transferred in
                           kind to the Participant within 60 days of his
                           retirement. If installments have been elected the
                           aggregate number of Shares held in the separate
                           account for deferred Shares Awards 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 Awards so allocated
                           will be distributed in kind, the first payment made
                           within 60 days of retirement and the second and all
                           subsequent installment payments made between January
                           1 and 15 of each following year.

                  (iii)    Death. If any portion of a Participant's account
                           remains unpaid at his death, then after his death
                           such amount will be paid (i) to his beneficiary(ies)
                           in accordance with the method of distribution elected
                           by the Participant (following the procedure for lump
                           sum and installment payments set forth above), or
                           (ii) if the Participant has not designated a
                           beneficiary or if the beneficiary predeceases the
                           Participant, to the Participant's estate in a lump
                           sum. Should a beneficiary die after the Participant
                           but before the entire benefit has been disbursed, the
                           Shares benefit will be transferred to such estate in
                           kind.

                  (iv)     Emergency Distribution. In the event an emergency
                           situation occurs (as defined below) while a
                           Participant is in the employ of the Company or a
                           Subsidiary, the Participant may request the Committee
                           to make an immediate distribution to him from his
                           account. Any such distribution will be solely within
                           the discretion of the Committee and will be limited
                           in an amount to that necessary to meet the emergency.

                           An emergency situation means a bona fide unexpected
                           financial emergency that is caused by an event beyond
                           the control of the Participant (e.g., a serious
                           family illness or disaster) and would result in
                           severe financial hardship to the Participant if early
                           distribution were not permitted.

                           IN WITNESS WHEREOF, the Company has caused this
restatement to be executed this 19th day of January, 2001.

                                  FLOWSERVE CORPORATION

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

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                                                                    ATTACHMENT A

                           PERFORMANCE CYCLE OR CYCLES

                      EXAMPLE OF A THREE-YEAR CYCLE PROGRAM

<TABLE>
<CAPTION>
                    Year       Year     Year       Year      Year      Year
                    One        Two      Three      Four      Five      Six
                  -------    -------   -------   -------   -------   -------
<S>               <C>        <C>       <C>       <C>       <C>       <C>
1st Cycle         Awarded ------------ Earned

2nd Cycle                    Awarded ----------- Earned

3rd Cycle                              Awarded ----------- Earned

4th Cycle                                        Awarded ----------- Earned
</TABLE>

         NOTE: Performance Units are contingently awarded prior to start of each
         Cycle and earned if Performance Goals are achieved at the end of the
         three-year period.

<PAGE>   10

                                                                    ATTACHMENT B

                  EXAMPLE OF BASIS FOR PERFORMANCE UNIT AWARDS

                           (LONG-TERM INCENTIVE PLAN)

<TABLE>
<CAPTION>
                                 TARGET UNIT AWARD      MAXIMUM UNIT AWARD
              SALARY RANGES            AS % OF            AS % OF BASE
BASE LEVEL     HAY POINTS       BASE SALARY MIDPOINT     SALARY MIDPOINT
----------    ------------      --------------------    -------------------
<S>           <C>               <C>                     <C>
    A         2500 & Above               45%                   90%

    B         1900 to 2499               35%                   70%

    C         1600 to 1899               30%                   60%

    D         1250 to 1599               25%                   50%
</TABLE>

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                                                                    ATTACHMENT C

                               PERCENT OF TARGET
 EXAMPLE OF PAYOUT AT FLOWSERVE SALES REVENUE GROWTH OVER OR UNDER McGRAW-HILL

<TABLE>
<CAPTION>
              FLOWSERVE GROWTH IN PERCENTAGE POINTS OVER McGRAW-HILL INDEX GROWTH
------------------------------------------------------------------------------------------------
RONA % OF          1% OR                                                                  10% OR
GOAL               LESS       2%     3%      4%     5%*      6%      7%      8%       9%   MORE
-------------      -----   -----   -----   -----   -----   -----   -----   -----   -----   -----
<S>                <C>     <C>     <C>    <C>     <C>     <C>     <C>      <C>     <C>     <C>
 0.0 - 79.9           0%      0%      0%      0%      0%      0%      0%      0%      0%      0%
 80.0 - 84.9         50%     50%     50%     50%     50%     65%     80%     90%    100%    110%
 85.0 - 89.9         50%     50%     50%     50%     65%     80%     90%    100%    110%    120%
 90.0 - 94.9         50%     50%     50%     65%     80%     90%    100%    110%    120%    130%
 95.0 - 99.9         50%     50%     65%     80%     90%    100%    110%    120%    130%    140%
100.0 - 104.9        50%     65%     80%     90%    100%    110%    120%    130%    140%    150%
105.0 - 109.9        65%     80%     90%    100%    110%    120%    130%    140%    150%    160%
110.0 - 114.9        80%     90%    100%    110%    120%    130%    140%    150%    160%    170%
115.0 - 119.9        90%    100%    110%    120%    130%    140%    150%    160%    170%    180%
120.0 - 124.9       100%    110%    120%    130%    140%    150%    160%    170%    180%    190%
125.0 and over      110%    120%    130%    140%    150%    160%    170%    180%    190%    200%
</TABLE>

* NOTE: 5 percentage point growth over McGraw-Hill results in payouts equal to
        the old plan. Award determination to be interpolated between categories
        based upon actual results.

<PAGE>   12

                                                                    ATTACHMENT D

                              FLOWSERVE CORPORATION
                         LONG-TERM STOCK INCENTIVE PLAN

                      PARTICIPANT'S BENEFICIARY DESIGNATION

In accordance with the provisions of the Long-Term Stock Incentive Plan (the
"Plan") of Flowserve Corporation (the "Company"), I elect to have any payments
which have not been made to me prior to my death, paid after my death to:

              ----------------------------------------------------

              ----------------------------------------------------

              ----------------------------------------------------

              ---------------           --------------------------
                  Date                   Signature of Participant

The undersigned acknowledges receipt of the above election on                 .
                                                              ----------------

                                                ------------------------------
                                                RONALD F. SHUFF
                                                VICE PRESIDENT, SECRETARY AND
                                                GENERAL COUNSEL

<PAGE>   13

                                                                    ATTACHMENT E

                              FLOWSERVE CORPORATION
                         LONG-TERM STOCK INCENTIVE PLAN

                         PARTICIPANT'S ELECTION TO DEFER

In accordance with the provisions of the Long-Term Stock Incentive Plan (the
"Plan") of Flowserve Corporation (the "Company"), I elect:

         1.       To defer ____% of my payment of Award payable in Shares for
                  the Plan Year ending December 31, 200___.

         2.       To receive payment of the amount credited to my deferred award
                  account in the following manner (I have initiated the method I
                  have elected):

                         A.  In one lump sum payment in kind distribution of
                  ----       "Shares" (as defined in the Plan) upon
                             retirement.

                         B.  In ten equal annual installments of Shares
                  ----       commencing within 60 calendar days of my
                             retirement.

         3.       To have any payments required by paragraph 2 above which have
                  not been made to me prior to my death, paid after my death to
                  the following designated person in the same manner as would
                  have been paid to me:

              ----------------------------------------------------

              ----------------------------------------------------

              ----------------------------------------------------

In making this election, I understand that:

         1.       My election may not be changed after the beginning of the Plan
                  Year with respect to which my award is earned.

         2.       My election is subject to the terms of the Plan, which, among
                  other things, requires a lump sum payout in the event of my
                  employment termination for reasons other than retirement or
                  death.

-------------------------              --------------------------------------
DATE                                   SIGNATURE OF PARTICIPANT

The undersigned acknowledges receipt of the above election on                 .
                                                              ----------------

                                                ------------------------------
                                                RONALD F. SHUFF
                                                VICE PRESIDENT, SECRETARY AND
                                                GENERAL COUNSEL

<PAGE>   14
                                                                    ATTACHMENT F

                              FLOWSERVE CORPORATION
                         LONG-TERM STOCK INCENTIVE PLAN

                      PARTICIPANT'S ELECTION TO PARTICIPATE

In accordance with the provisions of the Long-Term Stock Incentive Plan (the
"Plan") of Flowserve Corporation (the "Company"), I elect to participate in the
Plan for the Performance Cycle ended December 31, 200__. Participation in this
Plan is on a pro rata basis with the Flowserve Corporation Long-term Cash
Incentive Plan for Senior Executives and represents ___% of my total (100%
participation in both Plans. Unless otherwise determined by the Committee, I
understand that if I am a participant in the Flowserve Corporation Equity
Incentive Plan my participation in the Long-Term Stock Incentive Plan must be at
least 50% of my total (100%) participation in both the Long-Term Incentive Plan
and the Long-term Cash Incentive Plan.

In making this election, I understand that:

1.       My election may not be changed or revoked after the end of the
         Performance Cycle.

2.       The number of Shares to be received pursuant to this election will be
         calculated pursuant to the Plan and, accordingly, will be the
         equivalent of 115% of the value of the award, based upon the Plan's
         specified timing of the computation of the cash value of a Share.

3.       My election is otherwise subject to the terms of the Plan.

4.       The Shares have not been registered under the Securities Act of 1933.
         Rather, the Shares will be issued in reliance upon the so-called
         private placement exemption set forth in the Act. I may not sell the
         Shares unless either they are registered under the Act or unless an
         exemption from registration is available.

----------------------            ---------------------------------------------
DATE                              SIGNATURE OF PARTICIPANT

Receipt and acceptance acknowledged on behalf of the Compensation Committee.

----------------------            ---------------------------------------------
DATE                              RONALD F. SHUFF
                                  Vice President, Secretary and General Counsel

<PAGE>   15
                                                 Effective Date: October 1, 2000

                              FLOWSERVE CORPORATION
                          LONG-TERM CASH INCENTIVE PLAN

I.       PURPOSE

         The purpose of the Flowserve Corporation Long-Term Cash Incentive Plan
         (hereinafter referred to as the "Plan") is (i) to attract and retain
         employees of experience and ability by providing incentives to those
         who contribute to the successful operation of the business and affairs
         of the Company and its Divisions and Subsidiaries; (ii) to increase the
         identity of interests of such employees with those of the Company's
         shareholders; (iii) to encourage and reward achievement of the Company
         and its Divisions and Subsidiaries' long-term goals and objectives; and
         (iv) to reward longer term decisions in the first year of a Cycle which
         produce outstanding results over the full term of the Cycle.

II.      DEFINITIONS

         A.       "AWARD" - A Performance Unit or Units contingently awarded
                  under the Plan.

         B.       "BOARD" - The Company's Board of Directors.

         C.       "COMMITTEE" - The Compensation Committee of the Board.

         D.       "COMPANY" - Flowserve Corporation, a New York Corporation.

         E.       "DIVISION" - An unincorporated separated business unit of the
                  Company.

         F.       "FISCAL-YEAR" - The Company's fiscal year ended December 31.

         G.       "PARTICIPANT" - An employee who is selected by the Committee
                  to receive an Award under the plan.

         H.       "PERFORMANCE CYCLE" OR "CYCLE" - The period of years selected
                  by the Committee during which the performance of the Company
                  and its Divisions and Subsidiaries is measured for the purpose
                  of determining the extent to which an award has been earned.
                  (See Attachment A.)

         I.       "PERFORMANCE GOALS" - The objectives for the Company and its
                  Divisions and Subsidiaries established by the Committee for
                  the purpose of determining the extent to which Performance
                  Units which have been contingently awarded for a Cycle are
                  earned.

         J.       "PERFORMANCE UNITS" - An Award granted in the form of a number
                  of units at a fixed dollar value per unit.

         K.       "SUBSIDIARY" - Any entity of which more than 50 percent of the
                  voting control is owned, directly or indirectly, by the
                  Company.

<PAGE>   16

III.     ADMINISTRATION

         The Plan will be administered by the Committee. No member of the
         Committee win be eligible to be granted an Award while he is a member
         of the Committee or with respect to any Fiscal Year during which a
         Performance Cycle was established and he was a member of the Committee.
         The Committee's power of Plan administration shall include the ability
         to amend the Plan, except for amendments which affect the Awards which
         may be earned by or payable to the Company's Chief Executive Officer.
         No such amendment shall retroactively affect the benefit rights or
         other entitlement of any Award granted to or earned by a Participant.

IV.      ELIGIBILITY

         Employees eligible to participate in the Plan are those full-time
         salaried executives of the Company and its Subsidiaries who are in a
         position to contribute, in a substantial measure, to the long-term
         strategies, performance and profitability of the Company and its
         Subsidiaries. The Company's Chief Executive Officer will, from time to
         time, propose to the Committee eligible employees for participation in
         the Plan. Generally, only executives who are at the Division/Subsidiary
         President or Company Officer level will be eligible for participation,
         although the Committee in its discretion may admit other employees as
         Participants. Unless electing to the contrary to participate in the
         Flowserve Corporation Long-Term Stock Incentive Plan, all Eligible
         Participants shall participate in this Plan.

V.       OPERATION OF THE PLAN

         A.       AUTHORITY OF THE COMMITTEE - The Committee will have the sole
                  authority to determine the eligible employees who will become
                  Participants, the number of Performance Units each Participant
                  will receive, the value of each Performance Unit for each
                  Performance Cycle and the duration of each Performance Cycle.
                  There may be more than one Performance Cycle in existence at
                  any one time, and the duration of Performance Cycles may
                  differ from each other. (See Attachment A for an example of a
                  series of Performance Cycles.) Each Award of Performance Units
                  will be confirmed by a Performance Unit offer executed by the
                  Company and sent to the Participant, which shall be deemed to
                  have been accepted by the Participant and thus have become a
                  binding agreement, unless the Participant objects in writing
                  within seven (7) days after receipt. (See Attachment B for an
                  example of the basis for Performance Unit Awards.)

         B.       PERFORMANCE GOALS - The Committee will establish Performance
                  Goals for each Cycle on the basis of such criteria and to
                  accomplish such objectives as the Committee may from time to
                  time select. During any Cycle, the Committee may adjust the
                  Performance Goals for such Cycle as it deems equitable in
                  recognition of unusual or non-recurring events affecting the
                  Company or changes in applicable tax laws or accounting
                  principles.

         C.       COMPUTATION OF PERFORMANCE UNIT AWARDS EARNED - The Committee
                  will determine the number of Performance Units which have been
                  earned at the end

                                       2
<PAGE>   17

                  of each Performance Cycle, based upon the Company's
                  performance in relation to the established Performance Goals.
                  A Participant's earned Award for any Performance Cycle shall
                  be contingent upon the Company's achieving such percentage of
                  the Performance Goals for that Cycle as may be specified by
                  the Committee. If the Company achieves 100% of such goals, the
                  Participant will receive the target Award. If the Company's
                  performance falls short of or exceeds such goals, the actual
                  Award may be less than or exceed the target Award by such
                  amount as may be specified by the Committee, but the actual
                  Award shall in no event exceed 200% of the target Award. (See
                  Attachment C for an example of the proportional allocation of
                  an Award.)

         D.       PAYMENTS OF PERFORMANCE UNITS - Payment of Performance Units
                  will be in cash. A Participant may also elect to defer payment
                  of cash under the provisions of Section X.

VI.      TERMINATION OF EMPLOYMENT

         A.       TERMINATION DUE TO RETIREMENT - Performance Units will be paid
                  at the end of each Performance Cycle; provided, however, the
                  value of an Award made for the Fiscal Year in which a
                  Participant retires will be prorated by twelfths as of the
                  date of retirement, based upon the number of whole months from
                  January 1 of such Fiscal Year to the date of retirement and
                  counting as a whole month the month of retirement if the date
                  of retirement is after the 15th of the month. The retirement
                  of a Participant subsequent to the end of a Fiscal Year shall
                  not affect the value of or his entitlement to an Award
                  previously made for such Fiscal Year.

         B.       TERMINATION DUE TO DEATH OR DISABILITY - Performance Units
                  shall be paid at the end of each Performance Cycle; provided,
                  however, the value of an Award made for the Fiscal Year in
                  which a Participant dies or becomes disabled shall be prorated
                  by twelfths as of the date of death or disability, based upon
                  the number of whole months from January 1 of such Fiscal Year
                  to the date of death or disability and counting as a whole
                  month the month of death or disability if the date of death or
                  disability is after the 15th of the month. The death or
                  disability of a Participant subsequent to the end of a Fiscal
                  Year shall not affect the value of or his entitlement to an
                  Award previously made for such Fiscal Year. In the event of a
                  Participant's death, any amount payable with respect to his
                  Performance Units shall be paid to his beneficiary(ies).
                  Should a beneficiary die after the Participant but before the
                  benefit is disbursed, the benefit will be paid to the
                  beneficiary's estate.

         C.       REASSIGNMENT TO A NON-PARTICIPATING POSITION - Performance
                  Units shall be paid at the end of each Performance Cycle;
                  provided, however, the value of an Award made for the Fiscal
                  Year in which a Participant is reassigned to a
                  non-participating position shall be prorated by twelfths as of
                  the date of the reassignment, based upon the number of whole
                  months from January 1 of such Fiscal Year to the date of
                  reassignment and counting as a whole month the

                                       3
<PAGE>   18

                  month of reassignment if the date of reassignment is after the
                  15th of the month.

         D.       TERMINATION FOR ANY OTHER REASON - All Awards not yet earned
                  upon a Participant's termination of employment for any reason
                  other than those set forth in Section VI. A.-C., above, will
                  be forfeited. The Committee may, but is not obligated to, make
                  whole or partial payments of Performance Units to a terminated
                  Participant at its discretion if it deems such action to be in
                  the best interest of Company.

VII.     DESIGNATION OF THE BENEFICIARY

         Each Participant, at the beginning of each Performance Cycle, will
         designate one or more beneficiaries to whom the Company will make any
         distribution to be made after the Participant's death. This designation
         will be made in writing on a form filed with the Company's Vice
         President, Secretary and General Counsel (or other officer designated
         by the President). If a Participant does not designate a beneficiary,
         or if the beneficiary predeceases the Participant, the distribution
         shall be made to the Participant's estate. Should a beneficiary die
         after the Participant but before distribution is made, the distribution
         shall be made to the beneficiary's estate. A Participant may change his
         designated beneficiary(ies) at any time. (See Attachment D for a copy
         of the Beneficiary Designation.)

VIII.    AMENDMENT, SUSPENSION OR TERMINATION OF PLAN

         In addition to the Committee's aforementioned limited power of Plan
         amendment, the Board may at any time amend, suspend or terminate this
         Plan; provided, however, that no amendment, suspension or termination
         will affect the rights of Participants to receive distribution of
         awards already vested but not paid nor retroactively eliminate or
         reduce any Award granted to or earned by any Participant. For purposes
         of the foregoing, an award shall be considered to have been vested upon
         the expiration of the first Fiscal Year of the Performance Cycle to
         which the award relates.

IX.      GENERAL

         A.       All expenses of administering the Plan, including reasonable
                  compensation to the members of the Committee, will be borne by
                  the Company.

         B.       No rights under the Plan, contingent or otherwise, will be
                  transferable, assignable or subject to any encumbrance, pledge
                  or charge of any nature.

         C.       Neither the adoption of the Plan nor its operation will in any
                  way affect the right and power of the Company to dismiss or
                  discharge any employee at any time.

         D.       The Board, the Committee and the Chief Executive Officer may
                  rely upon any information supplied to them by an officer of
                  the Company or by the Company's independent public accountants
                  and may rely upon the advice of such

                                       4
<PAGE>   19

                  accountants or of counsel in connection with the
                  administration of the Plan and will be fully protected in
                  relying upon such information or advice.

X.       DEFERRED PAYMENT OF PERFORMANCE UNITS

         Awards under the Plan may be paid in cash or deferred cash or a
         combination thereof for a Performance Cycle.

         A.       CASH AWARDS - Cash Awards will be paid in full as soon as
                  practicable after the end of the Performance Cycle.

         B.       ELECTION TO DEFER - Each Participant may elect to defer
                  distribution of a cash Award or a portion thereof. The
                  Participant's election to defer must be made either at or
                  before August 31 of the applicable Plan Year. Such election
                  may not be changed after August 31 of the applicable Plan
                  year. Attachment E is a copy of the election to defer,
                  although the Committee may elect to honor any written
                  communication statement from a Participant which communicates
                  substantially the same election intention. The Committee, in
                  its absolute discretion, may elect to accept any such election
                  applicable to the Plan Year beginning January 1, 1990, January
                  1, 1991, January 1, 1992 or January 1, 1993 where the
                  Committee (or the Chief Administrative Officer on behalf of
                  the Committee, except in cases involving the Chief
                  Administrative Officer) determines in its absolute discretion
                  that the Participant submitted in good faith an irrevocable
                  election to defer a possible award prior to the commencement
                  of the applicable Plan Year, regardless of the content of any
                  election form or notice.

         C.       PARTICIPANTS' ACCOUNTS FOR DEFERRED CASH AWARD - The Company
                  will establish and maintain a separate account for each
                  Participant who has elected to defer his cash Award, in which
                  the amount of the Participant's deferred cash Award will be
                  recorded. The Company will credit to each such account, as of
                  the first day of each calendar quarter, interest on the amount
                  then credited to such account, including all previous credits
                  to such account by operation of this Section, computed at an
                  annual rate equal to 120% of the long-term applicable federal
                  rate compounded quarterly as published by the Internal Revenue
                  Service for the beginning month of each calendar quarter. Any
                  dividends paid on the Shares deferred pursuant to the
                  Flowserve Corporation Long-Term Stock Incentive Plan
                  ("Long-term Stock Incentive Plan") will be credited to a
                  deferred cash account of the Participant under this Plan, with
                  interest to be credited to such dividends in the same manner
                  as credited to deferred cash Awards.

         D.       UNSECURED ACCOUNT - Any amount credited to the account of a
                  Participant as a deferred Award, or as interest or Dividends
                  (as described below) paid on such deferred Award, will
                  represent only an unsecured promise of the Company to pay the
                  amount so credited in accordance with the terms 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 amount credited to a

                                       5
<PAGE>   20

                  Participant's account. At all times, a Participant's rights
                  with respect to the amount credited to his account will be
                  only those of an unsecured creditor of the Company. The
                  Company will not be obligated or required in any manner to
                  restrict the use of any of its assets as a result of any
                  amount credited to a Participant's account.

         E.       DEFERRED PAYMENTS - Deferred Awards will be distributed only
                  in accordance with the following sections.

                  (i)      Termination of Employment. In the event a Participant
                           ceases to be employed by the Company or a Subsidiary
                           for any reason other than death or retirement, any
                           deferred cash Award (earned in respect of any Cycle
                           ending prior to the Cycle in which such termination
                           occurs), and any interest on such Award and any
                           dividends with interest credited to his deferred cash
                           account as described in Section X. C. ("Dividends")
                           will be distributed in a lump sum payment within 60
                           days of his termination of employment.

                  (ii)     Retirement. In the event a Participant retires under
                           a retirement plan of the Company or a Subsidiary, any
                           deferred cash Award, and the interest and Dividends
                           on such Award previously or currently credited to his
                           account, will be distributed commencing within 60
                           calendar days of his retirement in accordance with
                           the method of distribution elected by the
                           Participant. If the election is a lump sum, interest
                           and Dividends will be credited to the account
                           pursuant to Section X. C. through the date of
                           distribution, and the entire deferred cash amount
                           will be paid to the Participant within 60 days of his
                           retirement. If installments have been elected,
                           interest and Dividends will be calculated through the
                           date of retirement pursuant to Section X. C. and
                           added to the account. The resulting deferred cash
                           Award account total shall be divided equally by the
                           number of installments elected and the first payment
                           made within 60 days of retirement. The second and all
                           subsequent installment payments shall be made between
                           January 1 and 15 of each following year. Interest
                           will continue to accrue to the account pursuant to
                           Section X. C. on the balance remaining in the
                           Participant's deferred cash Award account until all
                           installments have been paid and will be paid annually
                           with each installment payment. Dividends from any
                           undistributed Shares deferred pursuant to the
                           Long-Term Stock Incentive Plan will continue to
                           accrue to the Participant's deferred cash Award
                           account and will be paid with the next applicable
                           installment payment of a deferred cash Award.

                  (iii)    Death. If any portion of a Participant's account
                           remains unpaid at his death, then after his death
                           such amount will be paid (i) to his beneficiary(ies)
                           in accordance with the method of distribution elected
                           by the Participant (following the procedure for lump
                           sum and installment payments set forth above), or
                           (ii) if the Participant has not designated a
                           beneficiary or if the beneficiary predeceases the
                           Participant, to the Participant's estate in a lump
                           sum. Should a beneficiary die after the

                                       6
<PAGE>   21

                  Participant but before the entire benefit has been disbursed,
                  the balance of the cash benefit will be paid to the
                  beneficiary's estate in a lump sum.

         (iv)     Emergency Distribution. In the event an emergency situation
                  occurs (as defined below) while a Participant is in the employ
                  of the Company or a Subsidiary, the Participant may request
                  the Committee to make an immediate distribution to him from
                  his account. Any such distribution will be solely within the
                  discretion of the Committee and will be limited in an amount
                  to that necessary to meet the emergency.

                  An emergency situation means a bona fide unexpected financial
                  emergency that is caused by an event beyond the control of the
                  Participant (e.g., a serious family illness or disaster) and
                  would result in severe financial hardship to the Participant
                  if early distribution were not permitted.

                  IN WITNESS WHEREOF, the Company has caused this restatement to
be executed this 19th day of January, 2001.

                               FLOWSERVE CORPORATION

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

                                       7
<PAGE>   22

                                                                    ATTACHMENT A

                           PERFORMANCE CYCLE OR CYCLES

                      EXAMPLE OF A THREE-YEAR CYCLE PROGRAM

<TABLE>
<CAPTION>
                    Year       Year     Year       Year      Year      Year
                    One        Two      Three      Four      Five      Six
                  -------    -------   -------   -------   -------   -------
<S>               <C>        <C>       <C>       <C>       <C>       <C>
1st Cycle         Awarded ------------ Earned

2nd Cycle                    Awarded ----------- Earned

3rd Cycle                              Awarded ----------- Earned

4th Cycle                                        Awarded ----------- Earned
</TABLE>

         NOTE: Performance Units are contingently awarded prior to start of each
         Cycle and earned if Performance Goals are achieved at the end of the
         three-year period.

<PAGE>   23

                                                                    ATTACHMENT B

                  EXAMPLE OF BASIS FOR PERFORMANCE UNIT AWARDS

                           (LONG-TERM INCENTIVE PLAN)

<TABLE>
<CAPTION>
                                 TARGET UNIT AWARD      MAXIMUM UNIT AWARD
              SALARY RANGES            AS % OF            AS % OF BASE
BASE LEVEL     HAY POINTS       BASE SALARY MIDPOINT     SALARY MIDPOINT
----------    -------------     --------------------    ------------------
<S>           <C>               <C>                     <C>
    A         2500 & Above               45%                   90%

    B         1900 to 2499               35%                   70%

    C         1600 to 1899               30%                   60%

    D         1250 to 1599               25%                   50%
</TABLE>

<PAGE>   24

                                                                    ATTACHMENT C

                               PERCENT OF TARGET
 EXAMPLE OF PAYOUT AT FLOWSERVE SALES REVENUE GROWTH OVER OR UNDER McGRAW-HILL

<TABLE>
<CAPTION>
              FLOWSERVE GROWTH IN PERCENTAGE POINTS OVER McGRAW-HILL INDEX GROWTH
------------------------------------------------------------------------------------------------
RONA % OF          1% OR                                                                  10% OR
GOAL               LESS       2%     3%      4%      5%*     6%      7%      8%      9%    MORE
-------------      -----    ----    ----    ----    ----    ----    ----    ----    ----   -----
<S>                <C>      <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
  0.0 - 79.9          0%      0%      0%      0%      0%      0%      0%      0%      0%      0%
 80.0 - 84.9         50%     50%     50%     50%     50%     65%     80%     90%    100%    110%
 85.0 - 89.9         50%     50%     50%     50%     65%     80%     90%    100%    110%    120%
 90.0 - 94.9         50%     50%     50%     65%     80%     90%    100%    110%    120%    130%
 95.0 - 99.9         50%     50%     65%     80%     90%    100%    110%    120%    130%    140%
100.0 - 104.9        50%     65%     80%     90%    100%    110%    120%    130%    140%    150%
105.0 - 109.9        65%     80%     90%    100%    110%    120%    130%    140%    150%    160%
110.0 - 114.9        80%     90%    100%    110%    120%    130%    140%    150%    160%    170%
115.0 - 119.9        90%    100%    110%    120%    130%    140%    150%    160%    170%    180%
120.0 - 124.9       100%    110%    120%    130%    140%    150%    160%    170%    180%    190%
125.0 and over      110%    120%    130%    140%    150%    160%    170%    180%    190%    200%
</TABLE>

* NOTE: 5 percentage point growth over McGraw-Hill results in payouts equal to
        the old plan. Award determination to be interpolated between categories
        based upon actual results.

<PAGE>   25

                                                                    ATTACHMENT D

                              FLOWSERVE CORPORATION
                          LONG-TERM CASH INCENTIVE PLAN

                      PARTICIPANT'S BENEFICIARY DESIGNATION

In accordance with the provisions of the Long-Term Cash Incentive Plan (the
"Plan") of Flowserve Corporation (the "Company"), I elect to have any payments
which have not been made to me prior to my death, paid after my death to:

              ----------------------------------------------------

              ----------------------------------------------------

              ----------------------------------------------------

              ---------------           --------------------------
                  Date                   Signature of Participant

The undersigned acknowledges receipt of the above election on                 .
                                                              ----------------

                                                ------------------------------
                                                RONALD F. SHUFF
                                                VICE PRESIDENT, SECRETARY AND
                                                GENERAL COUNSEL

<PAGE>   26

                                                                    ATTACHMENT E

                              FLOWSERVE CORPORATION
                          LONG-TERM CASH INCENTIVE PLAN

                         PARTICIPANT'S ELECTION TO DEFER

In accordance with the provisions of the Long-Term Cash Incentive Plan (the
"Plan") of Flowserve Corporation (the "Company"), I elect:

         1.       To defer ____% of my payment of Award payable in cash for the
                  Plan Year ending December 31, 200___.

         2.       To receive payment of the amount credited to my deferred award
                  account in the following manner (I have initiated the method I
                  have elected):

                           A.   In one lump sum payment of cash upon retirement.
                  ----
                           B.   In ten equal annual installments of cash
                  ----          commencing within 60 calendar days of my
                                retirement.

         3.       To have any payments required by paragraph 2 above which have
                  not been made to me prior to my death, paid after my death to
                  the following designated person in the same manner as would
                  have been paid to me:

              ----------------------------------------------------

              ----------------------------------------------------

              ----------------------------------------------------

In making this election, I understand that:

         1.       My election may not be changed after the beginning of the Plan
                  Year with respect to which my award is earned.

         2.       My election is subject to the terms of the Plan, which, among
                  other things, requires a lump sum payout in the event of my
                  employment termination for reasons other than retirement or
                  death.

--------------------                            ------------------------------
DATE                                            SIGNATURE OF PARTICIPANT

The undersigned acknowledges receipt of the above election on                 .
                                                              ----------------

                                                ------------------------------
                                                RONALD F. SHUFF
                                                VICE PRESIDENT, SECRETARY AND
                                                GENERAL COUNSEL<PAGE>   1
                                                                   EXHIBIT 10.13

                               AMENDMENT NO. 3 TO
                              FLOWSERVE CORPORATION
                             1989 STOCK OPTION PLAN

Effective January 1, 2001, the Flowserve Corporation 1989 Stock Option Plan is
hereby amended in the following respects:

1.   Definitions

     The following definition is added to Section 2:

         (r) "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.   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 Fair 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."

     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."

3.   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 deleted.

<PAGE>   2

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

4.   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."

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

     Section 9A(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

                                       2

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