1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 27, 2000

REGISTRATION STATEMENT NO. 333-
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--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------

FLOWSERVE CORPORATION
(Exact name of Registrant as specified in its charter)

NEW YORK                                        3561
(State or other jurisdiction of                 (Primary Standard Industrial
incorporation or organization)                 Classification Code Number)

NEW YORK                                     31-0267900
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                     Identification No.)

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

222 W. LAS COLINAS BLVD.
SUITE 1500
IRVING, TEXAS 75039
(972) 443-6500
(Address, including zip code, and telephone number, including area code, of
Flowserve Corporation's principal executive offices)

FLOWSERVE FINANCE B.V.
(Exact name of Registrant as specified in its charter)

THE NETHERLANDS                                     3561
(State or other jurisdiction of                 (Primary Standard Industrial
incorporation or organization)                 Classification Code Number)

THE NETHERLANDS                                     NONE
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                     Identification No.)

PARALLELWEG 6
ETTEN-LEUR 4870AA
THE NETHERLANDS
011 3176 502 8200
(Address, including zip code, and telephone number, including area code, of
Flowserve Finance B.V.'s principal executive offices)

CT CORPORATION SYSTEM
111 EIGHTH AVENUE
NEW YORK,NY 10011
(212) 894-8700
(Name, address, including zip code, and telephone number, including area code,
of agent for process)
---------------------

with copies to

CHRISTOPHER C. PACI, ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, N.Y. 10022
(212) 848-8515

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]

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PROPOSED MAXIMUM     PROPOSED MAXIMUM
TITLE OF EACH CLASS OF                 AMOUNT TO BE        OFFERING PRICE         AGGREGATE            AMOUNT OF
SECURITIES TO BE REGISTERED                REGISTERED            PER UNIT          OFFERING PRICE      REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------

12 1/4% Senior Subordinated Notes due 2010
of Flowserve Corporation..................      $290,000,000             100%             $290,000,000          $76,560(2)
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12 1/4% Senior Subordinated Notes due 2010
of Flowserve Finance B.V. ................      E100,000,000             100%           $ 85,220,000(1)         $23,068(3)
---------------------------------------------------------------------------------------------------------------------------------
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(1) Calculated based on the euro noon buying rate on September 25, 2000 of
$0.8738 per E1.00.

(2) The registration fee was calculated pursuant to Rule 457(f)(2) under the
Securities Act.

(3) The registration fee was calculated pursuant to Rule 457(f)(2) under the
Securities Act based on the euro noon buying rate on September 25, 2000 of
$0.8738 per E1.00.

THESE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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FLOWSERVE CORPORATION
TABLE OF ADDITIONAL REGISTRANTS

PRIMARY STANDARD
STATE OF          INDUSTRIAL
INCORPORATION     CLASSIFICATION
NAME                                                          OR ORGANIZATION     CODE NUMBER
----                                                          ---------------   ----------------

Flowserve RED Corporation...................................  Delaware                3561
Flowserve FSD Corporation...................................  Delaware                3561
Flowserve FCD Corporation...................................  Delaware                3561
Flowserve International, Inc. ..............................  Delaware                3561
Flowserve Management Company................................  Delaware                3561
BW/IP-New Mexico, Inc. .....................................  Delaware                3561
Flowserve International, LLC................................  Delaware                3561
Flowserve Holdings, Inc.....................................  Delaware                3561
Durametallic Australia Holding Company......................  Michigan                3561
Flowserve International Limited.............................  United Kingdom          3561
Innovative Valve Technologies, Inc. ........................  Delaware                3561
Plant Maintenance, Inc. ....................................  Delaware                3561
Varco Valve, Inc. ..........................................  Delaware                3561
Colonial Equipment & Service Co., Inc. .....................  Delaware                3561
CECORP, Inc. ...............................................  Delaware                3561
DIVT Acquisition, LLC.......................................  Delaware                3561
DIVT Subsidiary, LLC........................................  Delaware                3561
IPSCO Holding, Inc. ........................................  Delaware                3561
Southern Valve Service, Inc. ...............................  Alabama                 3561
L.T. Koppl Industries, Inc. ................................  California              3561
Koppl Company...............................................  California              3561
Koppl Industrial Systems, Inc. .............................  California              3561
Harley Industries, Inc. ....................................  California              3561
Koppl Company of Arizona....................................  Arizona                 3561
Seeley & Jones, Incorporated................................  Connecticut             3561
GSV, Inc. ..................................................  Florida                 3561
IPSCO-Florida, Inc. ........................................  Florida                 3561
International Piping Services Company.......................  Illinois                3561
Cypress Industries, Inc. ...................................  Illinois                3561
DALCO, LLC..................................................  Kentucky                3561
Plant Specialties, Inc. ....................................  Louisiana               3561
Energy Maintenance, Inc. ...................................  Missouri                3561
Preventive Maintenance, Inc. ...............................  North Carolina          3561
Production Machine Incorporated.............................  Oklahoma                3561
ICE Liquidating, Inc. ......................................  Pennsylvania            3561
Valve Repair of South Carolina, Inc. .......................  South Carolina          3561
The Safe Seal Company, Inc. ................................  Texas                   3561
Flickinger-Benicia Inc. ....................................  Washington              3561
Puget Investments, Inc. ....................................  Washington              3561
Steam Supply & Rubber Co., Inc. ............................  Washington              3561
Flickinger Company..........................................  Washington              3561
Boyden Inc. ................................................  West Virginia           3561
Valve Actuation & Repair Co. ...............................  West Virginia           3561
Ingersoll-Dresser Pump Company..............................  Delaware                3561
IDP Alternate Energy Company................................  Delaware                3561
Energy Hydro, Inc. .........................................  Delaware                3561
Pump Investments, Inc. .....................................  Delaware                3561

The address, including zip code, and telephone number, including area code,
of the principal offices of the additional registrants listed above is: 222 W.
Las Colinas Blvd., Suite 1500, Irving, Texas 75039; the telephone number at that
address is (972) 443-6500.

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Subject to completion dated September     , 2000
PROSPECTUS

FLOWSERVE LOGO

OFFER TO EXCHANGE

any and all
12 1/4% Senior Subordinated Notes due August 15, 2010
($290,000,000 aggregate principal amount outstanding)
for
12 1/4% Senior Subordinated
Notes due August 15, 2010 of
FLOWSERVE CORPORATION

and
12 1/4% Senior Subordinated Notes due August 15, 2010
(E100,000,000 principal amount outstanding)
for
12 1/4% Senior Subordinated
Notes due August 15, 2010 of
FLOWSERVE FINANCE B.V.
Fully and Unconditionally Guaranteed on a Senior Subordinated Basis by

FLOWSERVE CORPORATION
-------------------------

TERMS OF EXCHANGE OFFER

- Expires 12:00 p.m., New York time (5:00 p.m., London time) on      ,
2000, unless extended

- Not subject to any other condition other than that the Exchange Offer
does not violate applicable law or any applicable interpretation of the
Staff of the Securities and Exchange Commission

- All outstanding notes that are validly tendered and not validly withdrawn
will be exchanged

- Tenders of outstanding notes may be withdrawn by you any time prior to
12:00 p.m., New York time (5:00 p.m., London time), on the date of the
expiration of the Exchange Offer

- The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes

- We will not receive any proceeds from the Exchange Offer

- The terms of the exchange notes to be issued are substantially similar to
the outstanding notes, except for transfer restrictions and registration
rights relating to the outstanding notes

- We intend to list the exchange notes on the Luxembourg Stock Exchange

SEE "RISK FACTORS" BEGINNING ON PAGE 22 FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is             , 2000.

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The Exchange Offer is not being made to, nor will we accept surrenders of
or exchange from, holders of outstanding notes in any jurisdiction in which the
Exchange Offer or the acceptance of outstanding notes would not be in compliance
with the securities or blue sky laws of such jurisdiction.

No dealer, salesperson or other individual has been authorized to give any
information or make any representation not contained in this prospectus in
connection with the offering covered by this prospectus. If given or made, such
information or representation must not be relied upon as having been authorized
by us. This prospectus does not constitute an offer or a solicitation in any
jurisdiction where, or to any person to whom, it is unlawful to make such offer
or solicitation. Neither the delivery of this prospectus, nor any distribution
of securities made using this prospectus, shall under any circumstances create
any implication that there has not been any change in the facts set forth in
this prospectus or in our affairs since the date of this prospectus.

The securities may not be offered or sold in or into the United Kingdom
except in circumstances that do not constitute an offer to the public within the
meaning of the Public Offers of Securities Regulation 1995. All applicable
provisions of the Financial Services Act 1986 must be complied with in respect
of anything done in relation to securities in, from or otherwise involving the
United Kingdom.

Exchange notes may only be offered in The Netherlands or elsewhere to
persons who trade or invest in securities in the conduct of their profession or
trade within the meaning of the Securities Transactions Supervision Act 1995
(Wet Toezicht Effectenverkeer 1995) and its implementing regulations (which
includes banks, securities intermediaries (including dealers and brokers),
insurance companies, pension funds, other institutional investors, and
commercial enterprises which as an ancillary activity regularly invest in
securities).

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5

TABLE OF CONTENTS

PROSPECTUS SUMMARY......................    1
RISK FACTORS............................   22
SOURCES AND USES OF PROCEEDS............   33
THE EXCHANGE OFFER......................   34
CAPITALIZATION..........................   42
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS..................   43
SELECTED HISTORICAL FINANCIAL
DATA..................................   53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................   55
BUSINESS................................   70
MANAGEMENT..............................   88
DESCRIPTION OF THE ACQUISITION..........   91
DESCRIPTION OF CERTAIN INDEBTEDNESS.....   93
DESCRIPTION OF THE NOTES................   95
CERTAIN TAX CONSIDERATIONS..............  144
PLAN OF DISTRIBUTION....................  152
LEGAL MATTERS...........................  153
EXPERTS.................................  153
WHERE YOU CAN FIND MORE INFORMATION.....  153
GENERAL LISTING INFORMATION.............  154
INDEX TO FINANCIAL STATEMENTS...........  F-1

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS MAY ONLY BE USED WHERE IT IS
LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS PROSPECTUS MAY ONLY BE
ACCURATE ON THE DATE OF THIS DOCUMENT.

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SERVICE OF PROCESS AND
ENFORCEABILITY OF CIVIL LIABILITIES

Flowserve Finance B.V. is a company formed under the laws of The
Netherlands and substantially all of its assets are located outside the United
States. In addition, certain future members of Flowserve Finance's management
board are residents of countries other than the United States. As a result, it
may not be possible for investors to effect service of process within the United
States upon such persons or to enforce against such persons or Flowserve Finance
judgments of courts of the United States based upon civil liabilities under the
United States federal securities laws. We have been advised by our Netherlands
counsel, De Brauw Blackstone Westbroek N.V., that a judgment rendered by a court
in the United States will not be recognized and enforced by the Netherlands
courts. However, if a person has obtained a final and conclusive judgment for
the payment of money rendered by a court in the United States which is
enforceable in the United States and files his claim with the competent
Netherlands court, the Netherlands court will generally give binding effect to
such judgment insofar as it finds that the jurisdiction of the United States
court has been based on grounds which are internationally acceptable and that
proper legal procedures have been observed and unless such judgment contravenes
the public policy of The Netherlands.

There can be no assurance that United States investors will be able to
enforce against Flowserve Finance, or members of the management board, or
certain experts named herein who are residents of The Netherlands or other
countries outside the United States, any judgments in civil and commercial
matters, including judgments under the U.S. federal securities laws. In
addition, there is doubt as to whether a Netherlands court would impose civil
liability on Flowserve Finance or on the members of the management board in an
original action predicated solely upon the federal securities laws of the United
States brought in a court of competent jurisdiction in The Netherlands against
Flowserve Finance or such members.

Flowserve Finance is a besloten vennootschap (private company with limited
liability) with its corporate seat at Amsterdam, The Netherlands and its
principal place of business at Parallelweg 6, Etten-Leur 4870 AA, The
Netherlands. Its telephone number is 011-31-76-502-8200.

INDUSTRY DATA

In this prospectus, we rely on and refer to information regarding the flow
control products market and its segments and competitors from The Freedonia
Group, Hydraulic Institute, Valve Manufacturers Association, Bloomberg, and
Hydrocarbon Processing Magazine, market research reports, analyst reports and
other publicly available information. Although we believe that this information
is reliable, we cannot guarantee the accuracy and completeness of the
information and have not independently verified it.

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FORWARD-LOOKING STATEMENTS

This prospectus contains various forward-looking statements and includes
assumptions about future market conditions, operations and results. These
statements are based on current expectations and are subject to significant
risks and uncertainties. They are made pursuant to safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Among the many factors that
could cause actual results to differ materially from the forward-looking
statements are:

- further changes in the already competitive environment for our products
or competitors' responses to our strategies;

- our ability to integrate Ingersoll-Dresser Pump Company ("IDP") and
Innovative Valve Technologies, Inc. ("Invatec") into our management and
operations and realize anticipated synergies and cost savings;

- political risks or trade embargoes affecting important country markets;

- the health of the petroleum, chemical and power generation industries;

- economic conditions in areas outside the United States;

- continued economic growth within the United States; and

- the recognition of significant expenses associated with adjustments to
realign our combined facilities and other capabilities with our strategic
objectives and business conditions including, without limitation,
expenses incurred in restructuring our operations to incorporate IDP's
facilities and the cost of financing to acquire IDP.

We undertake no obligation to publicly update or revise any forward-looking
statement as a result of new information, future events or otherwise.

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PROSPECTUS SUMMARY

The following is a summary of the more detailed information contained
elsewhere in this prospectus. Except where otherwise indicated and unless the
context otherwise requires, (i) the terms "we", "us", "our" and "our company"
refer collectively to Flowserve Corporation and its subsidiaries giving effect
to the acquisition of Innovative Valve Technologies, Inc. and Ingersoll-Dresser
Pump Company and their respective subsidiaries; (ii) the terms "Flowserve",
"Flowserve Finance", "Invatec" and "IDP" refer to Flowserve Corporation,
Flowserve Finance B.V., Innovative Valve Technologies, Inc. and
Ingersoll-Dresser Pump Company, respectively, and their respective subsidiaries,
as stand-alone companies; (iii) the term "Transactions" refers to our
acquisition of IDP, the financing provided under new senior credit facilities
entered into on August 8, 2000 to finance the acquisition, refinance outstanding
indebtedness and pay transaction fees and expenses, and the offering of the
notes on August 8, 2000 and the application of the proceeds, all as described in
this prospectus; and (iv) the term "1999" refers to the year ended December 31,
1999 on a pro forma basis giving effect to the Transactions and the acquisition
of Invatec as though they had occurred on January 1, 1999. Flowserve Finance
issued the euro notes. It is an indirect wholly owned subsidiary of Flowserve
and was formed for the purpose of issuing and selling securities and making the
proceeds of those issuances available to us.

THE EXCHANGE OFFER

On August 8, 2000:

- we completed a private offering of $290,000,000 12 1/4% Senior
Subordinated Notes due August 15, 2010, which are referred to in this
prospectus as the outstanding dollar notes

and

- our wholly owned subsidiary, Flowserve Finance B.V., completed a private
offering of E100,000,000 12 1/4% Senior Subordinated Notes due August 15,
2010, which are referred to in this prospectus as the outstanding euro
notes, and we refer to the outstanding dollar notes and the outstanding
euro notes collectively as the outstanding notes.

On the same day, Flowserve and Flowserve Finance each entered into a
separate registration rights agreement relating to the outstanding dollar notes
and the outstanding euro notes, respectively, with the initial purchasers in the
private offering of these securities in which Flowserve and Flowserve Finance
each agreed, among other things, to deliver to you this prospectus and to
complete this exchange offer within 180 days of the issuance of the outstanding
dollar notes and the outstanding euro notes. The outstanding dollar notes and
the outstanding euro notes can now be tendered for exchange. You should read the
discussion under the heading "Summary Description of the Notes" and "Description
of the Notes" for further information regarding the registered notes. We refer
to the registered notes to be issued in the exchange offer as the notes or the
exchange notes.

We believe that the notes issued in the exchange offer may be resold by you
under U.S. federal securities laws without compliance with the registration and
prospectus delivery provisions of the Securities Act of 1933, subject to certain
conditions. You should read the discussion under the headings "Summary of the
Terms of Exchange Offer" and "The Exchange Offer" for further information
regarding the exchange offer and resale of the notes.

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COMPANY

We are the largest manufacturer and aftermarket service provider of
comprehensive flow control systems in the world. We have been in the flow
control industry for over 125 years. We develop and manufacture
precision-engineered flow control equipment for critical service applications
where high reliability is required. The flow control system components we
produce include pumps, valves and mechanical seals. Our products and services
are used in several industries, including petroleum, chemical, power generation
and water treatment. We believe that our product portfolio is the most
comprehensive and our scope of operations is the most geographically diversified
in the industry. In 1999, we generated revenue of $2.1 billion.

We sell our products and services to more than 1,000 companies including
some of the world's leading engineering and construction firms, original
equipment manufacturers ("OEMs"), distributors and end users. Our sales mix by
industry in 1999 consisted of petroleum (39%), chemical (20%), power generation
(14%), general industrial (14%), water treatment (6%) and other industries (7%).
Some of our top customers include Asea Brown Boveri, Atlantic Richfield
("ARCO"), BASF, Bayer, Bechtel, BP Amoco, Dow Chemical, Duke Energy, DuPont,
Eastman Chemical, ExxonMobil, Royal Dutch/Shell, Saudi Aramco, Texaco,
TotalFinaElf, and the United States Navy. No single customer accounted for more
than 3% of our total revenues in 1999. Our revenues by geographic region in 1999
consisted of North America (55%), Europe and the Middle East (28%), Latin
America (9%) and Asia (8%). We have pursued a strategy of geographic diversity
to mitigate the impact of an economic downturn in any one part of the world on
our business.

We believe we have an installed base of approximately 1,100,000 pumps
worldwide, which we believe is the most extensive installed base of industrial
pumps in the industry. A large installed equipment base is critical to securing
future revenues as industry analysts suggest that approximately 86% of the total
life-cycle cost of a pump consists of aftermarket products and services, such as
replacement parts, mechanical seals and maintenance. When outsourced, a majority
of replacement part orders and aftermarket service business is typically awarded
to the original equipment manufacturer. Aftermarket parts and services have
provided us with a steady source of revenues at higher margins than original
equipment sales. In 1999, we generated approximately 49% of our revenues from
aftermarket products and services.

We believe we are the largest manufacturer of pumps used in the petroleum
and chemical industries, with approximately 59% of our 1999 sales from companies
operating in those industries. Due to the simultaneous decline in oil and
chemical prices in 1998 and 1999, many of our key customers reduced their
capital spending, which resulted in declines in our revenues, net income and
EBITDA in those years. Additionally, the economic downturn in Asia in late 1997
and 1998 had a negative impact on our overall business in that region. With the
strong recent recovery in oil prices to a year to date high of over $35.00 per
barrel in 2000 from a low of $10.73 in December of 1998, higher expected
chemical prices and renewed signs of economic growth in Asia, we are seeing
renewed capital spending by our customers that should result in increasing
bookings and revenues for us. In general, market improvements reflected in our
bookings precede revenue growth by six to twelve months. We have already begun
to see tangible signs of recovery in our petroleum and chemical end-markets as
bidding activity and bookings are improving.

On August 8, 2000, Flowserve acquired all of the equity interests of IDP
from Ingersoll-Rand Company for a consideration of $775.0 million. IDP is a
leading manufacturer of pumps with a diverse mix of pump products and customers
with operations in 30 countries. As a result of the IDP acquisition, we expect
to:

- be the second largest pump manufacturer in the world (improving from
fifth and seventh largest for IDP and Flowserve, respectively);

- be the largest pump manufacturer for the petroleum, chemical and power
generation industries;

- offer a more comprehensive range of products and services at a time when
our customers are seeking to lower costs by reducing supplier
relationships;

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- expand our customer base in the water, general industrial, mining, paper,
power and U.S. Navy sectors;

- diversify our customer and geographic sales mix, reducing the impact of
commodity price cycles and regional economic downturns; and

- triple Flowserve's installed equipment base to an estimated 1,100,000
pumps worldwide, creating a significant opportunity to capture additional
recurring aftermarket replacement parts and service revenue.

Our acquisition of IDP also provides significant cost saving opportunities,
which we estimate to be $75.0 million by mid-2002. We will incur significant
cash integration costs to achieve these cost savings. We expect these cost
savings to result from the execution of a number of actions including:

- eliminating redundant administrative overhead;

- reducing overlapping sales personnel; and

- eliminating fixed costs by shifting manufacturing capacity to more
economic facilities.

In addition to the tangible and identified cost savings, we also expect to
benefit from significant operating synergies from several initiatives,
including:

- capitalizing on the opportunities to cross-sell valves, mechanical seals
and aftermarket services to IDP customers that are currently being
serviced by our competitors;

- realizing volume procurement savings; and

- lowering unit variable costs due to larger scale and better capacity
utilization.

We believe we are well positioned to gain market share and increase
revenues, net income and EBITDA by (i) leveraging our leading market position;
(ii) cross-selling our comprehensive product offerings; (iii) capitalizing on
our customers' trend to outsource service and repair; (iv) realizing significant
cost savings and operating synergies from the IDP acquisition; and (v)
benefiting from the recent improvement of our end markets.

INDUSTRY

The flow control industry generates $54-57 billion per year in worldwide
sales and includes pumps, valves, mechanical seals and aftermarket services.
According to industry sources, engineered pumps account for approximately $23
billion, valves approximately $21 billion, seals approximately $2-3 billion and
aftermarket services approximately $8-10 billion of annual worldwide sales. The
pumps, seals, valves and aftermarket services segments are projected to grow
annually at 3-4%, 3-4%, 3-4% and 7-8%, respectively, over the next several
years. The engineered pump segment in which we operate excludes non-industrial
applications, such as residential, which represents a market of approximately
equivalent size to the industrial segment.

Quality and reliability of equipment are critical in the industry as the
failure of a pump, valve or seal may halt the flow process. Of the three product
types, at the time of the original equipment purchase, pumps are generally the
most expensive followed by valves then seals. During the replacement cycle,
seals may have to be replaced every few hours in highly corrosive applications,
while pumps can run for months or years before needing replacement. Products and
services in the flow control industry are sold to engineering and construction
firms, OEMs, distributors and end users throughout the world.

Despite the consolidation trend over the past ten years, the industry
remains highly fragmented. Competition for original equipment sales among the
industry leaders is primarily against a select group of large companies
operating on a global scale. Competition for original equipment sales is
generally based on price, expertise, delivery times, breadth of product
offerings, contractual terms, previous installation history

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11

and reputation for quality. In the pump segment, there are more than 500
companies, with the top ten pump companies accounting for less than 40% of total
1999 estimated worldwide annual pump sales. In the valve segment, we believe
that the top ten domestic manufacturers generate less than 25% of domestic
sales. The aftermarket service sector is extremely fragmented as many end users
either use in-house resources or buy service from local operators, which are
often very small.

COMPETITIVE STRENGTHS

WORLDWIDE MARKET LEADER. We are the largest provider of comprehensive flow
control systems in the world, offering an extensive range of pumps, valves,
mechanical seals and aftermarket services. We are the largest pump manufacturer
serving the petroleum, chemical and power generation industries and the second
largest overall pump manufacturer in the world. We believe we are also the
largest independent aftermarket product and service provider for the flow
control industry. We have one of the most extensive global manufacturing and
service networks in the industry, with 49 manufacturing facilities and more than
150 service and repair centers in 30 countries (after giving effect to planned
facilities rationalization within the first twelve months after closing of the
IDP acquisition). As the larger end users of flow control products continue to
consolidate and operate globally, they seek providers that can offer a broad
range of products and services on a global basis. Our widely recognized global
brands, extensive breadth of product and service offerings and worldwide
presence position us to serve our customers' flow control needs and capture
additional business.

AFTERMARKET SERVICES PROVIDE STABLE, CONSISTENT REVENUES. Industry analysts
estimate that approximately 86% of the lifetime cost of a pump consists of
aftermarket replacement parts, services and maintenance. We have a strong and
growing aftermarket business, representing approximately 49% of our 1999
revenues. The consistent requirement for maintenance and installation of
replacement parts provides us with a steady source of revenues from our
aftermarket business at significantly higher margins than our original equipment
business. As a result of Flowserve's historic focus on aftermarket services, we
believe Flowserve has achieved approximately 50% higher aftermarket revenue per
installed pump than IDP. The opportunity to leverage IDP's installed pump base
to increase our aftermarket business provides us with significant potential for
growth.

LARGE INSTALLED EQUIPMENT BASE. We believe our global installed base of
approximately 1,100,000 pumps is the largest in the industry and provides us
with a unique platform to grow our aftermarket service business. When
outsourced, a significant amount of replacement parts orders and aftermarket
services business is awarded to the original equipment manufacturer, assuming
they provide those parts and services. We are well positioned to capitalize on
IDP's large installed equipment base which is significantly larger than
Flowserve's installed base, by utilizing our extensive service network of more
than 150 service and repair centers to cross-sell aftermarket products and
services to IDP's pump customers.

PROVEN ABILITY TO INTEGRATE ACQUISITIONS. Flowserve's management team has
extensive experience in acquiring and integrating companies, having completed 23
acquisitions since 1990. We completed the integration of the merger of Durco
International Inc. with BW/IP, Inc., which created Flowserve in 1997,
approximately one year ahead of schedule and generated annual cost savings in
excess of $37 million, which was approximately 10% greater than originally
announced. We employ a systematic and decisive approach to integrating acquired
companies by implementing best practices across our operations, rationalizing
manufacturing capacity, eliminating overlapping sales and service coverage,
reducing overhead costs, leveraging supply chain opportunities and developing
additional cross-selling opportunities. Most of our key operating managers who
led the integration of our predecessor companies, BW/IP and Durco, will be
responsible for the integration of Flowserve and IDP. In order to integrate IDP,
we have a team of specialists from Flowserve, IDP and third party consultants
exclusively dedicated to the integration.

GLOBAL MANUFACTURING AND SERVICE CAPABILITIES. After giving effect to
planned facilities rationalization, we will have one of the most extensive
global manufacturing and service networks in the industry, with 49 manufacturing
facilities and more than 150 service and repair centers located in 30 countries.
Our global operations help us serve our customers' manufacturing and aftermarket
service needs on a 24-hour basis. Because of the critical nature of the
applications in which our products are used, immediate
4

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response times are important to capturing and retaining our customer's business.
Original equipment sales benefit from our global presence, as our customers
often require real-time design and engineering assistance for new projects.

DIVERSE CUSTOMER MIX. We sell our products and services to more than 1,000
companies globally including the world's leading engineering and construction
firms, OEMs, distributors and end users. In 1999, no one customer accounted for
more than 3% of our revenues, and our top ten customers accounted for
approximately 11% of our revenues. Our customers operate in many industries
throughout the world, including petroleum, chemical, power generation and water
treatment. Our acquisition of IDP significantly increases our market share in
the power and water industries, both of which are expected to continue to grow
faster than the overall flow control industry.

COMPREHENSIVE PRODUCT OFFERINGS WITH LEADING BRANDS. We believe we offer
the most comprehensive array of products and services in the industry, providing
a "one-stop shop" for our customers, who increasingly require comprehensive flow
control solutions including pumps, valves, seals and services. Many of our
brands have an extensive history within our industry and are well-known for
their superior quality and high performance, including Flowserve(R), Byron
Jackson(R), Durco(R), Atomac(TM), BW Seals(R), Durametallic(R), United
Centrifugal(R), Stork(R), Worthington(R), Jeumont Schneider(R), Pleuger(R),
Pacific Wietz(TM) and Scienco(R). Our brand identity has created customer
loyalty and helps us capture additional business, as well as maintain existing
business, particularly as our customers look to procure from fewer
manufacturers.

EXPERIENCED MANAGEMENT TEAM. Our senior management team has an average of
over 25 years of experience in industrial manufacturing. In addition, this team
has substantial experience in the integration of acquired businesses, supply
chain management and lean manufacturing techniques. Our operating division
managers are among the most experienced in the flow control industry, with an
average of more than 20 years of experience.

BUSINESS STRATEGY

EFFICIENTLY INTEGRATE IDP'S OPERATIONS AND CAPITALIZE ON OPPORTUNITIES FOR
OPERATING SYNERGIES. We have begun to quickly integrate IDP's business in order
to capitalize on the significant operating and financial benefits of the IDP
acquisition. We have established a dedicated integration team comprised of
representatives from Flowserve, IDP and third party consultants that has created
a detailed plan to capture cost savings and achieve operating synergies through
eliminating redundant administrative overhead, cutting overlapping sales
personnel, shifting production to lower cost facilities, and realizing volume
procurement savings and other opportunities.

BECOME THE LOW COST PRODUCER AND INCREASE OPERATIONAL EFFICIENCY. We
continue to lower costs, enhance product quality, reduce manufacturing
inefficiency and increase product throughput. We have several initiatives in
process to accomplish this, including:

- FOCUS ON SUPPLY CHAIN MANAGEMENT. Supply chain management focuses on
reducing procurement costs. We have implemented several initiatives,
including creating alliances, standardizing procedures, negotiating more
favorable contract terms and conditions and forming dedicated teams for
procurement of raw materials on a company-wide basis.

- INCREASE OPERATIONAL EFFICIENCY. In early 2000, Flowserve introduced a
"lean" manufacturing program that is focused on optimizing the
productivity and profitability of Flowserve's plants around the world.
For example, in Flowserve's Kalamazoo, Michigan facility, Flowserve
expects to experience in 2001 an approximate 25% increase in
productivity, 25% reduction in work in process, 25% reduction in lead
times and a significant increase in usable shop floor space.

- IMPLEMENT 6 SIGMA. The 6 Sigma Value Analysis process has been launched
within IDP to accelerate improvement of processes, products and services.
This analytical process is focused on reducing product defects, improving
product quality and streamlining manufacturing and transactional
processes. We believe this process resulted in total cost savings for IDP
of approximately $10 million in 1999.

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GROW AFTERMARKET SERVICE BUSINESS. Growing our aftermarket business is an
essential aspect of our strategy which complements our manufacturing
capabilities. Historically, many of our customers have utilized their in-house
service capabilities and outsourced only the most technical portion of their
service needs. Customers are increasingly utilizing third party aftermarket
service providers like us to reduce their fixed costs and improve profitability.
Our leading installed equipment base creates a powerful platform from which we
can expand this business. Our aftermarket products and service business offers
steady revenues with margins significantly higher than our original equipment
sales and enables us to remain close to our customers and quickly address their
requirements. We have significantly enhanced our aftermarket business with the
acquisition of Invatec. Invatec focuses on valve service and repair, which
complements Flowserve's pump and seal repair expertise, allowing us to expand
the range of services offered to our customers.

PURSUE CROSS-SELLING OPPORTUNITIES. Historically, IDP has focused on
manufacturing pumps for the original equipment market. In contrast, Flowserve's
strategy focuses on meeting the full range of end user needs from original
equipment (pumps, valves and seals) to replacement parts and services. We plan
to capitalize on the cross-selling opportunities created by Flowserve's
comprehensive aftermarket business platform and IDP's extensive installed
equipment base. In addition, significant opportunities exist to cross-sell
valves and mechanical seals to IDP's pump customers, which are being primarily
serviced by our competitors. Further, Invatec's expanded service center network
provides an opportunity for us to extend pump repair coverage to Flowserve's and
IDP's customer base.

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THE TRANSACTIONS

We will not receive any cash proceeds from the issuance of the exchange
notes offered hereby. In consideration for issuing the notes contemplated by
this prospectus, we will receive in exchange the outstanding notes in like
principal amount. The outstanding notes surrendered in exchange for the exchange
notes will be retired and canceled and cannot be reissued. Accordingly, issuance
of the exchange notes will not result in any change in our indebtedness.

On August 8, 2000, Flowserve acquired IDP from Ingersoll-Rand Company for
consideration of $775.0 million. In order to finance the IDP acquisition,
refinance existing indebtedness of Flowserve and pay related transaction fees
and expenses, we:

- entered into and incurred initial borrowings of $750.0 million under new
senior credit facilities (the "Senior Credit Facilities") which provide
for borrowings of up to $1.05 billion; and

- issued the outstanding dollar notes and, through our subsidiary Flowserve
Finance, the outstanding euro notes.

The following table sets forth the sources and uses of funds for the IDP
acquisition as of June 30, 2000 on a pro forma basis, as though the Transactions
had occurred at that date:

(DOLLARS IN MILLIONS)

SOURCES:
Cash and Cash Equivalents.............   $   22.0
Term Loan Facilities(1)...............      750.0
Senior Subordinated Dollar Notes(3)...      285.9
Senior Subordinated Euro Notes(3)(4)...      89.1
--------
Total Sources...............   $1,147.0
========
USES:
Purchase of IDP.......................   $  775.0
Refinance Existing Flowserve
Debt(2)...............................      315.4
Transaction Fees and Expenses.........       56.6
--------
Total Uses..................   $1,147.0
========

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

(1) Includes two facilities, Term Loan A and Term Loan B, which we collectively
refer to as the Term Loan Facilities. The Term Loan A facility of $275.0
million will mature in six years and the Term Loan B facility of $475.0
million will mature in eight years.

(2) Includes debt incurred in connection with the Invatec acquisition, which
closed on January 13, 2000.

(3) Reflects issuance of the senior subordinated dollar notes of $290.0 million
and the senior subordinated euro notes of E100.0 million at 98.586% of face
value.

(4) Utilizing a conversion rate of euro into U.S. dollars of E0.9033 to $1.00,
which was the rate in effect on August 3, 2000.

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CORPORATE STRUCTURE FOR
FLOWSERVE CORPORATION/FLOWSERVE FINANCE B.V. OFFERINGS

The following chart sets forth our corporate structure.

CORPORATE STRUCTURE FOR FLOWSERVE CORPORATION/FLOWSERVE BV OFFERING

$290.0 million Senior Subordinated Notes
$1.05 billion Senior Credit Facilities

FLOWSERVE CORPORATION
(a)

E100.0 million
Senior Subordinated Notes

Flowserve               Innovative Valve               Ingersoll-Dresser
Domestic              Technologies, Inc.                 Pump Company
Subsidiaries               ("Invatec")                       ("IDP")                    Flowserve International, Inc.
(b)(c)(d)                  (b)(c)(d)                       (b)(c)(d)                             (b)(c)(d)

Invatec                           IDP
Domestic                        Domestic                                        FLOWSERVE
Subsidiaries                    Subsidiaries                Foreign(e)           FINANCE B.V.
(b)(c)(d)                       (b)(c)(d)                 Subsidiaries             (b)(c)

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

(a)   Guarantor (on a senior subordinated basis) of outstanding euro notes
issued by Flowserve Finance B.V.

(b)   Guarantor (on a senior basis) of Senior Credit Facilities.

(c)   Guarantor (on a senior subordinated basis) of dollar notes issued by
Flowserve Corporation.

(d)   Guarantor (on a senior subordinated basis) of euro notes issued by
Flowserve Finance B.V.

(e)   Intercompany loans to Flowserve's foreign subsidiaries out of proceeds of
the offering of the euro notes issued by Flowserve Finance B.V., including
loans made initially to Flowserve's subsidiaries in Germany and Italy to
purchase the outstanding shares of IDP subsidiaries in Germany and Italy
in connection with the closing of the IDP acquisition.

8

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SUMMARY OF THE TERMS OF THE EXCHANGE OFFER

The exchange offer relates to the exchange of up to $290,000,000 aggregate
principal amount of the outstanding 12 1/4% Senior Subordinated Notes due August
15, 2010 and up to E100,000,000 aggregate principal amount of the outstanding
12 1/4% Senior Subordinated Notes due August 15, 2010 for an equal aggregate
principal amount of exchange notes. The exchange notes will be our obligations
(and the obligation of Flowserve Finance in the case of the euro exchange notes)
and are entitled to the benefits of the indentures relating to the outstanding
notes. The form and terms of the exchange notes are identical in all material
respects to the form and terms of the outstanding notes, except that the
exchange notes have been registered under the Securities Act of 1933, and
therefore contain no restrictive legends. The exchange notes are not entitled to
the benefits of the registration rights granted under the registration rights
agreements, executed as a part of the offering of the outstanding notes, each
dated as of August 8, 2000, among, in the case of the outstanding dollar notes,
Flowserve Corporation, the guarantors of the outstanding dollar notes and the
initial purchasers of the outstanding dollar notes and, in the case of the
outstanding euro notes, Flowserve Finance B.V., the guarantors of the
outstanding euro notes and the initial purchasers of the outstanding euro notes.

REGISTRATION RIGHTS........  In August 2000, Flowserve Corporation and Flowserve
Finance and the initial purchasers agreed that you,
as a holder of the outstanding notes, would be
entitled to exchange your notes for registered
notes with substantially identical terms. This
exchange offer is intended to satisfy these rights.
After the exchange offer is complete, you will no
longer be entitled to any exchange or registration
rights with respect to your outstanding notes.

THE EXCHANGE OFFER.........  Flowserve Corporation is offering to exchange:

- $1,000 principal amount of 12 1/4% Senior
Subordinated Notes due 2010 which have been
registered under the Securities Act of 1933 for
each $1,000 principal amount of its outstanding
12 1/4% Senior Subordinated Notes due 2010, which
were issued on August 8, 2000 in a private
offering; and

Flowserve Finance B. V. is offering to exchange:

- E1,000 principal amount of 12 1/4% Senior
Subordinated Notes due 2010 which have been
registered under the Securities Act of 1933 for
each E1,000 principal amount of its outstanding
12 1/4% Senior Subordinated Notes due 2010 which
were issued on August 8, 2000 in a private
offering.

In order to be exchanged, an outstanding note must
be properly tendered and accepted. All outstanding
notes that are validly tendered and not validly
withdrawn will be exchanged.

As of this date, there are $290 million in
aggregate principal amount of outstanding 12 1/4%
Senior Subordinated Notes due 2010 and E100 million
in aggregate principal amount of outstanding
12 1/4% Senior Subordinated Notes due 2010.

We will issue the exchange notes to you on or
promptly after the expiration of the Exchange
Offer.

RESALE OF THE NOTES ISSUED
IN THE EXCHANGE OFFER..  Based on an interpretation by the staff of the
Securities and Exchange Commission set forth in
no-action letters issued to third parties,
including "Exxon Capital Holdings Corporation"
(available May 13,
9

17

1988), "Morgan Stanley & Co. Incorporated"
(available June 5, 1991), "Mary Kay Cosmetics,
Inc." (available June 5, 1991) and "Warnaco, Inc."
(available October 11, 1991), we believe that the
notes issued in the exchange offer may be offered
for resale, resold and otherwise transferred by you
under U.S. federal securities laws without
compliance with the registration and prospectus
delivery provisions of the Securities Act of 1933
provided that:

- you are acquiring the notes issued in the
exchange offer in the ordinary course of
business;

- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate, in
the distribution of the notes issued to you in
the exchange offer;

- you are not a broker-dealer who purchased the
outstanding notes directly from us for resale
pursuant to Rule 144A or any other available
exemption under the Securities Act of 1933; and

- you are not an "affiliate" of ours.

If our belief is inaccurate and you transfer any
note issued to you in the exchange offer without
delivering a prospectus meeting the requirements of
the Securities Act of 1933 or without an exemption
from registration of your notes from such
requirements, you may incur liability under the
Securities Act of 1933. We do not assume or
indemnify you against such liability, but we do not
believe that any such liability should exist.

Each broker-dealer that is issued notes in the
exchange offer for its own account in exchange for
notes which were acquired by such broker-dealer as
a result of market-making or other trading
activities must acknowledge that it will deliver a
prospectus meeting the requirements of the
Securities Act of 1933, in connection with any
resale of the notes issued in the exchange offer.
The letter of transmittal states that by so
acknowledging and by delivering a prospectus, such
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act of 1933. A broker-dealer may use
this prospectus for an offer to resell or otherwise
retransfer of the notes issued to it in the
exchange offer. We have agreed that, for a period
of 180 days after the date of this prospectus, we
will make this prospectus and any amendment or
supplement to this prospectus available to any such
broker-dealer for use in connection with any such
resales. We do not believe that any registered
holder of the outstanding notes is an affiliate (as
such term is defined in Rule 405 of Securities Act
of 1933) of ours.

The exchange offer is not being made to, nor will
we or Flowserve Finance accept surrenders for
exchange from, holders of outstanding notes in any
jurisdiction in which this exchange offer or the
acceptance thereof would not be in compliance with
the securities or blue sky laws of such
jurisdiction.

EXPIRATION OF EXCHANGE
OFFER.................   The exchange offer will expire at 12:00 p.m., New
York City time (5:00 p.m., London time), for the
outstanding notes, on      , 2000, unless we decide
to extend the expiration date.

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18

ACCRUED INTEREST ON THE
NOTES ISSUED IN THE
EXCHANGE OFFER AND THE
OUTSTANDING NOTES........  The notes issued in the exchange offer will bear
interest from August 8, 2000. Holders of
outstanding notes whose outstanding notes are
accepted for exchange will be deemed to have waived
the right to receive any payment in respect of
interest on such outstanding notes accrued from
August 8, 2000 to the date of the issuance of the
exchange notes. Consequently, holders who exchange
their outstanding notes for exchange notes will
receive the same interest payment on February 15,
2001 (the first interest payment date with respect
to the outstanding notes and the notes issued in
the exchange offer) that they would have received
had they not accepted the exchange offer.

TERMINATION OF THE EXCHANGE
OFFER....................  We may terminate the exchange offer if we determine
that our ability to proceed with the exchange offer
could be materially impaired due to any legal or
governmental action, new law, statute, rule or
regulation or any interpretation of the staff of
the Securities and Exchange Commission of any
existing law, statute, rule or regulation. We do
not expect any of the foregoing conditions to
occur, although there can be no assurance that such
conditions will not occur. Holders of outstanding
notes will have certain rights against our company
under the registration rights agreements executed
as part of the offering of the outstanding notes
should we fail to consummate the exchange offer.

PROCEDURES FOR TENDERING
OUTSTANDING NOTES........  If you are a holder of an outstanding dollar note
and you wish to tender your note for exchange
pursuant to the exchange offer, you must transmit
to The Bank of New York, at its New York office as
exchange agent for the dollar notes, on or prior to
the expiration date a letter of transmittal in
accordance with the instructions contained in the
letter of transmittal accompanying this prospectus.
Then you must mail, fax or deliver the completed
letter of transmittal, together with the
outstanding dollar notes you wish to exchange and
any other required documentation, to The Bank of
New York, which is acting as exchange agent. Its
address appears on the letter of transmittal.
However, if you hold outstanding dollar notes
through The Depositary Trust Company ("DTC") and
wish to participate in the exchange offer, you must
comply with DTC's Automated Tender Offer Program
procedures, by which you will agree to be bound by
the letter of transmittal.

If you are a holder of an outstanding euro note and
you wish to tender your note for exchange pursuant
to the exchange offer, you must transmit to The
Bank of New York, at its London office as exchange
agent for the euro notes, on or prior to the
expiration date:

- a computer-generated message transmitted in
accordance with Euroclear's or Clearstream,
Luxembourg's, as the case may be, standard
operating procedures for electronic tenders and
received by Euroclear or Clearstream, Luxembourg
and forming a part of a confirmation of
book-entry transfer in which you acknowledge and
agree to be bound by the terms of the letter of
transmittal which accompanies this prospectus;
and

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19

- a timely confirmation of book-entry transfer of
your outstanding euro notes to either Euroclear
or Clearstream, Luxembourg, as the case may be,
pursuant to the procedure for book-entry
transfers described in this prospectus under the
heading "The Exchange Offer -- Procedure for
Tendering," must be received by the exchange
agent in London on or prior to the expiration
date.

By agreeing to the terms of the letter of
transmittal which accompanies this prospectus, each
holder will represent to us that, among other
things, (i) the notes to be issued in the exchange
offer are being obtained in the ordinary course of
business of the person receiving such notes whether
or not such person is the holder, (ii) neither the
holder nor any such other person has an arrangement
or understanding with any person to participate in
the distribution or such notes and (iii) neither
the holder nor any such other person is an
"affiliate," as defined in Rule 405 under the
Securities Act of 1933, of ours.

SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS........  If you are a beneficial owner of outstanding notes
that are registered in the name of a broker,
dealer, commercial bank, trust company or other
nominee and you wish to tender such notes in the
exchange offer, you should contact such person
whose name your notes are registered promptly and
instruct such person to tender on your behalf. If
you, as such beneficial holder, wish to tender on
your own behalf you must, prior to completing and
executing the letter of transmittal and delivering
your outstanding notes, either make appropriate
arrangements to register ownership of the
outstanding notes in your name or obtain a properly
completed bond power from the registered holder.
The transfer of record ownership may take
considerable time.

GUARANTEED DELIVERY
PROCEDURES FOR OUTSTANDING
NOTES....................  If you wish to tender your outstanding dollar notes
and time will not permit your required documents to
reach the exchange agent by the expiration date, or
the procedure for book-entry transfer cannot be
completed on time or certificates for registered
notes cannot be delivered on time, you may tender
your outstanding dollar notes pursuant to the
guaranteed delivery procedures described in this
prospectus under the heading "The Exchange
Offer -- Guaranteed Delivery Procedure for
Outstanding Dollar Notes." The guaranteed delivery
procedures are not available for euro notes.

WITHDRAWAL RIGHTS..........  You may withdraw the tender of your outstanding
notes at any time prior to 12:00 p.m., New York
City time (5:00 p.m. London time), on             ,
2000, the business day prior to the expiration
date, unless your outstanding notes were previously
accepted for exchange.

ACCEPTANCE OF OUTSTANDING
NOTES AND DELIVERY OF NOTES
TO BE ISSUED IN THE
EXCHANGE OFFER...........  Subject to the conditions summarized above in
"Termination of the Exchange Offer" and described
more fully under the "The Exchange
Offer -- Termination," we will accept for exchange
any and all outstanding notes which are properly
tendered in the exchange offer prior to 12:00 p.m.,
New York City time (5:00 p.m. London time), on

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the expiration date. The notes issued pursuant to
the exchange offer will be delivered promptly
following the expiration date.

CERTAIN U.S. FEDERAL INCOME
TAX CONSEQUENCES.........  The exchange of the notes will generally not be a
taxable exchange for United States federal income
tax purposes.

USE OF PROCEEDS............  We will not receive any proceeds from the issuance
of notes pursuant to the exchange offer. We will
pay all expenses incident to the exchange offer.

EXCHANGE AGENT FOR
OUTSTANDING NOTES........  The Bank of New York is serving as exchange agent
in connection with the outstanding notes. The
exchange agent with respect to matters concerning
the outstanding dollar notes can be reached at 101
Barclay Street, New York, N.Y. 10286. The exchange
agent with respect to matters concerning the
outstanding euro notes can be reached at 30 Common
Street, London EC4M 6XH. For more information with
respect to the exchange of outstanding dollar
notes, the telephone number of the exchange agent
in New York is (212) 815-6331 and the facsimile
number is (212) 815-6339. For more information with
respect to the exchange of outstanding euro notes,
the telephone number is 011 44 207 964-7284 or 011
44 207 964-7235 and the facsimile number is 011 44
207 964-6369 or 011 44 207 964-7294.

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DESCRIPTION OF THE NOTES TO BE ISSUED IN THE EXCHANGE OFFER

ISSUER

Dollar Notes.............  Flowserve Corporation

Euro Notes...............  Flowserve Finance B.V., an indirect wholly owned
subsidiary of Flowserve

SECURITIES OFFERED

Dollar Notes.............  $290,000,000 aggregate principal amount of 12 1/4%
Senior Subordinated Notes Due 2010, which we refer
to as dollar notes, of Flowserve.

Euro Notes...............  E100,000,000 aggregate principal amount of 12 1/4%
Senior Subordinated Notes Due 2010, which we refer
to as euro notes, of Flowserve Finance. We refer to
the euro notes and the dollar notes, collectively,
as the notes or the exchange notes.

MATURITY DATE

Dollar Notes.............  August 15, 2010

Euro Notes...............  August 15, 2010

INTEREST PAYMENTS

Dollar Notes.............  12 1/4% per year, payable February 15, and August
15 of each year, commencing February 15, 2001.

Euro Notes...............  12 1/4% per year, payable February 15, and August
15 of each year, commencing February 15, 2001.

OPTIONAL REDEMPTION........  We (in the case of the dollar notes) and Flowserve
Finance (in the case of the euro notes) cannot
redeem the notes issued by each of them prior to
August 15, 2005 except as discussed below. Until
August 15, 2003, we (in the case of the dollar
notes) and Flowserve Finance (in the case of the
euro notes) can choose to redeem the applicable
notes in an amount not to exceed 35.0% of the sum
of the original principal amount of the applicable
notes with money we receive from certain equity
offerings, as long as:

- we (in the case of the dollar notes) and
Flowserve Finance (in the case of the euro
notes) pay the holders of the applicable
notes a redemption price of 112.25% (in the
case of the dollar notes) and 112.25% (in
the case of the euro notes) of the principal
amount of the applicable notes, plus accrued
but unpaid interest to the date of
redemption; and

- at least 65.0% of the original aggregate
principal amount of the respective dollar
notes and the euro notes remains outstanding
after each such redemption.

On or after August 15, 2005, we (in the case of the
dollar notes) and Flowserve Finance (in the case of
the euro notes) can redeem some or all of the notes
issued by each of them at the redemption prices
listed in the "Description of the Notes -- Optional
Redemption" section of this prospectus, plus
accrued but unpaid interest to the date of
redemption.

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PAYMENTS OF ADDITIONAL
AMOUNTS..................  All payments of principal and interest with respect
to the euro notes will be made free and clear of,
and without withholding or deduction for and on
account of, any present or future taxes, duties,
levies, imposts, assessments or other governmental
charges of whatever nature imposed or levied by or
on behalf of The Netherlands or any successor
jurisdiction or any political subdivision or taxing
authority thereof or therein having power to tax,
unless such withholding or deduction is required by
law or by regulation or governmental policy of
general application. In the event that any such
withholding or deduction is so required, subject to
certain exceptions, Flowserve Finance will pay such
additional amounts as will result in receipt by
holders of the euro notes of such amounts as would
have been received by them had no such withholding
or deduction been required. See "Description of the
Notes -- Withholding Taxes".

REDEMPTION FOR TAX
REASONS.................  Upon the occurrence of certain changes in or
amendments to The Netherlands tax law requiring the
payment of additional amounts, Flowserve Finance
may redeem the euro notes at 100% of the principal
amount thereof plus accrued and unpaid interest, if
any, to the date fixed for redemption. See
"Description of the Notes -- Withholding Taxes".

EXCESS CASH FLOW
REPURCHASE OFFER.........  If we have excess cash flow for any fiscal year
(commencing with the fiscal year ending December
31, 2001), we will be required, subject to certain
exceptions and limitations, to make an offer to
purchase, on a pro rata basis, dollar notes and
euro notes with 50% of such excess cash flow
(reduced by the amount of any similar payments we
elect or are required to make to our senior lenders
or other holders of senior indebtedness) at a price
equal to 100% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of
purchase. The term "Excess Cash Flow" is defined in
the "Description of the Notes -- Certain
Definitions" section of this prospectus.

CHANGE OF CONTROL OFFER....  If we experience a change of control, subject to
certain conditions, we (in the case of the dollar
notes) and Flowserve Finance (in the case of the
euro notes) must give holders of the respective
notes an opportunity to sell to them their notes at
a purchase price of 101% of the principal amount of
the notes, plus accrued and unpaid interest. The
term "Change of Control" is defined in the
"Description of the Notes -- Change of Control"
section of this prospectus.

RANKING....................  The dollar notes will be senior subordinated
unsecured obligations of ours and the euro notes
will be senior subordinated unsecured obligations
of Flowserve Finance. They will rank ahead in right
of payment of any of our (in the case of the dollar
notes) and Flowserve Finance's (in the case of the
euro notes) future subordinated obligations, equal
in right of payment with any of our (in the case of
the dollar notes) and Flowserve Finance's (in the
case of the euro notes) existing and future senior
subordinated indebtedness and behind in right of
payment to any of our (in the case of the dollar
notes) and Flowserve Finance's (in the case of the
euro notes) existing and future senior
indebtedness. As of June 30, 2000, on a pro forma
basis after giving effect to the Transactions, we
would have had approximately

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$750.0 million in the aggregate of senior
indebtedness outstanding (which would have
represented indebtedness under our Senior Credit
Facilities), and Flowserve Finance would have had
no senior indebtedness outstanding except its
senior guaranty under our Senior Credit Facilities.
We would have had additional availability of
approximately $270.0 million, net of issued letters
of credit, for revolving credit facility borrowings
under our Senior Credit Facilities, all of which
would be senior indebtedness, if borrowed. We and
Flowserve Finance may incur additional senior
indebtedness in the future, subject to
restrictions. The terms "Senior Indebtedness",
"Senior Subordinated Indebtedness" and
"Subordinated Obligations" are defined in the
"Description of the Notes -- Certain Definitions"
section in this prospectus.

GUARANTIES.................  Upon consummation of the exchange offer, Flowserve
Finance, Flowserve International Limited
("Flowserve International") and our material
domestic subsidiaries will guarantee the dollar
notes, and we, Flowserve International and our
material domestic subsidiaries will guarantee the
euro notes.

Each guarantor will provide a full and
unconditional guarantee of the payment of the
principal, premium and interest on the notes on a
senior subordinated unsecured basis.

The guaranty by each guarantor will be subordinated
to all existing and future senior indebtedness of
such guarantor. See "Description of the
Notes -- Guaranties".

A substantial portion of our business is conducted
through our foreign operating subsidiaries, none of
which will be guarantors of the notes other than
Flowserve International (in the case of the dollar
notes and the euro notes) and Flowserve Finance (in
the case of the dollar notes).

RESTRICTIVE COVENANTS......  The indentures governing the dollar notes and the
euro notes will each contain covenants that limit
our ability and the ability of certain of our
subsidiaries (including Flowserve Finance) to:

- incur or guarantee additional indebtedness;

- pay dividends and make distributions;

- make investments and other restricted payments;

- permit payment or dividend restrictions on our
subsidiaries;

- transfer or sell assets;

- engage in transactions with affiliates; and

- consolidate or merge.

The indenture governing the euro notes will also
restrict Flowserve Finance from engaging in
business activities other than those incident to
the issuance and payment of the euro notes, the
issuance of guaranties of the Senior Credit
Facilities and the dollar notes and the lending of
intercompany loans to other Flowserve subsidiaries,
and will require that Flowserve Finance remain a
wholly owned subsidiary of ours.

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All these restrictions and prohibitions are subject
to a number of important qualifications and
exceptions. See "Description of the
Notes -- Certain Covenants".

LISTING....................  We intend to list the euro exchange notes on the
Luxembourg Stock Exchange. We do not intend to list
the dollar exchange notes on any exchange.

CONSEQUENCES OF FAILURE TO
EXCHANGE.................  Untendered outstanding notes will remain restricted
securities and will continue to be subject to the
following restrictions on transfer:

(i) outstanding notes may be resold only if
registered pursuant to the Securities Act of 1933,
if an exemption from registration is available, or
if neither such registration nor such exemption is
required by law,

(ii) outstanding notes shall bear a legend
restricting transfer in the absence of registration
or an exemption therefrom, and

(iii) a holder of outstanding notes who desires
to sell or otherwise dispose of all or any part of
its outstanding notes under an exemption from
registration under the Securities Act of 1933, if
requested by us, must deliver to us an opinion of
independent counsel experienced in Securities Act
matters, reasonably satisfactory in form and
substance to us, that such exemption is available.
See "Risk Factors -- Consequences of failure to
exchange your outstanding notes for exchange
notes."

For more complete information about the notes, see "Description of the
Notes".

RISK FACTORS

Investing in the notes involves substantial risks. See the "Risk Factors"
section of this prospectus for a description of certain of the risks you should
carefully consider before exchanging your outstanding notes.

ADDITIONAL INFORMATION

Flowserve is incorporated under the laws of the State of New York. Our
principal executive offices are located at 222 W. Las Colinas Blvd., Suite 1500,
Irving, Texas 75039. Our telephone number is (972) 443-6500. Flowserve Finance
is a company formed under the laws of The Netherlands. Its corporate seat is at
Amsterdam, The Netherlands and its principal executive offices are located at
Parallelweg 6, Etten-Leur 4870 AA, The Netherlands, and its telephone number is
011-31-76-502-8200.

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SUMMARY UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION

The following summary unaudited pro forma condensed consolidated financial
information is based on the historical consolidated financial statements of
Flowserve Corporation, Innovative Valve Technologies, Inc. and Ingersoll-Dresser
Pump Company included elsewhere in this prospectus, adjusted to give effect to
the acquisition of Invatec and the Transactions.

The unaudited pro forma consolidated statement of operations data for the
year ended December 31, 1999 and the six months ended June 30, 1999 and June 30,
2000 give effect to the acquisition of Invatec and the Transactions as if they
had occurred on January 1, 1999. The unaudited pro forma consolidated balance
sheet data give effect to the Transactions as if they had occurred as of June
30, 2000.

The following summary unaudited pro forma condensed consolidated financial
information should be read in conjunction with "Summary Historical Consolidated
Financial Information of Flowserve Corporation," "Summary Historical
Consolidated Financial Information of Ingersoll-Dresser Pump Company,"
"Capitalization," "Unaudited Pro Forma Consolidated Financial Statements,"
"Selected Historical Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the historical consolidated
financial statements of Flowserve Corporation, Innovative Valve Technologies,
Inc. and Ingersoll-Dresser Pump Company included elsewhere in this prospectus.

SIX MONTHS ENDED
YEAR ENDED       -------------------------------
DECEMBER 31, 1999   JUNE 30, 1999    JUNE 30, 2000
-----------------   --------------   --------------
(DOLLARS IN MILLIONS)

Net sales.........................................      $2,060.7           $1,031.2          $947.9
Cost of sales.....................................       1,433.8              715.3           662.4
Gross profit......................................         626.8              315.8           285.5
Operating income..................................          87.4               56.0            53.0
Loss before income taxes..........................         (35.4)              (9.4)           (7.4)
Benefit for income taxes..........................         (12.7)              (3.4)           (2.7)
Net loss..........................................      $  (22.7)          $   (6.0)         $ (4.7)
========           ========          ======

SUMMARY OF HISTORICAL AND PRO FORMA EBITDA RESULTS

You should read the following summary historical calculation of EBITDA, as
defined, in conjunction with the consolidated financial statements and other
financial information of Flowserve included elsewhere in this prospectus. The
definition of EBITDA, used herein, may differ from the definition of EBITDA used
by other companies and should not be considered as an alternative to net income,
cash flows or any other items calculated in accordance with generally accepted
accounting principles or as an indicator of Flowserve's operating performance.

HISTORICAL EBITDA
(AS DEFINED)

YEAR ENDED DECEMBER 31,
------------------------------------------
1995     1996     1997     1998     1999
------   ------   ------   ------   ------

Flowserve Corporation(1)..........................  $142.9   $157.7   $175.0   $167.7   $113.2
IDP(2)............................................  $ 46.1   $ 72.9   $ 84.3   $ 94.5   $ 87.1

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PRO FORMA EBITDA(3)

PRO                        IDP
HISTORICAL          INVATEC       FORMA      HISTORICAL   ACQUISITION/
-------------------   ACQUISITION   FLOWSERVE/   ----------    FINANCING       PROFORMA
FLOWSERVE   INVATEC   ADJUSTMENTS    INVATEC        IDP       ADJUSTMENTS    CONSOLIDATED
---------   -------   -----------   ----------   ----------   ------------   ------------

For the year ended
December 31, 1999......   $113.2      $11.5       $1.6         $126.3       $87.1         $10.2          $223.6
For the six months ended
June 30, 1999..........   $ 65.8      $ 6.6       $ --         $ 72.4       $35.8         $ 4.5          $112.7
For the six months ended
June 30, 2000..........   $ 68.2         --(4)      --(4)          --(4)    $22.1         $ 5.3          $ 95.6

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

(1) EBITDA means net income before interest, taxes, depreciation, amortization,
other income, net (excluding commission and royalty income) and other
non-recurring items. For Flowserve, other non-recurring items consist of
merger transaction and restructuring expense, merger integration expense
and, for the year ended December 31, 1999 non-cash charges of $5.8 million
related to executive severance and facility closures and $5.1 million
related to inventory and fixed asset impairment. Such definition of EBITDA
may differ from the definition of EBITDA used by other companies and should
not be considered as an alternative to net income, cash flows or any other
items calculated in accordance with generally accepted accounting principles
or as an indicator of Flowserve's operating performance.

(2) EBITDA means net income before interest, taxes, depreciation, amortization,
other income, net (excluding commission and royalty income) and other
non-recurring items. For IDP, other non-recurring items consist of
restructuring expense and, in 1999, $3.1 million of non-recurring consultant
expense and $0.9 million of severance expense.

(3) Pro forma EBITDA means net income (loss) before interest, taxes,
depreciation, amortization, other income, net (excluding commission and
royalty income) and other non-recurring items, on a pro forma basis.

For Flowserve, other non-recurring items consist of merger transaction and
restructuring expense, merger integration expense and, for the year ended
December 31, 1999, non-cash charges of $5.8 million related to executive
severance and facility closures and $5.1 million related to inventory and
fixed asset impairment.

For IDP, other non-recurring items consist of restructuring expense and, for
the year ended December 31, 1999, $3.1 million of non-recurring consultant
expense and $0.9 million of severance expense.

For Invatec, other non-recurring items in 1999 included $39.1 million of
goodwill impairment, $3.8 million of loss on assets held for sale and $2.0
million of merger transaction costs.

(4) Flowserve historical includes the results of Invatec from January 13, 2000.

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
OF FLOWSERVE CORPORATION

You should read the following summary historical consolidated financial
information in conjunction with the consolidated financial statements and the
other financial information of Flowserve included elsewhere in this prospectus.

HISTORICAL
----------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995       1996       1997       1998       1999
--------   --------   --------   --------   --------
(DOLLARS IN MILLIONS)

RESULTS OF OPERATION:
NET SALES..................................  $  983.9   $1,097.6   $1,152.2   $1,083.1   $1,061.3
COST OF SALES..............................     591.6      668.7      703.3      667.7      697.9
--------   --------   --------   --------   --------
GROSS PROFIT...............................     392.3      428.9      448.9      415.4      363.4
Selling and administrative expense.......     264.4      283.4      285.9      265.6      275.9
Research, engineering and development
expense...............................      24.6       24.5       26.9       26.4       25.6
Merger transaction and restructuring
expense...............................       5.1        5.8       44.5         --       15.9
Merger integration expense...............        --         --        7.0       38.3       14.2
--------   --------   --------   --------   --------
OPERATING INCOME...........................      98.2      115.2       84.6       85.1       31.8
Interest expense.........................      12.3       12.1       13.3       13.2       15.5
Other income, net........................      (2.5)      (5.2)     (18.5)      (1.3)      (2.0)
--------   --------   --------   --------   --------
EARNINGS BEFORE INCOME TAXES...............      88.4      108.3       89.8       73.2       18.3
Provision for income taxes...............      34.4       37.2       38.2       25.5        6.1
Cumulative effect of change in accounting
principle.............................        --         --         --       (1.2)        --
--------   --------   --------   --------   --------
NET INCOME.................................  $   54.0   $   71.1   $   51.6   $   48.9   $   12.2
========   ========   ========   ========   ========
PER COMMON SHARE:
Net earnings (basic and diluted).........  $   1.30   $   1.72   $   1.26   $   1.23   $   0.32
Dividends paid...........................       .51        .57        .65        .56        .56
Book value(1)............................      9.01       9.40       9.74       9.15       8.23
OTHER FINANCIAL DATA:
Bookings.................................  $1,013.9   $1,141.6   $1,172.4   $1,082.5   $1,039.3
Depreciation and amortization............      34.5       36.7       38.9       39.3       39.6
Capital expenditures, net................      39.9       35.7       39.6       38.2       40.5
BALANCE SHEET DATA (AS OF END OF PERIOD):
Working capital..........................  $  251.8   $  280.0   $  284.2   $  268.2   $  258.1
Total assets.............................     801.1      829.8      880.0      870.2      838.2
Long-term debt...........................     125.9      144.0      128.9      186.3      198.0
Shareholders' equity.....................     375.2      388.6      395.3      344.8      308.3

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

(1) Calculated as shareholders' equity as of the end of the period divided by
common shares issued, less amounts held in treasury.

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
OF INGERSOLL-DRESSER PUMP COMPANY

You should read the following summary historical consolidated financial
information in conjunction with the consolidated financial statements and the
other financial information of IDP included elsewhere in this prospectus.

YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995        1996     1997     1998     1999
-----------   ------   ------   ------   ------
(UNAUDITED)         (DOLLARS IN MILLIONS)

NET SALES........................................    $793.1      $856.3   $865.1   $907.2   $838.4
COST OF SALES....................................     607.5       641.2    637.2    661.1    610.7
------      ------   ------   ------   ------
GROSS PROFIT.....................................     185.6       215.1    227.9    246.1    227.7
Selling and administrative expense.............     162.5       163.2    163.1    168.9    162.1
Research, engineering and development
expense.....................................       1.6         2.8      3.6      3.8      3.0
Restructuring expense..........................        --         4.5     19.5      3.6      0.2
------      ------   ------   ------   ------
OPERATING INCOME.................................      21.5        44.6     41.7     69.8     62.4
Interest expense...............................       1.7         1.5      1.3      1.6      1.4
Other income, net..............................     (13.0)       (5.0)    (4.1)    (7.1)    (7.5)
------      ------   ------   ------   ------
EARNINGS BEFORE INCOME TAXES.....................      32.8        48.1     44.5     75.3     68.5
Provision for income taxes.....................       6.8        11.8     13.2     16.6     19.0
------      ------   ------   ------   ------
NET INCOME.......................................    $ 26.0      $ 36.3   $ 31.3   $ 58.7   $ 49.5
======      ======   ======   ======   ======
OTHER FINANCIAL DATA:
Bookings.......................................    $827.8      $855.0   $919.7   $925.9   $840.0
Depreciation and amortization..................      21.6        20.5     20.1     19.0     18.3
Capital expenditures, net......................      17.3        17.0     16.3     20.3     18.2
BALANCE SHEET DATA (AS OF END OF PERIOD):
Working capital................................    $261.4      $329.6   $215.9   $197.5   $174.9
Total assets...................................     630.2       690.0    725.9    800.6    796.4
Partners' equity...............................     362.8       401.0    416.4    479.1    492.5

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RISK FACTORS

You should carefully consider the risks described below in addition to the
other information set forth in this prospectus before making an investment in
the notes.

RISKS RELATING TO THE NOTES

OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH, MAKE
US VULNERABLE TO ADVERSE ECONOMIC AND INDUSTRY CONDITIONS AND PREVENT US FROM
FULFILLING OUR OBLIGATIONS UNDER THE NOTES

We have a significant amount of indebtedness. The following chart sets
forth important credit information, assuming we had completed the Transactions
as of the date specified below and applied the proceeds as described in the
unaudited pro forma consolidated financial information contained in this
prospectus:

PRO FORMA
JUNE 30, 2000
---------------------------------
(UNAUDITED, DOLLARS IN MILLIONS)

Total indebtedness....................                   $1,125.0
Shareholders' equity..................                      314.4

Our substantial indebtedness could have important consequences to you. For
example, it could:

- make it more difficult for us to satisfy our obligations with respect to
the notes;

- increase our vulnerability to general adverse economic and industry
conditions;

- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, research and development efforts and other general
corporate purposes;

- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;

- place us at a competitive disadvantage relative to our competitors that
have less debt; and

- limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional funds.

Furthermore, failing to comply with those covenants could result in an
event of default which, if not cured or waived, could have a material adverse
effect on our business, financial condition and results of operations.

DESPITE THE CURRENTLY EXPECTED LEVELS OF INDEBTEDNESS, WE STILL MAY BE ABLE TO
INCUR SUBSTANTIALLY MORE DEBT. THIS COULD FURTHER EXACERBATE THE EFFECT OF ANY
OF THE CONSEQUENCES DESCRIBED ABOVE

We may be able to incur substantial additional indebtedness in the future,
subject to the terms of the indentures governing the notes and the Senior Credit
Facilities. Our Senior Credit Facilities permit us to borrow up to approximately
an additional $270.0 million, net of issued letters of credit, under the
revolving credit facility portion of the Senior Credit Facilities. All of these
borrowings will be secured by substantially all of the assets of our domestic
subsidiaries and pledges of the stock of our subsidiaries. The addition of new
debt to our current debt levels could intensify the leverage-related risks that
we now face. See "Description of Certain Indebtedness" and "Description of the
Notes."

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YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES RANKS BEHIND OUR AND FLOWSERVE
FINANCE'S SENIOR INDEBTEDNESS AND POSSIBLY ALL OF OUR AND FLOWSERVE FINANCE'S
FUTURE BORROWINGS. FURTHER, THE GUARANTIES OF THE NOTES RANK BEHIND ALL OF THE
GUARANTORS' EXISTING SENIOR INDEBTEDNESS AND POSSIBLY ALL OF THEIR FUTURE
BORROWINGS

The notes will be unsecured senior subordinated obligations of Flowserve
(in the case of the dollar notes) and Flowserve Finance (in the case of the euro
notes). Therefore, your right to receive payments on these notes will rank
behind Flowserve's and Flowserve Finance's respective existing senior debt
(including borrowings and guarantees under the Senior Credit Facilities) and any
future senior debt Flowserve or Flowserve Finance may incur. Further, the
guaranties of the notes by the guarantors (including Flowserve with respect to
its guaranty of the euro notes) will rank behind those guarantors' existing
senior debt and all of their future senior debt. As a result, upon any
distribution to Flowserve's, Flowserve Finance's or the guarantors' creditors,
as applicable, in a bankruptcy, liquidation or reorganization or similar
proceeding or upon the distribution of Flowserve's, Flowserve Finance's or the
guarantors' property, the holders of the senior debt of these entities,
including the lenders under the Senior Credit Facilities, will be entitled to be
paid in full in cash before any payment may be made with respect to the notes or
the guaranties.

In addition, all payments on the notes and the guaranties will be blocked
in the event of a payment default on certain of our senior indebtedness
(including borrowings under the Senior Credit Facilities) and may be blocked for
specified periods in the event of certain non-payment defaults on senior debt.

In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to the guarantors, holders of the notes will participate
with other creditors in the assets remaining after the guarantors have paid all
of their senior indebtedness. Similarly, in the event of a bankruptcy,
liquidation or reorganization or similar proceeding relating to Flowserve (in
the case of the dollar notes) or Flowserve Finance (in the case of the euro
notes), holders of the notes will participate with other creditors in the assets
remaining after Flowserve (in the case of the dollar notes) or Flowserve Finance
(in the case of the euro notes) have paid all of their senior indebtedness.
However, because the indentures governing the notes requires that amounts
otherwise payable to holders of the notes in a bankruptcy or similar proceeding
be paid to holders of senior indebtedness instead, holders of the notes may
receive ratably less than holders of trade payables in any such proceeding. In
any of these cases, Flowserve, Flowserve Finance and the guarantors may not have
sufficient funds to pay all of their respective creditors and holders of the
notes may receive ratably less than holders of senior indebtedness.

Assuming we had completed the Transactions and used the proceeds from these
offerings as described in this prospectus, in each case on June 30, 2000, the
notes and the guaranties would have been subordinated to approximately $750.0
million of senior indebtedness (consisting of debt (and guaranties thereof)
outstanding under the term loan facilities portion of the Senior Credit
Facilities) and approximately $270.0 million would have been available for
additional borrowings under our revolving credit facility, all of which would be
senior indebtedness, if borrowed. All of our subsidiaries that guarantee the
notes are also guarantors of our Senior Credit Facilities. Obligations under
such guaranties constitute senior indebtedness.

THE SENIOR CREDIT FACILITIES AND THE INDENTURES GOVERNING THE DOLLAR NOTES AND
THE EURO NOTES CONTAIN VARIOUS COVENANTS WHICH LIMIT MANAGEMENT'S DISCRETION IN
THE OPERATION OF OUR BUSINESS

The Senior Credit Facilities and the indentures governing the dollar notes
and the euro notes contain various provisions that limit management's discretion
in operating our (including our subsidiaries') businesses by restricting their
ability to:

- incur additional debt;

- pay dividends and make other distributions;

- prepay subordinated debt, make investments and other restricted payments;

- enter into sale and leaseback transactions;

- create liens;

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- sell assets; and

- enter into transactions with affiliates.

The indenture governing the euro notes also restricts Flowserve Finance
from engaging in business activities other than those incident to the issuance
and payment of the euro notes, the issuance of guaranties of the Senior Credit
Facilities and the dollar notes and the lending of intercompany loans to other
Flowserve subsidiaries, and requires that Flowserve Finance remain a wholly
owned subsidiary of Flowserve.

In addition, the Senior Credit Facilities require us to maintain certain
financial ratios, which will become more restrictive over time.

If we fail to comply with the restrictions contained in the Senior Credit
Facilities, the indentures governing the dollar notes and the euro notes or any
other subsequent financing agreements, a default may occur. This default may
allow some creditors, if their respective agreements so provide, to accelerate
payments owed on such debt as well as any other indebtedness as to which a
cross-acceleration or cross-default provision applies. In addition, our lenders
may be able to terminate any commitments they had made to supply us with further
funds. See "Description of Certain Indebtedness" and "Description of the Notes."

FLOWSERVE FINANCE IS A FINANCE VEHICLE WITH LIMITED ASSETS, NO OPERATIONS OF ITS
OWN AND A LIMITED SOURCE OF FUNDS FROM WHICH TO REPAY THE EURO NOTES

Flowserve Finance is a finance vehicle which has limited assets and no
operations of its own. Following the closing of the offering of the euro notes,
Flowserve Finance loaned all of the proceeds of that offering to our European
operating subsidiaries, which applied those proceeds, to purchase all of the
capital stock of IDP's operating subsidiaries in Germany and Italy. Flowserve
Finance's assets consist solely of the intercompany notes entered into by our
European operating subsidiaries evidencing their obligation to repay the loans
made to them by Flowserve Finance from time to time. Flowserve Finance's only
source of funds will be payments of interest and principal due to it by those
subsidiaries pursuant to such intercompany notes. The ability of Flowserve
Finance to make payments of principal and interest on the euro notes is
dependent on the ability of the European operating subsidiaries that are
obligors on the intercompany notes to make payments under those notes. In the
event of a default in payment by those European operating subsidiaries under the
intercompany notes, absent a loan or capital contribution from us or one of our
other subsidiaries, Flowserve Finance would be unable to make payments under the
euro notes.

CERTAIN SUBSIDIARIES ARE NOT INCLUDED AS SUBSIDIARY GUARANTORS

The guarantors of the notes (other than Flowserve and Flowserve
International in the case of the euro notes and Flowserve Finance and Flowserve
International in the case of the dollar notes) include only material domestic
subsidiaries of Flowserve. Additionally, immediately after the consummation of
the closing of the IDP acquisition, IDP and its material domestic subsidiaries
became subsidiary guarantors of the dollar notes and the euro notes. However,
the historical consolidated financial information (including the consolidated
financial statements of Flowserve, Invatec and IDP included elsewhere in this
prospectus) and the pro forma consolidated financial information included in
this prospectus are presented on a consolidated basis, including both domestic
and foreign subsidiaries of Flowserve, Invatec and IDP. The aggregate net sales,
EBITDA and total assets for the twelve months ended December 31, 1999 of
Flowserve's subsidiaries which are not subsidiary guarantors were $472.6
million, $63.4 million and $36.1 million, respectively.

Because a substantial portion of both Flowserve's operations and IDP's
operations is conducted by foreign subsidiaries, our cash flow and our ability
to service debt, including our and the subsidiary guarantors' ability to pay the
interest on and principal of the dollar notes when due and the subsidiary
guarantors' ability and our ability under our guaranty to pay the interest on
and principal of the euro notes when due, are dependent to a significant extent
upon interest payments, cash dividends and distributions or

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32

other transfers from our foreign subsidiaries. In addition, any payment of
interest, dividends, distributions, loans or advances by our foreign
subsidiaries to us, to Flowserve Finance and to the subsidiary guarantors, as
applicable, could be subject to restrictions on dividends or repatriation of
earnings under applicable local law, monetary transfer restrictions and foreign
currency exchange regulations in the jurisdiction in which those foreign
subsidiaries operate. Moreover, payments to us, Flowserve Finance and the
subsidiary guarantors by the foreign subsidiaries will be contingent upon these
subsidiaries' earnings.

Our foreign subsidiaries are separate and distinct legal entities and
(except to the extent of Flowserve Finance's guaranty of the dollar notes and
Flowserve International's guaranties of the dollar notes and the euro notes)
have no obligation, contingent or otherwise, to pay any amounts due pursuant to
the dollar notes, the euro notes, our guaranty or the subsidiary guaranties or
to make any funds available therefor, whether by dividends, loans, distributions
or other payments. Any right that we or the subsidiary guarantors have to
receive any assets of any of the foreign subsidiaries upon the liquidation or
reorganization of those subsidiaries, and the consequent rights of holders of
dollar notes or euro notes to realize proceeds from the sale of any of those
subsidiaries' assets, will be effectively subordinated to the claims of that
subsidiary's creditors, including trade creditors and holders of debt of that
subsidiary. See Flowserve and IDP unaudited consolidated financial statements
contained elsewhere in this prospectus.

WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE ANY CHANGE
OF CONTROL OFFER REQUIRED BY THE INDENTURES GOVERNING THE NOTES

If we undergo a change of control (as defined in the indentures governing
the notes) we may need to refinance large amounts of our debt, including the
notes and borrowings under the Senior Credit Facilities. If a change of control
occurs, we (in the case of the dollar notes) and Flowserve Finance (in the case
of the euro notes) must offer to buy back the notes for a price equal to 101% of
the principal amount of the notes, plus any accrued and unpaid interest. We
cannot assure you that there will be sufficient funds available for us (in the
case of the dollar notes) and Flowserve Finance (in the case of the euro notes)
to make any required repurchases of the notes upon a change of control. In
addition, our Senior Credit Facilities will prohibit us (in the case of the
dollar notes) and Flowserve Finance (in the case of the euro notes) from
repurchasing the notes until we first repay the Senior Credit Facilities in
full. If we (in the case of the dollar notes) and Flowserve Finance (in the case
of the euro notes) fail to repurchase the notes in that circumstance, we (in the
case of the dollar notes) and Flowserve Finance (in the case of the euro notes)
will go into default under both the indenture governing the applicable notes and
the Senior Credit Facilities. Any future debt which we incur may also contain
restrictions on repayment upon a change of control. If any change of control
occurs, we cannot assure you that we (in the case of the dollar notes) and
Flowserve Finance (in the case of the euro notes) will have sufficient funds to
satisfy all of our debt obligations. The buyback requirements may also delay or
make it harder for others to effect a change of control. However, certain other
corporate events, such as a leveraged recapitalization that would increase our
level of indebtedness, would not constitute a change of control under the
indentures governing the notes. See "Description of Certain Indebtedness" and
"Description of the Notes -- Change of Control."

FEDERAL OR STATE LAWS ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID DEBTS,
INCLUDING GUARANTIES, AND REQUIRE HOLDERS OF NOTES TO RETURN PAYMENTS RECEIVED
FROM US AND THE DOMESTIC GUARANTORS

If a bankruptcy proceeding or lawsuit were to be initiated by unpaid
creditors, the dollar notes and the guaranties of the dollar notes and the euro
notes by our domestic subsidiaries could come under review for federal or state
fraudulent transfer violations. Under federal bankruptcy law and comparable
provisions of state fraudulent transfer laws, obligations under the dollar notes
or guaranties of the dollar notes or euro notes could be voided, or claims in
respect of the dollar note or guaranties of the dollar notes or euro notes could
be subordinated to all other debts of the debtor or guarantor if, among other
things, the debtor or guarantor at the time it incurred the indebtedness
evidenced by such notes or guaranties:

- received less than reasonably equivalent value or fair consideration for
the incurrence of such debt or guaranty; and

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- one of the following applies:

- it was insolvent or rendered insolvent by reason of such incurrence;

- it was engaged in a business or transaction for which its remaining
assets constituted unreasonably small capital; or

- it intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.

In addition, any payment by that debtor or guarantor under the dollar notes or
guaranties of the dollar notes or euro notes could be voided and required to be
returned to the debtor or guarantor, as the case may be, or to a fund for the
benefit of the creditors of the debtor or guarantor.

The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a debtor or guarantor
would be considered insolvent if:

- the sum of its debts, including contingent liabilities, were greater than
the fair salable value of all of its assets;

- if the present fair salable value of its assets were less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or

- it could not pay its debts as they become due.

DUTCH INSOLVENCY LAWS MAY ADVERSELY AFFECT A RECOVERY BY THE HOLDERS OF THE EURO
NOTES

Flowserve Finance, the issuer of the euro notes, is a Dutch company. Dutch
insolvency laws differ significantly from insolvency proceedings in the United
States and may make it more difficult for holders of the euro notes to effect a
restructuring of Flowserve Finance or to recover the amount they would have
recovered in a liquidation or bankruptcy proceeding in the United States. There
are two primary insolvency regimes under Dutch law: the first, moratorium of
payment (surseance van betaling), is intended to facilitate the reorganization
of a debtor's debts and enable the debtor to continue as a going concern. The
second, bankruptcy (faillissement), is primarily designed to liquidate and
distribute the assets of a debtor to its creditors.

Should Flowserve Finance not comply with certain Netherlands rules issued
pursuant to the Wet toezicht kredietwezen 1992 (the 1992 Act on the supervision
of the credit system), then instead of the faillissement and surseance van
betaling rules mentioned above, the specific insolvency regime of this act, the
noodregeling (emergency regulation), will apply.

Upon commencement of moratorium of payment proceedings, the court will
grant a provisional moratorium. The definitive moratorium will generally be
granted upon the approval of a qualified majority of the unsecured creditors. In
both cases, certain creditors will be precluded from attempting to recover their
claims from the assets of the debtor. This moratorium is subject to exceptions,
the most important of which excludes certain secured and certain preferential
creditors (such as tax and social security authorities) from the protection of
the moratorium. Unlike Chapter 11 proceedings under U.S. bankruptcy law, during
which both secured and unsecured creditors are generally barred from seeking to
recover on their claims, during Dutch moratorium of payment proceedings, certain
secured creditors may proceed against the assets that secure their claims to
satisfy their claims. A recovery under Dutch law, therefore, could involve a
sale of the assets of the debtor in a manner that does not reflect the going
concern value of the debtor. Consequently, Dutch insolvency laws could preclude
or inhibit the ability of the holders of the euro notes to effect a
restructuring of Flowserve Finance and could reduce the recovery in a Dutch
insolvency proceeding.

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In connection with Dutch bankruptcy proceedings, the assets of a debtor are
generally liquidated and the proceeds distributed to the debtor's creditors on
the basis of the relative claims of those creditors, and certain parties (such
as secured creditors) will have special rights that may adversely affect the
interests of holders of the euro notes. The claim of a creditor may be limited
depending on the date the claim becomes due and payable in accordance with its
terms. Generally, claims of holders of euro notes which were not due and payable
by their terms on the date of a bankruptcy of Flowserve Finance will be
accelerated and become due and payable as of that date. Each of these claims
will have to be submitted to the receiver of Flowserve Finance to be verified by
the receiver. "Verification" under Dutch law means that the receiver determines
the value of the claim and whether and to what extent it will be admitted in the
bankruptcy proceedings. The valuation of claims that otherwise would not have
been payable at the time of the bankruptcy proceedings may be based on a net
present value analysis. Creditors that wish to dispute the valuation of their
claims by the receiver will need to commence a court proceeding. These
verification procedures could cause holders of euro notes to recover less than
the principal amount of their notes or less than they could recover in a U.S.
liquidation. Such verification procedures could also cause payments to the
holders of euro notes to be delayed compared with holders of undisputed claims.

YOUR RIGHTS UNDER THE GUARANTY BY ONE OF OUR ENGLISH SUBSIDIARIES MAY BE
IMPAIRED UNDER INSOLVENCY LAWS IN ENGLAND

One of the guarantors of the dollar notes and the euro notes, Flowserve
International, is incorporated in England. Any insolvency proceedings by or
against Flowserve International would likely be based on English insolvency
laws. The procedural and substantive provisions of English insolvency laws
generally are more favorable to secured creditors than comparable provisions of
U.S. law and afford debtors and unsecured creditors only limited protection from
secured creditors. Due to the nature of English insolvency laws and the
unsecured nature of the claims of holders of the notes against Flowserve
International, the ability of holders of the notes to protect their interests
will be more limited than would be the case under U.S. bankruptcy laws. In
addition, under English insolvency law, in the event of a winding up of
Flowserve International, its liabilities under its guaranty will be paid only
after certain of its other debts which are entitled to priority under English
law, such as money owed to the U.K. Inland Revenue for income tax deducted at
source, value added tax and certain other taxes and duties owed to the U.K.
Customs and Excise, social security contributions, occupational pension scheme
contributions and salaries owed to employees. In addition, in any insolvency
proceedings by or against Flowserve International, its guaranty will rank behind
all of its current and future senior indebtedness.

Under English insolvency law, the liquidator or administrator of a
subsidiary guarantor incorporated in England may, among other things, apply to
the court under Section 238 of the U.K. Insolvency Act 1986 to rescind the
issuance of its guaranty, if that subsidiary guarantor was unable to pay its
debts (within the meaning of Section 123 of the U.K. Insolvency Act 1986) at the
time of the issuance of its guaranty or became unable to pay its debts (within
the meaning of that section) in consequence thereof and there occurs in relation
to that subsidiary the onset of insolvency (as defined in Section 240 of the
U.K. Insolvency Act 1986) within two years after the guaranty is issued. The
guaranty might be subject to such recision (or other competent order of a court
under Section 241 of the U.K. Insolvency Act 1986) if it involved a gift by the
subsidiary guarantor or if the subsidiary guarantor received consideration of
significantly less value than the consideration given by it. A court, however,
cannot make an order under Section 238 if it is satisfied that the subsidiary
guarantor entered into the transaction in good faith for the purpose of carrying
on its business and that at the time it did so that there were reasonable
grounds for believing that the transaction would benefit such guarantor.

We believe that the guaranty to be issued by Flowserve International will
not be provided in a transaction at less than fair value or for inadequate
consideration and that the guaranty will be provided in good faith for the
purposes of carrying on the business of the guarantor and that there are
reasonable grounds for believing that the transaction will benefit that
guarantor. We cannot assure you, however, that a person entitled to apply to a
court pursuant to Section 238 or 242 or the relevant English court would concur
with our analysis.

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In addition, under English insolvency law any debt payable in the
liquidation of a company in a currency other than pounds sterling (such as euros
in the case of the euro notes and dollars in the case of the dollar notes) must
be converted into pounds sterling in the case of a company incorporated in
England, at the "official exchange rate" prevailing on the date when the debtor
went into liquidation for the purpose of proving in the liquidation. The
"official exchange rate" for these purposes is the middle market rate at the
Bank of England as published for the date in question or, if no such rate is
published, the court determines the rate. Accordingly, in the event of an
insolvency of Flowserve International, holders of notes may be subject to
exchange rate risk between the date that Flowserve International went into
liquidation and the date of receipt of any amounts to which the holders of notes
may become entitled.

WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NOTES

Prior to this exchange offer, there has been no public market for the
notes. We do not intend to apply for listing of the dollar notes on any
securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System. We have made application to list
the euro exchange notes on the Luxembourg Stock Exchange in accordance with the
rules of the Luxembourg Stock Exchange. Both the liquidity and the market price
quoted for the dollar notes and the euro notes may be adversely affected by
changes in the overall market for high yield securities and by changes in our
financial performance or prospects, or in the prospects for companies in our
industry generally. As a result, we cannot assure you that an active or stable
trading market will develop for the notes.

CONSEQUENCES OF FAILURE TO EXCHANGE YOUR OUTSTANDING NOTES FOR EXCHANGE NOTES

If you do not tender your outstanding notes to be exchanged in this
exchange offer, your notes will remain restricted securities and will be subject
to certain transfer restrictions. As restricted securities, your outstanding
notes:

- may be resold only if registered pursuant to the Securities Act of 1933,
if an exemption from registration is available thereunder, or if neither
such registration nor such exemption is required by law; and

- shall bear a legend restricting transfer in the absence of registration
or an exemption therefrom.

In addition, a holder of outstanding notes who desires to sell or otherwise
dispose of all or any part of its outstanding notes under an exemption from
registration under the Securities Act of 1933, if requested by us, must deliver
to us an opinion of independent counsel experienced in Securities Act matters,
reasonably satisfactory in form and substance to us, that such exemption is
available.

RISKS RELATING TO OUR BUSINESS

WE MAY NOT BE ABLE TO INTEGRATE THE BUSINESS OF IDP AND INVATEC

Our future success will depend in part on our ability to effectively
integrate the businesses of IDP and Invatec into Flowserve's operations. The
combination of Flowserve, Invatec and IDP involves the integration of companies
that have previously operated independently. The integration process may be
disruptive to the businesses and may cause an interruption of, or a loss of
momentum in, the businesses as a result of a number of obstacles such as:

- loss of key employees or customers;

- failure to maintain the quality of customer service that such companies
have historically provided;

- the need to coordinate geographically diverse organizations;

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- retooling and reprogramming of equipment; and

- the resulting diversion of management's attention from our day-to-day
business and the need to hire additional management personnel to address
integration obstacles.

If we are not successful in this combination, if the combination takes
longer than anticipated, or if our integrated product and service offering fails
to achieve market acceptance, our business could be adversely affected.

WE MAY NOT BE ABLE TO REALIZE THE ANTICIPATED COST SAVINGS, SYNERGIES OR REVENUE
ENHANCEMENTS FROM COMBINING FLOWSERVE, INVATEC AND IDP AND WE WILL INCUR
SIGNIFICANT CASH INTEGRATION COSTS TO ACHIEVE THESE COST SAVINGS

Even if we are able to integrate the operations of the companies
successfully, we cannot assure you that we will realize the cost savings,
synergies or revenue enhancements that we anticipate from such integration or
that we will realize such benefits within the time frame that we currently
expect.

- Whether we can effectively eliminate redundant administrative overhead
and overlapping sales personnel, rationalize manufacturing capacity and
shift production to more economic facilities is difficult to predict.
Accordingly, the amount and timing of the resulting cost savings are
inherently difficult to estimate.

- Any cost savings and other synergies from the transactions may be offset
by costs incurred in integrating the companies.

- The cost savings and other synergies may also be offset by increases in
other expenses, by operating losses or by problems unrelated to the
transactions.

- Labor cost savings depend on the avoidance of labor disruptions in
connection with the integration of the businesses.

- We will incur significant cash integration costs to achieve these cost
savings.

WE HAVE LIMITED INFORMATION CONCERNING IDP AND INVATEC, AND THEY MAY HAVE
LIABILITIES OR OBLIGATIONS THAT ARE NOT REFLECTED IN THEIR HISTORICAL FINANCIAL
STATEMENTS

In connection with the acquisitions of Invatec and IDP, we conducted a
review of information available to us regarding Invatec and IDP; however, we
have been unable to perform a complete review of the past activities and
financial performance of the two companies. Prior to our acquisition of their
businesses, Invatec and IDP may have incurred contractual, financial or other
obligations and liabilities that may impact us in the future and that are not
currently reflected in their historical financial statements or otherwise known
to us. In addition, with respect to the IDP acquisition we have received limited
warranties with respect to these obligations and liabilities from
Ingersoll-Rand. Any such obligation or liability could have a material adverse
effect on our business, financial condition and results of operations.

IF ACTUAL RESULTS DIFFER FROM THE ESTIMATES UNDERLYING SOME OF THE COST SAVINGS
INFORMATION, OUR RESULTS MAY BE LESS FAVORABLE THAN ANTICIPATED

Certain information contained within this prospectus is based on
anticipated cost savings that our management believes are reasonable, including
cost savings resulting from plant closures and certain cost savings anticipated
in connection with the Transactions and the Invatec acquisition. We cannot
assure you that the anticipated cost savings will be achieved. If our savings
are less than our estimates or adversely affect our revenues or operations, our
results will be less than we anticipate and less than the amounts set forth in
this prospectus.

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ALTHOUGH WE HAVE ENTERED INTO A CONSENT DECREE WITH THE U.S. DEPARTMENT OF
JUSTICE ADDRESSING ITS ANTITRUST CONCERNS RELATED TO THE IDP ACQUISITION, WE MAY
NOT OBTAIN A FINAL COURT ORDER APPROVING THE IDP ACQUISITION

In connection with the IDP acquisition, we entered into a consent decree
with the U.S. Department of Justice to resolve its antitrust concerns related to
the acquisition. This consent decree provides for a post-closing divestiture of
certain product lines, a manufacturing facility and two service and repair
centers. The consent decree was filed with the United States District Court for
the District of Columbia on July 28, 2000. The provisions of the consent decree
are described in more detail in "Business -- Regulatory Divestitures."

On September 13, 2000, after the filing of the consent decree, the
Department of Justice published the consent decree in the Federal Register.
Under the Antitrust Procedures and Penalties Act, the general public will have
60 days from the date of publication in the Federal Register to comment on the
adequacy of the consent decree. The federal district court will only issue a
final order approving the IDP acquisition after the public has had the
opportunity to comment on the adequacy of the consent decree, the Department of
Justice has responded to such comments, and the federal district court has
determined that the consent decree is in the public interest. We cannot assure
you that we will obtain the final order from the federal district court
approving the acquisition. The issuance of the final order by the federal
district court is not a condition to the closing of the acquisition, although
the failure of the court to issue such a final order could result in the
restructuring or unwinding of the acquisition.

ECONOMIC, POLITICAL AND OTHER RISKS ASSOCIATED WITH INTERNATIONAL SALES AND
OPERATIONS COULD ADVERSELY AFFECT OUR BUSINESS

Since we sell our products worldwide, our business is subject to risks
associated with doing business internationally. Our sales outside North America,
as a percentage of our total sales, was 45% in 1999. Accordingly, our future
results could be harmed by a variety of factors, including:

- changes in foreign currency exchange rates;

- changes in a specific country's or region's political or economic
conditions, particularly in emerging markets;

- trade protection measures and import or export licensing requirements;

- potentially negative consequences from changes in tax laws;

- difficulty in staffing and managing widespread operations;

- differing labor regulations;

- differing protection of intellectual property; and

- unexpected changes in regulatory requirements.

OUR OPERATING RESULTS COULD BE HARMED DURING ECONOMIC DOWNTURNS

The businesses of most of our industrial customers, particularly
refineries, chemical companies and power plants, are, to varying degrees,
cyclical and have historically experienced periodic downturns. Margins in those
industries are highly sensitive to demand cycles, and our customers in those
industries historically have tended to delay large capital projects, including
expensive maintenance and upgrades, during economic downturns. For example, due
to the simultaneous decline in oil and chemical prices in 1998 and 1999, many of
our key customers significantly reduced their capital spending, which resulted
in declines in revenues and EBITDA during those years. These industry downturns
have been characterized by diminished product demand, excess manufacturing
capacity and subsequent accelerated erosion of average selling prices in the
flow control industry. Therefore, any significant downturn in our customers'
markets or in general economic conditions could result in a reduction in demand
for our products and services and could harm our business.

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WE FACE INTENSE COMPETITION

We encounter intense competition in all areas of our business.
Additionally, customers for our products are attempting to reduce the number of
vendors from which they purchase in order to reduce the size and diversity of
their inventory. To remain competitive, we will need to invest continuously in
manufacturing, marketing, customer service and support and our distribution
networks. We anticipate that we may have to adjust the prices of some of our
products to stay competitive. We cannot assure you that we will have sufficient
resources to continue to make such investments or that we will maintain our
competitive position.

ENVIRONMENTAL COMPLIANCE COSTS AND LIABILITIES COULD ADVERSELY AFFECT OUR
FINANCIAL CONDITION

Our operations and properties are subject to increasingly stringent laws
and regulations relating to environmental protection, including laws and
regulations governing air emissions, water discharges, waste management and
workplace safety. Such laws and regulations can impose substantial fines and
sanctions for violations and require the installation of costly pollution
control equipment or operational changes to limit pollution emissions and/or
decrease the likelihood of accidental hazardous substance releases. We must
conform our operations and properties to these laws, and adapt to regulatory
requirements in all countries as these requirements change. In connection with
the IDP acquisition, we believe that we may be required to incur costs to bring
the former IDP properties into compliance with applicable requirements.

We use and generate hazardous substances and wastes in our manufacturing
and foundry operations. In addition, many of our current and former properties
are or have been used for industrial purposes. Accordingly, we are conducting
investigation and remediation activities at several on-site and off-site
locations. We also may be subject to potentially material liabilities relating
to the investigation and clean-up of contaminated properties and to claims
alleging personal injury.

We have experienced, and expect to continue to experience, operating costs
to comply with environmental laws and regulations. In addition, new laws and
regulations, stricter enforcement of existing laws and regulations, the
discovery of previously unknown contamination or the imposition of new clean-up
requirements could require us to incur costs or become the basis for new or
increased liabilities that could have a material adverse effect on our business,
financial condition or results of operations.

OUR BUSINESS COULD SUFFER IF WE ARE UNSUCCESSFUL IN NEGOTIATING NEW COLLECTIVE
BARGAINING AGREEMENTS

As of December 31, 1999, we had approximately 12,000 employees, of whom
approximately 18% are represented by unions. Our operations in the following
countries are unionized: Argentina, Austria, Belgium, Brazil, Canada, France,
Germany, Italy, Mexico, The Netherlands, Spain and the United Kingdom. Each of
our material collective bargaining agreements with such unions expires from
November 2000 to December 2002. Although we believe that our relations with our
employees are good and we have not experienced any strikes or work stoppages
since the strike at IDP's Phillipsburg facilities in the mid 1990s, we cannot
assure you that we will be successful in negotiating new collective bargaining
agreements, that such negotiations will not result in significant increases in
the cost of labor or that a breakdown in such negotiations will not result in
the disruption of our operations. In addition, our planned closures of certain
facilities may create the risk of strikes or work stoppages at those and other
facilities.

THIRD PARTIES MAY INFRINGE OUR INTELLECTUAL PROPERTY, AND WE MAY EXPEND
SIGNIFICANT RESOURCES ENFORCING OUR RIGHTS OR SUFFER COMPETITIVE INJURY

Our success depends in part on our proprietary technology. We rely on a
combination of patents, copyrights, trademarks, trade secrets, confidentiality
provisions and licensing arrangements to establish and protect our proprietary
rights. If we fail to successfully enforce our intellectual property rights, our
competitive position could suffer, which could harm our operating results. We
may be required to spend significant resources to monitor and police our
intellectual property rights.

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OUR SUCCESS WILL CONTINUE TO DEPEND TO A SIGNIFICANT EXTENT ON OUR EXECUTIVES
AND OTHER KEY PERSONNEL

Our future success depends to a significant degree on the skills,
experience and efforts of our senior management and other key personnel. The
loss of the services of any of these individuals could adversely affect our
ability to implement our business strategy, including integrating IDP and
Invatec, and our results of operations.

WE ARE DEPENDENT ON THE AVAILABILITY OF RAW MATERIALS

We require substantial amounts of raw materials and substantially all raw
materials we require are purchased from outside sources. The availability and
prices of raw materials may be subject to curtailment or change due to, among
other things, new laws or regulations, suppliers' allocations to other
purchasers, interruptions in production by suppliers, changes in exchange rates
and worldwide price levels. Any change in the supply of, or price for, these raw
materials could materially affect our operating results.

WE ARE SUBJECT TO THE EFFECTS OF FLUCTUATIONS IN FOREIGN EXCHANGE RATES

We are exposed to fluctuations in foreign currencies as a significant
portion of our revenue, and certain of our costs, assets and liabilities, are
denominated in currencies other than U.S. dollars. Principal and interest on the
dollar notes will be payable in U.S. dollars. Our ability to pay interest and
principal on the dollar notes when due is dependent on the then current exchange
rates between U.S. dollars, on the one hand, and the euro and other European as
well as Asian currencies, on the other hand, which rates are and will be subject
to fluctuation. Approximately 45% of our revenue during 1999 was from sales
outside of North America. Our share of revenue in non-dollar denominated
currencies may continue to increase in future periods. We can offer no
assurance, however, that exchange rate fluctuations will not have a material
adverse effect on our results of operations and financial condition and
therefore on our ability to make principal and interest payments on our
indebtedness, including the dollar notes, when due.

WE CANNOT GUARANTEE THAT JUDGMENTS OBTAINED IN A U.S. COURT WILL BE ENFORCEABLE
AGAINST FLOWSERVE FINANCE

All of Flowserve Finance's assets will be located outside the United
States. As a result, it may not be possible for investors to effect service of
process within the United States upon Flowserve Finance. In addition, it may not
be possible for investors to enforce judgments obtained in a U.S. court against
its assets, including in order to foreclose upon such assets. See "Service of
Process and Enforceability of Civil Liabilities."

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SOURCES AND USES OF PROCEEDS

We will not receive any cash proceeds from the issuance of the exchange
notes offered hereby. In consideration for issuing the notes contemplated by
this prospectus, we will receive in exchange the outstanding notes in like
principal amount. The outstanding notes surrendered in exchange for the exchange
notes will be retired and canceled and cannot be reissued. Accordingly, issuance
of the exchange notes will not result in any change in our indebtedness.

The following table sets forth the sources and uses of funds for the IDP
acquisition as of June 30, 2000 on a pro forma basis, as though the Transactions
had occurred at that date:

(DOLLARS IN MILLIONS)

SOURCES:
Cash and Cash Equivalents............   $   22.0
Term Loan Facilities(1)..............      750.0
Senior Subordinated Dollar
Notes(3)...........................      285.9
Senior Subordinated Euro
Notes(3)(4)........................       89.1
--------
Total Sources..............   $1,147.0
========
USES:
Purchase of IDP......................   $  775.0
Refinance Existing Flowserve
Debt(2)..............................      315.4
Transaction Fees and Expenses........       56.6
--------
Total Uses.................   $1,147.0
========

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

(1) Includes two facilities, Term Loan A and Term Loan B, which we collectively
refer to as the Term Loan Facilities. The Term Loan A facility of $275.0
million will mature in six years and the Term Loan B facility of $475.0
million will mature in eight years.

(2) Includes debt incurred in connection with the Invatec acquisition, which
closed on January 13, 2000.

(3) Reflects issuance of the senior subordinated dollar notes of $290.0 million
and senior subordinated euro notes of E100.0 million at 98.586% of face
value.

(4) Assuming a conversion rate of euro into U.S. dollars of E0.9033 to $1.00,
which was the rate in effect on August 3, 2000.

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THE EXCHANGE OFFER

GENERAL

In connection with the exchange offer, Flowserve and the guarantors of the
outstanding dollar notes entered into a registration rights agreement with
Credit Suisse First Boston Corporation, Bank of America Securities LLC, ABN AMRO
Incorporated, Banc One Capital Markets, Inc. (the "Dollar Notes Initial
Purchasers") relating to the outstanding dollar notes and Flowserve Finance and
the guarantors of the outstanding euro notes entered into a registration rights
agreement with Credit Suisse First Boston (Europe) Limited, Bank of America
International Limited, ABN AMRO Bank N.V. and First Chicago Limited (the "Euro
Notes Initial Purchasers," and together with the Dollar Notes Initial
Purchasers, the "Initial Purchasers") relating to the outstanding euro notes
(the "Registration Rights Agreements"). Under the Registration Rights
Agreements, Flowserve and Flowserve Finance agreed to file within 90 days of the
date of the original issuance of the outstanding notes a registration statement
(the "Exchange Offer Registration Statement") of which this prospectus is a part
with respect to a registered offer to exchange the outstanding notes for the
notes with terms identical in all material respects to the outstanding notes
(the "Exchange Offer"). We further agreed to use our reasonable best efforts to
(i) cause the Exchange Offer Registration Statement to become effective and
commence the Exchange Offer on or prior to the 150th day after the Issue Date,
(ii) keep the Exchange Offer open for 30 days (or longer if required by
applicable law) (the last day of such period, the "Expiration Date") and (iii)
exchange the notes to be issued in the Exchange Offer for all outstanding notes
validly tendered and not withdrawn pursuant to the Exchange Offer on or prior to
the fifth day following the Expiration Date.

Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, we will accept all outstanding
notes validly tendered prior to 12:00 p.m., New York City time (5:00 p.m. London
time) on             , 2000 (the "Expiration Date"). Flowserve will issue $1,000
principal amount of exchange notes in exchange for each $1,000 principal amount
of outstanding dollar notes accepted in the exchange offer. Flowserve Finance
will issue E1,000 principal amount of exchange notes in exchange for each E1,000
principal amount of outstanding euro notes accepted in the Exchange Offer.
Holders may tender some or all of their outstanding dollar notes and outstanding
euro notes pursuant to the Exchange Offer in denominations of $1,000 and E1,000,
respectively and integral multiples thereof.

Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "SEC") to third parties, we believe that the notes
issued pursuant to the Exchange Offer in exchange for outstanding notes may be
offered for resale, resold and otherwise transferred by any holder thereof under
U.S. federal securities laws (other than (i) a broker-dealer who purchased such
outstanding notes directly from us to resell pursuant to Rule 144A or any other
available exemption under the Securities Act of 1933, as amended (the
"Securities Act") or (ii) a person that is an "affiliate" of ours within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that the holder is acquiring the notes issued in the Exchange Offer in
its ordinary course of business and is not participating and does not intend to
participate, and has no arrangements or understanding with any person to
participate, in the distribution of the notes issued in the Exchange Offer.
Holders of outstanding notes wishing to accept the exchange offer must represent
to us that such conditions have been met.

Each broker-dealer that receives notes in exchange for outstanding notes
held for its own account, as a result of market-making or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, such broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. The prospectus, as it may be amended or supplemented from time to time, may
be used by such broker-dealer in connection with resales of notes received in
exchange for outstanding notes. We have agreed that, for a period of 180 days
after the Expiration Date, we will make this prospectus and any amendment or
supplement to this prospectus available to any such broker-dealer for use in
connection with any such resale. See "Plan of Distribution."

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As of the date of this prospectus, $290 million aggregate principal amount
of the outstanding dollar notes and E100 million aggregate principal amount of
the outstanding euro notes are outstanding. In connection with the issuance of
the outstanding notes, we arranged for the outstanding notes initially purchased
by Qualified Institutional Buyers and certain eligible persons in "offshore
transactions" (within the meaning of Regulation S under the Securities Act)
pursuant to Regulation S under the Securities Act of 1933 to be issued and
transferable in book-entry form through the facilities of, with respect to the
dollar notes, the Depositary Trust Company ("DTC") and, with respect to the euro
notes, Euroclear or Clearstream, Luxembourg, acting as depositary for the
outstanding euro notes. The dollar notes and the euro notes to be issued in the
Exchange Offer will also be issuable and transferable in book-entry form through
DTC or Euroclear or Clearstream, Luxembourg, as the case may be, respectively.

This prospectus, together with the accompanying letter of transmittal, is
being sent to all registered holders as of           , 2000 (the "Record Date").

We will be deemed to have accepted validly tendered outstanding notes when,
as and if we have given oral or written notice thereof to the Exchange Agent.
See "-- Exchange Agent." The Exchange Agent will act as agent for the tendering
holders of outstanding notes for the purpose of receiving notes to be issued in
the Exchange Offer from us and delivering such notes to such holders.

If any tendered outstanding notes are not accepted for exchange because of
an invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted outstanding notes will be returned, without
expenses, to the tendering holder thereof as promptly as practicable after the
Expiration Date.

Holders of outstanding notes who tender in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes pursuant to the Exchange Offer. We will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "-- Fees and Expenses."

EXPIRATION DATE; EXTENSIONS; AMENDMENTS

The term "Expiration Date" shall mean           , 2000 unless we, in our
sole discretion, extend the Exchange Offer, in which case the term "Expiration
Date" shall mean the latest date to which the Exchange Offer is extended.

In order to extend the Expiration Date, we will notify the Exchange Agent
of any extension by oral or written notice and will mail to the record holders
of outstanding notes an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Such announcement may state that we are extending the Exchange Offer for a
specified period of time.

We reserve the right (i) to delay acceptance of any outstanding notes, to
extend the Exchange Offer or to terminate the Exchange Offer and to refuse to
accept outstanding notes not previously accepted, if any of the conditions set
forth herein under "-- Termination" shall have occurred and shall not have been
waived by us (if permitted to be waived by us), by giving oral or written notice
of such delay, extension or termination to the Exchange Agent, and (ii) to amend
the terms of the Exchange Offer in any manner deemed by us to be advantageous to
the holders of the outstanding notes. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof. If the Exchange Offer is amended in a manner that we
determine to constitute a material change, we will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the
outstanding notes of such amendment.

Without limiting the manner by which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, we will have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than making a timely
release to a financial news service.

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INTEREST ON THE NOTES TO BE ISSUED IN THE EXCHANGE OFFER

The notes to be issued in the Exchange Offer will bear interest from August
8, 2000, payable semiannually in arrears on February 15 and August 15 of each
year, commencing on February 15, 2001, at the rate of 12 1/4% per annum, in the
case of both the dollar notes and the euro notes. Holders of outstanding notes
whose outstanding notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the outstanding notes
accrued from August 8, 2000 until the date of the issuance of the notes to be
issued in the Exchange Offer. Consequently, holders who exchange their
outstanding notes for notes to be issued in the Exchange Offer will receive the
same interest payment on February 15, 2001 (the first interest payment date with
respect to the outstanding notes and the notes to be issued in the Exchange
Offer) that they would have received had they not accepted the Exchange Offer.

PROCEDURES FOR TENDERING

Procedures for Tendering Outstanding Dollar Notes

To tender outstanding dollar notes in the Exchange Offer, a holder must:

- complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal; have the signature on the letter of transmittal
guaranteed if the letter of transmittal so requires; and mail or
otherwise deliver the letter of transmittal or facsimile to the Exchange
Agent prior to 5:00 p.m., New York City time on the Expiration Date; or

- comply with DTC's Automated Tender Offer Program procedures described
below.

In addition, either:

- the Exchange Agent must receive any corresponding certificate or
certificates representing outstanding dollar notes along with the letter
of transmittal; or

- the Exchange Agent must receive, before expiration of the Exchange Offer,
a timely confirmation of book-entry transfer of outstanding dollar notes
into the Exchange Agent's account at DTC according to DTC's Automated
Tender Offer Program described below and a properly transmitted agent's
message described below; or

- the holder must comply with the guaranteed delivery procedures described
below.

To be tendered effectively, the Exchange Agent must receive any physical
delivery of the letter of transmittal and other required documents at the
address set forth below under "-- Exchange Agent" before expiration of the
Exchange Offer. Delivery of documents to DTC in accordance with its procedures
does not constitute delivery to the Exchange Agent.

Any financial institution that is a participant in DTC's system may use
DTC's Automated Tender Offer Program to tender. Participants in the program may,
instead of physically completing and signing the letter of transmittal and
delivering it to the Exchange Agent, transmit their acceptance of the Exchange
Offer electronically. They may do so by causing DTC to transfer the outstanding
dollar notes to the Exchange Agent in accordance with its procedures for
transfer. DTC will then send an agent's message to the Exchange Agent. The term
"agent's message" means a message transmitted by DTC, received by the Exchange
Agent and forming part of the book-entry confirmation which states that:

- DTC has received an express acknowledgment from the participant that is
tendering outstanding dollar notes; and

- the participant has received and agrees to be bound by the terms of the
letter of transmittal or, in the case of an agent's message relating to
guaranteed delivery, that the participant has received and agrees to be
bound by the applicable notice of guaranteed delivery.

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44

Procedures for Tendering Outstanding Euro Notes

To tender outstanding euro notes in the Exchange Offer, a holder must
effect such tender pursuant to the standard operating procedures of Euroclear or
Clearstream, Luxembourg, as the case may be, for book-entry transfers, prior to
5:00 p.m., London time, on the Expiration Date.

Any financial institution that is a participant in the Euroclear or
Clearstream, Luxembourg system, as the case may be, may make book-entry delivery
of the outstanding euro notes to Euroclear or Clearstream, Luxembourg in
accordance with Euroclear's or Clearstream, Luxembourg's standard procedures for
such transfer. In lieu of delivering a letter of transmittal to the Exchange
Agent, a computer-generated message, in which the holder of the outstanding euro
notes acknowledges and agrees to be bound by the terms of the letter of
transmittal, must be transmitted and received or confirmed by Euroclear or
Clearstream, Luxembourg, as the case may be, prior to 5:00 p.m., London time, on
the Expiration Date.

The tender by a holder of outstanding euro notes will constitute an
agreement between such holder and us in accordance with the terms and subject to
the conditions set forth in this prospectus and in the letter of transmittal.

Procedures for Tendering applicable to all Outstanding Notes

Holders may also request that their respective brokers, dealers, commercial
banks, trust companies or nominees effect such tender for such holders.

The method of delivery of outstanding notes and all other required
documents to the Exchange Agent is at the election and risk of the holders.
Instead of delivery by mail, we recommend that holders use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. No letter of transmittal or outstanding notes should be sent to
us.

Only a holder of outstanding notes may tender such outstanding notes in the
Exchange Offer. The term "holder" with respect to the Exchange Offer means any
person in whose name outstanding notes are registered on our books or the books
of any other person who has obtained a properly completed bond power from the
registered holder, or any person whose outstanding notes are held of record by
DTC, Euroclear or Clearstream, Luxembourg, who desires to deliver such
outstanding notes by book-entry transfer at DTC, Euroclear or Clearstream,
Luxembourg, as the case may be.

Any beneficial holder whose outstanding notes are registered in the name of
his broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on his behalf. If such beneficial holder wishes
to tender on his own behalf, such beneficial holder must, prior to completing
and executing the letter of transmittal and delivering his outstanding notes,
either make appropriate arrangements to register ownership of the outstanding
notes in such holder's name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take considerable time.

Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" (an "Eligible Institution")
within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), unless the outstanding notes tendered pursuant
thereto are tendered (i) by a registered holder who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the letter of transmittal or (ii) for the account of an Eligible Institution.

If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes listed therein, such outstanding
notes must be endorsed or accompanied by appropriate bond powers which authorize
such person to tender the outstanding notes on behalf of the registered holder,
in either case signed as the name of the registered holder or holders appears on
the outstanding notes.

If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or

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45

representative capacity, such persons should so indicate when signing and,
unless waived by us, evidence satisfactory to us of their authority to so act
must be submitted with the letter of transmittal.

All the questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered outstanding notes will be
determined by us in our sole discretion, which determinations will be final and
binding. We reserve the absolute right to reject any and all outstanding notes
not validly tendered or any outstanding notes our acceptance of which would, in
the opinion of our counsel, be unlawful. We also reserve the absolute right to
waive any irregularities or conditions of tender as to particular outstanding
notes. Our interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the letter of transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of outstanding notes must be cured within such time as
we will determine. Neither we, the Exchange Agent nor any other person shall be
under any duty to give notification of defects or irregularities with respect to
tenders of outstanding notes nor shall any of them incur any liability for
failure to give such notification. Tenders of outstanding notes will not be
deemed to have been made until such irregularities have been cured or waived.
Any outstanding notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned without cost by the Exchange Agent to the tendering
holder of such Outstanding Notes unless otherwise provided in the letter of
transmittal, as soon as practicable following the Expiration Date.

In addition, we reserve the right in our sole discretion to (a) purchase or
make offers for any outstanding notes that remain outstanding subsequent to the
Expiration Date, or, as set forth under "Termination," to terminate the Exchange
Offer and (b) to the extent permitted by applicable law, purchase outstanding
notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers may differ from the terms of the Exchange
Offer.

By tendering, each holder of outstanding notes will represent to us that,
among other things, the notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such notes,
whether or not such person is the holder, that neither the holder nor any other
person has an arrangement or understanding with any person to participate in the
distribution of such notes and that neither the holder nor any such other person
is an "affiliate" of ours within the meaning of Rule 405 under the Securities
Act.

GUARANTEED DELIVERY PROCEDURES FOR OUTSTANDING DOLLAR NOTES

Holders who wish to tender their outstanding dollar notes and (i) whose
outstanding dollar notes are not immediately available, or (ii) who cannot
deliver their outstanding dollar notes, the letter of transmittal, or any other
required documents to the Exchange Agent prior to the Expiration Date, or if
such holder cannot complete the procedure for book-entry transfer on a timely
basis, may effect a tender if:

(a) the tender is made through an Eligible Institution or pursuant to
DTC's, Euroclear's or Clearstream, Luxembourg's standard operating
procedures;

(b) prior to the Expiration Date (i) the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed "notice of
guaranteed delivery" in the form accompanying this prospectus (by facsimile
transmission, mail or hand delivery) setting forth the name and address of
the holder of the outstanding dollar notes, the certificate number or
numbers of such outstanding dollar notes and the principal amount of
outstanding dollar notes tendered, stating that the tender is being made
thereby, and guaranteeing that, within five business days after the
Expiration Date, the letter of transmittal (or facsimile thereof), together
with the certificate(s) representing the outstanding dollar notes to be
tendered in proper form for transfer and any other documents required by
the letter of transmittal, will be deposited by the Eligible Institution
with the Exchange Agent, or (ii) in lieu of "notice of guaranteed delivery"
DTC, Euroclear or Clearstream, Luxembourg receives an electronic
transmission which contains the character by which the participant
acknowledges its receipt of and agrees to be bound by the guaranteed
delivery procedures set forth herein; and

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46

(c) such properly completed and executed letter of transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered outstanding dollar notes in proper form for transfer (or to DTC,
Euroclear or Clearstream, Luxembourg, as the case may be, of outstanding
dollar notes delivered electronically) and all other documents required by
the letter of transmittal are received by the Exchange Agent within five
business days after the Expiration Date.

WITHDRAWAL OF TENDERS

Except as otherwise provided herein, tenders of outstanding notes may be
withdrawn at any time prior to 12:00 p.m., New York City time (5:00 p.m., London
time) on the Expiration Date unless previously accepted for exchange.

For a withdrawal to be effective:

- the exchange agent must receive a written notice, which may be by
telegram, telex, facsimile transmission or letter, of withdrawal at the
address set forth below under "-- Exchange Agent";

- for DTC participants, (with respect to the dollar notes only) holders
must comply with the appropriate procedures of DTC's Automated Tender
Offer Program system and the exchange agent must receive an electronic
notice of withdrawal from DTC and any notice of withdrawal must specify
the name and number of the account at DTC to be credited with the
withdrawn outstanding notes and otherwise comply with the procedures of
the facility; or

- with respect to the euro notes, a notice of withdrawal must be
transmitted to Euroclear and Clearstream, Luxembourg, as the case may be,
in accordance with the standard operating procedures of Euroclear or
Clearstream, Luxembourg, as the case may be, prior to 12:00 p.m., New
York City time (5:00 p.m., London time), on the business day prior to the
Expiration Date and prior to acceptance for exchange thereof by Flowserve
Finance.

Any written or facsimile notice of withdrawal for outstanding notes must
(i) specify the name of the person having deposited the outstanding notes to be
withdrawn (the "Depositor"), (ii) identify the outstanding notes to be withdrawn
(including the certificate number or numbers and principal amount of such
outstanding notes), (iii) be signed by the Depositor in the same manner as the
original signature on the Letter of Transmittal by which such outstanding notes
were tendered (including any required signature guarantees) or be accompanied by
documents of transfers sufficient to permit the Trustee with respect to the
outstanding notes to register the transfer of such outstanding notes into the
name of the Depositor withdrawing the tender and (iv) specify the name in which
any such outstanding notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) for such withdrawal notices will be determined by us, and our
determination shall be final and binding on all parties. Any outstanding notes
so withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no exchange notes will be issued with respect thereto
unless the outstanding notes so withdrawn are validly tendered. Any outstanding
notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn outstanding notes may be tendered by following the
procedures described above under "-- Procedures for Tendering" at any time prior
to the Expiration Date.

TERMINATION

Notwithstanding any other term of the Exchange Offer, we will not be
required to accept for exchange, or exchange notes for, any outstanding notes
not therefore accepted for exchange, and may terminate or amend the Exchange
Offer as provided herein before the acceptance of such outstanding notes if: (i)
any action or proceeding is instituted or threatened in any court or by or
before any governmental agency with respect to the Exchange Offer, which, in our
reasonable judgment, might materially impair our ability to proceed with the
Exchange Offer or (ii) any law, statute, rule or regulation is proposed, adopted
or enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of

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the SEC or court of competent jurisdiction in a manner, which, in our reasonable
judgment, might materially impair our ability to proceed with the Exchange
Offer.

If we determine that we may terminate the Exchange Offer, as set forth
above, we may (i) refuse to accept any outstanding notes and return any
outstanding notes that have been tendered to the holders thereof, (ii) extend
the Exchange Offer and retain all outstanding notes tendered prior to the
Expiration Date, subject to the rights of such holders of tendered outstanding
notes to withdraw their tendered outstanding notes, or (iii) waive such
termination event with respect to the Exchange Offer and accept all properly
tendered outstanding notes that have not been withdrawn. If such waiver
constitutes a material change in the Exchange Offer, we will disclose such
change by means of a supplement to this prospectus that will be distributed to
each registered holder of outstanding notes, and we will extend the Exchange
Offer for a period of five to ten business days, depending upon the significance
of the waiver and the manner of disclosure to the registered holders of the
outstanding notes, if the Exchange Offer would otherwise expire during such
period.

EXCHANGE AGENT

The Bank of New York, has been appointed as Exchange Agent for the exchange
of the outstanding notes (the "Exchange Agent"). Questions and requests for
assistance relating to the exchange of the outstanding dollar notes should be
directed to the Exchange Agent in New York addressed as follows:

By Mail:                                The Bank of New York
Reorganization Section
101 Barclay Street, Floor 7 East
New York, New York 10286
By Hand Delivery:                       The Bank of New York
101 Barclay Street
Corporate Trust Services Window
Ground level
New York, New York 10286
Facsimile Transmission:                 (212) 815-6339
Confirm by Telephone:                   (212) 815-6331

Questions and requests for assistance relating to the exchange of the
outstanding euro notes should be directed to the Exchange Agent in London
addressed as follows:

By Mail or Hand Delivery:               The Bank of New York
Lower Ground Floor
30 Cannon Street
London
EC4m 6XH
Facsimile Transmission:                 011 44 207 964-6369 or
011 44 207 964-7294
Confirm by Telephone:                   011 44 207 964-7284 or
011 44 207 964-7235

Banque Internationale a Luxembourg has been appointed as Luxembourg Paying
Agent for the exchange of the outstanding euro notes.

FEES AND EXPENSES

We will bear the expenses of soliciting tenders pursuant to the Exchange
Offer. The principal solicitation for tenders pursuant to the Exchange Offer is
being made by mail. Additional solicitations may

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be made by officers and regular employees of Flowserve and its affiliates in
person, by telegraph or telephone.

We will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. We, however, will pay the Exchange
Agent reasonable and customary fees for its services and will reimburse the
Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. We may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this prospectus, letters of transmittal and related documents to the
beneficial owners of the outstanding notes and in handling or forwarding tenders
for exchange.

We will pay the expenses to be incurred in connection with the Exchange
Offer, including fees and expenses of the Exchange Agent and Trustees and
accounting and legal fees.

We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes pursuant to the Exchange Offer. If, however, certificates
representing exchange notes or outstanding notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the outstanding notes tendered, or if tendered outstanding notes are
registered in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of outstanding notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the letter of
transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.

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CAPITALIZATION

The following table sets forth our consolidated capitalization as of June
30, 2000 (i) on an actual basis and (ii) on a pro forma basis as adjusted to
give effect to the Transactions as if they had occurred on such date. The
information set forth in the table below should be read in conjunction with the
consolidated financial statements and the notes thereto of Flowserve and IDP and
the Unaudited Pro Forma Consolidated Financial Statements included elsewhere in
this prospectus. Except as set forth in this prospectus, there has been no
material change in our capitalization on a consolidated basis since June 30,
2000.

PRO FORMA
ACTUAL    AS ADJUSTED
-------   ------------
(DOLLARS IN MILLIONS)

Cash and cash equivalents...................................  $ 14.5      $   16.1
======      ========
Current portion of long-term debt...........................      --           6.0
Long-term debt:
Other long-term debt......................................    52.4            --
Existing credit facilities.............................   263.0            --
New senior credit facilities:
Revolving credit facility(1).........................      --            --
Term loan facilities.................................      --         744.0
Dollar notes offered hereby(2).........................      --         285.9
Euro notes offered hereby(2)(3)........................      --          89.1
------      --------
Total current and long-term debt..................  $315.4      $1,125.0
------      --------
Shareholders' equity:
Serial preferred stock, $1.00 par value:
No shares issued.......................................      --            --
Common shares, $1.25 par value:
Shares authorized -- 120,000;
Shares issued and outstanding -- 41,484................    51.9          51.9
Capital in excess of par value............................    67.7          67.7
Retained earnings.........................................   368.8         366.6
Treasury stock............................................   (93.2)        (93.2)
Accumulated other comprehensive income....................   (78.7)        (78.6)
------      --------
Total shareholders' equity........................   316.5         314.4
------      --------
Total capitalization..............................  $631.9      $1,439.4
======      ========

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

(1) Borrowings of up to $300.0 million will be available under the revolving
credit facility for six years. We had approximately $30.0 million in undrawn
letters of credit issued under the revolving credit facility at the closing
of the IDP acquisition. As a result, under our revolving credit facility
immediately after the closing of the IDP acquisition we had unused borrowing
capacity, net of issued letters of credit, of approximately $270.0 million.

(2) Reflects issuance of the senior subordinated dollar notes of $290.0 million
and senior subordinated euro notes of E100.0 million at 98.586% of face
value.

(3) Assuming a conversion rate of euro into U.S. dollars of E0.9033 to $1.00,
which was the rate in effect on August 3, 2000.

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma consolidated financial statements (the
"Unaudited Pro Forma Financial Statements") are based on the historical
consolidated financial statements of Flowserve, Invatec and IDP included
elsewhere in this prospectus, adjusted to give effect to the transactions
described herein.

The Unaudited Pro Forma Consolidated Statements of Operations for the year
ended December 31, 1999 and six months ended June 30, 1999 and June 30, 2000,
respectively, give effect to the Transactions and the acquisition of Invatec as
if they had occurred on January 1, 1999. The Unaudited Pro Forma Consolidated
Balance Sheet gives effect to the Transactions as if they had occurred as of
June 30, 2000.

The Transactions and the acquisition of Invatec and the related adjustments
are described in the accompanying notes. The pro forma adjustments are based
upon available information and certain assumptions that we believe are
reasonable. In our opinion, all adjustments that are necessary to present fairly
the pro forma data have been made. The Unaudited Pro Forma Consolidated
Financial Statements do not purport to represent what our results of operations
or financial condition would actually have been had the Transactions in fact
occurred on such dates or to project our results of operations or financial
condition for any future period or date. The Unaudited Pro Forma Consolidated
Financial Statements should be read in conjunction with the historical
consolidated financial statements of Flowserve, Invatec and IDP included
elsewhere in this prospectus and Management's Discussion and Analysis of
Financial Condition and Results of Operations.

The unaudited pro forma consolidated financial statements do not include
the impact of any post-closing regulatory divestitures required under our
consent decree with the U.S. Department of Justice in connection with the IDP
acquisition. See "Business -- Regulatory Divestitures." These divestitures would
affect less than three percent of the combined 1999 revenues of Flowserve and
IDP. In the opinion of management, the impact of these divestiture actions will
not be material to our overall pro forma financial position or results of
operations.

The unaudited pro forma information with respect to the Invatec acquisition
and the IDP acquisition is based on the historical financial statements of
Flowserve, Invatec and IDP. The Invatec acquisition and the IDP acquisition have
been accounted for under the purchase method of accounting. The total purchase
price for the Invatec acquisition and the IDP acquisition has been allocated to
the tangible and identifiable intangible assets and liabilities of the acquired
businesses based upon our preliminary estimates of their fair value with the
remainder allocated to goodwill. The purchase price allocations for the Invatec
acquisition and the IDP acquisition are subject to refinement when additional
information concerning asset and liability valuations is obtained.

The historical consolidated financial statements of Flowserve, Invatec and
IDP were prepared in accordance with accounting principles generally accepted in
the United States.

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999

PRO                         IDP
HISTORICAL            INVATEC         FORMA      HISTORICAL    ACQUISITION/
---------------------    ACQUISITION     FLOWSERVE/   ----------     FINANCING       PRO FORMA
FLOWSERVE    INVATEC    ADJUSTMENTS(1)    INVATEC        IDP       ADJUSTMENTS(1)   CONSOLIDATED
----------   --------   --------------   ----------   ----------   --------------   ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Net sales....................  $1,061,272   $160,991      $     --     $1,222,263     $838,390      $      --       $2,060,653
Cost of sales................     697,928    115,956            --        813,884      610,745         (1,400)(f)    1,433,842
6,112(g)
4,884(k)
(383)(p)
----------   --------      --------     ----------     --------      ---------       ----------
Gross profit.................     363,344     45,035            --        408,379      227,645         (9,213)         626,811
Selling and administrative
expense..................     275,884     40,368        (1,554)(a)    314,642      162,047           (600)(f)      480,472
(56)(b)                                 (3,600)(h)
(4,200)(i)
9,134(j)
3,049(k)
Research, engineering and
development expense......      25,645         --            --         25,645        2,984             --           28,629
Merger transaction and
restructuring
expense(2)...............      15,860         --            --         15,860          200             --           16,060
Merger integration
expense(3)...............      14,207         --            --         14,207           --             --           14,207
----------   --------      --------     ----------     --------      ---------       ----------
Operating income.............      31,748      4,667         1,610         38,025       62,414        (12,996)          87,443
Interest (income)
expense..................      15,504     12,724        (6,928)(c)     21,300        1,362        105,993(l)       128,655
Loss on assets held for
sale.....................          --      3,810            --          3,810           --             --            3,810
Impairment of goodwill.....          --     39,073       (39,073)(d)         --           --             --               --
Other income, net..........      (2,001)      (174)           --         (2,175)      (7,446)            --           (9,621)
----------   --------      --------     ----------     --------      ---------       ----------
Earnings (loss) before income
taxes......................      18,245    (50,766)       47,611         15,090       68,498       (118,989)         (35,401)
Provision (benefit) for
income taxes.............       6,068      6,372        (7,234)(e)      5,206       18,965        (36,915)(m)      (12,744)
----------   --------      --------     ----------     --------      ---------       ----------
Net income (loss)..........  $   12,177   $(57,138)     $ 54,845     $    9,884     $ 49,533      $ (82,074)      $  (22,657)
==========   ========      ========     ==========     ========      =========       ==========
PER COMMON SHARE:
Net loss per share (basic and diluted)..........................................................................    $     (.60)
==========
Average shares outstanding......................................................................................        37,856
OTHER FINANCIAL DATA:
Depreciation and
amortization...............  $   39,599   $  4,851      $    (56)     $  44,394     $ 18,251      $  23,179       $   85,824
Cash interest expense(n)........................................................................................       122,215
Ratio of earnings to fixed charges(o)...........................................................................            --

The accompanying notes are an integral part of the unaudited pro forma
consolidated financial statements.

44

52

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999

IDP
HISTORICAL          INVATEC      PRO FORMA     HISTORICAL    ACQUISITION/
-------------------   ACQUISITION    FLOWSERVE/    ----------     FINANCING       PRO FORMA
FLOWSERVE   INVATEC   ADJUSTMENTS    INVATEC(1)       IDP       ADJUSTMENTS(1)   CONSOLIDATED
---------   -------   -----------   ------------   ----------   --------------   ------------
(DOLLARS IN THOUSANDS)

Net sales.......................  $544,583    $87,103                   $631,686      $399,490       $     --       $1,031,176
Cost of sales...................   353,903     60,902                    414,805       295,575           (700)(f)      715,345
3,056(g)
2,442(k)
167(p)
--------    -------     -------       --------      --------       --------       ----------
Gross profit....................   190,680     26,201          --        216,881       103,915         (4,965)         315,831
Selling and administrative
expense.....................   133,314     22,062     $   (28)(b)    155,348        79,847           (300)(f)      237,303
(1,800)(h)
(1,884)(i)
4,567(j)
1,525(k)
Research, engineering and
development expense.........    13,199         --          --         13,199         1,470             --           14,669
Merger integration
expense(3)..................     7,838         --          --          7,838            --             --            7,838
--------    -------     -------       --------      --------       --------       ----------
Operating income................    36,329      4,139          28         40,496        22,598         (7,073)          56,021
Interest (income) expense.....     7,203      6,197      (3,464)(c)      9,936           765         53,627(l)        64,328
Loss on assets held for
sale........................                3,810                      3,810                                         3,810
Other (income) expense, net...       525        (60)                       465        (3,167)            --           (2,702)
--------    -------     -------       --------      --------       --------       ----------
Earnings (loss) before income
taxes.........................    28,601     (5,808)      3,492         26,285        25,000        (60,700)          (9,415)
Provision (benefit) for income
taxes.......................     9,724       (547)       (109)(e)      9,068        10,005        (22,462)(m)       (3,389)
--------    -------     -------       --------      --------       --------       ----------
Net income (loss).............  $ 18,877    $(5,261)    $ 3,601       $ 17,217      $ 14,995       $(38,238)      $   (6,026)
========    =======     =======       ========      ========       ========       ==========
PER COMMON SHARE:
Net loss per share (basic and diluted)..........................................................................    $     (.16)
==========
Average Shares Outstanding......................................................................................        37,771

OTHER FINANCIAL DATA:
Depreciation and amortization...................................................................................    $   45,134
Cash interest expense(n)........................................................................................        61,108

The accompanying notes are an integral part of the unaudited pro forma
consolidated financial statements.

45

53

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000

HISTORICAL                                IDP
-----------------------   FLOWSERVE/   ACQUISITION/FINANCING     PRO FORMA
FLOWSERVE(A)     IDP         IDP          ADJUSTMENTS(1)        CONSOLIDATED
------------   --------   ----------   ---------------------    ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Net sales...................    $584,462     $363,409    $947,871          $     --             $947,871
Cost of sales...............     382,070      279,792     661,862              (700)(f)          662,378
1,573(g)
193(k)
(550)(p)
--------     --------    --------          --------             --------
Gross profit................     202,392       83,617     286,009              (516)             285,493
Selling and administrative
expense................     142,220       76,362     218,582              (300)(f)          218,789
(1,800)(h)
(1,944)(i)
2,899(j)
1,352(k)
Research, engineering and
development expense....      12,353        1,310      13,663                --               13,663
--------     --------    --------          --------             --------
Operating income............      47,819        5,945      53,764              (723)              53,041
Interest expense..........      13,576          530      14,106            50,222(l)            64,328
Other (income) expense,
net....................      (3,161)        (712)     (3,873)               --               (3,873)
--------     --------    --------          --------             --------
Earnings (loss) before
income
taxes..................      37,404        6,127      43,531           (50,945)              (7,414)
Provision (benefit) for
income taxes...........      12,905        8,591      21,496           (24,165)(m)           (2,669)
--------     --------    --------          --------             --------
Net income (loss).........    $ 24,499     $ (2,464)   $ 22,035          $(26,780)            $ (4,745)
========     ========    ========          ========             ========
PER COMMON SHARE:
Net loss per share (basic and diluted)....................................................      $  (0.13)
========
Average shares outstanding................................................................        37,810

OTHER FINANCIAL DATA:
Depreciation and amortization.............................................................      $ 41,302
Cash interest expense(n)..................................................................        61,108
Ratio of earnings to fixed charges(o).....................................................            --

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

(A) Includes the results of Invatec from January 13, 2000.

The accompanying notes are an integral part of the unaudited pro forma
consolidated financial statements.

46

54

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT
OF OPERATIONS

NOTE 1: PRO FORMA ADJUSTMENTS

The following pro forma adjustments have been applied to the accompanying
historical consolidated statements of operations of Flowserve, Invatec and IDP
to give effect to the Invatec acquisition and the IDP acquisition (see note 1 to
the unaudited pro forma consolidated balance sheet) and the financing
transactions as if they had all occurred on January 1, 1999.

(a)  Represents reduction in Invatec selling and administrative
costs for non-recurring items associated with
pre-acquisition bank fees and other credit facility related
expenses.
(b)  Represents incremental decrease in annual goodwill
amortization based on decrease of $4.3 million of estimated
goodwill originating from the Invatec acquisition and
reduction of amortization period from 40 to 20 years.
(c)  Represents the net reduction in consolidated interest
expense related to Invatec debt financing.
(d)  Represents reversal of Invatec goodwill impairment charge.
(e)  Represents income tax adjustments required to arrive at the
expected pro forma effective tax rate of 34.5% after
Flowserve's acquisition of Invatec.
(f)  Represents actuarially determined adjustment to retiree
pension and post-retirement benefits expense for hourly and
salaried personnel of IDP that, pursuant to the IDP purchase
agreement, were retained by Ingersoll-Rand, IDP's
predecessor parent, net of the pension benefits provided to
IDP employees under the Flowserve plans.
(g)  Represents incremental increase in depreciation expense in
cost of sales based on estimated fair market value of
property, plant and equipment over estimated useful lives of
3 to 40 years.
This adjustment is based on a preliminary allocation of the
purchase price for the IDP acquisition. The final allocation
of the purchase price is contingent upon valuations that
have not been completed. See note 1 to the unaudited pro
forma consolidated balance sheet for further discussion on
the purchase price allocation related to the IDP
acquisition.
(h)  Represents the elimination of corporate overhead expenses
allocated by Ingersoll-Rand to IDP. Pursuant to the IDP
purchase agreement, this allocation was eliminated upon
closing of the IDP acquisition on August 8, 2000. Flowserve
will assume and provide services with no significant
incremental cost above what it cost Flowserve to provide
such services prior to the acquisition for tax services,
information technology support, pensions and benefits
administration and other overhead costs.
(i)  Represents the elimination of expense recorded by IDP
related to a phantom stock incentive plan that was
eliminated upon consummation of the Acquisition. IDP
personnel losing these previous incentives may be eligible
to participate in Flowserve's established stock option
incentive scheme, which generally does not result in any
compensation charge.
(j)  Represents incremental increase in annual goodwill
amortization based on $225.7 million of estimated goodwill
over an estimated useful life of 40 years related to the IDP
acquisition.
(k)  Represents incremental increase in amortization expense
based on estimated fair value of other intangible assets
acquired over their estimated useful lives of approximately
17 years.

47

55
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT
OF OPERATIONS -- (CONTINUED)

SIX MONTHS      SIX MONTHS
FOR YEAR ENDED         ENDED           ENDED
DECEMBER 31, 1999   JUNE 30, 1999   JUNE 30, 2000
-----------------   -------------   -------------
(DOLLARS IN MILLIONS)

(l)  Represents the following:
Interest on Term Loan A ($275.0 @ 9.4%).....................      $ 25.9             $12.9           $12.9
Interest on Term Loan B ($475.0 @ 10.1%)....................        48.0              24.0            24.0
Interest expense associated with notes offered hereby
($380.3 @ 12.25%)...........................................        46.5              23.3            23.3
Letter of credit fee ($110.0 @ 1.64% weighted average,
including $30.0 under the Revolving Credit Facility)........         1.8               0.9             0.9
------             -----           -----
Cash interest expense.....................................       122.2              61.1            61.1
Non-cash increase in amortization associated with $46.5
million in deferred financing costs and $5.4 million
discount on the note offerings incurred in connection with
entering into the Senior Credit Facilities and issuance of
the notes offered hereby, amortized over terms ranging from
6 to 10 years. .............................................         6.5               3.2             3.2
------             -----           -----
Sub-total interest expense................................       128.7              64.3            64.3
Elimination of interest and associated fees on borrowings
repaid in connection with the financings....................       (22.7)            (10.7)          (14.1)
------             -----           -----
Net Adjustment............................................      $106.0             $53.6           $50.2
======             =====           =====

For each 0.125% change in the interest rates payable on the
outstanding balance under the Senior Credit Facilities and
the notes offered hereby, annual interest expense would
change by $1.4 million before the effect of income taxes.

(m)  Represents income tax adjustment required to arrive at the
expected pro forma effective tax rate of 36.0% and to
provide U.S. taxes on IDP partnership earnings.

(n)  Cash interest expense is total interest expense less amortization of
deferred financing costs and discount of notes offered hereby. For purposes
of determining the ratio of earnings to fixed charges, earnings

(o)  consist of income (loss) from continuing operations before income taxes,
plus fixed charges. Fixed charges consist of interest expense on all
indebtedness, amortization of deferred financing fees and the estimated
interest portion of rental expense estimated to be attributable to
interest. For the year ended December 31, 1999 and the six months ended
June 30, 2000, earnings were insufficient to cover fixed charges by $34.5
million and $7.9 million, respectively.

(p)  Represents estimated rental expense for the Phillipsburg plant for
Flowserve's planned usage prior to the shutdown of the facility, net of
direct costs related to the facility historically incurred by IDP which are
not incremental costs to Flowserve as the Phillipsburg plant was not
acquired under the terms of the Agreement.

NOTE 2: MERGER TRANSACTION AND RESTRUCTURING EXPENSE

Represents non-recurring merger transaction and restructuring expenses. In
1999, $15.9 million for Flowserve represents facility closure and personnel
reductions of 9% to reduce excess capacity and $0.2 million for IDP relates to
additional costs incurred in regards to a foundry closure initiated in 1996.

NOTE 3: MERGER INTEGRATION EXPENSES

Represents non-recurring expenses related to the merger of BW/IP and Durco
in order to achieve the planned merger synergies. These expenses were
principally for costs for consultants and costs related to integration team
members including salaries, benefits and training.

48

56

UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2000

ASSETS

HISTORICAL
--------------------     PRO FORMA          PRO FORMA
FLOWSERVE    IDP(1)    ADJUSTMENTS(2)      CONSOLIDATED
---------   --------   --------------      ------------
(DOLLARS IN THOUSANDS)

Current assets:
Cash and cash equivalents...................  $ 14,495    $ 23,566     $ (21,963)(a)      $   16,098
Accounts receivable, net....................   246,331     178,848            --             425,179
Inventories.................................   210,617     122,117            --             332,734
Prepaids and other current assets...........    37,094      26,746        22,598(b)           86,438
--------    --------     ---------          ----------
Total current assets................   508,537     351,277           635             860,449
Property, plant and equipment, net............   221,336     164,863        27,701(c)          413,900
Goodwill, net.................................   145,155     139,675       225,676(d)          510,506
Intangibles assets, net.......................     6,197      75,622        63,478(e)          145,297
Other assets..................................    80,851      17,162        44,301(f)          142,314
--------    --------     ---------          ----------
Total assets.............................  $962,076    $748,599     $ 361,791          $2,072,466
========    ========     =========          ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt and notes
payable..................................  $    575    $     --     $   5,956(g)       $    6,531
Accounts payable............................    76,802     187,420            --             264,222
Income taxes................................     8,904          --                             8,904
Accrued expenses and other liabilities......    96,957       3,458        54,646(h)          155,061
--------    --------     ---------          ----------
Total current liabilities...........   183,238     190,878        60,602             434,718
--------    --------     ---------          ----------
Noncurrent liabilities........................        --          90            --                  90
Post-retirement benefits and deferred items...   146,963      92,477       (35,088)(i)         204,352
Long-term debt due after one year.............   315,348          --       803,604(g)        1,118,952
Shareholders' equity:
Serial preferred stock
Common stock................................    51,856     414,558      (414,558)             51,856
Capital in excess of par value..............    67,697          --            --              67,697
Retained earnings...........................   368,754      89,982       (92,155)            366,581
Treasury stock, at cost.....................   (93,226)         --            --             (93,226)
Accumulated other comprehensive income......   (78,554)    (39,386)       39,386             (78,554)
--------    --------     ---------          ----------
Total shareholders' equity...............   316,527     465,154      (467,327)(j)         314,354
--------    --------     ---------          ----------
Total liabilities and shareholders'
equity............................  $962,076    $748,599     $ 361,791          $2,072,466
========    ========     =========          ==========

The accompanying notes are an integral part of the unaudited pro forma
consolidated financial statements.

49

57

NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET

The following pro forma adjustments have been applied to the accompanying
historical balance sheets of Flowserve and IDP to give effect to the IDP
acquisition and the financing transactions as if they had occurred on June 30,
2000.

NOTE 1. ACQUISITIONS

On August 8, 2000 Flowserve acquired IDP. The IDP acquisition will be
accounted for as a purchase, with the excess of the purchase price over the fair
value of net assets acquired allocated to goodwill.

A summary of the purchase price and related preliminary purchase price
allocation follows:

(DOLLARS IN THOUSANDS)
----------------------

Cash paid at closing........................................         $ 775,000
Cash paid for direct acquisition costs, including financial
advisory, accounting and legal costs......................            10,049
---------
Aggregate purchase price..................................           785,049
Book value of IDP net assets acquired.......................          (505,242)
---------
Excess of cost over net book value of assets acquired.......           279,807
Adjustments to record assets and liabilities at fair market
values(a)
Prepaid rent on Phillipsburg Plant........................            (1,839)
Property and equipment....................................           (27,701)
Elimination of Phantom Stock Incentive Plan...............            (3,018)
Intangible assets, including patents, trademarks and trade
names..................................................           (63,478)
Deferred income taxes related to IDP acquisition..........             5,000
Severance, facility closing expenses and other exit costs
to be incurred in connection with the Acquisition, net
of taxation(b).........................................            36,905
---------
Net adjustment to goodwill........................         $ 225,676
=========

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

(a)  Upon completion of appraisals of the fair values of the acquired assets and
liabilities, our allocation of the purchase price may differ from that
presented above, and we may identify other assets to which a portion of the
purchase price will be allocated. We believe that the depreciation and
amortization periods for such identifiable other assets will be
approximately 17 years.

(b)  Reflects exit costs to be incurred in connection with the Acquisition in
accordance with EITF 95-3, "Recognition of Liabilities in Connection with a
Purchase Business Combination."

50

58
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET -- (CONTINUED)

NOTE 2: PRO FORMA ADJUSTMENTS TO CONSOLIDATED BALANCE SHEET

The Unaudited Pro Forma Consolidated Balance Sheet reflects the IDP
acquisition and related financing transactions, as if they had occurred as of
June 30, 2000. The application of the proceeds from borrowings under the Senior
Credit Facilities and the issuance of the notes offered by this offering
occurred concurrently with the closing of this offering.

(DOLLARS IN THOUSANDS)
----------------------

(a)  Changes in cash and cash equivalents are:
Cash proceeds from initial borrowings under the Senior Credit
Facilities..................................................        $   750,000
Cash proceeds from issuance of the notes ($380.3 million)
offered hereby................................................            374,952
-----------
Proceeds from these borrowings................................          1,124,952
Payment to Ingersoll-Rand for purchase of IDP.................           (775,000)
Repayment of existing Flowserve debt..........................           (315,392)
Transaction fees and expenses.................................            (56,523)
-----------
Uses of cash.............................................         (1,146,915)
-----------
Total adjustment to cash...............................        $   (21,963)
===========
(b)  To record prepaid asset associated with free rental period
provided by Ingersoll-Rand in accordance with contractual
terms of the Agreement based on the planned usage of the
facility by Flowserve prior to shut-down......................        $     1,839
Deferred taxes resulting from restructuring costs associated
with IDP......................................................             20,759
-----------
Total adjustment to prepaids and other current
assets.................................................        $    22,598
===========
(c)  To record property and equipment acquired from IDP at
estimated fair value, excluding the Phillipsburg Plant which
was not acquired under the terms of the Agreement.............        $    27,701
(d)  To record goodwill resulting from the IDP acquisition.........        $   225,676
(e)  To reflect adjustments to record fair value of intangible
assets acquired from the IDP acquisition......................        $    63,478
(f)  To reflect adjustments to record the following:
To record deferred financing costs in connection with entering
into the Senior Credit Facilities and issuing the notes
offered hereby................................................        $    46,474
Write-off of deferred financing fees related to existing
Flowserve credit facility.....................................             (2,173)
-----------
Total adjustment to other assets.......................        $    44,301
===========

51

59
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET -- (CONTINUED)

NOTE 2: PRO FORMA ADJUSTMENTS TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)

(DOLLARS IN THOUSANDS)
----------------------

(g)  Reflects the issuance of the notes offered hereby and initial
borrowings under the Senior Credit Facilities, net of
repayment of existing indebtedness:
Issuance of the notes offered herein..........................        $   374,952
Initial borrowings under the Senior Credit Facilities.........            750,000
-----------
1,124,952
Less: repayment of Flowserve long-term debt...................           (315,348)
Less: reclassification of long-term to current for initial
principal payment due June 30, 2001...........................             (6,000)
-----------
Net adjustment to long-term debt..............................        $   803,604
===========
Adjustment to current portion of long-term debt:
Current portion of Term Loan A and Term Loan B due
June 30, 2001..........................................        $     6,000
Less: repayment of existing current portion of long-term
debt....................................................                (44)
-----------
Net adjustment to current portion of long-term debt...........        $     5,956
===========
(h)  To reflect adjustments to record integration related
restructuring costs associated with the Acquisition in
accordance with EITF 95-3 "Recognition of liabilities in
connection with a Purchase Business Combination"..............        $    57,664
Represents elimination of liability recorded by IDP related to
a phantom stock incentive plan that ceased at the date of the
IDP acquisition...............................................             (3,018)
-----------
Total adjustments.............................................        $    54,646
===========
(i)  Pension and post-retirement health care liabilities retained
by Ingersoll-Rand, IDP's predecessor parent...................        $   (40,088)
Deferred income taxes related to IDP acquisition..............              5,000
-----------
Net adjustment to Post-retirement benefits and deferred
items.........................................................        $   (35,088)
===========
(j)  Represents adjustments to reflect the following:
Elimination of IDP contributed capital........................        $   414,558
Elimination of IDP accumulated earnings.............   $89,982
Write-off of pre-existing deferred financing costs
related to existing Flowserve debt..................   2,173
-------
Sub-total, retained/accumulated earnings
adjustments.........................................                       92,155
Elimination of IDP accumulated other comprehensive
income........................................................            (39,386)
-----------
Total adjustments.............................................        $   467,327
===========

52

60

SELECTED HISTORICAL FINANCIAL DATA

FLOWSERVE CORPORATION

The following selected historical financial data of Flowserve as of and for
each of five fiscal years in the period ended December 31, 1999 have been
derived from Flowserve's audited consolidated financial statements and the notes
thereto. The following selected historical financial data as of and for the six
months ended June 30, 1999 and June 30, 2000 have been derived from Flowserve's
unaudited consolidated financial statements included elsewhere within this
prospectus. This selected historical financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Flowserve" and the consolidated financial
statements of Flowserve included elsewhere in this prospectus.

YEAR ENDED DECEMBER 31,                   SIX MONTHS      SIX MONTHS
----------------------------------------------------       ENDED           ENDED
1995       1996       1997       1998       1999     JUNE 30, 1999   JUNE 30, 2000
--------   --------   --------   --------   --------   -------------   -------------
(DOLLARS IN MILLIONS)

Net sales.................................  $  983.9   $1,097.6   $1,152.2   $1,083.1   $1,061.3      $544.6          $584.5
Cost of sales.............................     591.6      668.7      703.3      667.7      697.9       353.9           382.1
--------   --------   --------   --------   --------      ------          ------
Gross profit..............................     392.3      428.9      448.9      415.4      363.4       190.7           202.4
Selling and administrative expense......     264.4      283.4      285.9      265.6      275.9       133.3           142.2
Research, engineering and development
expense...............................      24.6       24.5       26.9       26.4       25.6        13.2            12.4
Merger transaction and restructuring
expense...............................       5.1        5.8       44.5         --       15.9
Merger integration expense..............        --         --        7.0       38.3       14.2         7.9              --
--------   --------   --------   --------   --------      ------          ------
Operating income..........................      98.2      115.2       84.6       85.1       31.8        36.3            47.8
Interest expense........................      12.3       12.1       13.3       13.2       15.5         7.2            13.6
Other (income) expense, net.............      (2.5)      (5.2)     (18.5)      (1.3)      (2.0)         .5            (3.2)
--------   --------   --------   --------   --------      ------          ------
Earnings before income taxes..............      88.4      108.3       89.8       73.2       18.3        28.6            37.4
Provision for income taxes..............      34.4       37.2       38.2       25.5        6.1         9.7            12.9
Cumulative effective of change in
accounting principle..................        --         --         --       (1.2)        --          --              --
--------   --------   --------   --------   --------      ------          ------
Net income................................  $   54.0   $   71.1   $   51.6   $   48.9   $   12.2      $ 18.9          $ 24.5
========   ========   ========   ========   ========      ======          ======
PER COMMON SHARE:
Net earnings (basic and diluted)........  $   1.30   $   1.72   $   1.26   $   1.23   $   0.32      $ 0.50          $ 0.65
Dividends...............................       .51        .57        .65        .56        .56        0.28              --
Book value(1)...........................      9.01       9.40       9.74       9.15       8.23        9.23            8.46
OTHER FINANCIAL DATA:
Depreciation and amortization...........      34.5       36.7       38.9       39.3       39.6        21.2            20.4
Capital expenditures, net...............      39.9       35.7       39.6       38.2       40.5        20.2            12.4
Ratio of earnings to fixed charges(2)...       6.3        7.3        5.9        5.2        1.8         3.6             3.1
BALANCE SHEET DATA (AS OF END OF PERIOD):
Working capital.........................  $  251.8   $  280.0   $  284.2   $  268.2   $  258.1      $267.6          $325.3
Total assets............................     801.1      829.8      880.0      870.2      838.2       845.0           962.1
Long-term debt..........................     125.9      144.0      128.9      186.3      198.0       192.9           315.3
Shareholders' equity....................     375.2      388.6      395.3      344.8      308.3       345.3           316.5

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

(1) Calculated as shareholders' equity as of the end of the period divided by
common shares issued, less amounts held in Treasury.

(2) For purposes of determining the ratio of earnings to fixed charges, earnings
from continuing operations before income taxes, plus fixed charges. Fixed
charges consist of interest expense on all indebtedness, amortization of
deferred financing fees and the estimated interest portion of rental expense
attributable to interest.

53

61

INGERSOLL-DRESSER PUMP COMPANY

The following selected historical financial data of IDP as of and for the
years ended December 31, 1996, 1997, 1998 and 1999 have been derived from its
audited consolidated financial statements and the notes thereto. The selected
historical financial data as of and for the year ended December 1995 is
unaudited. The following selected historical financial data as of and for the
six months ended June 30, 1999 and June 30, 2000 have been derived from IDP's
unaudited consolidated financial statements included elsewhere in this
prospectus. This selected historical financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Ingersoll-Dresser Pump Company" and the
consolidated financial statements of Ingersoll-Dresser Pump Company included
elsewhere in this prospectus.

SIX MONTHS   SIX MONTHS
YEAR ENDED DECEMBER 31,                 ENDED        ENDED
-----------------------------------------------    JUNE 30,     JUNE 30,
1995        1996     1997     1998     1999       1999         2000
-----------   ------   ------   ------   ------   ----------   ----------
(UNAUDITED)               (DOLLARS IN MILLIONS)

Net sales.............................................    $793.1      $856.3   $865.1   $907.2   $838.4     $399.5       $363.4
Cost of Sales.........................................     607.5       641.2    637.2    661.1    610.7      295.6        279.8
------      ------   ------   ------   ------     ------       ------
Gross profit..........................................     185.6       215.1    227.9    246.1    227.7      103.9         83.6
Selling and administrative expense..................     162.5       163.2    163.1    168.9    162.1       79.8         76.4
Research, engineering and development expense.......       1.6         2.8      3.6      3.8      3.0        1.5          1.3
Restructuring expense...............................        --         4.5     19.5      3.6      0.2         --           --
------      ------   ------   ------   ------     ------       ------
Operating income......................................      21.5        44.6     41.7     69.8     62.4       22.6          5.9
Interest expense....................................       1.7         1.5      1.3      1.6      1.4         .8          0.5
Other income, net...................................     (13.0)       (5.0)    (4.1)    (7.1)    (7.5)      (3.2)        (0.7)
------      ------   ------   ------   ------     ------       ------
Earnings before income taxes..........................      32.8        48.1     44.5     75.3     68.5       25.0          6.1
Provision for income taxes............................       6.8        11.8     13.2     16.6     19.0       10.0          8.6
------      ------   ------   ------   ------     ------       ------
Net income............................................    $ 26.0      $ 36.3   $ 31.3   $ 58.7   $ 49.5     $ 15.0       $ (2.5)
======      ======   ======   ======   ======     ======       ======
OTHER FINANCIAL DATA:
Depreciation and amortization.......................    $ 21.6      $ 20.5   $ 20.1   $ 19.0   $ 18.3     $  9.9       $ 14.9
Capital expenditures................................      17.3        17.0     16.3     20.3     18.2        5.9          4.8
BALANCE SHEET DATA (AS OF END OF PERIOD):
Working capital.....................................    $261.4      $329.6   $215.9   $197.5   $174.9      429.6       $160.4
Total assets........................................     630.2       690.0    725.9    800.6    796.4      748.9        748.6
Partners' equity....................................     362.8       401.0    416.4    479.1    492.5      474.4        465.2

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the consolidated financial statements of Flowserve and IDP appearing elsewhere
in this prospectus. For information regarding our pro forma financial condition,
see "Unaudited Pro Forma Consolidated Financial Statements" included in this
prospectus.

OVERVIEW

On February 9, 2000, Flowserve announced it had reached a definitive
agreement to acquire Ingersoll-Dresser Pump Company from Ingersoll-Rand for $775
million in cash. The acquisition closed August 8, 2000. The transaction was
financed with a combination of new bank facilities and senior subordinated
notes. In connection with the acquisition, all of Flowserve's existing
indebtedness was refinanced. Flowserve also announced suspension of dividend
payments.

We believe we are the largest manufacturer and aftermarket service provider
of comprehensive flow control systems in the world. Our customers include the
world's leading engineering and construction firms, OEMs, distributors and end
users, including Asea Brown Boveri, ARCO, BASF, Bayer, Bechtel, BP Amoco, Dow
Chemical, Duke Energy, DuPont, Eastman Chemical, ExxonMobil, Royal Dutch/Shell,
Saudi Aramco, Texaco, TotalFinaElf and the United States Navy. Our ability to
provide the full spectrum of products and services in our markets in a time
critical manner is key to increasing our market share.

The principal elements comprising cost of sales are raw materials, labor
and manufacturing overhead. During 1999, raw materials accounted for
approximately half of cost of sales. Principal raw materials we use include bar
stock and structural steel, castings, fasteners, gaskets, motors, silicon faces
and carbon faces and teflon(R). We expect to reduce our overall cost of raw
materials through increased negotiating leverage and improvements in
manufacturing efficiency. Although we often purchase raw materials from one
supplier, we have multiple sources from which we can procure raw materials.
Labor costs include employee costs of salaried and hourly employees. We have
reduced labor costs over the last few years through productivity improvements
and restructuring efforts. Manufacturing overhead includes lease costs,
depreciation on property, plant and equipment, utilities, property taxes and
repairs and maintenance.

Operating expenses include selling, general and administrative expenses and
research, engineering and development expenses. Selling expenses primarily
include salaries and benefits to the sales force and commissions to independent
sales representatives. Our sales force is paid a commission on recurring sales.
General and administrative expenses include corporate overhead relating to
employee costs, rent expense, professional fees and information system costs.
Research, engineering and development expenses are incurred for the development
of new products and the enhancement of existing products. We have reduced our
engineering, design and development costs through, among other things, the use
of common designs and components.

FLOWSERVE

OVERVIEW

Flowserve was created on July 22, 1997, through a merger of equals between
BW/IP, Inc. and Durco International Inc., which was accounted for under the
"pooling of interests" method of accounting. Accordingly, all historical
information for Flowserve has been restated giving effect to the transaction as
if the two companies had been combined at the beginning of all periods
presented.

Flowserve produces engineered pumps, precision mechanical seals, automated
and manual quarter-turn valves, control valves and valve actuators, and provides
a range of related flow management services worldwide, primarily for the process
industries. Flowserve's products are used in industries which process difficult
to handle and often corrosive fluids, in environments with extreme temperature
and pressure and wherever process leakage cannot be tolerated. Flowserve's
businesses are affected by economic conditions in the United States and other
countries where its products are sold and serviced, by the relationship of the
U.S. dollar to other currencies, and by the demand and pricing for customers'
products. The impact of

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these conditions is somewhat mitigated by the strength and diversity of
Flowserve's product lines and geographic coverage.

RESULTS OF OPERATIONS

The following table sets forth summary categories of statements of
operations data as a percentage of net sales:

FISCAL YEAR ENDED       SIX MONTHS
DECEMBER 31,        ENDED JUNE 30,
---------------------   ---------------
1997    1998    1999     1999     2000
-----   -----   -----   ------   ------

Net sales......................................  100.0%  100.0%  100.0%  100.0%   100.0%
Cost of goods sold.............................   61.0    61.6    65.8    65.0     65.4
Gross profit...................................   39.0    38.4    34.2    35.0     34.6
Selling and administrative expenses............   24.8    24.5    26.0    24.5     24.3
Operating income...............................    7.3     7.9     3.0     6.7      8.2
Interest expense...............................    1.2     1.2     1.5     1.3      2.3
Earnings before income taxes...................    7.8     6.8     1.7     5.3      6.4
Net income.....................................    4.5     4.5     1.1     3.5      4.2

In general, results for the first half of 2000 were higher than the
corresponding period of the previous year due to Flowserve's acquisition of
Invatec on January 13, 2000 and 1999 results were lower than the two previous
years due to trends in the global markets in which Flowserve participates. The
economic turmoil that started in Asia in the second half of 1997 spread to other
parts of the world, including Latin America. The profitability of Flowserve's
chemical and petroleum customers, which collectively represent about 71% of the
business, was negatively impacted by the economic weakness. This economic
weakness contributed to a supply/demand imbalance of chemical products, and an
oil price that fell to as low as $10.73 per barrel in December 1998 compared
with $17.78 per barrel in December 1997. At the end of 1999, the price per
barrel increased to $25.60 and, as a result, Flowserve began to see an increase
in bid activity in the petroleum and chemical markets. This increase did not
have a significant positive effect on 1999 results as any market upturn
generally precedes an increase in shipments by six to twelve months.

SALES AND BOOKINGS

Bookings, or incoming orders for which there are purchase commitments, for
the first six months of 2000, were $620.1 million, 23.0% higher than the first
half of 1999 when bookings were $504.2 million. Excluding Invatec, bookings also
showed year-on-year improvement of 5.3%. Sales increased 7.3% to $584.5 million
for the six months ended June 30, 2000, compared with $544.6 million for the
same period in 1999. Sales for the first half of 2000 would have been $501.2
million without the acquisition of Invatec, 8% below the first half of 1999.

Bookings were lower in 1999 at $1,039.3 million, compared with $1,082.5
million in 1998 and $1,172.4 million in 1997. Sales decreased to $1,061.3
million in 1999 from $1,083.1 million in 1998 and $1,152.2 million in 1997.
Bookings and sales declines in 1999 were largely a result of the economic and
market factors previously discussed.

There were several other factors that affected the comparison of 1999 to
1998 and 1998 to 1997. A stronger U.S. dollar, in relation to other currencies
in which Flowserve conducts its business, had the effect of reducing both
bookings and sales when compared with the prior year. The negative translation
effect reduced 1999 bookings and sales by about 1% and 1998 bookings and sales
by about 2%. The negative translation impact on net earnings was about 7% in
1999 and 2% in 1998.

Comparisons are also impacted by the divestitures of several businesses in
1997 that contributed about $18 million to both bookings and sales in 1997.
Several acquisitions affected the comparability as well. Acquisitions made in
late 1998 and 1999 added over $12 million to 1999 bookings and sales, compared

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64

with 1998. In addition, acquisitions made in 1998 added about $14 million to
1998 bookings and sales, compared with 1997.

BUSINESS SEGMENTS

Flowserve manages its operations through three business segments: Rotating
Equipment Division ("RED") for pumps (prospectively to be known as Flowserve
Pump Division); Flow Control Division ("FCD") for automated and manual
quarter-turn valves, control valves and valve actuators; and Flow Solutions
Division ("FSD") for precision mechanical seals and aftermarket services. Each
division's results include aftermarket sales of spare parts.

Sales and operating income before special items, as defined below, for each
of the three business segments are:

ROTATING EQUIPMENT DIVISION
--------------------------------------------
FISCAL YEAR ENDED       SIX MONTHS ENDED
DECEMBER 31,             JUNE 30,
------------------------   -----------------
1997     1998     1999     1999      2000
------   ------   ------   -------   -------
(DOLLARS IN MILLIONS)

Sales.....................................  $412.8   $371.5   $353.2   $189.7    $155.7
Operating income, before special items....    51.0     39.1     23.1     11.5      10.1

The sales decrease in 2000 was generally due to a reduced opening backlog
of highly engineered pumps. Unfavorable currency translation also reduced sales
by about 3%.

Sales of pumps and pump parts for the Rotating Equipment Division decreased
to $353.2 million in 1999 from $371.5 million in 1998 and $412.8 million in
1997. The sales decline was generally due to reduced demand for chemical process
pumps as Flowserve's chemical industry customers lowered their capital and
maintenance spending in response to over-capacity in their industry. RED sales
were also lower due to unfavorable pricing. RED sales decreased in 1998 compared
with 1997 due to the same factors.

Operating income before special items, as a percentage of sales, increased
to approximately 6.5% in first half of 2000 from about 6.1% in the comparable
prior-year period. The operating income margin increased due to an improved
gross margin resulting from an improved product mix and ongoing cost reduction
efforts.

Operating income, before restructuring expenses and other special items, as
a percentage of RED sales, declined to 6.5% in 1999 from 10.5% in 1998 and 12.4%
in 1997. The decline was due to the lower volume of more profitable chemical
process and vertical pumps, nuclear products and other parts and replacement
business that more than offset the benefits of the merger integration program.
The decline was also impacted by unfavorable pricing.

FLOW CONTROL DIVISION
--------------------------------------------
FISCAL YEAR ENDED       SIX MONTHS ENDED
DECEMBER 31,             JUNE 30,
------------------------   -----------------
1997     1998     1999     1999      2000
------   ------   ------   -------   -------
(DOLLARS IN MILLIONS)

Sales.....................................  $317.2   $313.2   $295.3   $151.7    $135.2
Operating income, before special items....    47.0     43.8     25.1     15.1      16.2

The decrease in sales was due to reduced backlog at the beginning of the
year and lower book-to-build volume during the period. Unfavorable currency
translation also reduced sales by about 4%.

Sales of valves and valve automation products for the Flow Control Division
declined to $295.3 million in 1999 from $313.2 million in 1998 and $317.2
million in 1997. The decrease was primarily due to increased price competition
for valves and accessories and a decline in business levels of control valve
products and a weaker chemical market that reduced demand and placed downward
pressure

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65

on selling prices. The sales decrease between 1998 and 1997 was partly offset by
the acquisition of Valtek Engineering (United Kingdom licensee) in July 1998.

Operating income before special items, as a percentage of sales, was 12.0%
in the first half of 2000, compared with 10.0% in 1999. The improved operating
margin in 2000 was generally due to improved gross margins and lower operating
expenses. These improvements were generally due to a favorable product mix and
reduced costs principally related to the Company's restructuring program
initiated in the fourth quarter of 1999.

Operating income, before restructuring expenses and other special items, as
a percentage of FCD sales was 8.5% in 1999, compared with 14.0% in 1998 and
14.8% in 1997. The decline in 1999 was primarily due to severe price erosion, an
unfavorable product mix and lower sales volume. The decline in 1998 from 1997
was generally due to the lower sales volume. Operating income in 1998 was also
affected by lower selling prices and a reduced volume of higher profit spare
parts.

FLOW SOLUTIONS DIVISION
--------------------------------------------
FISCAL YEAR ENDED       SIX MONTHS ENDED
DECEMBER 31,             JUNE 30,
------------------------   -----------------
1997     1998     1999     1999      2000
------   ------   ------   -------   -------
(DOLLARS IN MILLIONS)

Sales.....................................  $430.1   $428.5   $438.5   $217.9    $308.4
Operating income, before special items....    62.7     65.1     56.1     27.9      35.4

Sales were higher than the prior-year period generally due to the
acquisition of Invatec. The increase in sales was offset slightly by an
unfavorable currency translation which reduced sales by about 2%.

Sales of seal products and services for the Flow Solutions Division
increased to $438.5 million in 1999, compared with $428.5 million in 1998 and
$430.1 million in 1997. The sales increase primarily resulted from the addition
of new service and repair centers while seal sales remained stable as a result
of increased market share.

Operating income before special items, as a percentage of sales, decreased
to 11.5% from 12.8% in the first half of 1999. The lower margins were generally
due to the acquisition of Invatec, as Invatec's gross margins are historically
lower than the balance of FSD operations, and period integration expenses
relating to the Company's 1999 restructuring program.

Operating income, before restructuring expenses and other special items, as
a percentage of FSD sales, decreased to 12.8% in 1999 from 15.2% in 1998 and
14.6% in 1997. The decrease in 1999 from 1998 was due to lower margins in the
service group that was impacted by competition and facility underutilization in
certain markets. The improved margin in 1998 compared to 1997 is due to the
leveraging of a higher volume of sales and the benefits of the merger
integration program, partly offset by a seal mix change to lower-margin
products.

OPERATIONS

Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999

The gross profit margin was 34.6% for the six months ended June 30, 2000,
compared with 35.0% for the same period in 1999. The slight decrease was due to
the lower margins associated with Invatec. Excluding Invatec, margins were 0.7
percentage points above the prior year.

Selling and administrative expense as a percentage of net sales was 24.3%
for the six-month period ended June 30, 2000, compared with 24.5% for the
corresponding 1999 period. The slight decrease was due to the Company's cost
reduction initiatives which more than offset period costs incurred as a result
of the Company's 1999 restructuring program and costs associated with
Flowserver, the Company's global business process improvement initiative.
Flowserver expenses totaled $2.5 million in the first half of 2000. In 1999,
Flowserver expenses were $7.8 million and were identified and disclosed
separately as merger integration expense.

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Research, engineering and development expense was $12.4 million for the
first six months of 2000, compared with $13.2 million during the same period
last year. The lower level of spending was generally the result of cost control
initiatives and the reallocation of resources to assist in project engineering.

Interest expense during the first half of 2000 was $13.6 million, up $6.4
million from the same period in 1999 due to higher interest rates and the
increased borrowing levels required to acquire Invatec stock and retire debt
obtained in the acquisition.

The Company recorded other income of $3.2 million during the six months
ended June 30, 2000 primarily as a result of two factors. Income of $1.1 million
was realized due to the quarterly mark-to-market adjustments requirement under
the provisions of EITF No. 97-14 "Accounting for Deferred Compensation
Agreements Where Amounts Earned Are Held in a Rabbi Trust and Invested". In
addition, $1.0 million of income was recorded as a result of the Company
reaching an agreement and receiving payment on an outstanding promissory note
which had previously been fully reserved.

The Company's effective tax rate for the first half of 2000 was 34.5%
compared to 34.0% in the first half of 1999. The increase was due to the
acquisition of Invatec.

Net earnings for the first half of 2000 were $24.5 million or $0.65 per
share. This was 30.0% above net earnings of $18.9 million, or $0.50 per share,
for the same period in 1999. Excluding special items, net earnings for the first
half of 1999 were $24.1 million or $0.64 per share.

1999 compared to 1998 and 1997

Gross profit margin, or gross profit as a percentage of sales, declined to
34.2% in 1999 from 38.4% in 1998 and 39.0% in 1997. The 1999 margin included
$5.1 million in one-time costs relating to inventory and fixed asset
impairments. The lower margin in 1999 related to these impairments along with
underabsorption variances due to lower sales, lower selling prices and a less
favorable product mix. These reductions were partly offset by savings related to
Flowserve's merger integration program that reduced cost of sales by
approximately $5 million. The lower margin in 1998 was generally related to
valve price discounting and a product mix change toward lower margin products.
These factors and lower sales contributed to a decline in gross profit dollars
to $363.4 million in 1999 from $415.4 million in 1998 and $448.9 million in
1997.

Selling and administrative expense was $275.9 million in 1999 compared with
$265.6 million in 1998 and $285.9 million in 1997. Selling and administrative
expense in 1999 included $5.8 million in costs for executive separation
contracts and certain costs relating to fourth-quarter 1999 facility closures
while 1998 included $3.8 million in costs associated with an obligation under an
executive employment agreement. As a percentage of sales, selling and
administrative expense was 26.0% (25.5% when adjusted for the special items),
compared with 24.5% (24.2% when adjusted for the executive employment agreement)
in 1998 and 24.8% in 1997. The increase in 1999 was generally due to expenses
related to the implementation of a consolidated benefit program and other
personnel related costs as well as lower sales. Reductions in selling and
administrative expense in 1998 compared to 1997 were generally due to savings
from merger integration activities of about $12 million and lower sales.

Research, engineering and development expense was $25.6 million in 1999,
compared with $26.4 million in 1998 and $26.9 million in 1997. The decline in
these expenses in 1999 is related to reallocation of some resources to assist in
project engineering and cost controls.

Interest expense was $15.5 million in 1999, compared with $13.2 million in
1998 and $13.3 million in 1997. The increase in 1999 is primarily due to higher
interest rates and increased average borrowings due to the share repurchase
program initiated in the second quarter of 1998.

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The effective tax rate, excluding special items, was 33.3% in 1999,
compared with 34.9% in 1998 and 36.9% in 1997. The decrease in 1999 was due to
the geographic mix of earnings while the decrease in 1998 was due to the
geographic mix of earnings and post-merger restructuring of operations. The
effective tax rate after special items in both 1999 and 1998 was the same as the
effective tax rate excluding special items. In 1997, the effective tax rate was
42.6% due to the nondeductibility of certain merger transaction expenses, partly
offset by certain tax benefits realized from the sale of a subsidiary.

Earnings after special items were $12.2 million in 1999, compared with
$48.9 million in 1998 and $51.6 million in 1997. Special items include
restructuring charges, merger integration expense, merger transaction expense,
inventory and fixed asset impairments, costs associated with obligations under
executive employment and separation agreements, a gain on the sale of a
subsidiary and the cumulative effect of a change in accounting principle.
Earnings before special items were $39.5 million in 1999, compared with $74.9
million in 1998 and $82.1 million in 1997. The decline in earnings in 1999 was
largely due to the decline in sales and a lower gross profit margin.

The restructuring charge of $15.9 million in 1999 was related to the
closure of 10 facilities and a corresponding reduction in workforce at those
locations while the restructuring charge of $32.6 million in 1997 was related to
Flowserve's merger integration program. Merger integration expense was $14.2
million in 1999, $38.3 million in 1998 and $7.0 million in 1997. Merger
integration expense in 1999 related solely to Flowserve's business process
improvement initiative, "Flowserver". Merger integration expense in 1998 and
1997 was principally related to the consolidation of the business units and
headquarters, plant closures and the formation of the Services Group of the Flow
Solutions Division. Merger transaction expense of $11.9 million in 1997 was for
severance and other expenses triggered by the merger of BW/IP and Durco, and
investment banking fees, legal fees and other costs required to effect the
merger. In 1999, Flowserve recorded special items of $5.1 million for inventory
and fixed asset impairments in cost of sales and special items of $5.8 million
for executive separation contracts and certain costs relating to fourth-quarter
1999 facility closures in selling and administrative expense. In 1998, Flowserve
recognized an obligation under an executive employment agreement of $3.8 million
recorded in selling and administrative expense. In 1997, Flowserve sold its
Metal Fab subsidiary and realized a pre-tax gain of $11.4 million. The change in
accounting principle resulted in a one-time cumulative net of tax benefit of
$1.2 million in 1998. The accounting change was due to the required adoption of
EITF 97-14, "Accounting for Deferred Compensation Arrangements Where Amounts
Earned Are Held in a Rabbi Trust and Invested."

RESTRUCTURING

In the fourth quarter of 1999, Flowserve initiated a restructuring program
designed to streamline Flowserve for better value and improve asset utilization.
This $26.7 million program consists of a one-time charge of $15.9 million
recorded as restructuring expense and $10.8 million of other special items. The
restructuring charge related to the planned closure of 10 facilities and a
corresponding reduction in workforce at those locations, as well as at other
locations that are part of the restructuring. The other special items relate to
inventory impairments and a fixed asset impairment totaling $5.1 million, and
executive separation contracts and certain costs related to fourth-quarter 1999
facility closures of $5.8 million. The inventory impairments relate to the
rationalization of certain low-margin product lines and the related inventory
writedown. The fixed asset impairment relates primarily to the reduction in fair
market value of a facility. The impairment amounts are included in cost of goods
sold while the remaining items are recorded as selling and administrative
expenses.

Flowserve expects to realize ongoing annual operating income benefits of
approximately $20 million per year effective in 2001. Approximately $10 million
in savings is expected to be realized in selling and administrative expenses
while the remainder is expected in costs of sales.

In 2000, period integration costs related to the implementation of the
program are expected to offset any potential benefit to operating income.
Current estimates are that planned savings of approximately $10 million will be
offset by period integration costs.

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Additionally, in 2000, a majority of the costs associated with the
restructuring program will be incurred and charged against the remaining
restructuring reserve.

The restructuring program is expected to result in a net reduction of
approximately 300 employees. As of June 30, 2000, the program has resulted in a
net reduction of 149 employees. Expenditures charged to the restructuring
reserve as of June 30, 2000 were:

OTHER
SEVERANCE   EXIT COSTS   TOTAL
---------   ----------   -----
(DOLLARS IN MILLIONS)

Balance at December 24, 1999.............................    $12.9       $ 3.0      $15.9
Cash expenditures........................................     (0.1)         --       (0.1)
-----       -----      -----
Balance at December 31, 1999.............................     12.8         3.0       15.8
Cash expenditures........................................     (1.7)       (0.6)      (2.3)
-----       -----      -----
Balance at March 31, 2000................................     11.1         2.4       13.5
Cash expenditures........................................     (1.3)       (1.0)      (2.3)
-----       -----      -----
Balance at June 30, 2000.................................    $ 9.8       $ 1.4      $11.2
=====       =====      =====

MERGER INTEGRATION PROGRAM

In 1997, Flowserve developed a program designed to achieve the synergies
planned for the merger of BW/IP and Durco. The program included facility
rationalizations in North America and Europe, organizational realignments at the
corporate and division levels, procurement initiatives, investments in training
and support for service operations. In the fourth quarter of 1997, Flowserve
recognized a one-time restructuring charge of $32.6 million, excluding
Flowserver, in connection with this program. Other non-recurring expenses
related to the merger (merger integration expense) were incurred in 1998 and
1997 in order to achieve the planned synergies. These expenses of $33.2 million
and $7.0 million, respectively were principally for costs for consultants,
relocation and training.

As of June 30, 1999, the restructuring portion of the merger integration
had been completed. Flowserve paid severance to approximately 331 employees at a
cost of $22.4 million.

In 1999, Flowserve realized approximately $37.3 million in operating income
benefit related to the merger compared with about $21.3 million in 1998. By
2001, Flowserve expects to achieve $45 million to $55 million of annual
operating income benefit from this program. The benefits are expected to result
from eliminating cost redundancies, capturing procurement savings and realizing
earnings increases from sales synergies.

In the week following Flowserve's acquisition of IDP, the Company announced
its progress in making facility consolidations and reducing employment levels by
approximately 1,100 positions as part of working to realize the estimated $75
million in annual synergies expected by December 2001. The majority of these
reductions are planned to occur before December 31, 2000. The Company expects to
complete all consolidation actions within 15 months.

Flowserve also will divest eight pump lines, and the repair and service
centers in Batavia, Ill., and La Mirada, Calif., and its manufacturing facility
in Tulsa, Okla., as part of its antitrust agreement with the U.S. Department of
Justice.

BUSINESS PROCESS IMPROVEMENT INITIATIVE

In 1998, Flowserve's Board of Directors approved a $120.0 million
expenditure for "Flowserver." This business process improvement program was
planned to have costs and benefits incremental to the initial merger integration
program. Effective January 1, 1999, merger integration costs relate solely to
Flowserver. Flowserver includes the standardization of Flowserve's processes and
the implementation of a global information system to facilitate common
practices. In 1999, Flowserve incurred costs associated with this project of
$14.2 million recorded as merger integration expense and $11.4 million as
capital expenditures.

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In 1998, these costs were $5.1 million recorded as merger integration expense
and $1.5 million as capital expenditures.

Flowserve has re-evaluated the Flowserver project and its 2000 investment
in Flowserver is expected to be approximately one-half the 1999 level. In
addition, the overall duration of the program will extend beyond its originally
planned five years and the scope will be scaled back significantly. Costs prior
to 2000 related to the development of a common business model. Costs in 2000
generally relate to implementation and will no longer be identified separately
as merger integration expense. Instead, beginning with the first quarter of
2000, Flowserver costs are classified as selling and administrative expense.

INGERSOLL-DRESSER PUMP COMPANY

OVERVIEW

IDP was formed in October 1992 when Ingersoll-Rand Company and Dresser
Industries merged their respective pump divisions to form Ingersoll-Dresser Pump
Company, a 51%/49% partnership. IDP is considered an industry leader with over
150 years of experience and expertise as one of the world's leading pump
designers, engineers and specialists. Ingersoll-Dresser Pump Company,
headquartered in Liberty Corner, New Jersey, is a leading full service pump
manufacturer providing a broad array of pump products and services to various
worldwide markets. IDP's product portfolio is among the most diverse in the
industry with 40 product families and over 90 discrete product types serving
twelve broad end-market segments.

In September 1998, Dresser Industries, IDP's 49% holder, completed its
merger with Halliburton Company, which resulted in Halliburton Company acquiring
Dresser Industries' 49% interest in IDP. In August 1999, Ingersoll-Rand
announced its intention to terminate the IDP partnership and exit the industry
due to changes in Ingersoll-Rand's strategic direction. As provided for in the
IDP partnership agreement, Halliburton Company sold its interest in IDP to
Ingersoll-Rand Company, at which point IDP became a wholly owned business unit
of Ingersoll-Rand Company in December 1999.

RESULTS OF OPERATIONS

The following table sets forth summary categories of statements of
operations data as a percentage of net sales:

SIX MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31,          JUNE 30,
-------------------------------     -----------------
1997        1998        1999       1999        2000
-------     -------     -------     -----       -----

Net sales............................   100.0%      100.0%      100.0%     100.0%      100.0%
Cost of sales........................    73.7        72.9        72.8       74.0        77.0
Gross profit.........................    26.3        27.1        27.2       26.0        23.0
Selling and administrative
expenses...........................    18.9        18.6        19.3       20.0        21.0
Operating income.....................     4.8         7.7         7.4        5.7         1.6
Interest expense.....................     0.2         0.2         0.2        0.2         0.1
Earnings before income taxes.........     5.1         8.3         8.2        6.3         1.7
Net income (loss)....................     3.6         6.5         5.9        3.8        (0.7)

In general, IDP's results for the six months ended June 30, 2000 reflect
the weakness of bookings encountered during mid-1999 and the impact of
additional costs recognized as a result of the December 1999 purchase of the
partnership interest from Halliburton by Ingersoll-Rand. As a result of applying
pushdown accounting for the December 1999 purchase for the six months ended June
30, 2000, IDP has recorded additional depreciation and amortization and higher
cost of sales for inventory on hand at December 31, 1999. IDP's 1999 results
were lower than the prior years due to trends in the global markets in which IDP
participates. Historically low oil prices reduced capital spending by the major
oil and chemical companies. This was further compounded by, among other things,
significant strategic combinations of oil companies, such as BP Amoco and
ExxonMobil, resulting in volume reductions which

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reduced IDP's overall performance below expectations. The economic turmoil that
started in Asia in the second half of 1997 spread to other parts of the world,
including Latin America. In addition, IDP's operations were negatively affected
by reduced spending in the North American agricultural market.

SALES AND BOOKINGS

First half 2000 bookings at $453.3 million were $50.1 million, or 12%,
above the $403.2 million bookings level experienced in 1999. The year over year
growth occurred in both the engineered pump and industrial pump product areas,
with the most significant increase appearing in the industrial water markets
served by IDP's European businesses. There was also evidence of strengthening in
the North American general industrial and power industries, though to a lesser
extent than in the water treatment segment. In addition, there was noticeable
improvement in the South American and Asia Pacific regions, which appear to be
recovering from the depressed levels of business experienced last year.

Complete pumps bookings of $279.2 million were $35.5 million, or 15%,
greater than the $243.7 million booked in the first half last year. Parts
bookings of $115.7 million increased by $11.0 million, or 10.5%, while repairs
and service bookings of $58.4 million increased by $3.4 million, or 6.2%, when
compared with the prior year.

Sales for the first half of 2000 totaled $363.4 million, down $36.1
million, or 9% from sales of $399.5 million in the comparable period in the
prior year. The decline in sales was experienced within both the engineered and
the industrial pumps product areas. The decline in engineered pump sales is
directly related to entering the year with a lower level of shippable backlog
for the hydrocarbon processing industry, whereas prior years' bookings were
negatively impacted by the low world oil price. The decline in industrial pump
sales was primarily due to the scheduled timing of backlog, where significant
order volumes are scheduled for shipment later in the year. In addition, the
decline in the value of the euro relative to the dollar had a significant
negative impact on sales in IDP's European markets.

Bookings were lower in 1999 at $826.6 million, compared with $925.9 million
in 1998 and $919.7 million in 1997. Sales totaled $838.4 million in 1999, down
from $907.2 million in 1998 and down from $865.1 million in 1997. Bookings and
sales declines in 1999 were largely the result of reduced activity within the
hydrocarbon processing industry that was adversely affected by the low oil
prices throughout most of the year.

The substantial decline in spending by the American farming industry,
resulting from depressed agricultural commodity prices, negatively affected one
of IDP's most profitable product areas. The financial crisis in Brazil, which
spread throughout Latin America, reduced the normal sales volume in that
geographic region below the prior years' levels.

In total, sales outside the United States were $484.6 million, $562.2
million and $574.0 million in 1999, 1998 and 1997, respectively. Foreign sales
have declined during the past two years. The decline was primarily due to the
deteriorating economic conditions throughout the Asia Pacific region, which
began in late 1997 and continued through the end of 1999. In addition, the
Brazilian currency crisis, which began in early 1999, had a depressing impact on
all of the neighboring Latin American economies, resulting in a reduction in our
bookings and sales within that geographic region.

BUSINESS SEGMENTS

IDP manages its operations through two business segments: engineered pumps
and industrial pumps. Though there is some cross-over as each end user market is
not exclusively tied to these two business segments, the engineered pump markets
primarily include hydrocarbon processing, marine and navy, oil and gas
production, pipeline, power generation and water resources, while the industrial
pump markets primarily include agriculture, chemical processing, general
industrial, mining, primary metals, pulp and paper and water resources.

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Sales and operating income before special items, as described below, for
the two business segments were as follows:

FISCAL YEAR ENDED        SIX MONTHS ENDED
DECEMBER 31,              JUNE 30,
------------------------   ------------------
1997     1998     1999     1999       2000
------   ------   ------   -------    -------
(DOLLARS IN MILLIONS)

Engineered pumps
Sales....................................  $534.0   $577.1   $569.7   $ 262.5    $ 235.6
Operating income.........................    31.1     47.5     48.4      15.3        5.9

Sales of engineered pumps decreased by $26.9 million to $235.6 million in
the first half of 2000 from $262.5 million in the first half of 1999. The sales
decline consisted almost entirely of reduced sales volume within two business
units and were primarily related to the adverse impact on shipments of depressed
conditions in the hydrocarbon processing industry.

Operating income as a percentage of sales declined to 2.5% in the first
half of 2000 from 5.8% in the comparable period in the prior year, due
principally to lower sales volumes, as well as less favorable sales mix, and
less weighting toward spare parts and repair compared with the prior year and
the impact of pushdown accounting.

Sales of engineered pumps decreased slightly to $569.7 million in 1999 from
$577.1 million in 1998, but were 6.7% greater than the $534.0 million of sales
in 1997. The sales decline in 1999 was primarily attributable to reduced spare
parts shipments resulting from curtailment of oil and gas plant maintenance
spending due to low oil prices and volume decreases resulting from significant
strategic combinations of oil companies such as BP Amoco and ExxonMobil.

Operating income as a percentage of sales improved to 8.5% in 1999 from
8.2% in 1998 and 5.8% in 1997. The improvement in operating margin experienced
in 1999 was accomplished despite the moderate sales decrease, as manufacturing
cost improvements were realized and expense controls were maintained.

FISCAL YEAR ENDED       SIX MONTHS ENDED
DECEMBER 31,             JUNE 30,
------------------------   -----------------
1997     1998     1999     1999      2000
------   ------   ------   -------   -------
(DOLLARS IN MILLIONS)

Industrial pumps
Sales...................................  $331.1   $330.1   $268.7   $137.0    $127.8
Operating income........................    34.0     30.3     11.9      7.7       3.5

Sales of industrial pumps decreased $9.2 million, to $127.8 million in the
first half of 2000, from $137.0 million in the first half of 1999. The sales
decline was due principally to the negative impact of currency translation.

Operating income as a percentage of sales declined to 2.7% for the first
half of 2000 from 5.6% in the comparable period in the prior year, primarily due
to the reduced shipment volume within these business units servicing the
agriculture and chemical industries and the impact of pushdown accounting. In
addition, the weakness of the European currency negatively impacted the sector's
financial performance.

Sales of industrial pumps decreased to $268.7 million in 1999 from $330.1
million in 1998 and $331.1 million in 1997. The sales decline was generally due
to the decline of the North American agriculture industry, the Brazilian
financial crisis and its negative impact on most of the Latin American
economies, and the downturn in both the chemical and water resources markets in
the United Kingdom.

Operating income as a percentage of industrial pump sales declined to 4.4%
in 1999 from 9.2% in 1998 and 10.3% in 1997. The decline in operating margin was
directly related to the same negative factors impacting the sales volume noted
above.

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OPERATIONS

Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999

Gross profit margin for the first quarter of 2000 declined to 23.0% from
26.0% in the comparable period in the prior year. This decline is the combined
result of a less favorable sales mix of spare parts versus complete pumps, sales
volumes, and the impact of pushdown accounting on cost of sales.

Selling, general and administrative expense was $76.4 million, or 20.9% of
sales, in 2000 compared with $79.8 million, or 20.0% of sales in 1999. The
decline in costs relates to reduced sales volumes and cost control efforts, net
of the impact of pushdown accounting.

Research, engineering and development expense was $1.3 million for the six
months ended June 30, 2000, compared with $1.5 million for the same period in
1999. The decline in these costs in 2000 related to cost control efforts
previously put in place.

Interest expense was $0.5 million in 2000 compared to $0.8 million for the
first half of 1999.

The effective tax rate was 140.0% in the first half of 2000, compared with
40.0% in the first half of 1999. The increase was due primarily to losses in the
US that can not be offset against income generated in foreign jurisdictions. No
U.S. federal or state taxes were paid by IDP because it is a partnership for
U.S. tax purposes. Under U.S. tax law, such taxes are levied upon the partners
rather than the partnership.

Earnings before income taxes as a percentage of sales were 1.7% in the
first half of 2000 down from 6.3% in the comparable period in the prior year.

1999 Compared to 1998 and 1997

Gross profit margin remained relatively unchanged at 27.2% in 1999 compared
with 27.1% in 1998, while reflecting an improvement when compared with 26.3% in
1997. While gross profit margin in 1999 was relatively unchanged from 1998, IDP
experienced an improving trend in standard margins for complete pumps, spare
parts and repairs and services, as a result of a change in sales mix. Higher
margin spare parts sales contributed a reduced share of total sales in 1999
compared to 1998.

Selling and administrative expense was $162.1 million in 1999 compared with
$168.9 million in 1998 and $163.1 million in 1997. Selling and administrative
expense in 1999 included $3.1 million of non-recurring consultant expenses and
$0.9 million of severance expense. The decreased spending level in 1999 was
primarily attributable to the combined impact of reduced commission expense and
reductions in expense spending levels throughout the selling and administrative
areas. As a percentage of sales, selling and administrative expense was 19.3% in
1999 due to reduced sales, compared with 18.6% in 1998 and 18.9% in 1997.
Selling and administrative expense increased by $5.8 million from 1997 to 1998
principally due to increased commissions on higher sales volume and due to
higher expenses related to consultants, marketing initiatives and operational
improvement initiatives.

Research, engineering and development expense was $3.0 million in 1999,
compared with $3.8 million in 1998 and $3.6 million in 1997. The decline in
spending during 1999 was the result of overall expense reductions necessitated
by the reduced business volume.

Interest expense was $1.4 million in 1999, compared with $1.6 million in
1998 and $1.3 million in 1997.

The effective tax rate was 27.7% in 1999, compared with 22.0% in 1998 and
29.7% in 1997. The increase in 1999 was due to greater earnings in the higher
taxed foreign entities compared with 1998. No U.S. federal or state taxes are
paid by IDP because it is a partnership for U.S. tax purposes. Under U.S. tax
law, such taxes are levied upon the partners rather than the partnership.

Earnings were $49.5 million in 1999, compared with $58.7 million in 1998
and $31.3 million in 1997. Special items include restructuring charges. Earnings
before special items were $49.7 million in 1999, compared with $62.3 million in
1998 and $50.8 million in 1997. The decline in earnings in 1999 was

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primarily due to reduced sales volume. Sales declined under the pressure of low
world oil prices, the downturn in the Asia Pacific and Latin American economies
and reduced spending in the North American agriculture industry.

OUR LIQUIDITY AND CAPITAL RESOURCES FOLLOWING THE TRANSACTIONS

Following the Transactions, our debt capitalization consists of $375.0
million aggregate principal amount of the notes and $750.0 million under our
Senior Credit Facilities. Under our Revolving Credit Facility we had unused
borrowing capacity, net of issued letters of credit, of approximately $270.0
million, on a pro forma basis, as of June 30, 2000. The borrowings under the
Senior Credit Facilities and the notes will increase debt service costs. The
notes mature in 2010. The Senior Credit Facilities and the indentures under
which the notes are issued will limit our ability, among other things, to incur
additional debt, to pay dividends, to redeem capital stock and to sell certain
assets. We may incur additional indebtedness under the indenture as long as our
Consolidated Coverage Ratio, as defined, is greater than certain minimum levels
or if such additional indebtedness fits within certain exceptions. Loans under
the Senior Credit Facilities mature from 2006 to 2008. We believe that based on
current financial performance and anticipated growth, cash flow from operations,
together with the available sources of funds including borrowings under the
Senior Credit Facilities, will be adequate to make required payments of interest
on our indebtedness, to fund anticipated capital expenditures and working
capital requirements and to enable us to comply with the terms of our debt
agreements. Our actual capital requirements may change, particularly as a result
of acquisitions we may make, although no acquisitions are currently
contemplated. We expect that our capital expenditures (exclusive of
acquisitions) in 2000 will be approximately $40 million. We believe that these
capital expenditures will be sufficient to maintain our equipment and to provide
additional planned manufacturing capabilities and upgrades. Our future operating
performance and ability to service or refinance the notes and to extend or
refinance the Senior Credit Facilities will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond our control.

HISTORICAL LIQUIDITY AND CAPITAL RESOURCES OF FLOWSERVE

Cash flows from operations and financing available under existing credit
agreements are Flowserve's primary sources of short-term liquidity. Cash flows
from operating activities for the first six months of 2000 were significantly
below the same period in 1999. The decrease in cash flows in 2000 was primarily
due to payments relating to the restructuring program and Invatec acquisition.
Cash flows from operating activities in 1999 increased to $81.9 million,
compared with $54.1 million in 1998 and $90.0 million in 1997. The increase in
cash flows in 1999 was primarily due to Flowserve's increased focus on capital
utilization and reduced merger integration costs. The decrease in cash flows in
1998 compared to 1997 was primarily due to cash expended for restructuring and
lower operating profits.

Capital expenditures, net of disposals, were $12.4 million during the first
six months of 2000, compared with $20.2 million in the first six months of 1999.
The reduction reflects a concerted effort by the Company to reduce capital
spending. Capital expenditures were funded primarily by operating cash flows.

On January 13, 2000, Flowserve acquired Invatec, a company which is
principally engaged in providing comprehensive maintenance, repair, replacement
and value-added distribution services for valves, piping systems,
instrumentation and other process-system components for industrial customers.

The purchase involved acquiring all of the outstanding stock of Invatec and
assuming Invatec's existing debt and related obligations. The transaction was
accounted for under the purchase method of accounting and was financed through
the borrowings under the revolving credit facility. The results of operations
for Invatec are included in Flowserve consolidated financial statements from the
date of acquisition. The purchase price was approximately $18.3 million in cash.
Liabilities of $94.9 million were simultaneously paid through borrowing under
Flowserve's revolving credit agreement.

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The purchase price has been allocated to the net assets acquired based
primarily on information furnished by management of the acquired company. The
preliminary estimated fair value of net identifiable assets acquired exceeded
the purchase price by $4.3 million, which resulted in net additional goodwill of
$48.6 million at the time of the purchase. The final allocation of the purchase
price will be determined in a reasonable time and will be based on a complete
evaluation of assets acquired and the liabilities assumed. Accordingly, the
information presented herein may differ from the final purchase price
allocation.

During the second quarter of 1998, Flowserve initiated a $100.0 million
share repurchase program. In 1998, Flowserve spent approximately $64.5 million
to repurchase approximately 2.8 million, or 7.1%, of its outstanding shares.
During 1999, Flowserve spent approximately $5.3 million to purchase an
additional 325,300 shares. Flowserve generally used credit facilities to fund
the purchases. Future repurchases may be restricted under the notes and the
Senior Credit Facilities.

In October 1999, Flowserve entered into a revolving credit agreement that
replaced its then-existing agreement. At June 30, 2000, Flowserve had borrowings
outstanding of $263.0 million and $4.0 million in issued letters of credit, and
availability of $193.0 million under the revolving credit agreement. At June 30,
2000, total debt was 50.0% of Flowserve's capital structure compared with 39.6%
at December 31, 1999. At December 31, 1999, total debt was 39.6% of Flowserve's
capital structure, compared with 37.2% at December 31, 1998. The ratio at
December 31, 1999 increased due to Flowserve's 1999 restructuring charge and the
negative currency translation effect. The interest coverage ratio of Flowserve's
indebtedness was 5.3 times interest at June 30, 2000, compared with 4.3 times
interest at December 31, 1999, compared with 9.5 times interest at December 31,
1998.

During October 1999, Flowserve purchased certain assets and liabilities of
Honeywell's industrial control-valve product line and production equipment
located near Frankfurt, Germany. Flowserve completed the phased move of this
operation to its existing control-valve manufacturing facilities in Europe by
June 30, 2000. In October 1999, Flowserve also acquired R&C Valve Service, Inc.
The assets of this company were integrated into Flowserve's existing services
and repair center network during the fourth quarter of 1999.

On February 9, 2000, the Company announced it had reached a definitive
agreement to acquire Ingersoll-Dresser Pump Company (IDP) from Ingersoll-Rand
Company for $775 million in cash. On August 8, 2000, the Company announced the
completion of the acquisition. The transaction, which was accounted for as a
purchase, was financed with a combination of bank financing and senior
subordinated notes. Upon closing of the transaction, the existing Flowserve debt
was repaid. Flowserve has received $1,425 million of financing to pay for the
acquisition and pay off existing debt as well as provide for a $300 million
revolving credit facility in connection with the acquisition. The financing
consists of approximately $375 million of 12.25% Senior Subordinated Notes due
in ten years and $1.05 billion of senior credit facilities. The credit
facilities consist of a $275 million term loan with a final maturity of six
years and an initial interest rate of LIBOR plus 2.75%, a $475 million term loan
with a final maturity of eight years and an initial interest rate of LIBOR plus
3.50%, and a $300 million revolving credit facility with a term of six years and
an initial interest rate of LIBOR plus 2.75%. During the first quarter of 2000,
the Company also announced it was suspending the payment of its cash dividend
which is required by the financing. The Company believes that internally
generated funds, including synergies from the IDP acquisition, will be adequate
to service the debt.

At June 30, 2000, total debt was 50.0% of the Company's capital structure,
compared with 39.6% at December 31, 1999. The interest coverage ratio of the
Company's indebtedness was 5.3 times interest at June 30, 2000, compared with
4.3 times interest at December 31, 1999.

HISTORICAL LIQUIDITY AND CAPITAL RESOURCES OF IDP

Generally, IDP's primary source of short-term liquidity is through cash
flows from operations. Cash flows from operations were $53.5 million in 1999,
$77.4 million in 1998 and $63.3 million in 1997. The decrease in cash flows in
1999 was primarily due to a decrease in accounts payable and accruals as
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compared to the year ended December 31, 1998. Cash flows from operations for the
first half of 2000 were a net outflow of $1.7 million, primarily as a result of
a higher level of receivables at June 30, 2000 as compared with the end of 1999.

Capital expenditures have remained fairly consistent at $18.2 million in
1999, $20.2 million in 1998 and $16.3 million in 1997. Capital expenditures for
the first six months of 2000 were $4.8 million compared to $5.8 million in the
first six months of 1999.

As a partnership, IDP provides excess cash to the partners. Amounts
transferred to the partners increased from $43.0 million in 1997 to $69.8
million in 1998. The increase in amounts transferred results primarily from the
increase in cash flow provided by operations. At December 31, 1999, the amount
due from the partners, other than amounts relating to trade receivables and
payables, was transferred to equity, as a result of the acquisition by
Ingersoll-Rand of Halliburton's 49% interest in IDP and thereby IDP becoming a
wholly owned entity of Ingersoll-Rand. In addition, at December 31, 1999, there
were loans from IDP foreign subsidiaries to Halliburton that had matured late in
1999 of $36.2 million. The IDP foreign subsidiaries retained the cash received
on these matured loans in 1999, resulting in an increase in cash and cash
equivalents at December 31, 1999. These amounts, or portions thereof, were
provided to Ingersoll-Rand in the first quarter of 2000.

INFLATION AND FOREIGN CURRENCY TRANSLATION

Inflation during the past three years had little impact on Flowserve's
consolidated financial performance. Foreign currency translation had the effect
of reducing sales by 1% and earnings by 7% in 1999 and both sales and earnings
by 2% in 1998.

MARKET RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS OF FLOWSERVE

Flowserve has certain market-sensitive financial instruments, including
long-term debt and investments in foreign subsidiaries. To evaluate the risks
associated with these instruments, Flowserve considered the impact of
unfavorable changes in the rates or values of these instruments as of December
31, 1999. The market changes, assumed to occur as of December 31, 1999, to
measure potential risk are a 100-basis-point increase in market interest rates,
a 10% adverse change in all foreign currency exchange rates and a 10% decline in
the value of its net investment in foreign subsidiaries.

Flowserve considered the impact of a 100-basis-point increase in interest
rates and determined such an increase would not materially affect its earnings.

Flowserve employs a foreign currency hedging strategy to minimize potential
losses in earnings or cash flows from unfavorable foreign currency exchange rate
movements. Foreign currency exposures arise from transactions, including firm
commitments and anticipated transactions, denominated in a currency other than
an entity's functional currency and from foreign-denominated revenues and
profits translated back into U.S. dollars. The primary currencies to which
Flowserve has exposure are the German mark; British pound; Dutch guilder and
other European currencies; the Canadian dollar; the Mexican peso; the Japanese
yen; the Singapore dollar; and the Australian dollar.

Exposures are hedged primarily with foreign currency forward contracts that
generally have maturity dates of less than one year. Flowserve's policy allows
foreign currency coverage only for identifiable foreign currency exposures and,
therefore, Flowserve does not enter into foreign currency contracts for trading
purposes where the objective is to generate profits. The potential loss in fair
value at December 31, 1999, based on year-end positions of outstanding foreign
currency contracts resulting from a hypothetical 10% adverse change in all
foreign currency exchange rates, would not be material. The potential loss would
exclude hedges of existing balance sheet exposures as losses in these contracts
would be offset by exchange gains in the underlying net monetary exposures for
which the contracts are designated as hedges.

As a rule, Flowserve generally views investments in foreign subsidiaries
from a long-term perspective, and therefore, does not hedge these investments.
Flowserve uses capital structuring techniques to manage investment in foreign
subsidiaries as deemed necessary. Net investment in foreign subsidiaries and
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affiliates, translated into U.S. dollars using year-end exchange rates, was
$113.8 million at December 31, 1999. A potential loss in value of net investment
in foreign subsidiaries resulting from a hypothetical 10% adverse change in
quoted foreign exchange rates at the end of 1999 would approximate $11.4
million.

There have been no material changes in reported market risk since the end
of 1999.

MARKET RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS OF IDP

IDP managed exposure to changes in foreign currency exchange rates through
its normal operating and financing activities, as well as through the use of
financial instruments. Generally, the only financial instruments IDP used were
forward exchange contracts. IDP used sensitivity analysis to assess the market
risk associated with its foreign currency transactions. Market risk is defined
here as the potential change in fair value resulting from an adverse movement in
foreign currency exchange rates. A 10% adverse movement in foreign currency
rates would have resulted in a net loss of $7.0 million in 1999 on IDP's foreign
currency forward contracts. The purpose of IDP's hedging activities was to
mitigate the impact of changes in foreign currency exchange rates. IDP attempted
to hedge transaction exposures through natural offsets. To the extent this was
not practicable, major exposure areas considered for hedging included foreign
currency denominated receivables and payables, intercompany loans, firm
committed transactions, anticipated sales and purchases, and dividends relating
to foreign subsidiaries.

IDP maintained significant operations in foreign countries. A 10% adverse
movement in foreign currency rates would have resulted in an unrealized loss of
$18.0 million in 1999 on its net investment in foreign subsidiaries. However,
since IDP viewed these investments as long term, they would not expect such a
loss to be realized in the near term.

EURO CONVERSION

On January 1, 1999, 11 European Union member states (Germany, France, the
Netherlands, Austria, Italy, Spain, Finland, Ireland, Belgium, Portugal and
Luxembourg) adopted the euro as their common national currency. Until January 1,
2002, either the euro or a participating country's national currency will be
accepted as legal tender. Beginning on January 1, 2002, euro-denominated bills
and coins will be issued, and by July 1, 2002, only the euro will be accepted as
legal tender. Flowserve does not expect future balance sheets, statements of
earnings or statements of cash flows to be materially impacted by the euro
conversion.

ACCOUNTING DEVELOPMENTS

In 1999, Flowserve adopted Financial Accounting Standards Board (FASB)
Statement of Position (SOP) No. 98-1, "Accounting for Costs of Software
Developed or Obtained for Internal Use." SOP 98-1 is effective for fiscal
periods beginning after December 15, 1998 and establishes guidelines to
determine whether software-related costs should be capitalized or expensed.

In December 1999, the SEC issued Staff Accounting Bulletin (SAB) 101,
"Revenue Recognition in Financial Statements". As amended in June 2000, this
bulletin will become effective in the fourth quarter of 2000. SAB 101 expresses
the SEC staff's view regarding the application of generally accepted accounting
principles to revenue recognition in financial statements. Management is still
evaluating the impact of SAB 101 on reported financial position, results of
operations and cash flows.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This Statement
will become effective beginning January 1, 2001. SFAS No. 133 requires all
derivatives to be recognized as assets or liabilities on the balance sheet and
measured at fair value. Changes in the fair value of derivatives will be
recognized in earnings or other comprehensive income, depending on the
designated purpose of the derivative.

During June 2000, FASB issued statement No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities," an amendment to SFAS No.
133. SFAS No. 138 is to be adopted concurrently with SFAS No. 133. These
standards are not expected to materially impact Flowserve's reported financial
position, results of operations or cash flows.
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BUSINESS

GENERAL

We are the largest manufacturer and aftermarket service provider of
comprehensive flow control systems in the world. We have been in the flow
control industry for over 125 years. We develop and manufacture
precision-engineered flow control equipment for critical service applications
where high reliability is required. The flow control system components we
produce include pumps, valves and mechanical seals. Our products and services
are used in several industries, including petroleum, chemical, power generation
and water treatment. We believe that our product portfolio is the most
comprehensive and our scope of operations is the most geographically diversified
in the industry. For the year ended December 31, 1999, we generated revenue of
$2.1 billion.

We sell our products and services to more than 1,000 companies including
some of the world's leading engineering and construction firms, OEMs,
distributors and end users. Our sales mix by industry in 1999 consisted of
petroleum (39%), chemical (20%), power generation (14%), general industrial
(14%), water treatment (6%) and other industries (7%). Some of our top customers
include Asea Brown Boveri, ARCO, BASF, Bayer, Bechtel, BP Amoco, Dow Chemical,
Duke Energy, DuPont, Eastman Chemical, ExxonMobil, Royal Dutch/Shell, Saudi
Aramco, Texaco, TotalFinaElf and the United States Navy. No single customer
accounted for more than 3% of our total revenues in 1999. Our revenues by
geographic region in 1999 consisted of North America (55%), Europe and the
Middle East (28%), Latin America (9%) and Asia (8%). We have pursued a strategy
of geographic diversity to mitigate the impact of an economic downturn in any
one part of the world on our business.

We believe we have an installed base of approximately 1,100,000 pumps
worldwide, which we believe is the most extensive installed base of industrial
pumps in the industry. A large installed equipment base is critical to securing
future revenues as industry analysts suggest that approximately 86% of the total
life-cycle cost of a pump consists of aftermarket products and services, such as
replacement parts, mechanical seals and maintenance. When outsourced, a majority
of replacement part orders and aftermarket service business is typically awarded
to the original equipment manufacturer. Aftermarket parts and services have
provided us with a steady source of revenues at higher margins than original
equipment sales. In 1999, we generated approximately 49% of our revenues from
aftermarket products and services.

We believe we are the largest manufacturer of pumps used in the petroleum
and chemical industries, with approximately 59% of our 1999 sales from companies
operating in those industries. Due to the simultaneous decline in oil and
chemical prices in 1998 and 1999, many of our key customers reduced their
capital spending, which resulted in declines in our revenues and EBITDA in those
years. Additionally, the economic downturn in Asia in late 1997 and 1998 had a
negative impact on our overall business in that region. With the strong recent
recovery in oil prices to a year to date high of over $35.00 per barrel in 2000
from a low of $10.73 in December of 1998, higher expected chemical prices and
renewed signs of economic growth in Asia, we are seeing renewed capital spending
by our customers that should result in increasing bookings and revenues for us.
In general, market improvements reflected in our bookings precede revenue growth
by six to twelve months. We have already begun to see tangible signs of recovery
in our petroleum and chemical end-markets as bidding activity and bookings are
improving.

We believe we are well positioned to gain market share and increase
revenues and EBITDA by (i) leveraging our leading market position; (ii)
cross-selling our comprehensive product offerings; (iii) capitalizing on our
customers' trend to outsource service and repair; (iv) realizing significant
cost savings and operating synergies from the Acquisition; and (v) benefiting
from the recent improvement of our end markets.

ACQUISITION RATIONALE

On February 9, 2000, Flowserve agreed to acquire all of the equity
interests of IDP from Ingersoll-Rand for a consideration of $775.0 million. The
acquisition was consummated August 8, 2000. IDP is a

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leading manufacturer of pumps with a diverse mix of pump products and customers
with operations in 30 countries. As a result of the IDP acquisition, we expect
to:

- be the second largest pump manufacturer in the world (improving from
fifth and seventh largest for IDP and Flowserve, respectively);

- be the largest pump manufacturer for the petroleum, chemical and power
generation industries;

- offer a more comprehensive range of products and services at a time when
our customers are seeking to lower costs by reducing supplier
relationships;

- expand our customer base in the water, general industrial, mining, paper,
power and U.S. Navy sectors;

- diversify our customer and geographic sales mix, reducing the impact of
commodity price cycles and regional economic downturns; and

- triple Flowserve's installed equipment base to an estimated 1,100,000
pumps worldwide, creating a significant opportunity to capture additional
recurring aftermarket replacement parts and service revenue.

The IDP acquisition also provides significant cost saving opportunities,
which we estimate to be approximately $75.0 million by mid-2002. We will incur
significant cash integration costs to achieve these cost savings. We expect
these cost savings to result from the execution of a number of actions
including:

- eliminating redundant administrative overhead;

- eliminating fixed costs by shifting overlapping sales personnel to more
economic facilities; and

- rationalizing manufacturing capacity.

In addition to the tangible and identified cost savings, we also expect to
benefit from significant operating synergies from several initiatives including:

- capitalizing on the opportunities to cross-sell valves, mechanical seals
and aftermarket services to IDP customers that are currently being
serviced by our competitors;

- realizing volume procurement savings; and

- lowering unit variable costs due to larger scale and better capacity
utilization.

COMPETITIVE STRENGTHS

WORLDWIDE MARKET LEADER. We are the largest provider of comprehensive flow
control systems in the world, offering an extensive range of pumps, valves,
mechanical seals and aftermarket services. We are the largest pump manufacturer
serving the petroleum, chemical and power generation industries and the second
largest overall pump manufacturer in the world. We believe we are also the
largest independent aftermarket product and service provider for the flow
control industry. We have one of the most extensive global manufacturing and
service networks in the industry, with 49 manufacturing facilities and more than
150 service and repair centers in 30 countries (after giving effect to planned
facilities rationalization within the first twelve months after closing of the
IDP acquisition). As the larger end users of flow control products continue to
consolidate and operate globally, they seek providers that can offer a broad
range of products and services on a global basis. Our widely recognized global
brands, extensive breadth of product and service offerings and worldwide
presence position us to serve our customers' flow control needs and capture
additional business.

AFTERMARKET SERVICES PROVIDE STABLE, CONSISTENT REVENUES. Industry analysts
estimate that approximately 86% of the lifetime cost of a pump consists of
aftermarket replacement parts, services and maintenance. We have a strong and
growing aftermarket business, representing approximately 49% of our 1999
revenues. The consistent requirement for maintenance and installation of
replacement parts provides
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us with a steady source of revenues from our aftermarket business at
significantly higher margins than our original equipment business. As a result
of Flowserve's historic focus on aftermarket services, we believe Flowserve has
achieved approximately 50% higher aftermarket revenue per installed pump than
IDP. The opportunity to leverage IDP's installed pump base to increase our
aftermarket business provides us with significant potential for growth.

LARGE INSTALLED EQUIPMENT BASE. We believe our global installed base of
approximately 1,100,000 pumps is the largest in the industry and provides us
with a unique platform to grow our aftermarket service business. When
outsourced, a significant amount of replacement parts orders and aftermarket
services business is awarded to the original equipment manufacturer, assuming
they provide those parts and services. We are well positioned to capitalize on
IDP's large installed equipment base which is significantly larger than
Flowserve's installed base, by utilizing our extensive service network of more
than 150 service and repair centers to cross-sell aftermarket products and
services to IDP's pump customers.

PROVEN ABILITY TO INTEGRATE ACQUISITIONS. Flowserve's management team has
extensive experience in acquiring and integrating companies, having completed 23
acquisitions since 1990. We completed the integration of the merger of Durco
with BW/IP, which created Flowserve in 1997, approximately one year ahead of
schedule and generated annual cost savings in excess of $37 million, which was
approximately 10% greater than originally announced. We employ a systematic and
decisive approach to integrating acquired companies by implementing best
practices across our operations, rationalizing manufacturing capacity,
eliminating overlapping sales and service coverage, reducing overhead costs,
leveraging supply chain opportunities and developing additional cross-selling
opportunities. Most of our key operating managers who led the integration of our
predecessor companies, BW/IP and Durco, will be responsible for the integration
of Flowserve and IDP. In order to integrate the IDP acquisition, we have a team
of specialists from Flowserve, IDP and third party consultants exclusively
dedicated to the integration.

GLOBAL MANUFACTURING AND SERVICE CAPABILITIES. After giving effect to
planned facilities rationalization, we will have one of the most extensive
global manufacturing and service networks in the industry, with 49 manufacturing
facilities and more than 150 service and repair centers located in 30 countries.
Our global operations help us serve our customers' manufacturing and aftermarket
service needs on a 24-hour basis. Because of the critical nature of the
applications in which our products are used, immediate response times are
important to capturing and retaining our customer's business. Original equipment
sales benefit from our global presence, as our customers often require real-time
design and engineering assistance for new projects.

DIVERSE CUSTOMER MIX. We sell our products and services to more than 1,000
companies globally including the world's leading engineering and construction
firms, OEMs, distributors and end users. In 1999, no one customer accounted for
more than 3% of our revenues and our top ten customers accounted for
approximately 11% of our revenues. Our customers operate in many industries
throughout the world, including petroleum, chemical, power generation and water
treatment. The IDP acquisition significantly increases our market share in the
power and water industries, both of which are expected to continue to grow
faster than the overall flow control industry.

COMPREHENSIVE PRODUCT OFFERINGS WITH LEADING BRANDS. We believe we offer
the most comprehensive array of products and services in the industry, providing
a "one-stop shop" for our customers, who increasingly require comprehensive flow
control solutions including pumps, valves, seals and services. Many of our
brands have an extensive history within our industry and are well-known for
their superior quality and high performance, including Flowserve(R), Byron
Jackson(R), Durco(R), Atomac(TM), BW Seals(R), Durametallic(R), United
Centrifugal(R), Stork(R), Worthington(R), Jeumont Schneider(R), Pleuger(R),
Pacific Wietz(TM) and Scienco(R). Our brand identity has created customer
loyalty and helps us capture additional business, as well as maintain existing
business, particularly as our customers look to procure from fewer
manufacturers.

EXPERIENCED MANAGEMENT TEAM. Our senior management team has an average of
over 25 years of experience in industrial manufacturing. In addition, this team
has substantial experience in the integration of acquired businesses, supply
chain management and lean manufacturing techniques. Our operating
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division managers are among the most experienced in the flow control industry,
with an average of more than 20 years of experience.

BUSINESS STRATEGY

EFFICIENTLY INTEGRATE THE ACQUISITION AND CAPITALIZE ON OPPORTUNITIES FOR
OPERATING SYNERGIES. We have begun to quickly integrate IDP's business in order
to capitalize on the significant operating and financial benefits of the IDP
acquisition. We have established a dedicated integration team comprised of
representatives from Flowserve, IDP and third party consultants that has created
a detailed plan to capture cost savings and achieve operating synergies through:
(i) eliminating redundant administrative overhead, (ii) cutting overlapping
sales personnel, (iii) shifting production to lower cost facilities, and (iv)
realizing volume procurement savings and other opportunities.

BECOME THE LOW COST PRODUCER AND INCREASE OPERATIONAL EFFICIENCY. We
continue to lower costs, enhance product quality, reduce manufacturing
inefficiency and increase product throughput. We have several initiatives in
process to accomplish this, including:

- FOCUS ON SUPPLY CHAIN MANAGEMENT. Supply chain management focuses on
reducing procurement costs. We have implemented several initiatives,
including creating alliances, standardizing procedures, negotiating more
favorable contract terms and conditions and forming dedicated teams for
procurement of raw materials on a company-wide basis.

- INCREASE OPERATIONAL EFFICIENCY. In early 2000, Flowserve introduced a
"lean" manufacturing program that is focused on optimizing the
productivity and profitability of Flowserve's plants around the world.
For example, in Flowserve's Kalamazoo, Michigan facility, Flowserve
expects to experience in 2001 an approximate 25% increase in
productivity, 25% reduction in work in process, 25% reduction in lead
times and a significant increase in usable shop floor space.

- IMPLEMENT 6 SIGMA. The 6 Sigma Value Analysis process has been launched
within IDP to accelerate improvement of processes, products and services.
This analytical process is focused on reducing product defects, improving
product quality and streamlining manufacturing and transactional
processes. We believe this process resulted in total cost savings for IDP
of approximately $10 million in 1999.

GROW AFTERMARKET SERVICE BUSINESS. Growing our aftermarket business is an
essential aspect of our strategy which complements our manufacturing
capabilities. Historically, many of our customers have utilized their in-house
service capabilities and outsourced only the most technical portion of their
service needs. Customers are increasingly utilizing third party aftermarket
service providers like us to reduce their fixed costs and improve profitability.
Our leading installed equipment base creates a powerful platform from which we
can expand this business. Our aftermarket products and service business offers
steady revenues with margins significantly higher than our original equipment
sales and enables us to remain close to our customers and quickly address their
requirements. We have significantly enhanced our aftermarket business with the
acquisition of Invatec. Invatec focuses on valve service and repair, which
complements Flowserve's pump and seal repair expertise, allowing us to expand
the range of services offered to our customers.

PURSUE CROSS-SELLING OPPORTUNITIES. Historically IDP has focused on
manufacturing pumps for the original equipment market. In contrast, Flowserve's
strategy focuses on meeting the full range of end user needs from original
equipment (pumps, valves and seals) to replacement parts and services. We plan
to capitalize on the cross-selling opportunities created by Flowserve's
comprehensive aftermarket business platform and IDP's extensive installed
equipment base. In addition, significant opportunities exist to cross-sell
valves and mechanical seals to IDP's pump customers, which are being primarily
serviced by our competitors. Further, Invatec's expanded service center network
provides an opportunity for us to extend pump repair coverage to Flowserve's and
IDP's customer base.

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OPERATIONS

We conduct our operations through three segments that encompass our primary
product types: (i) Rotating Equipment Division (pumps); (ii) Flow Control
Division (valves); and (iii) Flow Solutions Division (mechanical seals, repairs
and service). Through our Flow Solutions Division, we provide aftermarket
services. Through each of our segments, we provide aftermarket replacement
parts.

[1999 SALES BY DIVISION 1999 EBITDA BY DIVISION]

YEAR ENDED DECEMBER 31, 1999      YEAR ENDED DECEMBER 31, 1999
SALES BY DIVISION           OPERATING INCOME BY DIVISION

Flow        Flow      Rotating    Flow        Flow      Rotating
Solutions   Control   Equipment   Solutions   Control   Equipment
29%         14%       57%         35%         15%       50%

Note: Amounts are pro forma for the IDP and Invatec acquisitions and exclude
elimination of intercompany sales and corporate allocations.

ROTATING EQUIPMENT DIVISION ("RED"; 57% OF REVENUE)

Through our Rotating Equipment Division, we design, manufacture and
distribute engineered pump systems, replacement parts and related equipment
principally to industrial markets. Following the Acquisition, all of IDP's
operations will be integrated into RED. The sales price for a RED product can
range from $1,000 to $2.5 million. RED's products and services are primarily
used by companies that operate in the petroleum, chemical processing, power
generating, water treatment and general industrial markets. Following the
facilities rationalization contemplated in connection with the Acquisition, we
will manufacture our pump systems and components at eight plants in the United
States, four in Latin America, ten in Europe and the Middle East and one in
Asia. We also manufacture a small portion of our pumps through several foreign
joint ventures. We market our RED products, which are primarily sold to end
users and engineering and construction companies, through our worldwide sales
force, regional services and repair centers, independent distributors and sales
representatives.

RED Summary Segment Financials(1)

YEAR ENDED DECEMBER 31,
---------------------------------------
PRO FORMA(2)
1997     1998     1999        1999
------   ------   ------   ------------
(DOLLARS IN MILLIONS)

Sales.........................................  $412.8   $371.5   $353.2     $1,191.6
Operating income before all special items.....    51.0     39.1     23.1         80.2
Bookings......................................   420.2    371.6    331.5      1,171.5
Backlog.......................................   167.7    164.2    143.1        506.3
Identifiable assets...........................   301.2    285.6    223.0      1,333.4

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

(1) Summary segment financials are before corporate headquarters costs and
certain intercompany eliminations. These amounts are not discussed in
"Business -- Operations" and therefore the amounts for each of our
three segments will not agree in total to the consolidated figures
found elsewhere in this prospectus. See note 13 of Flowserve's Audited
Consolidated Financial Statements and note 7 of Flowserve's unaudited
Interim Consolidated Financial Statements contained in this prospectus
for additional segment information.

(2) Combines the historical results of Flowserve and IDP giving effect to
the Pro Forma adjustments anticipated to be realized from the
Acquisition. See note (1) to "Unaudited Pro Forma Consolidated
Statement of Operations."

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RED Products

We manufacture more than 350 different pump models, of which approximately
60-70% are highly engineered and designed for customized applications. These
high horsepower engineered pumps are manufactured with a wide range of metal
alloys and in a variety of configurations including pumps that utilize seals
(sealed) and pumps that do not (sealless). We continually update our pump
designs and materials for new technologies.

The following is a summary list of RED's general product types and globally
recognized brands:

PRODUCT TYPES                                BRAND NAMES
-------------                                -----------

- Chemical Process ANSI and ISO             - Byron Jackson(R)
- Petroleum Process API 610                 - Durco(R)
- Horizontal Between Bearing Single-stage   - United Centrifugal(R)
- Horizontal Between Bearing Multi-stage    - Wilson-Snyder(R)
- Vertical                                  - Flowserve(R)
- Submersible Motor                         - Stork(R)
- Specialty
- Nuclear

ENGINEERED HIGH PRESSURE DOUBLE CASE PUMP. This highly
engineered double case pump is utilized in the power
[PICTURE]                        industry for boiler feed water service in central power
stations and in the hydrocarbon industry for high pressure
charge and water injection applications.

DURCO(R)CHEMICAL PROCESS PUMPS. We offer a broad line of
Durco(R) chemical pumps which are widely recognized in the
chemical and related process industries for their materials,
expertise, engineering and ability to handle tough
[PICTURE]                        applications. Durco(R) process pumps are used in all areas
of a chemical or petrochemical plant to move fluids through
the facilities and have performed successfully in hundreds
of thousands of applications involving corrosive and toxic
substances in plants throughout the world.

BARREL TYPE PUMPS USED AS JET PUMP IN DECOKING
SYSTEM. Barrel type pumps are critical for our decoker
[PICTURE]                        systems. Our decoker systems were developed by IDP. These
pumps are responsible for breaking up coke deposits that
form during the petroleum refinery process.

RED New Product Developments

Our investments in new product research and development have consistently
led to producing longer lasting and more efficient pumps. The majority of our
new products and enhancements are driven by our customers' needs to achieve
higher throughput at lower costs with increased time between failure. Our
research and development efforts are solutions based and performed both by
dedicated personnel and throughout our manufacturing facilities. As a result, we
continually work with our customers to develop better products to improve their
operations. Some examples of our latest pump innovations, currently in
production, include:

- POLYCHEM SEALED AND SEALLESS PUMPS. A range of fluoropolymer PFA lined,
sealed and sealless pumps is being developed to American, European and
Japanese standards. Many common components are included in the range of
pump sizes, some of which are manufactured with

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proprietary technology. Applications in the worldwide chemical and
pharmaceutical industries include pumping of highly corrosive and toxic
fluids.

- GENERAL INDUSTRIAL SUMP PUMP. A line of vertical sump pumps for a variety
of general industrial applications including coolant, lube oil,
filtration, paint, industrial waste, sump, spray and pickling.

- GLOBAL WATER PUMP. This is an integrated product platform encompassing
horizontal (coupled and close-coupled), vertical sump and vertical
cantilevered pumps utilizing common hydraulic components. The new product
line will be based on a globally transportable design and will replace
multiple legacy products manufactured at four of our locations.

- SEALLESS CANNED AXIAL FIELD MOTOR PUMP. This innovative product embodies
a unique design that effectively makes the pump an integral part of the
motor. The design employs "built in" variable speed. The technology is a
platform for a variety of pump applications and product variants
including small sealless pumps for the process industries; specialty OEM
applications (i.e., CO(2) dry cleaning); marine/navy applications where
compact size and performance are important; and large pump applications.

RED Customers

RED sells its products to more than 1,000 customers including leading
engineering and construction firms, OEMS, distributors and end users. RED's
sales are diversified across several industries including the petroleum (38%),
power (16%), chemical (13%), water treatment (8%) and other industries (25%).
Our sales mix of original equipment products (61%) and aftermarket replacement
parts (39%) diversifies our business and mitigates somewhat the impact on us of
an economic downturn on our business.

Some of RED's top customers include: ARCO, Bechtel, BP Amoco, Dow Chemical,
Duke Power, DuPont, Eastman Chemical, ExxonMobil, Fluor, PEMEX, Royal
Dutch/Shell, Saudi Aramco and the United States Navy.

RED Competition

The industry is highly fragmented with more than 500 competitors. The top
ten pump companies accounted for less than 40% of total 1999 estimated worldwide
pump sales. We compete, however, primarily against a limited number of large
companies operating on a global scale. Competition is generally based on price,
expertise, delivery times, breadth of product offerings, contractual terms,
previous installation history and reputation for quality. Price competition for
original equipment tends to be more intense than for aftermarket services. Some
of the largest pump industry competitors include ITT Industries, Ebara, KSB,
Weir, Sulzer and Textron.

The pump industry has undergone a significant amount of consolidation in
recent years. For example, in the last 24 months, ten acquisitions of pump
companies with annual sales of at least $40.0 million each have been announced.
This trend can be illustrated by the mergers announced in 1999 including Weir
Group acquiring Warman, United Technologies acquiring Sundstrand and Eaton
acquiring Aeroquip-Vickers. The three primary causes for this consolidation
trend are: (1) the need to lower costs through reduction of excess capacity in
the market, (2) the desire among the leading players to solidify their market
positions in terms of both product offering and geographic coverage, and (3)
customers' preference to align with global full service suppliers and simplify
their supplier base. Despite the consolidation activity, the market remains
highly fragmented.

FLOW CONTROL DIVISION ("FCD"; 14% OF REVENUE)

Through our Flow Control Division, we design, manufacture and distribute
valves, actuators and related equipment. FCD's valve products are an integral
part of a flow control system and are used to control the flow of liquids and
gases. Substantially all of FCD's valves are specialized and engineered to
perform specific functions within a flow control system. The sales price for an
FCD product can range from $200 to $750,000. FCD's products are primarily used
by companies that operate in the petroleum,
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chemical, and power generation industries. We manufacture valves and actuators
through 4 plants in the United States, 6 in Europe and 3 in other regions. We
also manufacture a small portion of our valves through a foreign joint venture.
Manual valve products and valve actuators are distributed through our sales
force personnel and a network of distributors. Automatic control valves are
marketed through sales engineers and service and repair centers or on a
commission basis through sales representatives in our principal markets. We
increased FCD's manufacturing capacity with the purchase of Honeywell Inc.'s
European industrial control-valve product line in September 1999 and with the
purchase of the Valtek Engineering division of Allen Power Engineering, Limited
from Rolls Royce plc in July 1998.

FCD Summary Segment Financials(1)

YEAR ENDED DECEMBER 31,
------------------------
1997     1998     1999
------   ------   ------
(DOLLARS IN MILLIONS)

Sales......................................................  $317.2   $313.2   $295.3
Operating income before all special items..................    47.0     43.8     25.1
Bookings...................................................   302.4    318.9    293.1
Backlog....................................................    69.8     71.3     67.6
Identifiable assets........................................   219.1    233.1    213.3

-------------------------
(1) Summary segment financials are before corporate headquarters costs and
certain intercompany eliminations. These amounts are not discussed in
"Business -- Operations" and therefore the amounts for each of our
three segments will not agree in total to the consolidated figures
found elsewhere in this prospectus. See note 13 of Flowserve's
Consolidated Financial Statements and note 7 of Flowserve's unaudited
Interim Consolidated Financial Statements contained in this prospectus
for additional segment information.

FCD Products

We manufacture approximately 50 different valves, actuators and automated
valve accessories, of which 65% are highly engineered and designed for
customized applications. Our valves are used in a wide variety of applications
from general service to highly corrosive environments as well as in environments
experiencing extreme temperatures and/or pressures and applications requiring
zero leakage. In addition to traditional valves, we also produce valves under
the Valtek(R) brand that incorporate "smart" valve technologies. "Smart" valve
technology packages integrate high technology sensors, microprocessor controls
and digital positioners into a high performance control valve, which permits
real time system analysis, system warnings and remote services. We were the
first company to introduce "smart" valve technologies in response to demands for
increased plant automation, more efficient process control and digital
communications. Through our technology alliance with Honeywell Inc., FCD's
"smart" and control valve technologies are being incorporated in Honeywell's
distributed control systems. We offer a growing line of digital products and are
incorporating digital technologies into existing products to upgrade
performance.

The following is a summary list of FCD's general product types and globally
recognized brands:

PRODUCT TYPES                               BRAND NAMES
-------------                               -----------

- Actuator Accessories                      - Accord(R)
- Control Valve                             - Anchor/Darling
- Digital Communications                    - Atomac(TM)
- Manual Quarter-turn Valves                - Automax(R)
- Valve Automation Systems                  - Battig
- Valve/Actuator Software                   - Durco(R)
- Nuclear Valves                            - Kammer(R)
- Quarter-Turn Actuators                    - Sereg(TM)
- Valtek(R)

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[PICTURE]
DURCO(R) 1/4-TURN VALVE UNDER AUTOMAX(TM) ACTUATOR
SUPPORTED BY ACCORD(R) POSITIONER. Our product line of
Durco(R) 1/4-Turn Valves consist of manually operated plug,
ball and butterfly valves which are widely used in the
petroleum refining, chemical processing, paper and
pharmaceutical industries. Automax(R) actuators and
accessories are available as separate components or as part
of an integrated 1/4-turn valve automation package.

[PICTURE]
SMART VALVE PRODUCTS. We offer the Valtek(R) intelligent
system for control valves -- in our opinion, the only true
"smart valve" package available today that includes process
sensors, a micro processor-based controller and a highly
accurate digital positioner mounted on a high performance
control valve.

FCD New Product Developments

Our investments in new product research and development are focused on
maintaining our technological leadership position and differentiating our
product offering. When necessary, we invest in the redesign of existing products
in an effort to improve their performance and continually meet customer needs.
Some examples of our latest product innovations include:

- LOGIX DIGITAL POSITIONER. This enhances performance, speed and accuracy
of pneumatic control valves and provides for quick calibration and setup
due to its revolutionary circuitry. This positioner is available in both
standard digital and advanced "smart" versions. The Logix digital
positioner keeps Flowserve on the leading edge of technology in the
control valve industry.

- BUSWITCH. This enables control and monitoring of automated on/off
quarter-turn valves through FOUNDATION fieldbus technology. The BUSwitch
technology is the first of its kind in the marketplace for on/off
applications. Customers will realize greater ability to perform
predictive and preventative maintenance, thus saving on installation and
operating costs. Due to this enhancement FCD expects to gain additional
business for quarter-turn valve and actuation products due to the market
potential of this product.

FCD Customers

FCD's customer mix is diversified within several industries including
chemical (51%), petroleum (16%), power (12%) and other industries (21%). We
benefit from a mix of original equipment sales (81%) and aftermarket parts
(19%).

Some of FCD's top customers include: Air Liquide, Air Products, Celanese,
Dow Chemical, DuPont, Eastman Chemical, Formosa Plastics, Merck and Royal
Dutch/Shell.

FCD Competition

Like the industrial pump market, the industrial valve market is highly
fragmented and has undergone a significant amount of consolidation in recent
years. According to a study done by the Freedonia Group, the leading six public
companies account for less than 25% of the market for standard industrial
valves. Beyond these six public companies, there are hundreds of private
companies with the largest three

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accounting for a combined 4% of the market. Within the valves segment, we
believe that the top ten domestic manufacturers generate less than 25% of
domestic sales.

FLOW SOLUTIONS DIVISION ("FSD"; 29% OF REVENUE)

Through our Flow Solutions Division, we design, manufacture and distribute
mechanical seals and sealing systems and provide parts, repair and services for
flow control equipment used in process industries. Flow control products require
mechanical seals to be replaced throughout the products' useful lives. The
replacement of mechanical seals is an integral part of aftermarket services. The
sales price for an FSD product can range from $3 to $140,000. Our mechanical
seals are used on a variety of pumps, mixers, compressors, steam turbines and
specialty equipment, primarily in the petroleum, chemical processing, power
generation, water treatment industries and general industrial end-markets.
Through FSD's global network of more than 150 service and quick response centers
in more than 30 countries we provide service, repair and diagnostic services for
maintaining flow control system components.

FSD Summary Segment Financials(1)

YEAR ENDED DECEMBER 31,
----------------------------------------
PRO FORMA(2)
1997     1998     1999         1999
------   ------   -------   ------------
(DOLLARS IN MILLIONS)

Sales.........................................  $430.1   $428.5   $438.5       $599.5
Operating income before all special items.....    62.7     65.1     56.1         62.4
Bookings......................................   439.5    430.5    436.0        597.0
Backlog.......................................    68.2     64.2     50.4         50.4
Identifiable assets...........................   257.5    266.5    292.0        403.0

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

(1) Summary segment financials are before corporate headquarters costs and
certain intercompany eliminations. These amounts are not discussed in
"Business -- Operations" and therefore the amounts for each of our
three segments will not agree in total to the consolidated figures
found elsewhere in this prospectus. See note 13 of Flowserve's
Consolidated Financial Statements and note 7 of Flowserve's unaudited
Interim Consolidated Financial Statements contained in this prospectus
for additional segment information.

(2) Combines the historical results of Flowserve and Invatec giving effect
to the Pro Forma adjustments anticipated to be realized from the
acquisition of Invatec. See note (1) "Unaudited Pro Forma Consolidated
Statement of Operations."

We manufacture mechanical seals through three plants in the United States,
two in Europe, three in Latin America and three in Asia. We also manufacture our
mechanical seals through foreign joint ventures. Our mechanical seal products
are primarily marketed through our sales force directly to end users. A portion
of our mechanical seal products is sold directly to OEMs for incorporation into
pumps, compressors, mixers or other rotating equipment requiring mechanical
seals. Distributors and sales agents are also used in the sale of mechanical
seals.

FSD Products and Services

MECHANICAL SEALS. Mechanical seals accounted for approximately 51% of 1999
FSD sales. We design, manufacture and distribute approximately 180 different
models of mechanical seals and sealing systems, of which approximately 65% are
highly engineered and designed for customized applications. We believe our
ability to turn around new seal product orders within 72 hours from the
customer's request, through design, engineering, manufacturing, testing and
delivery provides us with a competitive advantage. The mechanical seal is
critical to the smooth operation of pumps, compressors and mixers for prevention
of leakage and emissions of hazardous substances and the reduction of shaft
wear. We also manufacture a gas lubricated mechanical seal used in high-speed
compressors for gas transmission and oil and gas production markets. We
continually update our mechanical seals and sealing systems for new
technologies.

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The following is a summary list of FSD's general product types and globally
recognized brands:

PRODUCT TYPES                               BRAND NAMES
-------------                               -----------

- Cartridge                                 BW Seals(R)
- Dry-running                               Durametallic(R)
- Metal bellow                              Five Star Seal(R)
- Elastomeric                               GASPAC(R)
- Split                                     Pacific Wietz(TM)
- Gas barrier                               Pac-Seal(R)
- Service and repair

[PICTURE]

FSD SEAL GROUP. FSD manufactures and markets
highly engineered mechanical shaft seals for
containing corrosive, volatile, abrasive, precious
or flammable fluids. Our mechanical seals are used
on pumps, compressors, mixers, steam turbines and
other rotating-motion equipment. Flowserve seals
offer innovative designs, responsiveness, and
development of new technologies that aim to produce
lower maintenance and operating costs. Flowserve
seals can be found in nearly every process fluid
industry, including petroleum refining, oil and gas
production and pipelines, chemical processing, power
generation, pharmaceutical, mining and ore
processing, and pulp and paper. Major manufacturing
locations are in Michigan, The Netherlands and
Germany. FSD also has a worldwide network of quick
response centers, conveniently located for immediate
delivery of factory parts and complete seal
assemblies.

SERVICE. Service accounted for approximately 49% of 1999 FSD sales. We
provide aftermarket services through our global network of 575 service personnel
operating through more than 150 service and quick response centers in 30
countries, after giving effect to Flowserve's integration of Invatec. Our
service personnel provide a comprehensive set of equipment maintenance services
for flow control systems, including repair, advanced diagnostics, installation,
commissioning, re-rate and retrofit programs and full machining capabilities. A
large portion of our service work is performed on a quick response basis, and we
offer 24-hour service in all of our major markets. In 1998, we expanded our
service network with the acquisition of two valve repair companies in Belgium
and the Netherlands and a Canadian pump service repair facility. In October
1999, we acquired a valve repair company in Southern California. In January,
2000, we acquired Econ, another valve service business located in the
Netherlands.

Invatec Acquisition

On January 13, 2000, Flowserve completed the acquisition of Invatec.
Invatec provides repair, service and distribution of parts to many of the same
end users that we serve, but with a focus on valve products. The purchase
involved acquiring all of the outstanding stock of Invatec and assuming
Invatec's existing debt and related obligations. The purchase price was
approximately $18.3 million in cash. Liabilities of $94.9 million were
simultaneously paid through borrowing under Flowserve's revolving credit
agreement. Prior to Flowserve's acquisition, Invatec had approximately 500
service technicians, operating through 64 domestic locations and 2 UK locations.
We have identified 19 facilities that we are closing and consolidating with our
existing locations. Invatec significantly enhances our service capabilities and
helps us stay closer to end users on a day-to-day basis. This acquisition builds
on our plan to continue strengthening our aftermarket service and repair
business, which offers revenues that are recurring in nature with margins
significantly higher than original equipment sales.

Invatec is a single-source provider of comprehensive maintenance, repair,
replacement and value added distribution services for industrial valves, piping
systems and other flow control system components. For valves, Invatec services a
wide range of equipment including control, safety relief, manual and automated
valves both off site or on-line as needed. Invatec also provides field machining
services for

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turning, milling, drilling and severing/beveling work. Large portable machining
equipment and mobile machine shops are fully equipped for cleaning, machining,
welding, lapping and testing of equipment. Invatec offers all these on-site
services for a faster, more cost-efficient solution than conventional repair
methods. Invatec also provides on-call valve leak service and utilizes its
leakseal technology for volatile organic chemical and hydrocarbon leaks.
Safeseal technology for on-line valve restoration provides a permanent solution
for leaking rising stem valves. Invatec also provides additional field services
including routine and turnaround maintenance services, site evaluations, cost
evaluations, proactive maintenance programs for pumps and valves, shutdown
planning and mechanical repair.

Invatec Summary Financials

YEAR ENDED DECEMBER 31,
------------------------
1997     1998     1999
------   ------   ------
(DOLLARS IN MILLIONS)

Sales......................................................  $ 58.6   $154.6   $161.0
Operating income before all special items(1)...............     2.0      6.6      6.7
EBITDA(2)..................................................     3.2     11.1     11.5
Total assets...............................................   105.4    183.7    132.3

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

(1) Special items in 1997 consisted of $7.6 million in special non-cash
compensation expenses, in 1998 consisted of $2.2 million in the
write-off of capitalized costs and $2.0 million of merger transaction
costs in 1999.

(2) EBITDA means net income before interest, taxes, depreciation,
amortization, other income, net (excluding commission and royalty
income) and other non-recurring items. Other non-recurring items in 1997
consisted of $7.6 million in special non-cash compensation expenses in
1998 consisted of $2.2 million in the write-off of capitalized costs and
$39.1 million of goodwill impairment, $3.8 million loss on assets held
for sale and $2.0 million of merger transaction costs in 1999. Such
definition of EBITDA may differ from the definition of EBITDA used by
other companies and should not be considered as an alternative to net
income, cash flows or any other items calculated in accordance with
generally accepted accounting principles or as an indicator of Invatec's
operating performance.

FSD New Product Developments

Our investments in new product research and development are focused on
developing products that last longer and work more efficiently. Approximately
30% of our original equipment mechanical seal sales for 1999 were sales of
products developed within the past five years. The following are examples of our
latest mechanical seal and seal system innovations:

- Innovative Standard Cartridge

- GX2000 Double Gas Seal

- Gaspac(R) HP High Pressure Compressor Seal

- Gas Steam Turbine Seal

- LS-300 Cartridge Seal

- SLC Flushless, Heavy Duty Slurry Seal

FSD Customers

Our mechanical seal products are sold to OEMs for incorporation into pumps,
compressors, mixers or other rotating equipment requiring mechanical seals, and
directly to end-users. FSD's mix of mechanical seal sales is approximately 23%
for original equipment and 77% for aftermarket replacement and parts. FSD's
mechanical seal sales in 1999 were diversified among several industries
including petroleum (42%), chemical (36%), power generation (3%) and other
industries (19%).

We have established alliances with over 200 customers including BP Amoco,
Chevron, Dow Chemical, DuPont, Eastman Chemical, ExxonMobil and Royal
Dutch/Shell. In approximately 70% of our alliances, we have been selected as the
primary supplier and service provider. These alliances provide significant
benefits to us, as well as to our customers by creating a more efficient supply
chain through the

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reduction of procurement costs and increased communication with our customers.
Our alliances enable us to provide products and services to our customers in a
timely and cost-effective manner. We plan to capture an increasing share of our
current alliance partners' business as well as expand these types of
arrangements to new customers.

FSD Competition

In the aftermarket segment, we often compete against the customers'
in-house maintenance departments. An estimated 86% of the total costs of pump
ownership are attributable to maintenance, replacement parts and ongoing
service. The aftermarket service business is highly fragmented and there are no
other large independent competitors offering comprehensive services for flow
control products. Customers frequently use in-house resources or buy services
from small and local operations. Delivery speed and the proximity of services
and repair centers are particularly important in the aftermarket segment, with
customers more likely to rely on top tier, rather than smaller, providers for
more complex servicing needs.

REGULATORY DIVESTITURES

In connection with the IDP acquisition, we have entered into a consent
decree with the U.S. Department of Justice to resolve its antitrust concerns
related to the acquisition. The consent decree was filed with the United States
District Court for the District of Columbia on July 28, 2000 and published in
the Federal Register on September 13, 2000. See "Risk Factor -- Risks Relating
to our Business -- Although we have entered into a consent decree with the U.S.
Department of Justice addressing its antitrust concerns related to the
Acquisition, we may not obtain a final court order approving the Acquisition".

Pursuant to this consent decree, we have committed to divest the following
assets:

- certain designated models of highly engineered pumps in four product
lines serving the oil refinery and power industry markets;

- Flowserve's Tulsa manufacturing facility; and

- on-site plant and equipment at two IDP service and repair centers located
in the United States

In the divestures of product lines, we will be able to retain certain
overlapping models in all of the product lines. In addition, we will be required
to grant the purchaser of the divested product line(s) the exclusive right to
sell such product line(s) for installation within the United States and a
non-exclusive right to sell such product line(s) for installation outside the
United States, except for special provisions permitting sales in the U.S. to two
major alliance customers of equipment and parts on certain product lines for
specified periods of time from the date of entry of the consent decree.

With respect to the divestiture of the Tulsa manufacturing facility,
Flowserve must leave all production equipment and related assets used to
manufacture the pump product lines to be divested.

We must make the above divestitures within 150 calendar days after the
filing of the consent decree, subject to one 30-day extension by the Department
of Justice, in its sole discretion. If we have not divested these assets within
that time period, a trustee will be appointed by the federal district court, who
shall have the sole right to divest the assets following such appointment.

The above divestitures would affect less than three percent of the combined
1999 revenues of Flowserve and IDP. In the opinion of management, the impact of
these divestitures will not be material to our overall pro forma financial
position or results of operations.

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SALES AND MARKETING

We sell our products through a direct sales force totaling over 700 sales
and marketing personnel, distributors and commissioned sales agents in 70
countries. A significant percentage of our direct sales force has technical
backgrounds, including degrees in engineering. We believe that our worldwide
sales and distribution presence enables us to provide timely and responsive
support and service to our customers, many of which operate internationally, and
to capitalize on growth opportunities in both developed and emerging markets
around the world.

INTERNET AND E-COMMERCE INITIATIVES

Our Internet site (www.flowserve.com) provides information to existing and
potential customers, detailed information about our three divisions' products
and services, as well as supporting internal data sharing and exchange. We are
establishing several customer specific extranets through which we will share and
communicate information related to individual projects or distribution
activities, which will be implemented during 2000. The core of our e-commerce
strategy is to: (1) work closely with our major customers in identifying
opportunities to electronically integrate our work processes; (2) extend our
traditional lines of marketing and distribution using Web-based technologies;
and (3) reduce product lead time and supplier costs by sharing and leveraging
planning, scheduling and purchasing information on a global basis.

PROPERTIES

Our corporate headquarters are located in Irving, Texas encompassing
approximately 34,000 square feet of leased space. Information on the principal
manufacturing facilities, by segment, after giving effect to the Transactions
and the Invatec acquisition and eight announced facility closings, is as
follows:

RED                        FSD                        FCD
------------------------   ------------------------   ------------------------
NUMBER OF                  NUMBER OF                  NUMBER OF
FACILITIES   SIZE(FT(2))   FACILITIES   SIZE(FT(2))   FACILITIES   SIZE(FT(2))
----------   -----------   ----------   -----------   ----------   -----------

Domestic.......................       8        1,129,000        3          172,500         4          528,400
International..................      15        1,991,000        8          286,400         9          398,850

Most of our principal manufacturing facilities are owned and our leased
facilities are subject to long-term lease agreements.

We estimate that we utilize approximately 55%-65% of our manufacturing
capacity. Pursuant to a restructuring program announced in December 1999, we
expect to close one of the FSD manufacturing plants in the United States and a
number of smaller U.S. and foreign facilities. In addition, in connection with
our integration of IDP's operations, we intend to shut down a number of
additional Flowserve and IDP plants and service and repair centers in order to
realize the opportunities for cost savings and synergies presented by the IDP
acquisition. Management believes that after giving affect to the planned
rationalization of our facilities we will have sufficient capacity to meet
increased customer demand as our market recovers.

We maintain a substantial network of domestic and foreign service and
repair centers and sales offices, most of which are leased.

In connection with the IDP acquisition, we have entered into a consent
decree with the U.S. Department of Justice to resolve its antitrust concerns
related to the acquisition. This consent decree requires us to divest certain
product lines, our manufacturing facility in Tulsa, Oklahoma, and on-site plant
and equipment at two IDP service and repair centers located in the United States
that would affect less than three percent of the combined 1999 revenues of
Flowserve and IDP. See "-- Regulatory Divestitures."

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RESEARCH AND DEVELOPMENT

We conduct research and development at various facilities. In 1999, 1998
and 1997, we spent approximately $28.6 million, $30.1 million, and $30.5
million, respectively, on company-sponsored research and development, primarily
for new product development and extensions of existing products.

Our research and development group consists of engineers involved in new
product development as well as the support and improvement of existing products.
Additionally, we sponsor consortium programs for research with various
universities and conduct limited development work jointly with certain of our
vendors, licensees and customers. We believe current expenditures are adequate
to sustain ongoing research and development activities.

RAW MATERIALS

The principal raw materials we use in manufacturing our products are
readily available. The main raw materials we use include bar stock and
structural steel, castings, fasteners, gaskets, motors, silicon and carbon faces
and teflon(R). While substantially all raw materials are purchased from outside
sources, we have been able to obtain an adequate supply of raw materials and no
shortage of such materials is currently anticipated. We intend to expand our use
of worldwide sourcing to capitalize on low cost sources of purchased goods.
Certain corrosion-resistant castings for our pumps and quarter-turn valves are
manufactured at our Dayton, Ohio foundries, and other metal castings are
manufactured at three other foundries or purchased from outside sources. We also
produce most of our highly-engineered corrosion resistant plastic parts for
certain pump and valve product lines. This includes rotomolding, as well as
injection and compression molding, of a variety of fluorocarbon and other
plastic materials. Suppliers of raw materials for nuclear markets must be
qualified by the American Society of Mechanical Engineers and, accordingly, are
limited in number. However, to date we have experienced no significant
difficulty in obtaining such materials.

EMPLOYEES AND LABOR RELATIONS

We employ approximately 12,000 persons of whom approximately 47% work in
the United States. Our hourly employees at five principal U.S. pump
manufacturing plants, plus those at our valve manufacturing plant in
Williamsport, Pennsylvania and at our foundries in Dayton, Ohio are represented
by unions. Our operations in the following countries are unionized: Argentina,
Austria, Belgium, Brazil, Canada, France, Germany, Italy, Mexico, The
Netherlands, Spain and United Kingdom. We have a highly educated technical
workforce, many of whom have engineering degrees. We believe relations with our
employees throughout our operations are satisfactory, including with those
employees represented by unions.

TRADEMARKS AND PATENTS

We own a number of trademarks and patents relating to the name and design
of our products. We consider our trademarks Flowserve(R), Byron Jackson(R),
Durco(R), Atomac(TM), BW Seals(R), Durametallic(R), United Centrifugal(R),
Stork(R), Worthington(R), Jeumont Schneider(R), Pleuger(R), Pacific Wietz(TM)
and Scienco(R) to be important to our business. The patents underlying much of
the technology for our products have been in the public domain for many years.
Surviving patents are not considered, either individually or in the aggregate,
to be material to our business. However, our pool of proprietary information,
consisting of know-how and trade secrets relating to the design, manufacture and
operation of our products and their use, is considered particularly important
and valuable. Accordingly, we protect such proprietary information. In general,
we are the owner of the rights to the products which we manufacture and sell,
and we are not dependent in any material way upon any license or franchise to
operate.

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ENVIRONMENTAL MATTERS

We are subject to environmental laws and regulations in all jurisdictions
in which we have operating facilities. We periodically make capital expenditures
for pollution abatement and control to meet environmental requirements. At
present, we have no plans for any material capital expenditures for
environmental control facilities. However, we have experienced and continue to
experience operating costs relating to environmental matters, although certain
costs have been offset by our successful waste minimization programs.

We are also currently investigating and remediating several contaminated
properties, including several properties that we recently obtained through the
Acquisition that Ingersoll-Rand is responsible for remediating pursuant to the
IDP purchase agreement. While we believe that Ingersoll-Rand will honor its
contractual remediation obligations in this regard, we cannot assure you of
this. In the event that Ingersoll-Rand were to successfully dispute its
remediation obligations or our operations were to cause additional
contamination, we could incur clean up costs or other liabilities in connection
with these properties.

Based on information currently available, we believe that future
environmental compliance expenditures will not have a material adverse effect on
our financial position and have established allowances which we believe to be
adequate to cover potential environmental liabilities. See "Risk
Factors -- Environmental compliance costs and liabilities could adversely affect
our financial condition."

LEGAL PROCEEDINGS

We are involved in ordinary routine litigation incidental to our business,
none of which we believe to be material to our financial condition.

In addition, we are involved as a "potentially responsible party" at five
former public waste disposal sites that may be subject to remediation under
pending government procedures. Under certain environmental laws, we could be
held jointly and severally liable for all investigation and remediation costs at
these sites, as well as related natural resources damages, without regard to
fault. The sites are in various stages of evaluation by federal and state
environmental authorities. The projected cost of remediating these sites, as
well as our alleged "fair share" allocation, is uncertain and speculative until
all studies have been completed and parties have either negotiated an amicable
resolution or the matter has been judicially resolved. At each site, there are
many other parties who have similarly been identified, and the identification
and location of additional parties is continuing under applicable federal or
state law. Based on our preliminary information about the waste disposal
practices at these sites and the environmental regulatory process in general, we
believe that it is likely that ultimate remediation liability costs for each
site will be apportioned among all parties, including site owners and waste
transporters, according to the volumes and/or toxicity of the wastes shown to
have been disposed of at the sites.

We also have been named as one of a number of defendants in numerous
lawsuits involving approximately 70,000 claims (of which approximately 35,000
have been settled or dismissed) that seek to recover damages for alleged
personal injury claimed to result from exposure to asbestos-containing products
formerly manufactured and distributed by us. All such products were used within
self-contained process equipment, and management does not believe that there was
any emission of ambient asbestos fiber during the use of this equipment. We have
successfully resolved virtually all closed cases without payment or with a
nominal payment. We believe that the open cases are without merit, that we have
adequate insurance to pay most of the costs and liabilities in connection
therewith and that the ongoing costs and liabilities associated with current and
future asbestos-related litigation will not adversely affect us. Nevertheless,
unexpected adverse future events, such as a significant increase in the number
of new cases or changes in our current insurance arrangements, could result in
liabilities that could have a material adverse effect on our business, financial
condition or results of operations.

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INDUSTRY

The flow control industry generates $50-55 billion per year in worldwide
sales and includes pumps, valves, mechanical seals and aftermarket services.
According to industry sources, engineered pumps account for approximately $23
billion, valves approximately $21 billion, seals approximately $2-3 billion and
aftermarket services approximately $8-10 billion of annual world-wide sales. The
pump, valves and aftermarket service segments are projected to grow annually at
3-4%, 3-4% and 7-8%, respectively, over the next several years. The engineered
pump segment in which we operate excludes non-industrial applications, such as
residential, which represents a market of approximately equivalent size to the
industrial segment.

Quality and reliability of equipment are critical as the failure of a pump,
valve or seal may halt the flow process. Of the three product types, at the time
of the original equipment purchase, pumps are generally the most expensive
followed by valves then seals. During the replacement cycle, seals may have to
be replaced every few hours in highly corrosive applications, while pumps can
run for months or years before needing replacement. Products and services in the
flow control industry are sold to engineering and construction firms, OEMs,
distributors and end users throughout the world.

Despite the consolidation trend over the past ten years, the industry
remains highly fragmented. Competition for original equipment sales among the
industry leaders is primarily against a select group of large companies
operating on a global scale. Competition for original equipment sales is
generally based on price, expertise, delivery times, breadth of product
offerings, contractual terms, previous installation history and reputation for
quality. In the pump segment, there are more than 500 companies, with the top
ten pump companies accounting for less than 40% of total 1999 estimated
worldwide annual pump sales. In the valves segment, we believe that the top ten
domestic manufacturers generate less than 25% of domestic sales. The aftermarket
service sector is extremely fragmented as many end users either use in-house
resources or buy service from local operators, which are often very small.

COMPETITION

The industry is highly fragmented, although for original equipment sales
the industry leaders primarily compete against a selected number of large
companies operating on a global scale. In the pump segment, there are more than
500 companies, with the top ten pump companies accounting for less than 40% of
total 1999 estimated worldwide annual pump sales. In the valves segment, we
believe that the top ten domestic manufacturers generate less than 25% of
domestic sales. The aftermarket service sector is extremely fragmented as
customers either use in-house resources or buy service from local operators,
which are often times very small. Competition for original equipment sales is
generally based on price, expertise, delivery times, breadth of product
offerings, contractual terms, previous installation history and reputation for
quality.

END MARKET SEGMENTS

The following end market discussions address the primary segments we serve.

HYDROCARBON PROCESSING (PETROLEUM) INDUSTRY

Capital spending in the hydrocarbon processing (petroleum) industry fell by
approximately 20% in consecutive years in 1998 and 1999 as a result of
historically low oil prices. The depressed oil prices caused many planned
projects to become uneconomical. With the strong recent recovery in oil prices
to a year-to-date high of over $35.00 per barrel in 2000, from a low of $10.73
in December of 1998, industry analysts project HPI expenditures in the petroleum
and chemical sectors to begin to sustain growth momentum over the next several
years. Additionally, the recent consolidation among some of the oil industry's
largest competitors also impacted capital spending levels as those companies
sought to rationalize the combined entities' assets. Growth in capital spending
is expected to be driven by new projects, reinstated projects and deferred
maintenance work.

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CHEMICAL

The chemical industry appears to be in the early stages of recovery driven
by improved markets in Europe, Latin America and Asia. Industry analysts are
forecasting higher sales, volumes and capital investments for chemical companies
in 2000 and into 2001. Chemical producers' margins are expected to increase in
2000 and 2001 as price increases outpace raw material cost increases. This trend
appeared to be somewhat offset by higher feed stock prices in 2000, but this
imbalance is expected to reverse in 2001 as prices for most chemical products
have been rising in response to the continued strength of the U.S. economy and
the economic recovery in Asia.

POWER

The U.S. power generation market is expected to require increasing levels
of capital spending as the country's installed plants are becoming outdated and
obsolete, and therefore need to be replaced and repowered. In addition, the
deregulation of the power industry could lead to additional and more efficient
capacity as competition between suppliers heightens and producers focus on
lowering prices and costs while enhancing quality of service. Both these factors
have led to an increase in demand for flow control products and services. China
is the largest purchaser of pumps for new systems and represents 38% of the
global pump market; however, China's replacement market share is only 13%. In
the United States the opposite is true, as the United States holds a 9% share
for new pumps with a 32% market share for replacement pumps.

WATER TREATMENT

Demand for new pumps in the water treatment market is largely attributable
to the significant need for potable water and water treatment facilities around
the world, particularly in lesser-developed countries. It is estimated that
nearly half a billion people around the world face a shortage of potable water,
and that number is expected to grow. The anticipated economic improvement in
Asia, which requires a significant amount of infrastructure, is also a large
driving force behind new pump sales growth. The need for water and water
treatment is not limited to developing countries. A report published in August
1999 estimated that the United Kingdom must spend almost $60.0 billion over the
next ten years building wastewater treatment facilities to comply with new
European water quality standards. Industry analysts estimate that new and
replacement pump sales in the water treatment industry will grow at a compounded
annual growth rate of 9% and 5%, respectively, over the next four years.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The table below sets forth the names and ages of each of Directors and
officers of Flowserve, as well as the positions and offices held by such
persons. A summary of the background and experience of each of these individuals
is set forth after the table. The Board of Directors consists of 9 directors who
are divided into three classes, with one full class being elected at each annual
meeting of shareholders.

MANAGEMENT AND BOARD OF DIRECTORS

NAME                                         AGE                    POSITION
----                                         ---                    --------

C. Scott Greer............................   49    Chairman, President and Chief Executive
Officer and Director
Renee J. Hornbaker........................   48    Vice President and Chief Financial Officer
Howard D. Wynn............................   53    Vice President and President of Rotating
Equipment Division
George A. Shedlarski......................   56    Vice President and President of Flow
Solutions Division and President of Flow
Control Division
Rick L. Johnson...........................   47    Vice President and Controller
Kenneth P. Bell...........................   52    Vice President, Manufacturing Operations
Mark D. Dailey............................   41    Vice President, Supply Chain Integration
Cheryl D. McNeal..........................   50    Vice President, Human Resources
Rory E. MacDowell.........................   50    Vice President and Chief Information
Officer
Ronald F. Shuff...........................   48    Vice President, Secretary and General
Counsel
M. Kathleen McVay.........................   45    Vice President and Treasurer
Diane C. Harris...........................   57    Director
James O. Rollans..........................   58    Director
Hugh K. Coble.............................   65    Director
George T. Haymaker, Jr. ..................   62    Director
William C. Rusnack........................   55    Director
Michael F. Johnston.......................   53    Director
Charles M. Rampacek.......................   57    Director
Kevin E. Sheehan..........................   55    Director

C. SCOTT GREER has been our President since July 1999, Chief Executive
Officer since January 2000 and Chairman of the Board of Directors since April
2000. He has also been a director since 1999. Mr. Greer was Chief Operating
Officer from July 1999 until succeeding Bernard G. Rethore as Chief Executive
Officer in January 2000. Mr. Greer had been President of UT Automotive, a
subsidiary of United Technologies Corporation, a supplier of automotive systems
and components, from 1997 to 1999. He was president and a director of Echlin,
Inc., an automotive parts supplier, from 1990 to 1997, and its Chief Operating
Officer from 1994 to 1997.

RENEE J. HORNBAKER has been our Vice President and Chief Financial Officer
since December 1997. She was Vice President, Business Development and Chief
Information Officer in 1997. She served as Vice President, Finance and Chief
Financial Officer of BW/IP, Inc. in 1997 and Vice President, Business
Development of BW/IP from 1996 to 1997. She also served as Director-Business
Analysis and Planning of Phelps Dodge Industries, the diversified international
manufacturing business of Phelps Dodge Corporation in 1996 and
Director-Financial Analysis and Control from 1991 to 1996.

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HOWARD D. WYNN has been our President of Rotating Equipment Division since
1997. He was Vice President of BW/IP, Inc. and President, Pump Division of
BW/IP, Inc. from 1996 to 1997 and Vice President, Pump Division of BW/IP, Inc.
from 1993 to 1996.

GEORGE A. SHEDLARSKI has been our President of Flow Solutions Division
since January 1999 and President of Flow Control Division since August 1999. He
was President of Fluid Sealing Division from 1997 to 1999, President of Service
Repair Division in 1997, President of Rotating Equipment Group in 1997 and Group
Vice President, Industrial Products Group from 1994 to 1997 .

RICK L. JOHNSON has been our Vice President since January 1998 and
Controller since November 1998. He served as Vice President and Controller of
the Industrial Products Division from 1997 to January 1998, Industrial Products
Group Vice President and Controller from 1995 to 1997 and President, Durco
Valtek (Singapore) from 1993 to 1995.

KENNETH P. BELL has been our Vice President, Manufacturing Operations since
January 2000. He was General Manager and held other executive positions from
1985 to 1999 at UT Automotive, a subsidiary of United Technologies Corporation,
a supplier of automotive systems and components.

MARK D. DAILEY has been our Vice President, Supply Chain Integration since
September 1999. He was Vice President, Supply Chain and other Supply Chain
management positions, from 1992 to 1999 for the North American Power Tools
Division of The Black and Decker Company, a manufacturer of power tools,
fastening and assembly systems and security hardware and plumbing products.

CHERYL D. MCNEAL has been our Vice President, Human Resources since 1996.
She was Assistant Vice President, Human Resources and held other Human Resource
management positions at NCR from 1978 to 1996.

RORY E. MACDOWELL has been our Vice President and Chief Information Officer
since 1998. He served as Chief Information Officer of Keystone International,
Inc., a manufacturer and distributor of flow control products from 1993 to 1997.

RONALD F. SHUFF has been our Vice President since 1990 and Secretary and
General Counsel since 1989.

M. KATHLEEN MCVAY has been our Vice President and Treasurer since May 2000.
She had served as Chief of Staff to the President and as Head of Planning and
Administration, Global Corporate & Investment Bank, and held other management
positions at Bank of America Corporation from 1984 to 1999.

DIANE C. HARRIS has been a director since 1993. She is President of
Hypotenuse Enterprises, Inc., a merger and acquisition service and corporate
development outsourcing company. She was Vice President, Corporate Development,
of Bausch & Lomb, an optics and health care products company, from 1981 to 1996,
when she left to form Hypotenuse Enterprises, Inc.

JAMES O. ROLLANS has been a director since 1997. He is President and Chief
Executive Officer of Fluor Signature Services, a subsidiary of Fluor
Corporation, a major engineering and construction firm. He was Senior Vice
President of Fluor from 1992 to 1999. He was also its Chief Financial Officer
from 1998 to 1999 and 1992 to 1994, Chief Administrative Officer from 1994 to
1998 and Vice President, Corporate Communications from 1982 to 1992. Mr. Rollans
is also a director of Fluor Corporation and of Inovision, Inc., a pharmaceutical
products company.

HUGH K. COBLE has been a director since 1994. He is Vice Chairman Emeritus
of Fluor Corporation. Mr. Coble was a director of Fluor Corporation from 1984
and Vice Chairman from 1994 until his retirement in 1997. He joined Fluor
Corporation in 1966 and most recently was Group President of Fluor Daniel, Inc.,
a subsidiary of Fluor Corporation, from 1986 to 1994. He is also a director of
Beckman Instruments, Inc., a company that sells medical instruments, and a
director of ICO Global Communications, a telecommunications business.

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GEORGE T. HAYMAKER, JR. has been a director since 1997. He is Chairman of
Kaiser Aluminum Corporation, a company that operates in all principal aspects of
the aluminum industry, since 1994. Mr. Haymaker was Chief Executive Officer of
Kaiser Aluminum from 1994 to 1999. Prior to joining Kaiser Aluminum in 1993 as
President and Chief Operating Officer, Mr. Haymaker worked with a private
partner in the acquisition and redirection of several metal fabricating
companies. He was Executive Vice President of Alumax, Inc. from 1984 to 1986.

WILLIAM C. RUSNACK has been a director since 1997. He is President, Chief
Executive Officer and a director of Clark U.S.A., Inc., a company which refines
crude oil to manufacture petroleum products, since 1998. Before joining Clark
U.S.A., Inc., Mr. Rusnack was Senior Vice President of ARCO, an integrated
petroleum company, from 1990 to 1998, and President of ARCO Products Company
from 1993 to 1998. He is also a director of Clark Refining & Marketing, Inc.,
which is affiliated with Clark U.S.A., Inc.

MICHAEL F. JOHNSTON has been a director since 1997. He is President and
Chief Operating Officer of Visteon Corporation, which was spun off from Ford
Motor Company in late June 2000. Mr. Johnston previously was President at
Johnson Controls, Inc., Americas Automotive Group from 1997 to 1999, Vice
President and General Manager of ASG Interior Systems Business during 1997, Vice
President and General Manager of the Johnson Controls Battery Group from 1993 to
1997, Vice President and General Manager of SLI Battery Division from 1991 to
1993.

CHARLES M. RAMPACEK has been a director since 1998. He is President and
Chief Executive Officer of Probex Corporation, an energy technology company.
Before joining Probex, Mr. Rampacek served as President and Chief Executive
Officer of Lyondall-Citgo Refining, a manufacturer of petroleum products. Mr.
Rampacek also served as President of Tenneco Gas Transportation Company from
1992 to 1996, Executive Vice President of Tenneco Gas operations from 1989 to
1992 and Senior Vice President of Refining of Tenneco Oil Company from 1982 to
1988.

KEVIN E. SHEEHAN has been a director since 1990. He is a general partner of
CID Equity Partners, a venture capital firm that concentrates on early-stage and
high-growth entrepreneurial companies. Before joining CID Equity Partners, he
was a Vice President of Cummins Engine Company, a manufacturer of diesel engines
and related components, from 1980 to 1993. He is also a director of the Auburn
Foundry Group.

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DESCRIPTION OF THE ACQUISITION

THE ACQUISITION

On February 9, 2000, Flowserve and Flowserve RED Corporation, a subsidiary
of Flowserve, entered into a Purchase Agreement with Ingersoll-Rand Company and
its subsidiary IDP Acquisition, LLC, which was amended on July 14, 2000 (the
"Purchase Agreement"), to purchase all of the partnership interests in
Ingersoll-Dresser Pump Company at a price of $775.0 million. Flowserve and
Flowserve RED closed the purchase of the partnership interests on August 8,
2000.

THE PHILLIPSBURG FACILITY

At the closing of the IDP acquisition, Ingersoll-Rand agreed to lease, rent
free, to IDP the Phillipsburg facility for three years. There is ongoing
remediation of contamination at the Phillipsburg property that is being
conducted by Ingersoll-Rand. Under the Purchase Agreement, Ingersoll-Rand has
agreed to indemnify Flowserve and Flowserve RED for all environmental
liabilities at Phillipsburg except for new liabilities affirmatively caused by
IDP as the new tenant.

EMPLOYEE BENEFIT MATTERS

Ingersoll-Rand has assumed the phantom stock plan applicable to IDP
employees and is responsible for satisfying all obligations and liabilities with
respect to that plan.

Ingersoll-Rand has assumed each of IDP's qualified defined benefit pension
plans and all assets and liabilities accrued through the closing date of the IDP
acquisition. In addition, Ingersoll Rand has retained liability for certain
enhanced pension benefits payable to transferred employees under such defined
benefit pension plans that may be triggered by plant shutdowns occurring until
the first anniversary of the closing date of the acquisition, and has agreed to
grant one year's service credit for purposes of determining accrued benefits
under such defined benefit pension plans to transferred employees at the Liberty
Corners, Huntington Park and Phillipsburg facilities.

Flowserve has agreed to establish new pension plans for certain transferred
employees and, more generally, has agreed to maintain, for not less than a year
following the closing date of the IDP acquisition, (1) salaries for transferred
employees at levels no less favorable than immediately prior to the closing date
and (2) employee benefit plans (other than certain bonus and incentive
arrangements) for non-union transferred employees that, in the aggregate, are
competitive with salaries and employee benefit plans maintained by Flowserve and
those generally provided in IDP's industry in the relevant jurisdictions.

OTHER PROVISIONS

The Purchase Agreement also provides that Ingersoll-Rand will provide
certain transition services at no charge to the purchasers from the closing date
of the IDP acquisition through December 31, 2000.

- Immediately before the consummation of the IDP acquisition,
Ingersoll-Rand caused IDP to distribute all receivables (except for the
$3 million loan Ingersoll-Rand owed to the IDP Austrian subsidiary) held
by subsidiaries of IDP which were owed by Ingersoll-Rand in the form of
capital reductions of Ingersoll-Rand's capital account in IDP. To the
extent that the sum of cash retained by the non-U.S. Subsidiaries of IDP
and the principal amount of the loan Ingersoll-Rand owes to the IDP
Austrian subsidiary exceeds or falls below $25 million as of the closing
date, the amount of any such excess or shortfall will be paid by
Flowserve or Ingersoll-Rand to the other party. In any event,
Ingersoll-Rand will repay the loan it owes to the IDP Austrian subsidiary
on the closing date.

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REGULATORY APPROVALS

UNITED STATES

We have entered into a consent decree with the U.S. Department of Justice
to resolve its antitrust concerns relating to the IDP acquisition. This consent
decree requires us to divest certain product lines, Flowserve's Tulsa, Oklahoma
manufacturing facility, and on-site plant and equipment at two IDP service and
repair centers located in the United States. The provisions of the consent
decree are described in more detail in "Business -- Regulatory Divestiture." See
"Risk Factors -- Risk Factors Relating To Our Business -- Although we have
entered into a consent decree with the U.S. Department of Justice resolving its
antitrust concerns related to the IDP acquisition, we may not obtain a final
court order approving the acquisition." Under the purchase agreement, Flowserve
has agreed to take all steps necessary to obtain approval from the Department of
Justice with respect to the transaction.

GERMANY

We filed our notification of the IDP acquisition with the German Federal
Cartel Office in April 2000. The German Federal Cartel Office issued its
approval of the portion of the IDP acquisition subject to its jurisdiction on
July 17, 2000.

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DESCRIPTION OF CERTAIN INDEBTEDNESS

The following is a summary of certain indebtedness of our company. To the
extent such summary contains descriptions of the Senior Credit Facilities and
other loan documents, such descriptions do not purport to be complete and are
qualified in their entirety by reference to such documents which are filed as
Exhibits to the registration statement of which this prospectus is a part.

SENIOR CREDIT FACILITIES

General. In connection with the Transactions, we entered into the Senior
Credit Facilities with a syndicate of certain financial institutions, as
lenders, Credit Suisse First Boston, New York branch, as Syndication Agent, Bank
of America, N.A., as Administrative Agent, Collateral Agent and Swingline Lender
and ABN AMRO Bank N.V., Bank One, N.A. and Salomon Smith Barney Inc. as
Co-Documentation Agents. The description below of the Credit Agreement is a
summary of the principal terms of the Senior Credit Facilities and related loan
documents.

The Senior Credit Facilities provide for up to $1,050.0 million of
aggregate borrowing capacity for our company, consisting of:

- a secured $275.0 million funded term A loan (the "Term Loan A");

- a secured $475.0 million funded term B loan (the "Term Loan B"); and

- a secured $300.0 million revolving line of credit (the "Revolving Credit
Facility"). Approximately $30.0 million in letters of credit have been
issued under the Revolving Credit Facility. As a result, under our
Revolving Credit Facility we will have unused borrowing capacity, net of
issued letters of credit, of approximately $270.0 million. The Revolving
Credit Facility permits up to $25.0 million of swingline loans.

Use of the Senior Credit Facilities. We used the proceeds from the Term
Loan A and Term Loan B and borrowings under the Revolving Credit Facility,
together with the proceeds from the offering of the $290 million 12 1/4% Senior
Subordinated Notes due 2010 and the proceeds from the E100 million 12 1/4%
Senior Subordinated Notes due 2010, (i) to fund the Acquisition, (ii) to
refinance our existing indebtedness and (iii) to pay related fees and expenses.

Guarantees; Security. Our obligations under the Senior Credit Facilities
are unconditionally guaranteed, jointly and severally, by substantially all of
our existing and subsequently acquired or organized domestic subsidiaries. Our
obligations and those of such guarantors under the Senior Credit Facilities are
secured by substantially all of the assets of our company and each of the
guarantors. No foreign subsidiary is required to guarantee the senior credit
facilities and less than two-thirds of the capital stock of certain foreign
subsidiaries is required to be pledged to secure the senior credit facilities.

Amortization; Interest; Fees; Maturity. The Term Loan A Term Loan B will
amortize each year on a quarterly basis in the following approximate aggregate
principal amounts as set forth below:

YEAR                                                          TERM LOAN A   TERM LOAN B
----                                                          -----------   -----------
(DOLLARS IN MILLIONS)

2001........................................................    $ 15.0        $  3.0
2002........................................................      41.0           4.0
2003........................................................      56.0           4.0
2004........................................................      60.0           4.0
2005........................................................      64.0           4.0
2006........................................................      39.0          67.6
2007........................................................        --         258.7
2008........................................................        --         129.7
------        ------
$275.0        $475.0
======        ======

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The Revolving Credit Facility is available until June 30, 2006 unless
terminated earlier under certain circumstances.

Our borrowings under the Term Loan A, Term Loan B and Revolving Credit
Facility bear interest at a rate equal to, at our option, either (i) the base
rate (which is based on the prime rate most recently announced by the
Administrative Agent or the Federal Funds rate plus one-half of 1%) or (ii) the
applicable London interbank offered rate, in each case plus applicable margin.
In addition, the Senior Credit Facilities are subject to a commitment fee of
0.50% per annum of the undrawn portion of the Revolving Credit Facility and
letter of credit fees with respect to each letter of credit outstanding under
the Senior Credit Facilities equal to the applicable margin over Adjusted LIBOR
(as defined in the Senior Credit Facilities) in effect for loans under the
Revolving Credit Facility.

Prepayments. The loans under the Senior Credit Facilities are required to
be prepaid with certain assets and capital stock sales and dispositions, certain
incurrences of indebtedness, certain offerings of common equity securities and
by certain percentages of our annual Excess Cash Flow (as defined in the Credit
Agreement).

Voluntary prepayments may be made in whole or in part without premium or
penalty.

Covenants and Events of Default. The Senior Credit Facilities contain,
among other things, covenants restricting our ability and our subsidiaries'
ability to dispose of assets, merge, pay dividends, repurchase or redeem capital
stock and indebtedness (including the notes), incur indebtedness and guarantees,
create liens, enter into agreements with negative pledge clauses, make certain
investments or acquisitions, enter into sale and leaseback transactions, enter
into transactions with affiliates, change our business or make fundamental
changes, and otherwise restrict corporate actions. The Senior Credit Facilities
also contain a number of financial maintenance covenants.

The Senior Credit Facilities also include events of default usual for these
types of credit facilities and transactions, including but not limited to
nonpayment of principal or interest, violation of covenants, incorrectness of
representations and warranties, cross defaults and cross acceleration,
bankruptcy, material judgments, ERISA, actual or asserted invalidity of the
guarantees or the security documents and certain changes of control of our
company. The occurrence of any event of default could result in the acceleration
of our company's and the guarantors' obligations under the Senior Credit
Facilities, which could materially and adversely affect holders of the notes.

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DESCRIPTION OF THE NOTES

Flowserve Corporation will issue the Dollar Notes under an Indenture dated
August 8, 2000 (the "Dollar Notes Indenture") between itself, the guarantors
identified herein and The Bank of New York, as trustee (the "Dollar Notes
Trustee"). Flowserve Finance B.V. will issue the Euro Notes under an Indenture
dated August 8, 2000 (the "Euro Notes Indenture") between itself, the guarantors
identified herein and The Bank of New York, as trustee (the "Euro Notes
Trustee"). The Dollar Notes and the Euro Notes are collectively referred to as
the "Notes", the Dollar Notes Indenture and the Euro Notes Indenture are
collectively referred to as the "Indentures" and the Dollar Notes Trustee and
the Euro Notes Trustee are collectively referred to as the "Trustees". The terms
of each series of Notes include those stated in the applicable Indenture and
those made part of that Indenture by reference to the Trust Indenture Act of
1939 (the "Trust Indenture Act").

Certain terms used in this description are defined under the subheading
"-- Certain Definitions". In this description, the words "Company", "we", "us"
and "our" refer only to Flowserve Corporation and not to any of its subsidiaries
and "FFBV" refers only to Flowserve Finance B.V.

The following description is only a summary of the material provisions of
the Indentures. We urge you to read the Indentures because they, not this
description, define your rights as holders of these Notes. You may request
copies of these agreements at our address set forth under the heading
"Prospectus Summary -- Additional Information".

BRIEF DESCRIPTION OF THE NOTES

DOLLAR NOTES

The Dollar Notes:

- are unsecured senior subordinated obligations of the Company;

- are subordinated in right of payment to all existing and future Senior
Indebtedness of the Company;

- are senior in right of payment to any future Subordinated Obligations of
the Company;

- are guaranteed on a senior subordinated basis by each Dollar Notes
Guarantor, including FFBV; and

- are subject to registration with the SEC pursuant to the Dollar Notes
Registration Rights Agreement.

EURO NOTES

The Euro Notes:

- are unsecured senior subordinated obligations of FFBV;

- are subordinated in right of payment to all existing and future Senior
Indebtedness of FFBV;

- are senior in right of payment to any future Subordinated Obligations of
FFBV;

- are guaranteed on a senior subordinated basis by the Company and each
other Euro Notes Guarantor; and

- are subject to registration with the SEC pursuant to the Euro Notes
Registration Rights Agreement.

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PRINCIPAL, MATURITY AND INTEREST

DOLLAR NOTES

The Company issued the old Dollar Notes initially in a principal amount of
$290.0 million. The Company issued the Dollar Notes in denominations of $1,000
and any integral multiple of $1,000. The Dollar Notes will mature on August 15,
2010. Subject to our compliance with the covenant described under the subheading
"-- Certain Covenants -- Covenants Applicable to the Dollar Notes and the Euro
Notes -- Limitation on Indebtedness", we are permitted to issue more Dollar
Notes under the Dollar Notes Indenture in an unlimited principal amount (the
"Additional Dollar Notes"). The Dollar Notes and the Additional Dollar Notes, if
any, will be treated as a single class for all purposes of the Dollar Notes
Indenture, including waivers, amendments, redemptions and offers to purchase.
Unless the context otherwise requires, for all purposes of the Dollar Notes
Indenture and this "Description of the Notes", references to the Dollar Notes
include any Additional Dollar Notes actually issued.

Interest on the Dollar Notes will accrue at the rate of 12 1/4% per annum
and will be payable semiannually in arrears on February 15 and August 15,
commencing on February 15, 2001. We will make each interest payment to the
holders of record of the Dollar Notes on the immediately preceding February 1
and August 1. We will pay interest on overdue principal at 1% per annum in
excess of the above rate and will pay interest on overdue installments of
interest at such higher rate to the extent lawful.

Interest on the Dollar Notes will accrue from the date of original
issuance. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.

EURO NOTES

FFBV may issue Euro Notes initially in the principal amount of E100.0
million. FFBV will issue the Euro Notes in denominations of E1,000 and any
integral multiple of E1,000. The Euro Notes will mature on August 15, 2010.
Subject to the Company's compliance with the covenant described under the
subheading "-- Certain Covenants -- Covenants Applicable to the Dollar Notes and
the Euro Notes -- Limitation on Indebtedness", FFBV is permitted to issue more
Euro Notes under the Euro Notes Indenture in an unlimited principal amount (the
"Additional Euro Notes"). The Euro Notes, including the Additional Euro Notes,
if any, will be treated as a single class and series for all purposes of the
Euro Notes Indenture, including waivers, amendments, redemptions and offers to
purchase. Unless the context otherwise requires, for all purposes of the Euro
Notes Indenture and this "Description of the Notes", references to the Euro
Notes include any Additional Euro Notes actually issued.

Interest on the Euro Notes will accrue at the rate of 12 1/4% per annum and
will be payable semiannually in arrears on February 15 and August 15, commencing
on February 15, 2001. FFBV will make each interest payment to the holders of
record of the Euro Notes on the immediately preceding February 1 and August 1.
FFBV will pay interest on overdue principal at 1% per annum in excess of the
above rate and will pay interest on overdue installments of interest at such
higher rate to the extent lawful.

Interest on the Euro Notes will accrue from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.

OPTIONAL REDEMPTION

DOLLAR NOTES

Except as set forth below, we will not be entitled to redeem the Dollar
Notes at our option prior to August 15, 2005.

On and after August 15, 2005, we will be entitled at our option to redeem
all or a portion of the Dollar Notes upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed in percentages of principal
amount), plus accrued interest to the redemption date (subject to the right of

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Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period
commencing on August 15 of the years set forth below:

REDEMPTION
PERIOD                                                           PRICE
------                                                         ----------

2005........................................................    106.125%
2006........................................................    104.083
2007........................................................    102.042
2008 and thereafter.........................................    100.000

In addition, before August 15, 2003, we may at our option on one or more
occasions redeem Dollar Notes (which includes Additional Dollar Notes, if any)
in an aggregate principal amount not to exceed 35% of the aggregate principal
amount of the Dollar Notes (which includes Additional Dollar Notes, if any)
originally issued at a redemption price (expressed as a percentage of principal
amount) of 112.25%, plus accrued and unpaid interest to the redemption date,
with the net cash proceeds from one or more Public Equity Offerings; provided
that

(1) at least 65% of such aggregate principal amount of Dollar Notes
(which includes Additional Dollar Notes, if any) remains outstanding
immediately after the occurrence of each such redemption (other than Dollar
Notes held, directly or indirectly, by the Company or its Affiliates); and

(2) each such redemption occurs within 60 days after the date of the
related Public Equity Offering.

EURO NOTES

Except as set forth below and under "-- Withholding Taxes", FFBV will not
be entitled to redeem the Euro Notes at its option prior to August 15, 2005. On
and after August 15, 2005, FFBV will be entitled at its option to redeem all or
a portion of the Euro Notes upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed in percentages of principal amount), plus
accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
August 15 of the years set forth below:

REDEMPTION
PERIOD                                                           PRICE
------                                                         ----------

2005........................................................    106.125%
2006........................................................    104.083
2007........................................................    102.042
2008 and thereafter.........................................    100.000

In addition, before August 15, 2003, FFBV may at its option on one or more
occasions redeem Euro Notes (which includes Additional Euro Notes, if any) in an
aggregate principal amount not to exceed 35% of the aggregate principal amount
of the Euro Notes (which includes Additional Euro Notes, if any) originally
issued at a redemption price (expressed as a percentage of principal amount) of
112.25%, plus accrued and unpaid interest to the redemption date, with the net
cash proceeds contributed to it by the Company from one or more Public Equity
Offerings; provided that

(1) at least 65% of such aggregate principal amount of Euro Notes
(which includes Additional Euro Notes, if any) remains outstanding
immediately after the occurrence of each such redemption (other than Euro
Notes held, directly or indirectly, by the Company, FFBV or any of their
respective Affiliates); and

(2) each such redemption occurs within 60 days after the closing date
of the related Public Equity Offering.

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WITHHOLDING TAXES

FFBV is required to make all its payments under or with respect to the Euro
Notes free and clear of and without withholding or deduction for or on account
of any present or future tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and other liabilities related
thereto) (hereinafter "Taxes") imposed or levied by or on behalf of the
government of The Netherlands or any political subdivision or any authority or
agency therein or thereof having power to tax, or within any other jurisdiction
in which it is organized or is otherwise resident for tax purposes or any
jurisdiction from or through which payment is made (each a "Relevant Taxing
Jurisdiction"), unless it is required to withhold or deduct Taxes by law or by
the interpretation or administration thereof.

If FFBV is so required to withhold or deduct any amount for or on account
of Taxes imposed by a Relevant Taxing Jurisdiction from any payment made under
or with respect to the Euro Notes, it will be required to pay such additional
amounts ("Additional Amounts") as may be necessary so that the net amount
received by you (including Additional Amounts) after such withholding or
deduction will not be less than the amount you would have received if such Taxes
had not been withheld or deducted; provided, however, that the foregoing
obligation to pay Additional Amounts does not apply to (1) any Taxes that would
not have been so imposed but for the existence of any present or former
connection between the relevant holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of power over the relevant
holder, if the relevant holder is an estate, nominee, trust or corporation) and
the Relevant Taxing Jurisdiction (other than the mere receipt of such payment or
the ownership or holding outside of The Netherlands of such Euro Note); or (2)
any estate, inheritance, gift, sales, excise, transfer, personal property tax or
similar tax, assessment or governmental charge; nor will it pay Additional
Amounts (a) if the payment could have been made without such deduction or
withholding if the beneficiary of the payment had presented the Euro Note for
payment within 30 days after the date on which such payment or such Euro Note
became due and payable or the date on which payment thereof is duly provided
for, whichever is later (except to the extent that the holder would have been
entitled to Additional Amounts had the Euro Note been presented on the last day
of such 30 day period), (b) with respect to any payment of principal of (or
premium, if any, on) or interest on such Euro Note to any holder who is a
fiduciary or partnership or any person other than the sole beneficial owner of
such payment, to the extent that a beneficiary or settlor with respect to such
fiduciary, a member of such a partnership or the beneficial owner of such
payment would not have been entitled to the Additional Amounts had such
beneficiary, settlor, member or beneficial owner been the actual holder of such
Euro Note, (c) if Euro Notes are presented for payment in The Netherlands;
provided, however, that at such time FFBV has at least one paying agent in the
European Union (other than in The Netherlands), or (d) if Euro Notes are
presented for payment by, or on behalf of, a Holder who would be able to avoid
withholding or deduction by presenting any form or certificate and/or making a
declaration of non-residence or similar claim for exemption but fails to do so.

Upon request, FFBV will provide the Euro Notes Trustee with official
receipts or other documentation satisfactory to the Euro Notes Trustee
evidencing the payment of the Taxes with respect to which Additional Amounts are
paid.

Whenever in the Euro Indenture there is mentioned, in any context:

(1) the payment of principal;

(2) purchase prices in connection with a purchase of Euro Notes;

(3) interest; or

(4) any other amount payable on or with respect to any of the Euro
Notes,

such reference shall be deemed to include payment of Additional Amounts as
described under this heading to the extent that, in such context, Additional
Amounts are, were or would be payable in respect thereof.

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FFBV will pay any present or future stamp, court or documentary taxes or
any other excise or property taxes, charges or similar levies that arise in any
jurisdiction from the execution, delivery, enforcement or registration of the
Euro Notes, the Euro Indenture or any other document or instrument in relation
thereof, or the receipt of any payments with respect to the Euro Notes,
excluding such taxes, charges or similar levies imposed by any jurisdiction
outside of The Netherlands, the jurisdiction of incorporation of any successor
of FFBV or any jurisdiction in which a paying agent is located, and FFBV will
agree to indemnify the Holders for any such taxes paid by such Holders.

The obligations described under this heading will survive any termination,
defeasance or discharge of the Euro Indenture and will apply mutatis mutandis to
any jurisdiction in which any successor Person to FFBV is organized or any
political subdivision or taxing authority or agency thereof or therein.

For a discussion of Netherlands withholding taxes applicable to payments
under or with respect to the Euro Notes, see "Certain Tax Considerations".

GUARANTIES

The Dollar Notes Guarantors will jointly and severally guarantee, on a
senior subordinated and full and unconditional basis, our obligations under the
Dollar Notes. The Euro Notes Guarantors will jointly and severally guarantee, on
a senior subordinated and full and unconditional basis, FFBV's obligations under
the Euro Notes. The Dollar Notes Guarantors and the Euro Notes Guarantors are
collectively referred to as the "Guarantors". The obligations of each Guarantor
(other than the Company) that is a domestic subsidiary of the Company under its
Guaranty will be limited as necessary to prevent that Guaranty from constituting
a fraudulent conveyance under applicable law. See "Risk Factors -- Risks
Relating to the Notes -- Federal or state laws allow courts, under specific
circumstances, to void debts, including guaranties, and require holders of notes
to return payments received from us and the domestic guarantors".

Each Guarantor (other than the Company) that makes a payment under its
Guaranty will be entitled to a contribution from each other Guarantor in an
amount equal to such other Guarantor's pro rata portion of such payment based on
the respective net assets of all the Guarantors (other than the Company) at the
time of such payment determined in accordance with GAAP.

If a Guaranty (other than the Guaranty of the Euro Notes by the Company)
were rendered voidable, it could be subordinated by a U.S. court to all other
indebtedness (including guarantees and other contingent liabilities) of the
applicable Guarantor, and, depending on the amount of such indebtedness, such
Guarantor's liability on its Guaranty could be reduced to zero. See "Risk
Factors -- Risks Relating to the Notes -- Your right to receive payments on the
notes will rank behind our and Flowserve Finance's Senior Indebtedness and
possibly all of our and Flowserve Finance's future borrowings. Further, the
guaranties of the notes will rank behind all of the guarantors' existing Senior
Indebtedness and possibly all of their future borrowings".

The Guaranty of a Guarantor (other than FFBV's Guaranty of the Dollar Notes
and the Company's Guaranty of the Euro Notes) will be released:

(1) upon the sale or other disposition (including by way of
consolidation or merger) of a Guarantor;

(2) upon the sale or disposition of all or substantially all the
assets of a Guarantor; or

(3) at such time as such Guarantor no longer Guarantees any other
Indebtedness of the Company, FFBV or another Guarantor;

in the case of clauses (1) and (2), other than to the Company or an Affiliate of
the Company and as permitted by the applicable Indenture.

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RANKING

Senior Indebtedness versus Notes

The payment of the principal of, premium, if any, and interest on the
Dollar Notes and the Euro Notes and the payment of any Guaranty is subordinate
in right of payment to the prior payment in full of all Senior Indebtedness of
the Company, FFBV or the relevant Guarantor, as the case may be, including the
obligations of the Company, FFBV and such Guarantor in respect of the Credit
Agreement.

As of June 30, 2000, after giving pro forma effect to the Transactions:

(1) the Company's Senior Indebtedness would have been approximately
$750.0 million, all of which would have been secured indebtedness; and

(2) FFBV and the Guarantors (other than the Company) would have had no
Senior Indebtedness other than their obligations as guarantors of the
Company's obligations under the Credit Agreement.

Although the Indentures contain limitations on the amount of additional
Indebtedness that the Company, FFBV and the Guarantors may incur, under certain
circumstances the amount of such Indebtedness could be substantial and, in any
case, such Indebtedness may be Senior Indebtedness. See "-- Certain
Covenants -- Covenants Applicable to the Dollar Notes and the Euro
Notes -- Limitation on Indebtedness".

Liabilities of Subsidiaries versus Notes

A substantial portion of our operations are conducted through our foreign
subsidiaries. None of our foreign subsidiaries are guaranteeing the Notes except
FFBV (in the case of the Dollar Notes) and Flowserve International (in the case
of both the Dollar Notes and Euro Notes). Claims of creditors of such
non-guarantor subsidiaries, including trade creditors holding indebtedness or
guarantees issued by such non-guarantor subsidiaries, and claims of preferred
stockholders of such non-guarantor subsidiaries generally will effectively have
priority with respect to the assets and earnings of such non-guarantor
subsidiaries over the claims of our creditors and FFBV's creditors, including
holders of the Notes, even if such claims do not constitute Senior Indebtedness.
Accordingly, the Notes and each Guaranty will be effectively subordinated to
creditors (including trade creditors) and preferred stockholders, if any, of
such non-guarantor subsidiaries.

At December 31 1999, after giving pro forma effect to the Transactions, the
total liabilities of the Company's subsidiaries (other than FFBV and the other
Guarantors) would have been approximately $344.3 million, including trade
payables. Although the Indentures limit the incurrence of Indebtedness and
preferred stock of certain of our subsidiaries, each such limitation is subject
to a number of significant qualifications. Moreover, the Indentures do not
impose any limitation on the incurrence by such subsidiaries of liabilities that
are not considered Indebtedness under the Indentures. See "-- Certain
Covenants -- Covenants Applicable to the Dollar Notes and the Euro
Notes -- Limitation on Indebtedness".

Other Senior Subordinated Indebtedness versus Notes

Only Indebtedness of the Company, FFBV or another Guarantor that is Senior
Indebtedness of such Person will rank senior to the Dollar Notes, the Euro Notes
or the relevant Guaranty, as the case may be, in accordance with the provisions
of the applicable Indenture. The Dollar Notes, the Euro Notes and each Guaranty
will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company, FFBV and the relevant Guarantor, respectively.

The Company, FFBV and the other Guarantors have agreed in the applicable
Indenture that the Company, FFBV and such Guarantors will not Incur, directly or
indirectly, any Indebtedness that is contractually subordinate or junior in
right of payment to the Company's Senior Indebtedness, FFBV's

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Senior Indebtedness or the Senior Indebtedness of such Guarantors, unless such
Indebtedness is Senior Subordinated Indebtedness of such Person or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness of such
Person. The Indentures do not treat unsecured Indebtedness as subordinated or
junior to Secured Indebtedness merely because it is unsecured.

Payment of Notes

We and FFBV are not permitted to pay principal of, premium, if any, or
interest on the Dollar Notes or Euro Notes, respectively, or make any deposit
pursuant to the provisions described under "-- Defeasance" below and may not
purchase, redeem or otherwise retire any Dollar Notes or Euro Notes,
respectively (collectively, "pay the Notes"), if either of the following occurs
(a "Payment Default"):

(1) any Designated Senior Indebtedness of the Company (in the case of
the Dollar Notes) or FFBV (in the case of the Euro Notes) is not paid in
cash when due; or

(2) any other default on Designated Senior Indebtedness of the Company
(in the case of the Dollar Notes) or FFBV (in the case of the Euro Notes)
occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms;

unless, in either case, the Payment Default has been cured or waived and any
such acceleration has been rescinded or such Designated Senior Indebtedness has
been paid in full in cash. Regardless of the foregoing, we and FFBV are
permitted to pay the Dollar Notes and the Euro Notes, respectively, if the
applicable issuer and the applicable Trustee receive written notice approving
such payment from the Representatives of all applicable Designated Senior
Indebtedness with respect to which the Payment Default has occurred and is
continuing.

During the continuance of any default (other than a Payment Default) with
respect to any Designated Senior Indebtedness of the Company or FFBV, as the
case may be, pursuant to which the maturity thereof may be accelerated without
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, we and FFBV are
not permitted to pay the Dollar Notes and the Euro Notes, respectively, for a
period (a "Payment Blockage Period") commencing upon the receipt by the
applicable Trustee (with a copy to the applicable issuer) of written notice (a
"Blockage Notice") of such default from the Representative of such Designated
Senior Indebtedness specifying an election to effect a Payment Blockage Period
and ending 179 days thereafter. The Payment Blockage Period will end earlier if
such Payment Blockage Period is terminated:

(1) by written notice to the applicable Trustee and us or FFBV, as
applicable, from the Person or Persons who gave such Blockage Notice;

(2) because the default giving rise to such Blockage Notice is cured,
waived or otherwise no longer continuing; or

(3) because such Designated Senior Indebtedness has been discharged or
repaid in full in cash.

Notwithstanding the provisions described above, unless the holders of such
Designated Senior Indebtedness or the Representative of such Designated Senior
Indebtedness have accelerated the maturity of such Designated Senior
Indebtedness, we and FFBV are permitted to resume paying the Dollar Notes and
the Euro Notes, respectively, after the end of such Payment Blockage Period.
Neither the Dollar Notes nor the Euro Notes shall be subject to more than one
Payment Blockage Period in any consecutive 360-day period irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period, except that if any Blockage Notice is delivered to the applicable
Trustee by or on behalf of holders of Designated Senior Indebtedness (other than
holders of the Bank Indebtedness), a Representative of holders of the Bank
Indebtedness may give another Blockage Notice within such period. However, in no
event may the total number of days during which any Payment Blockage Period or
Periods is in effect exceed 179 days in the aggregate during any 360-consecutive
day period, and there must be 181 days during any 360-day consecutive period
during which no Payment Blockage Period is in effect.

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For purposes of this provision, no default or event of default which existed or
was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness of the Company and FFBV
initiating such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such default or event of default shall have been cured
or waived for a period of not less than 90 consecutive days.

Upon any payment or distribution of the assets of the Company (in the case
of the Dollar Notes) or FFBV (in the case of the Euro Notes) upon a total or
partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company (in the case of the Dollar Notes) or FFBV (in the case
of the Euro Notes) or its respective property:

(1) the holders of Senior Indebtedness of the Company (in the case of
the Dollar Notes) or FFBV (in the case of the Euro Notes) will be entitled
to receive payment in full in cash of such Senior Indebtedness before the
holders of the applicable Notes are entitled to receive any payment;

(2) until the Senior Indebtedness of the Company (in the case of the
Dollar Notes) or FFBV (in the case of the Euro Notes) is paid in full in
cash, any payment or distribution to which holders of the applicable Notes
would be entitled but for the subordination provisions of the applicable
Indenture will be made to holders of such Senior Indebtedness as their
interests may appear, except that holders of the applicable Notes may
receive certain Capital Stock and subordinated debt obligations; and

(3) if a distribution is made to holders of the applicable Notes that,
due to the subordination provisions, should not have been made to them,
such holders of the applicable Notes are required to hold it in trust for
the holders of Senior Indebtedness of the Company (in the case of the
Dollar Notes) or FFBV (in the case of the Euro Notes) and pay it over to
them as their interests may appear.

If payment of the Dollar Notes or the Euro Notes is accelerated because of
an Event of Default, the Company or FFBV, as the case may be, or the applicable
Trustee must promptly notify the holders of Designated Senior Indebtedness of
the applicable issuer or the Representative of such Designated Senior
Indebtedness of the acceleration. If any Designated Senior Indebtedness of the
applicable issuer is outstanding, neither the Company or FFBV, as the case may
be, nor any Guarantor may pay the Dollar Notes or the Euro Notes, as the case
may be, until five Business Days after the Representatives of all the issues of
Designated Senior Indebtedness receive notice of such acceleration and,
thereafter, may pay the applicable Notes only if the applicable Indenture
otherwise permits payment at that time.

A Guarantor's obligations under its Guaranty are senior subordinated
obligations. As such, the rights of Noteholders to receive payment by a
Guarantor pursuant to its Guaranty will be subordinated in right of payment to
the rights of holders of Senior Indebtedness of such Guarantor. The terms of the
subordination provisions described above with respect to the Company's
obligations under the Dollar Notes and FFBV's obligations under the Euro Notes
apply equally to a Guarantor of such Notes and the obligations of such Guarantor
under its Guaranty.

By reason of the subordination provisions contained in the Indentures, in
the event of a liquidation or insolvency proceeding, creditors of the Company,
FFBV or a Guarantor who are holders of Senior Indebtedness of the Company, FFBV
or a Guarantor, as the case may be, may recover more, ratably, than the holders
of the Dollar Notes or the Euro Notes, as the case may be, and creditors of the
Company, FFBV or a Guarantor, as applicable, who are not holders of Senior
Indebtedness of such Person may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than the holders of the Dollar Notes
or the Euro Notes, as the case may be.

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The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of securities held in trust by the
applicable Trustee for the payment of principal of and interest on the Dollar
Notes or the Euro Notes pursuant to the provisions described under
"-- Defeasance".

BOOK-ENTRY, DELIVERY AND FORM

DOLLAR NOTES

The old Dollar Notes were, and the new Dollar Notes will be, issued in the
form of one or more global dollar notes (the "Global Dollar Note"). The Global
Dollar Note will be deposited with, or on behalf of, the Depository and
registered in the name of the Depository or its nominee. Except as set forth
below, the Global Dollar Note may be transferred, in whole and not in part, only
to the Depository or another nominee of the Depository. You may hold your
beneficial interests in the Global Dollar Note directly through the Depository
if you have an account with the Depository or indirectly through organizations
which have accounts with the Depository.

The Depository has advised the Company as follows: the Depository is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of institutions that have accounts
with the Depository ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers (which may
include the Initial Purchasers), banks, trust companies, clearing corporations
and certain other organizations. Access to the Depository's book-entry system is
also available to others such as banks, brokers, dealers and trust companies
(collectively, the "indirect participants") that clear through or maintain a
custodial relationship with a participant, whether directly or indirectly.

The Company expects that pursuant to procedures established by the
Depository, upon the deposit of the Global Dollar Note with the Depository, the
Depository will credit, on its book-entry registration and transfer system, the
principal amount of Dollar Notes represented by such Global Dollar Note to the
accounts of participants. The accounts to be credited shall be designated by the
Initial Purchasers. Ownership of beneficial interests in the Global Dollar Note
will be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the Global Dollar Note will
be shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depository (with respect to participants'
interests), the participants and the indirect participants (with respect to the
owners of beneficial interests in the Global Dollar Note other than
participants). The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and laws may impair the ability to transfer or pledge
beneficial interests in the Global Dollar Note.

So long as the Depository, or its nominee, is the registered holder and
owner of the Global Dollar Note, the Depository or such nominee, as the case may
be, will be considered the sole legal owner and holder of any related Dollar
Notes evidenced by the Global Dollar Note for all purposes of such Dollar Notes
and the Dollar Notes Indenture. Except as set forth below, as an owner of a
beneficial interest in the Global Dollar Note, you will not be entitled to have
the Notes represented by the Global Dollar Note registered in your name, will
not receive or be entitled to receive physical delivery of certificated Dollar
Notes and will not be considered to be the owner or holder of any Dollar Notes
under the Global Dollar Note. We understand that under existing industry
practice, in the event an owner of a beneficial interest in the Global Dollar
Note desires to take any action that the Depository, as the holder of the Global
Dollar Note, is entitled to take, the Depository would authorize the
participants to take such action, and the participants would authorize
beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.

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We will make payments of principal of, premium, if any, and interest on
Dollar Notes represented by the Global Dollar Note registered in the name of and
held by the Depository or its nominee to the Depository or its nominee, as the
case may be, as the registered owner and holder of the Global Dollar Note.

We expect that the Depository or its nominee, upon receipt of any payment
of principal of, premium, if any, or interest on the Global Dollar Note will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Dollar
Note as shown on the records of the Depository or its nominee. We also expect
that payments by participants or indirect participants to owners of beneficial
interests in the Global Dollar Note held through such participants or indirect
participants will be governed by standing instructions and customary practices
and will be the responsibility of such participants or indirect participants. We
will not have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in
the Global Dollar Note for any Dollar Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depository and its participants or
indirect participants or the relationship between such participants or indirect
participants and the owners of beneficial interests in the Global Dollar Note
owning through such participants.

Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Dollar Note among participants
of the Depository, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Dollar Notes Trustee nor the Company will have any responsibility or
liability for the performance by the Depository or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.

EURO NOTES

The Euro Notes will be represented by a global Euro Note. The global Euro
Note will be issued in registered form without coupons and the global Euro Note
represents the aggregate principal amount of the outstanding Euro Notes. The
global Euro Note will be deposited with, or on behalf of The Bank of New York
Depositary (Nominees) Limited as common depositary for the Euroclear System
("Euroclear") and for Clearstream Banking, societe anonyme ("Clearstream,
Luxembourg"), formerly known as Cedelbank, and will be, registered in the name
of a nominee of the common depositary.

Upon the issuance of a global Euro Note, Euroclear or Clearstream,
Luxembourg, as the case may be, will credit the accounts of persons holding
through it with the respective principal amounts represented by such global Euro
Note purchased by such person in this offering. Such accounts shall be limited
to persons who have accounts with Euroclear or Clearstream, Luxembourg
("participants") or persons who may hold interests through participants.
Ownership of beneficial interests in a global Euro Note will be shown on, and
the transfer of that ownership interest will be effected only through, records
maintained by Euroclear or Clearstream, Luxembourg (with respect to
participants' interests) and such participants (with respect to the owners of
beneficial interests in such global Euro Notes other than participants).

Payment of principal of and interest on Euro Notes represented by a global
Euro Note will be made in immediately available funds to the common depositary
for Euroclear and Clearstream, Luxembourg or its nominee, as the case may be, as
the sole registered owner and the sole holder of the global Euro Notes
represented thereby for all purposes under the Euro Notes Indenture. FFBV has
been advised by Euroclear and Clearstream, Luxembourg that upon receipt of any
payment of principal of or interest on any global Euro Note, Euroclear and
Clearstream, Luxembourg will immediately credit, on their respective book-entry
registration and transfer systems, the accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
or face amount of such global Euro Note as shown on the records of Euroclear and
Clearstream, Luxembourg. Payments by participants to owners of beneficial
interests in a global Euro Note held through such participants will be governed
by standing instructions and customary practices as is now the case with
securities held for customer accounts registered in "street name" and will be
the sole responsibility of such participants.

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Purchasers of book-entry interests in the Euro Notes will hold their
book-entry interests in an underlying global Euro Note.

So long as the common depositary for Euroclear and Clearstream, Luxembourg
or its nominee, as the case may be, is the registered owner of a global Euro
Note, The Bank of New York Depositary (Nominees) Limited or such successor
depositary or such party will be considered the sole owner or holder of the Euro
Notes represented by such global Euro Note for all purposes under the Euro Notes
Indenture and the Euro Notes. Except as set forth above, owners of beneficial
interests in a global Euro Note will not be entitled to have the Euro Notes
represented by such global Euro Note registered in their names, will not receive
or be entitled to receive physical delivery of certificated Euro Notes in
definitive form and will not be considered to be the owners or holders of any
Euro Notes under such global Euro Note. Accordingly, each Person owning a
beneficial interest in a global Euro Note must rely on the procedures of
Euroclear or Clearstream, Luxembourg, as the case may be, and, if such Person is
not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a holder under the Euro
Notes Indenture. FFBV understands that under existing industry practices, in the
event that FFBV requests any action of holders or that an owner of a beneficial
interest in a global Euro Note desires to give or take any action which a holder
is entitled to give or take under the Euro Indenture, Euroclear or Clearstream,
Luxembourg, as the case may be, would authorize the participants holding the
relevant beneficial interest to give or take such action and such participants
would authorize beneficial owners owning through such participants to give or
take such action or would otherwise act upon the instructions of beneficial
owners owning through them.

FFBV understands that Euroclear and Clearstream, Luxembourg each hold
securities for their account holders and facilitate the clearance and settlement
of securities transactions by electronic book-entry transfer between their
respective account holders, thereby eliminating the need for physical movements
of certificates and any risks from lack of simultaneous transfers of securities.

Euroclear and Clearstream, Luxembourg each provide various services
including safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Euroclear and Clearstream, Luxembourg each also deals with domestic securities
markets in several countries through established depository and custodial
relationships. The respective systems of Euroclear and Clearstream, Luxembourg
have established and electronic bridge between their two systems which enables
their respective account holders to settle trades with each other.

Account holders in Euroclear and Clearstream, Luxembourg are world-wide
financial institutions including underwriters, securities brokers, and dealers,
banks, trust companies and clearing corporations. Indirect access to both
Euroclear and Clearstream, Luxembourg is available to other institutions that
clear through or maintain a custodial relationship with an account holder of
either system.

An account holder's overall contractual relations with either Euroclear or
Clearstream, Luxembourg are governed by the respective rules and operating
procedures of Euroclear or Clearstream, Luxembourg and any applicable laws. Both
Euroclear and Clearstream, Luxembourg act under those rules and operating
procedures only on behalf of their respective account holders, and have no
record of or relationship with persons holding through their respective holders.

CERTIFICATED NOTES

Subject to certain conditions, the Notes represented by the Global Notes
are exchangeable for certificated Notes of the same series in definitive form of
like tenor in denominations of $1,000 (in the case of the Dollar Notes) or
E1,000 (in the case of the Euro Notes) and integral multiples thereof if

(1) the Depository (in the case of the Dollar Notes) or Euroclear and
Clearstream, Luxembourg (in the case of the Euro Notes) notify us that it
is unwilling or unable to continue as a clearing agency for the applicable
Global Notes and we are unable to locate a qualified successor clearing
agency within 90 days;

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(2) we or FFBV, as the case may be, in our discretion at any time
determine not to have all the Dollar Notes or the Euro Notes, respectively,
represented by a Global Note; or

(3) a default entitling the holders of the Dollar Notes or the Euro
Notes, as the case may be, to accelerate the maturity thereof has occurred
and is continuing.

Any Note that is exchangeable as above is exchangeable for certificated
Notes issuable in authorized denominations and registered in such names as the
applicable depositary shall direct. Subject to the foregoing, the Global Notes
are not exchangeable, except for Global Notes of the same aggregate denomination
to be registered in the name of the applicable depository or its nominee.

SAME-DAY PAYMENT

Each Indenture requires us and FFBV, as applicable, to make payments in
respect of the applicable Notes (including principal, premium and interest) by
wire transfer of immediately available funds to the U.S. dollar accounts with
banks in the U.S. (in the case of the Dollar Notes) or to the Euro accounts with
banks in the European Union (in the case of the Euro Notes) specified by the
holders thereof or, if no such account is specified, by mailing a check to each
such holder's registered address.

EXCESS CASH FLOW REPURCHASE OFFER

(a) If the Company has Excess Cash Flow for any fiscal year (commencing
with the fiscal year ending December 31, 2001), no later than the 120th day
following the end of such fiscal year, the Company shall apply an amount equal
to 50% of the Excess Cash Flow for such fiscal year:

(1) first, to the extent the Company elects (or is required by the
terms of any Indebtedness), to prepay, repay, redeem or purchase (and
permanently reduce the commitments thereunder) Senior Indebtedness of the
Company with such percentage of Excess Cash Flow;

(2) second, to the extent of the balance of such percentage of Excess
Cash Flow after application in accordance with clause (1), to make an offer
to the holders of the Dollar Notes and Euro Notes (and to holders of other
Senior Subordinated Indebtedness of the Company or FFBV designated by the
Company) to purchase, on a pro rata basis, Dollar Notes and Euro Notes (and
such other Senior Subordinated Indebtedness of the Company or FFBV)
pursuant to and subject to the conditions contained in the Indentures (an
"Excess Cash Flow Offer"); and

(3) third, to the extent of the balance of such percentage of Excess
Cash Flow after application in accordance with clause (1) or (2) above, to
any other application or use not prohibited by the Indentures;

provided, however, that in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (1) above, the Company shall
permanently retire such Indebtedness and shall cause the related loan commitment
(if any) to be permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased; and provided, further, that no Excess Cash Flow
Offer shall be required to be made if the Company's Leverage Ratio is less than
3.0 to 1.0 on the last day of such fiscal year.

(b) In the event of an Excess Cash Flow Offer, the Company will be required
to purchase, on a pro rata basis, Dollar Notes and Euro Notes tendered pursuant
to an offer by the Company for the Notes (and other Senior Subordinated
Indebtedness of the Company and FFBV, as applicable) at a purchase price of 100%
of their respective principal amount (or, in the event such other Senior
Subordinated Indebtedness was issued with significant original issue discount,
100% of the accreted value thereof), without premium, plus accrued but unpaid
interest (or, in respect of such Senior Subordinated Indebtedness, such lesser
price, if any, as may be provided for by the terms of such Senior Subordinated
Indebtedness) in accordance with the procedures (including prorating in the
event of oversubscription) set forth in the Indentures. If the aggregate
purchase price of securities tendered pursuant to such offer is less than the
Excess Cash Flow allotted to their purchase, the Company will be entitled to
apply the remaining Excess

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Cash Flow in accordance with clause (a)(3) above. The Company shall not be
required to make an Excess Cash Flow Offer to purchase Notes (and other Senior
Subordinated Indebtedness) pursuant to this covenant if the Excess Cash Flow
available therefor is less than $5.0 million (which lesser amount shall be
carried forward for purposes of determining whether such an offer is required
with respect to the Excess Cash Flow in any subsequent fiscal year).

(c) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue of its compliance with
such securities laws or regulations.

CHANGE OF CONTROL

Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that the Company (in the
case of the Dollar Notes) and FFBV (in the case of the Euro Notes) repurchase
such Holder's Notes at a purchase price in cash equal to 101% of the principal
amount thereof on the date of purchase plus accrued and unpaid interest, if any,
to the date of purchase (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date):

(1) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that for purposes of this
clause (1) such person shall be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of a majority of the total voting power of the
Voting Stock of the Company (for the purposes of this clause (1), such
other person shall be deemed to beneficially own any Voting Stock of a
Person (the "specified person") held by any other Person (the "parent
entity"), if such other person is the beneficial owner (as defined above in
this clause (1)), directly or indirectly, of a majority of the voting power
of the Voting Stock of such parent entity);

(2) individuals who on the Issue Date constituted the Board of
Directors (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of 66 2/3% of the directors of the Company
then still in office who were either directors on the Issue Date or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors then in
office; or

(3) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the
sale of all or substantially all the assets of the Company (determined on a
consolidated basis) to another Person, other than a transaction following
which in the case of a merger or consolidation transaction, securities that
represented 100% of the Voting Stock of the Company immediately prior to
such transaction (or other securities into which such securities are
converted as part of such merger or consolidation transaction) constitute
at least a majority of the voting power of the Voting Stock of the
surviving Person in such merger or consolidation transaction.

Within 30 days following any Change of Control, the Company (in the case of
the Dollar Notes) or FFBV (in the case of the Euro Notes) will mail a notice to
each Holder with a copy to the Trustee (the "Change of Control Offer") stating:

(1) that a Change of Control has occurred and that such Holder has the
right to require the Company (in the case of the Dollar Notes) or FFBV (in
the case of the Euro Notes) to purchase such Holder's applicable Notes at a
purchase price in cash equal to 101% of the principal amount
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thereof on the date of purchase, plus accrued and unpaid interest, if any,
to the date of purchase (subject to the right of Holders of record on the
relevant record date to receive interest on the relevant interest payment
date);

(2) the circumstances and relevant facts regarding such Change of
Control (including relevant information with respect to income, cash flow
and capitalization;

(3) the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and

(4) the instructions, as determined by us (in the case of the Dollar
Notes) or FFBV (in the case of the Euro Notes), consistent with the
covenant described hereunder, that a Holder must follow in order to have
its Notes purchased.

The Company (in the case of the Dollar Notes) and FFBV (in the case of the
Euro Notes) will not be required to make a Change of Control Offer following a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the relevant Indenture applicable to a Change of Control Offer made by us (in
the case of the Dollar Notes) and FFBV (in the case of the Euro Notes) and
purchases all Dollar Notes or Euro Notes, as the case may be, validly tendered
and not withdrawn under such Change of Control Offer.

The Company (in the case of the Dollar Notes) and FFBV (in the case of the
Euro Notes) will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes as a result of a Change of Control.
To the extent that the provisions of any securities laws or regulations conflict
with the provisions of the covenant described hereunder, the Company (in the
case of the Dollar Notes) and FFBV (in the case of the Euro Notes) will comply
with the applicable securities laws and regulations and shall not be deemed to
have breached the obligations under the covenant described hereunder by virtue
of compliance with such securities laws or regulations.

The Change of Control purchase feature of the Notes may in certain
circumstances make more difficult or discourage a sale or takeover of the
Company and, thus, the removal of incumbent management. The Change of Control
purchase feature is a result of negotiations among the Company, FFBV and the
Initial Purchasers. We have no present intention to engage in a transaction
involving a Change of Control, although it is possible that we could decide to
do so in the future. Subject to the limitations discussed below, we could, in
the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Change of
Control under the Indentures, but that could increase the amount of indebtedness
outstanding at such time or otherwise affect our capital structure or credit
ratings. Restrictions on our ability to Incur additional Indebtedness are
contained in the covenant described under "-- Certain Covenants -- Covenants
Applicable to the Dollar Notes and the Euro Notes -- Limitation on
Indebtedness". Such restrictions can only be waived with the consent of the
holders of a majority in principal amount of the applicable Notes then
outstanding. Except for the limitations contained in such covenants, however,
the Indentures will not contain any covenants or provisions that may afford
holders of the Notes protection in the event of a highly leveraged transaction.

The Credit Agreement generally prohibits us and FFBV from purchasing Notes,
and also provides that the occurrence of certain change of control events with
respect to the Company would constitute a default thereunder. In the event that
at the time of such Change of Control the terms of any applicable Senior
Indebtedness (including the Credit Agreement) restrict or prohibit the purchase
of Notes following such Change of Control, then prior to the mailing of the
notice to Holders but in any event within 30 days following any Change of
Control, each of the Company (in the case of the Dollar Notes) and FFBV (in the
case of the Euro Notes) undertakes to (i) repay in full all such applicable
Senior Indebtedness or (ii) obtain the requisite consents under the agreements
governing such Senior Indebtedness to permit the repurchase of the applicable
Notes. If the Company (in the case of the Dollar Notes) and FFBV (in the case of
the Euro Notes) do not repay such Senior Indebtedness or obtain such consents,
the Company and FFBV, respectively, will remain prohibited from purchasing
Notes. In such case, the Company's and
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FFBV's failure to comply with the foregoing undertaking, after appropriate
notice and lapse of time would result in an Event of Default under the
applicable Indenture, which would, in turn, constitute a default under the
Credit Agreement. In such circumstances, the subordination provisions in the
applicable Indenture would likely restrict payment to the Holders of Notes.

Future indebtedness that we may incur may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require the repurchase of such indebtedness upon a Change of Control. Moreover,
the exercise by the Holders of their right to require the Company (in the case
of the Dollar Notes) and FFBV (in the case of the Euro Notes) to repurchase the
Notes could cause a default under such indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on us or
FFBV. Finally, the Company's and FFBV's ability to pay cash to the holders of
Notes following the occurrence of a Change of Control may be limited by the
Company's and FFBV's then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to make any
required repurchases.

The provisions under the Indentures relative to the Company's and FFBV's
respective obligation to make an offer to repurchase the Dollar Notes and the
Euro Notes as a result of a Change of Control may be waived or modified with the
written consent of the holders of a majority in principal amount of the Dollar
Notes and the Euro Notes, respectively.

CERTAIN COVENANTS

COVENANTS APPLICABLE TO THE DOLLAR NOTES AND THE EURO NOTES

Each Indenture contains covenants including, among others, the following:

Limitation on Indebtedness

(a) The Company will not, and will not permit any Restricted Subsidiary to,
Incur, directly or indirectly, any Indebtedness; provided, however, that the
Company will be entitled to Incur Indebtedness, and its Restricted Subsidiaries
will be entitled to Incur Eligible Indebtedness, in each case if, on the date of
such Incurrence and after giving effect thereto no Default has occurred and is
continuing and, the Consolidated Coverage Ratio exceeds 2.0 to 1 if such
Indebtedness is Incurred prior to September 1, 2003, or 2.25 to 1 if such
Indebtedness is Incurred thereafter.

(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries will be entitled to Incur any or all of the following
Indebtedness:

(1) Indebtedness Incurred by the Company pursuant to any Revolving
Credit Facility; provided, however, that, immediately after giving effect
to any such Incurrence, the aggregate principal amount of all Indebtedness
Incurred under this clause (1) and then outstanding does not exceed the
greater of (A) $300.0 million and (B) the sum of (x) 50% of the book value
of the inventory of the Company and its Restricted Subsidiaries and (y) 50%
of the book value of the accounts receivable of the Company and its
Restricted Subsidiaries (other than any accounts receivable constituting
Receivables and Related Assets pledged, sold or otherwise transferred or
encumbered in connection with a Receivables Program), less the sum of all
principal payments made with respect to such Indebtedness in satisfaction
of the provisions of paragraph (a)(3)(A) of the covenant described under
"-- Limitation on Sales of Assets and Subsidiary Stock";

(2) Indebtedness Incurred by the Company pursuant to any Term Loan
Facility; provided, however, that, after giving effect to any such
Incurrence, the aggregate principal amount of all Indebtedness Incurred
under this clause (2) and then outstanding does not exceed $750.0 million
less the aggregate sum of all principal payments actually made from time to
time after the Issue Date with respect to such Indebtedness (other than
principal payments made from any permitted Refinancings thereof);

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(3) Indebtedness Incurred by a Receivables Subsidiary pursuant to a
Receivables Program; provided, however, that, after giving effect to any
such Incurrence, the aggregate principal amount of all Indebtedness
Incurred under this clause (3) and then outstanding does not exceed $400.0
million;

(4) Indebtedness owed to and held by the Company or a Wholly Owned
Subsidiary; provided, however, that (A) any subsequent issuance or transfer
of any Capital Stock which results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such
Indebtedness (other than to the Company or a Wholly Owned Subsidiary) shall
be deemed, in each case, to constitute the Incurrence of such Indebtedness
by the obligor thereon and (B) if the Company or FFBV is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all obligations with respect to the Dollar Notes
and the Euro Notes, respectively;

(5) the Notes and the Exchange Notes (other than any Additional Dollar
Notes and Additional Euro Notes);

(6) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), (3), (4) or (5) of this
covenant);

(7) Indebtedness of a Person Incurred and outstanding on or prior to
the date on which such Person becomes a Restricted Subsidiary (including
upon merger or consolidation with the Company or any Restricted Subsidiary)
or assumed in connection with the purchase of assets from another Person
(other than Indebtedness Incurred by such Person in connection with, or to
provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to
which such Person became a Restricted Subsidiary or such Person or such
assets were acquired by the Company); provided, however, that (A) with
respect to any such Indebtedness Incurred prior to the first anniversary of
the Issue Date, such Indebtedness is in an aggregate principal amount which
when taken together with all other Indebtedness Incurred pursuant to this
clause (7), does not exceed $50.0 million or (B) on the date of such
acquisition and after giving pro forma effect thereto, the Company would
have been able to Incur at least $1.00 of additional Indebtedness pursuant
to paragraph (a) of this covenant;

(8) Indebtedness of the Company or any of its Restricted Subsidiaries
attributable to Capital Lease Obligations, or Incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including any Indebtedness assumed in connection with the acquisition of
any such assets, in an aggregate principal amount which, when taken
together with all other Indebtedness of the Company or any of its
Restricted Subsidiaries Incurred pursuant to this clause (8) and then
outstanding, does not exceed $25.0 million (including any Refinancing
Indebtedness with respect thereto);

(9) Indebtedness under industrial revenue bonds in an aggregate
principal amount which, when taken together with all other Indebtedness of
the Company or any of its Restricted Subsidiaries Incurred pursuant to this
clause (9) and then outstanding, does not exceed $20.0 million;

(10) Indebtedness Incurred by Foreign Restricted Subsidiaries in an
aggregate principal amount which, when taken together with all other
Indebtedness of Foreign Restricted Subsidiaries Incurred pursuant to this
clause (10) and then outstanding, does not exceed $25.0 million;

(11) Indebtedness of the Company, whether secured or unsecured,
consisting of Guarantees of Permitted Employee Stock Purchase Loans;

(12) Indebtedness or other obligations solely in respect of worker's
compensation claims, self-insurance obligations and surety, appeal and
performance bonds entered into in the ordinary course of business of the
Company and its Restricted Subsidiaries;

(13) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (5), (6) or (7) or this
clause (13); provided, however, that to the extent such Refinancing
Indebtedness directly or indirectly Refinances Indebtedness of a Subsidiary
Incurred pursuant to clause (7), such Refinancing Indebtedness shall be
Incurred only by such Subsidiary;

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(14) Hedging Obligations under or with respect to Interest Rate
Agreements, Currency Agreements or Commodity Agreements entered into in the
ordinary course of business and not for the purpose of speculation;

(15) Indebtedness consisting of the Guaranty of a Guarantor;

(16) Indebtedness of the Company or any Restricted Subsidiary arising
from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of
business, provided that the Indebtedness is satisfied within five business
days of Incurrence;

(17) Indebtedness of the Company or any Restricted Subsidiary
consisting of indemnification, adjustment of purchase price or similar
obligations, in each case incurred in connection with the disposition of
any assets of the Company or any Restricted Subsidiary;

(18) Indebtedness consisting of the Guarantee by (i) the Company of
any Indebtedness of a Restricted Subsidiary that was permitted to be
Incurred by another provision of this covenant and (ii) any Restricted
Subsidiary of the Company of Indebtedness of the Company that was permitted
to be Incurred by another provision of this covenant; and

(19) Indebtedness of the Company in an aggregate principal amount
which, when taken together with all other Indebtedness of the Company
outstanding on the date of such Incurrence (other than Indebtedness
permitted by clauses (1) through (18) above or paragraph (a)) does not
exceed $25.0 million.

(c) Notwithstanding the foregoing, neither the Company nor any Dollar Notes
Guarantor (in the case of the Dollar Notes) and neither FFBV nor any Euro Notes
Guarantor (in the case of the Euro Notes) will Incur any Indebtedness pursuant
to the foregoing paragraph (b) if the proceeds thereof are used, directly or
indirectly, to Refinance any Subordinated Obligations of the Company or any
Dollar Notes Guarantor (in the case of the Dollar Notes) or FFBV or any Euro
Notes Guarantor (in the case of the Euro Notes) unless such Indebtedness shall
be subordinated to the applicable Notes or the applicable Guaranty to at least
the same extent as such Subordinated Obligations.

(d) For purposes of determining compliance with this covenant, (1) in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described above, the Company and FFBV, as the case may be,
in its sole discretion, will classify such item of Indebtedness at the time of
Incurrence and only be required to include the amount and type of such
Indebtedness in one of the above clauses and (2) the Company and FFBV, as the
case may be, will be entitled to divide and classify an item of Indebtedness in
more than one of the types of Indebtedness described above.

(e) Notwithstanding paragraphs (a) and (b) above, neither the Company nor
any Dollar Notes Guarantor (in the case of the Dollar Notes) and neither FFBV
nor any Euro Notes Guarantor (in the case of the Euro Notes) will Incur (1) any
Indebtedness if such Indebtedness is subordinate or junior in ranking in any
respect to any Senior Indebtedness of such Person, unless such Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness of such Person or (2) any Secured
Indebtedness that is not Senior Indebtedness of such Person unless
contemporaneously therewith such Person makes effective provision to secure the
applicable Notes equally and ratably with such Secured Indebtedness for so long
as such Secured Indebtedness is secured by a Lien.

(f) For purposes of determining compliance with any U.S. dollar or Euro
denominated restriction on the Incurrence of Indebtedness where the Indebtedness
Incurred is denominated in a different currency, the amount of such Indebtedness
will be the U.S. Dollar Equivalent or Euro Equivalent, as the case may be,
determined on the date of the Incurrence of such Indebtedness; provided,
however, that if any such Indebtedness denominated in a different currency is
subject to a Currency Agreement with respect to U.S. dollars or Euros, as the
case may be, covering all principal, premium, if any, and interest payable on
such Indebtedness, the amount of such Indebtedness expressed in U.S. dollars or
Euros will be as provided
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in such Currency Agreement. The principal amount of any Refinancing Indebtedness
Incurred in the same currency as the Indebtedness being Refinanced will be the
Euro Equivalent or U.S. Dollar Equivalent, as appropriate, of the Indebtedness
Refinanced, except to the extent that (i) such U.S. Dollar Equivalent or Euro
Equivalent was determined based on a Currency Agreement, in which case the
Refinancing Indebtedness will be determined in accordance with the preceding
sentence, and (ii) the principal amount of the Refinancing Indebtedness exceeds
the principal amount of the Indebtedness being Refinanced, in which case the
U.S. Dollar Equivalent or Euro Equivalent of such excess, as appropriate, will
be determined on the date such Refinancing Indebtedness is Incurred.

Limitation on Restricted Payments

(a) The Company will not, and will not permit any Restricted Subsidiary,
directly or indirectly, to make a Restricted Payment if at the time the Company
or such Restricted Subsidiary makes such Restricted Payment:

(1) a Default shall have occurred and be continuing (or would result
therefrom);

(2) the Company is not entitled to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under
"-- Limitation on Indebtedness"; or

(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of (without
duplication):

(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter during which the Issue Date occurs to the end of the most recent
fiscal quarter for which internal financial statements are available on
or prior to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such deficit);
plus

(B) 100% of the aggregate Net Cash Proceeds received by the Company
from the issuance or sale of, or cash capital contribution in respect
of, its Capital Stock (other than Disqualified Stock) subsequent to the
Issue Date (other than an issuance or sale to a Subsidiary of the
Company and other than an issuance or sale to an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees); plus

(C) an amount equal to the sum of (x) the net reduction in the
Investments (other than Permitted Investments) made by the Company or
any Restricted Subsidiary in any Person resulting from repurchases,
repayments or redemptions of such Investments by such Person, proceeds
realized on the sale of such Investment, and proceeds representing the
return of capital (to the extent not included in Consolidated Net
Income), in each case received by the Company or any Restricted
Subsidiary, and (y) to the extent such Person is an Unrestricted
Subsidiary, the portion (proportionate to the Company's equity interest
in such Subsidiary) of the fair market value of the net assets of such
Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; provided, however, that the
foregoing sum shall not exceed, in the case of any such Person or
Unrestricted Subsidiary, the amount of Investments (excluding Permitted
Investments) previously made (and treated as a Restricted Payment) by
the Company or any Restricted Subsidiary in such Person or Unrestricted
Subsidiary.

(b) The preceding provisions will not prohibit:

(1) any Restricted Payment made out of the Net Cash Proceeds of the
substantially concurrent sale of, or made by exchange for, Capital Stock of
the Company (other than Disqualified Stock and other than Capital Stock
issued or sold to a Subsidiary of the Company or an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees) or a substantially
concurrent cash capital contribution received by the Company in respect of
its Capital Stock (other than Disqualified Stock); provided, however, that
(A) such Restricted Payment shall be excluded in the calculation of the
amount of Restricted Payments and

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(B) the Net Cash Proceeds from such sale or such cash capital contribution
(to the extent so used for such Restricted Payment) shall be excluded from
the calculation of amounts under clause (3)(B) of paragraph (a) above and
under clause (4) below;

(2) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness which is permitted to be Incurred pursuant to the covenant
described under "-- Limitation on Indebtedness"; provided, however, that
such purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount of
Restricted Payments;

(3) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this covenant; provided, however, that at the time of payment of such
dividend, no other Default shall have occurred and be continuing (or result
therefrom); provided further, however, that such dividend shall be included
in the calculation of the amount of Restricted Payments;

(4) so long as no Default has occurred and is continuing, the
repurchase or other acquisition of shares of Capital Stock of the Company
or any of its Subsidiaries (A) from employees, former employees, directors
or former directors of the Company or any of its Subsidiaries (or permitted
transferees of such employees, former employees, directors or former
directors), (B) in the open market to the extent such shares are acquired
to satisfy a current obligation to deliver shares in connection with the
exercise of stock options or similar rights, in each case pursuant to the
terms of the agreements (including employment agreements) or plans (or
amendments thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase or sell,
shares of such Capital Stock; provided, however, that the aggregate amount
of such repurchases and other acquisitions shall not exceed in any calendar
year the sum of (x) $5.0 million plus (y) the Net Cash Proceeds from the
sale of Capital Stock to employees or directors of the Company (including
pursuant to the exercise of stock options) that occur during such calendar
year (to the extent such Net Cash Proceeds are not applied to the payment
of a Restricted Payment pursuant to clause (1) above); provided further,
however, that (i) such repurchases and other acquisitions shall be excluded
in the calculation of the amount of Restricted Payments and (ii) the Net
Cash Proceeds from such sales described in clause (y) shall be excluded
from the calculation of amounts under clause (3)(B) of paragraph (a) above;
or

(5) Restricted Payments not exceeding $15.0 million in the aggregate;
provided, however, that (A) at the time of such Restricted Payments, no
Default shall have occurred and be continuing (or result therefrom) and (B)
such Restricted Payments shall be included in the calculation of Restricted
Payments.

Limitation on Restrictions on Distributions from Restricted Subsidiaries

The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions on its Capital Stock to the
Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company,
(b) make any loans or advances to the Company or (c) transfer any of its
property or assets to the Company, except:

(1) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date, including the Indentures and the
Credit Agreement as in effect on the Issue Date;

(2) any encumbrance or restriction with respect to a Receivables
Subsidiary pursuant to a Receivables Program of such Receivables
Subsidiary;

(3) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
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Incurred as consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding on
such date;

(4) any encumbrance or restriction pursuant to an agreement effecting
a Refinancing of Indebtedness Incurred pursuant to an agreement referred to
in clause (1), (2) or (3) of this covenant or this clause (4) or contained
in any amendment to an agreement referred to in clause (1), (2) or (3) of
this covenant or this clause (4); provided, however, that the encumbrances
and restrictions with respect to such Restricted Subsidiary contained in
any such refinancing agreement or amendment are, in the good faith judgment
of the Board of Directors, no less favorable, taken as a whole, to the
Noteholders than encumbrances and restrictions with respect to such
Restricted Subsidiary contained in such predecessor agreements;

(5) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease or the property
leased thereunder;

(6) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness, or under letters of
credit or bank guarantees, of a Restricted Subsidiary to the extent such
restrictions restrict the transfer of, or the grant of security over, the
property subject to such security agreements, mortgages, letters of credit
or bank guarantees;

(7) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition;

(8) purchase money obligations (including Capital Lease Obligations)
for property acquired in the ordinary course of business that impose
restrictions on the property so acquired of the nature described in clause
(c) above;

(9) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
in the ordinary course of business; and

(10) any such encumbrance or restriction with respect to a Foreign
Restricted Subsidiary pursuant to an agreement governing Indebtedness
Incurred by such Foreign Restricted Subsidiary.

Limitation on Sales of Assets and Subsidiary Stock

(a) The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless:

(1) the Company or such Restricted Subsidiary receives consideration
at the time of such Asset Disposition at least equal to the fair market
value (including as to the value of all non-cash consideration), as
determined in good faith by the Board of Directors, of the shares and
assets subject to such Asset Disposition;

(2) at least 75% of the consideration thereof received by the Company
or such Restricted Subsidiary is in the form of cash or cash equivalents;
and

(3) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted Subsidiary, as
the case may be)

(A) first, to the extent the Company elects (or is required by the
terms of any Indebtedness), to prepay, repay, redeem or purchase Senior
Indebtedness of the Company or Indebtedness (other than any Disqualified
Stock) of a Restricted Subsidiary (in each case other than Indebtedness
owed to the Company or an Affiliate of the Company) within one year from
the later of the date of such Asset Disposition or the receipt of such
Net Available Cash;

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(B) second, to the extent of the balance of such Net Available Cash
after application in accordance with clause (A), to the extent the
Company elects, to acquire Additional Assets within one year (or enter
into a binding commitment therefor within such period and acquire such
Additional Assets within 18 months) from the later of the date of such
Asset Disposition or the receipt of such Net Available Cash; and

(C) third, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B), to make an
offer to the holders of the Dollar Notes and the Euro Notes (and to
holders of other Senior Subordinated Indebtedness of the Company or FFBV
designated by the Company) to purchase, on a pro rata basis, Dollar
Notes and Euro Notes (and such other Senior Subordinated Indebtedness of
the Company or FFBV) pursuant to and subject to the conditions contained
in the Indentures;

provided, however, that in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (A) or (C) above, the Company
or such Restricted Subsidiary shall permanently retire such Indebtedness
and shall cause the related loan commitment (if any) to be permanently
reduced in an amount equal to the principal amount so prepaid, repaid or
purchased.

Notwithstanding the foregoing provisions of this covenant, (i) the Company
and the Restricted Subsidiaries will not be required to apply any Net Available
Cash in accordance with this covenant except to the extent that the aggregate
Net Available Cash from all Asset Dispositions which are not applied in
accordance with this covenant exceeds $10.0 million, and (ii) to the extent any
Asset Disposition constitutes the disposition of Consent Decree Assets, the
Company shall be required to apply the Net Available Cash from such Asset
Disposition pursuant to clause (a)(3)(A) and the Company shall not be required
to comply with clause (a)(1) above.

Pending application of Net Available Cash pursuant to this covenant, such
Net Available Cash shall be invested in Temporary Cash Investments or applied to
temporarily reduce revolving credit indebtedness.

For the purposes of this covenant, the following are deemed to be cash or
cash equivalents:

(1) the assumption of Indebtedness of the Company or any Restricted
Subsidiary and the release of the Company or such Restricted Subsidiary
from all liability on such Indebtedness in connection with such Asset
Disposition; and

(2) securities received by the Company or any Restricted Subsidiary
from the transferee that are promptly converted by the Company or such
Restricted Subsidiary into cash.

In addition, the Company may elect to deem Additional Assets (determined
based on the fair market value of such assets) as cash and cash equivalents for
purposes of this covenant; provided, however, that such Additional Assets were
acquired for fair market value as part of the transaction constituting an Asset
Disposition; and provided further, however, that such Additional Assets will be
deemed to have been acquired in accordance with clause (a)(3)(B) above.

(b) In the event of an Asset Disposition that requires the purchase of the
Notes (and other Senior Subordinated Indebtedness of the Company or FFBV)
pursuant to clause (a)(3)(C) above, the Company will purchase, on a pro rata
basis, Dollar Notes and Euro Notes tendered pursuant to an offer by the Company
for the Notes (and such other Senior Subordinated Indebtedness of the Company
and FFBV, as applicable) at a purchase price of 100% of their respective
principal amount (or, in the event such other Senior Subordinated Indebtedness
was issued with significant original issue discount, 100% of the accreted value
thereof), without premium, plus accrued but unpaid interest (or, in respect of
such other Senior Subordinated Indebtedness, such lesser price, if any, as may
be provided for by the terms of such Senior Subordinated Indebtedness) in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Indentures. If the aggregate purchase price
of the Dollar Notes and Euro Notes and other Senior Subordinated Indebtedness of
the Company or FFBV tendered exceeds the Net Available Cash allotted to their
purchase, the Company will select the Dollar Notes and Euro Notes and other
Senior Subordinated Indebtedness of the Company or FFBV to be purchased on a pro
rata basis but
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in round denominations, which in the case of the Dollar Notes will be
denominations of $1,000 principal amount or multiples thereof and in the case of
the Euro Notes will be denominations of E1,000 principal amount or multiples
thereof. The Company shall not be required to make such an offer to purchase
Notes (and other Senior Subordinated Indebtedness) pursuant to this covenant if
the Net Available Cash available therefor is less than $10.0 million (which
lesser amount shall be carried forward for purposes of determining whether such
an offer is required with respect to the Net Available Cash from any subsequent
Asset Disposition).

(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this clause by virtue of its compliance with
such securities laws or regulations.

Limitation on Affiliate Transactions

(a) The Company will not, and will not permit any Restricted Subsidiary to,
enter into or permit to exist any transaction (including the purchase, sale,
lease or exchange of any property, employee compensation arrangements or the
rendering of any service) with, or for the benefit of, any Affiliate of the
Company (an "Affiliate Transaction") unless:

(1) the terms of the Affiliate Transaction are no less favorable to
the Company or such Restricted Subsidiary than those that could be obtained
at the time of the Affiliate Transaction in arm's-length dealings with a
Person who is not an Affiliate;

(2) if such Affiliate Transaction involves an amount in excess of
$10.0 million, the terms of the Affiliate Transaction are set forth in
writing and a majority of the non-employee directors of the Company
disinterested with respect to such Affiliate Transactions have determined
in good faith that the criteria set forth in clause (1) are satisfied and
have approved the relevant Affiliate Transaction as evidenced by a Board
resolution; and

(3) if such Affiliate Transaction involves an amount in excess of
$20.0 million, the Board of Directors shall also have received a written
opinion from (A) an investment banking firm of national prominence or (B)
an accounting or appraisal firm nationally recognized in making such
determinations, in each case that is not an Affiliate of the Company to the
effect that such Affiliate Transaction is fair, from a financial
standpoint, to the Company and its Restricted Subsidiaries.

(b) The provisions of the preceding paragraph (a) will not prohibit:

(1) any Investment (other than a Permitted Investment) or other
Restricted Payment, in each case permitted to be made pursuant to the
covenant described under "-- Limitation on Restricted Payments";

(2) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options, stock ownership plans or other similar
incentive arrangements approved by the Board of Directors;

(3) loans or advances to employees in the ordinary course of business
in accordance with the past practices of the Company or its Restricted
Subsidiaries, but in any event not to exceed $5.0 million in the aggregate
outstanding at any one time;

(4) guaranties of Permitted Employee Stock Purchase Loans;

(5) the payment of reasonable fees to directors of the Company and its
Restricted Subsidiaries who are not employees of the Company or its
Restricted Subsidiaries;

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(6) any transaction with a Restricted Subsidiary or joint venture or
similar entity which would constitute an Affiliate Transaction solely
because the Company or a Restricted Subsidiary owns an equity interest in
or otherwise controls such Restricted Subsidiary, joint venture or similar
entity;

(7) the issuance or sale of any Capital Stock (other than Disqualified
Stock) of the Company;

(8) any Receivables Program of the Company or a Restricted Subsidiary;

(9) customary directors' and officers' indemnification arrangements;
and

(10) any agreement with the Company or any Restricted Subsidiary as in
effect as of the Issue Date and any amendment or replacement thereto or any
transaction contemplated thereby so long as such amendment or replacement
agreement is not more disadvantageous to the Company and its Restricted
Subsidiaries than the original agreement as in effect on the Issue Date.

Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries

The Company

(1) will not, and will not permit any Restricted Subsidiary to, sell,
lease, transfer or otherwise dispose of (but excluding any pledge of such
Capital Stock otherwise permitted by the applicable Indenture) any Capital
Stock of any Restricted Subsidiary to any Person (other than the Company or
a Wholly Owned Subsidiary), and

(2) will not permit any Restricted Subsidiary to issue any of its
Capital Stock (other than, if necessary, shares of its Capital Stock
constituting directors' or other legally required qualifying shares) to any
Person (other than to the Company or a Wholly Owned Subsidiary),

unless

(A) immediately after giving effect to such issuance, sale or other
disposition, neither the Company nor any of its Subsidiaries own any
Capital Stock of such Restricted Subsidiary;

(B) immediately after giving effect to such issuance, sale or other
disposition, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and any Investment in such Person remaining after
giving effect thereto would have been permitted to be made under the
covenant described under "-- Limitation on Restricted Payments" if made
on the date of such issuance, sale or other disposition; or

(C) the Company concurrently acquires sufficient shares of Capital
Stock of such Restricted Subsidiary to at least maintain the same
percentage ownership interest it had prior to the transaction.

Notwithstanding the foregoing, the issuance or sale of shares of Capital Stock
of any Restricted Subsidiary of the Company will not violate the provisions of
the immediately preceding sentence if such shares are issued or sold in
connection with:

(i) the formation or capitalization of a Restricted Subsidiary, or

(ii) a single transaction or a series of substantially contemporaneous
transactions whereby such Restricted Subsidiary becomes a Restricted
Subsidiary of the Company by reason of the acquisition of securities or
assets from another Person.

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Merger and Consolidation

Neither the Company nor FFBV will consolidate with or merge with or into,
or convey, transfer or lease, in one transaction or a series of transactions,
directly or indirectly, all or substantially all its assets to, any Person,
unless, in the case of the Company:

(1) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia or
under the laws of Bermuda, the British Virgin Islands, the Bahamas or
Canada and the Successor Company (if not the Company) shall expressly
assume, by an indenture supplemental thereto, executed and delivered to the
applicable Trustee, in form satisfactory to such Trustee, all the
obligations of the Company under the Dollar Notes and the Dollar Notes
Indenture (in the case of the Dollar Notes) and under its Guaranty of the
Euro Notes and the Euro Notes Indenture (in the case of the Euro Notes);

(2) immediately after giving pro forma effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Subsidiary as a result of such transaction as having been
Incurred by such Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing;

(3) immediately after giving pro forma effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under
"-- Limitation on Indebtedness";

(4) immediately after giving pro forma effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount that is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction;

(5) the Company shall have delivered to each Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and each such supplemental indenture (if
any) comply with the applicable Indenture;

(6) in the event that the Successor Company in any merger is organized
and existing under the laws of Bermuda, the British Virgin Islands, the
Bahamas or Canada (any such merger, a "Foreign Jurisdiction Merger"), the
Company shall have delivered to each Trustee an Opinion of Counsel to the
effect that the Holders will not recognize income, gain or loss for U.S.
Federal income tax purposes and, in the case of the Euro Notes, Netherlands
tax purposes, as a result of such transaction and will be subject to U.S.
Federal income tax and, in the case of the Euro Notes, Netherlands tax (if
any), on the same amounts and at the same times as would have been the case
if such transaction had not occurred; and

(7) in the event of a Foreign Jurisdiction Merger, the Company shall
have delivered to each Trustee an Opinion of Counsel in the jurisdiction of
the Successor Company to the effect that (A) any payment of interest or
principal under or with respect to the applicable Notes or the applicable
Guaranties will, after giving effect to such transaction, be exempt from
any withholding or deduction for or on account of any present or future
tax, duty, levy, impost, assessment or other governmental charge of
whatever nature imposed or levied by or on behalf of any jurisdiction from
or through which payment is made or in which the payor is organized,
resident or engaged in business for tax purposes and (B) no other taxes or
income (including capital gains) will be payable by a Holder of Dollar
Notes or Euro Notes, as the case may be, under the laws of any jurisdiction
where the Successor Company is or becomes organized, resident or engaged in
business for tax purposes in respect of the acquisition, ownership or
disposition of the Notes, including the receipt of interest or principal
thereon, provided that such Holder does not use or hold, and is not deemed
to use or hold the Dollar Notes or the Euro Notes, as the case may be, in
carrying on a business in the jurisdiction where the Successor Company is
or becomes organized, resident or engaged in business for tax purposes.

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provided, however, that clauses (3) and (4) will not be applicable to (A) a
Restricted Subsidiary consolidating with, merging into or transferring all or
part of its properties and assets to the Company or (B) the Company merging with
an Affiliate of the Company solely for the purpose and with the sole effect of
reincorporating the Company in another jurisdiction.

The Successor Company will be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under each Indenture, and the predecessor Company, except in the
case of a lease, shall be released from the obligation to pay the principal of
and interest on the Notes.

Each Indenture will provide that the Company will not permit any Guarantor
(other than the Company which, in its capacity as a Guarantor of the Euro Notes,
shall be bound by the provisions described above) to consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any Person unless:

(1) except in the case of a Guarantor that has been disposed of in its
entirety to another Person (other than to the Company or an Affiliate of
the Company), whether through a merger, consolidation or sale of Capital
Stock or assets, the resulting, surviving or transferee Person (if not such
Subsidiary) shall be a Person organized and existing under the laws of the
jurisdiction under which such Subsidiary was organized or under the laws of
the United States of America, or any State thereof or the District of
Columbia, and such Person shall expressly assume, by Guaranty Agreements,
in a form satisfactory to the applicable Trustee, all the obligations of
such Guarantor, if any, under its Dollar Notes Guaranty and Euro Notes
Guaranty;

(2) immediately after giving effect to such transaction or
transactions on a pro forma basis (and treating any Indebtedness which
becomes an obligation of the resulting, surviving or transferee Person as a
result of such transaction as having been issued by such Person at the time
of such transaction), no Default shall have occurred and be continuing; and

(3) the Company (in the case of the Dollar Notes) or FFBV (in the case
of the Euro Notes) delivers to the applicable Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such Guaranty Agreement, if any,
complies with the applicable Indenture.

Future Guarantors

The Company and FFBV will cause each domestic Restricted Subsidiary that
Guarantees any Indebtedness of the Company, FFBV or any other Guarantor to, at
the same time, execute and deliver to each Trustee a supplemental indenture
pursuant to which such Restricted Subsidiary will Guarantee payment of the
Dollar Notes and the Euro Notes on the same terms and conditions as those set
forth in the applicable Indenture.

Concurrently with the closing of the Acquisition, IDP and its domestic
subsidiaries will become Guarantors.

SEC Reports

Notwithstanding that the Company and FFBV may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
and FFBV will file with the SEC and provide the applicable Trustees and
Noteholders with such annual reports and such information, documents and other
reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filings of such information, documents and reports under such Sections;
provided, however, that so long as the Company is a Guarantor of the Euro Notes
(or the Exchange Euro Notes) and the rules and regulations of the SEC would
permit FFBV (if subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act) to satisfy such reporting requirements with the reports,
information and other documents required to be filed by the Company, the
provision of such reports,
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information and other documents by the Company hereunder shall be deemed to
satisfy the obligations of FFBV hereunder.

In addition, the Company and FFBV shall furnish to the Holders of the Notes
and to prospective investors, upon the requests of such Holders, any information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so
long as the Notes are not freely transferable under the Securities Act.

COVENANTS APPLICABLE SOLELY TO THE EURO NOTES

The Euro Notes Indenture contains the following additional covenants:

Ownership of FFBV

FFBV will at all times be a Wholly Owned Subsidiary of the Company.

Limitation on Business Activities of FFBV

FFBV will not, and the Company will not permit FFBV to, (a) incur any
Indebtedness other than (1) the Euro Notes (and the Exchange Euro Notes), (2)
FFBV's Guaranty of the Dollar Notes (and the Exchange Dollar Notes), (3) FFBV's
guaranty of obligations in respect of the Credit Agreement and (4) Indebtedness
incurred in compliance with clause (b)(4) of the covenant described under
"-- Covenants applicable to the Dollar Notes and the Euro Notes -- Limitation on
Indebtedness" and, in the case of (1) and (2), any refinancings or replacements
thereof permitted by the covenant described under "-- Covenants Applicable to
the Dollar Notes and the Euro Notes -- Limitation on Indebtedness" or (b) engage
in any business activities other than (1) the issuance of the Euro Notes and the
guaranties described in the preceding clause (a), (2) the making of Intercompany
Loans and (3) activities incidental to the activities described in clauses (1)
or (2) of this clause (b).

Limitation on Use of Proceeds

FFBV will use all the net proceeds of the issuance of the Euro Notes to
make Intercompany Loans and pay fees and expenses of the offering of the Euro
Notes, including customary organizational expenses of FFBV.

DEFAULTS

Each of the following is an Event of Default with respect to the Notes:

(1) a default in the payment of interest or any Additional Amounts on
the Dollar Notes or the Euro Notes, as the case may be, when due, continued
for 30 days;

(2) a default in the payment of principal of any Dollar Note or Euro
Note, as the case may be, when due at its Stated Maturity, upon optional
redemption, upon required purchase, upon declaration or otherwise;

(3) the failure by the Company or FFBV, as the case may be, to comply
with its obligations under "-- Certain Covenants -- Covenants Applicable to
the Dollar Notes and the Euro Notes -- Merger and Consolidation" above;

(4) the failure by the Company or FFBV, as the case may be, to comply
for 30 days after notice with any of its respective obligations in the
covenants described above under "Change of Control" (other than a failure
to purchase Notes) or under "-- Certain Covenants -- Covenants Applicable
to the Dollar Notes and the Euro Notes" under "-- Limitation on
Indebtedness", "-- Limitation on Restricted Payments", "-- Limitation on
Restrictions on Distributions from Restricted Subsidiaries", "-- Limitation
on Sales of Assets and Subsidiary Stock" (other than a failure to purchase
Notes), "-- Limitation on Affiliate Transactions", "-- Limitation on the
Sale or Issuance of Capital Stock of Restricted Subsidiaries", "-- Future
Guarantors" or "-- SEC Reports" or, with respect to the Euro Notes only,
the failure by the Company or FFBV to comply for 30 days after notice with
any of its obligations under "-- Certain Covenants -- Covenants Applicable
Solely to the Euro Notes" under

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"-- Ownership of FFBV" or "-- Limitation on Business Activities of FFBV" or
"-- Limitation on Use of Proceeds";

(5) the failure by the Company, FFBV, or any Guarantor to comply for
60 days after notice with its other agreements contained in the applicable
Indenture;

(6) Indebtedness of a Guarantor, the Company, FFBV or any Significant
Subsidiary is not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of a default and
the total amount of such Indebtedness unpaid or accelerated exceeds $10.0
million (the "cross acceleration provision");

(7) certain events of bankruptcy, insolvency or reorganization of the
Company, FFBV or a Significant Subsidiary (the "bankruptcy provisions");

(8) any judgment or decree for the payment of money the uninsured
amount of which is in excess of $10.0 million is entered against a
Guarantor, the Company, FFBV or a Significant Subsidiary, remains
outstanding for a period of 60 consecutive days following such judgment and
is not discharged, waived or stayed within 10 days after notice (the
"judgment default provision"); or

(9) a Guaranty ceases to be in full force and effect (other than in
accordance with the terms of the applicable Indentures) or a Guarantor
denies or disaffirms its obligations under its Guaranty.

However, a default under clauses (4), (5) and (8) will not constitute an Event
of Default until the applicable Trustee or the holders of 25% in principal
amount of the outstanding Dollar Notes or Euro Notes, as the case may be, notify
the Company or FFBV, as the case may be, of the default and the Company or FFBV,
as the case may be, does not cure such default within the time specified after
receipt of such notice.

If an Event of Default occurs and is continuing, the applicable Trustee or
the holders of at least 25% in principal amount of the outstanding applicable
Notes may declare the principal of and accrued but unpaid interest on all the
applicable Notes to be due and payable. Upon such a declaration, such principal
and interest shall be due and payable immediately. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company or FFBV, as the case may be, occurs and is continuing, the principal of
and interest on all the applicable Notes will ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the applicable Trustee or any holders of such Notes. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Dollar Notes or Euro Notes, as the case may be, may rescind any such
acceleration with respect to the Dollar Notes or Euro Notes, as the case may be,
and its consequences.

Subject to the provisions of each Indenture relating to the duties of the
relevant Trustee, in case an Event of Default under an Indenture occurs and is
continuing, the applicable Trustee will be under no obligation to exercise any
of the rights or powers under such Indenture at the request or direction of any
of the holders of the applicable Notes unless such holders have offered to such
Trustee reasonable indemnity or security against any loss, liability or expense.
Except to enforce the right to receive payment of principal, premium (if any) or
interest when due, no holder of a Note may pursue any remedy with respect to the
related Indenture or Notes unless:

(1) such holder has previously given the applicable Trustee notice
that an Event of Default is continuing;

(2) holders of at least 25% in principal amount of the outstanding
Notes of the applicable series have requested such Trustee to pursue the
remedy;

(3) such holders have offered such Trustee reasonable security or
indemnity against any loss, liability or expense;

(4) such Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity; and

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(5) holders of a majority in principal amount of the outstanding
Dollar Notes or Euro Notes, as the case may be, of such series have not
given the applicable Trustee a direction inconsistent with such request
within such 60-day period.

Subject to certain restrictions, the holders of a majority in principal amount
of the outstanding Dollar Notes or Euro Notes, as the case may be, are given the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the applicable Trustee or of exercising any trust or power
conferred on the applicable Trustee. The applicable Trustee, however, may refuse
to follow any direction that conflicts with law or the applicable Indenture or
that the applicable Trustee determines is unduly prejudicial to the rights of
any other holder of such Notes or that would involve the applicable Trustee in
personal liability.

If a Default under an Indenture occurs, is continuing and is known to the
relevant Trustee, such Trustee must mail to each holder of the Dollar Notes or
Euro Notes, as the case may be, notice of the Default within 90 days after it
occurs. Except in the case of a Default in the payment of principal of or
interest on any Note, the applicable Trustee may withhold notice if and so long
as a committee of its trust officers determines that withholding notice is not
opposed to the interest of the holders of the applicable Notes. In addition, we
(in the case of the Dollar Notes) and FFBV (in the case of the Euro Notes) are
required to deliver to each Trustee, within 120 days after the end of each
fiscal year, a certificate indicating whether the signers thereof know of any
Default under the related Indenture that occurred during the previous year. We
(in the case of the Dollar Notes) and FFBV (in the case of the Euro Notes) are
required to deliver to the applicable Trustee, within 30 days after the
occurrence thereof, written notice of any event which would constitute certain
Defaults, their status and what action we are taking or propose to take in
respect thereof.

AMENDMENTS AND WAIVERS

Subject to certain exceptions, the Dollar Notes Indenture and the Euro
Notes Indenture may be amended with the consent of the holders of a majority in
principal amount of the Dollar Notes or the Euro Notes, respectively, then
outstanding (including consents obtained in connection with a tender offer or
exchange for such Notes) and any past default or compliance with any provisions
may also be waived with the consent of the holders of a majority in principal
amount of such Notes then outstanding. However, without the consent of each
holder of an outstanding Dollar Note or Euro Note, as the case may be, affected
thereby, an amendment may not, among other things:

(1) reduce the amount of Dollar Notes or the Euro Notes, as the case
may be, whose holders must consent to an amendment;

(2) reduce the rate of or extend the time for payment of interest on
any Dollar Note or Euro Note, as the case may be;

(3) reduce the principal of or extend the Stated Maturity of any
Dollar Note or Euro Note, as the case may be;

(4) reduce the amount payable upon the redemption of any Dollar Note
or Euro Note, as the case may be, or change the time at which any Dollar
Note or Euro Note, as the case may be, may be redeemed as described under
"-- Optional Redemption" or, in the case of the Euro Notes only,
"-- Withholding Taxes", above;

(5) make any Dollar Note or Euro Note, as the case may be, payable in
money other than that stated in the Dollar Note or Euro Note, as the case
may be;

(6) impair the right of any holder of the Dollar Notes or the Euro
Notes, as the case may be, to receive payment of principal of and interest
on such holder's Dollar Notes or Euro Notes, as the case may be, on or
after the due dates therefor or to institute suit for the enforcement of
any payment on or with respect to such holder's Dollar Notes or Euro Notes,
as the case may be;

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(7) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions;

(8) make any change in the ranking or priority of any Dollar Note or
Euro Note, as the case may be, that would adversely affect the applicable
Noteholders;

(9) make any change in any Guaranty that would adversely affect the
applicable Noteholders; or

(10) in the case of the Euro Notes only, make any change in the
provisions of the Indenture described under "-- Withholding Taxes" that
adversely affects the rights of any applicable Noteholder or amend the
terms of the Euro Notes or the Euro Notes Indenture in a way that would
result in the loss of an exemption from any of the Taxes described
thereunder.

Notwithstanding the preceding, without the consent of any holder of the
Dollar Notes or Euro Notes, as the case may be, the Company, FFBV, the
Guarantors and relevant Trustee may amend an Indenture:

(1) to cure any ambiguity, omission, defect or inconsistency;

(2) to provide for the assumption by a successor corporation of the
obligations of the Company under such Indenture;

(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of
the Code);

(4) to add guarantees with respect to the related Notes, including any
Guaranties, to secure such Notes;

(5) to add to the covenants of the Company, FFBV or a Guarantor for
the benefit of the holders of the such Notes or to surrender any right or
power conferred upon the Company, FFBV or a Guarantor;

(6) to make any change that does not adversely affect the rights of
any holder of such Notes; or

(7) to comply with any requirement of the SEC in connection with the
qualification of such Indenture under the Trust Indenture Act.

However, no amendment may be made to the subordination provisions of such
Indenture that adversely affects the rights of any holder of Senior Indebtedness
of the Company, FFBV or a Guarantor then outstanding unless the holders of such
Senior Indebtedness (or their Representative) consent to such change.

The consent of the holders of Notes is not necessary under an Indenture to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.

After an amendment under an Indenture becomes effective, we (in the case of
the Dollar Notes) and FFBV (in the case of the Euro Notes) are required to mail
to holders of the related Notes a notice briefly describing such amendment.
However, the failure to give such notice to all holders of such Notes, or any
defect therein, will not impair or affect the validity of the amendment.

TRANSFER AND EXCHANGE

The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
In connection with any such transfer, the Indentures will require the transferor
to, among other things, furnish appropriate endorsements and transfer documents,
to furnish certain certificates and to pay any taxes, duties and governmental
charges in

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connection with such transfer. Such transfer documents, if any, will be made
available at the office of the Luxembourg Paying Agent where copies may be
obtained on request.

Notwithstanding the foregoing, the Company (in the case of the Dollar
Notes) and FFBV (in the case of the Euro Notes) are not required to register the
transfer of any certificated Notes:

(1) for a period of 15 calendar days prior to any date fixed for the
redemption of the Notes;

(2) for a period of 15 calendar days immediately prior to the date
fixed for selection of Notes to be redeemed in part;

(3) for a period of 15 calendar days prior to the record date with
respect to any interest payment date; or

(4) which the Holder has tendered (and not withdrawn) for repurchase
in connection with an offer in connection with a Change of Control offer or
an Asset Disposition offer.

Any such transfer will be made without charge to the Holder, other than any
taxes, duties and governmental charges payable in connection with such transfer.

DEFEASANCE

At any time, we (in the case of the Dollar Notes) or FFBV (in the case of
the Euro Notes) may terminate all our or FFBV's obligations under the Dollar
Notes or the Euro Notes, as the case may be, and the related Indenture ("legal
defeasance"), except for certain obligations, including those respecting the
defeasance trust and obligations to register the transfer or exchange of such
Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a
registrar and paying agent in respect of such Notes.

In addition, at any time we (in the case of the Dollar Notes) or FFBV (in
the case of the Euro Notes) may terminate our or FFBV's obligations under
"-- Excess Cash Flow Repurchase Offer" and "-- Change of Control" and under the
covenants described under "-- Certain Covenants" (other than the covenant
described under "-- Merger and Consolidation"), the operation of the cross
acceleration provision, the bankruptcy provisions with respect to Significant
Subsidiaries and the judgment default provision described under "-- Defaults"
above and the limitations contained in clauses (3) and (4) of the first
paragraph under "-- Certain Covenants -- Covenants Applicable to the Dollar
Notes and the Euro Notes -- Merger and Consolidation" above ("covenant
defeasance").

We (in the case of the Dollar Notes) or FFBV (in the case of the Euro
Notes) may exercise our legal defeasance option notwithstanding our or their
prior exercise of the covenant defeasance option. We and FFBV may exercise
either option with respect to the Dollar Notes or the Euro Notes, as the case
may be, without exercising any option with respect to the other series of Notes.
If we (in the case of the Dollar Notes) or FFBV (in the case of the Euro Notes)
exercise our legal defeasance option, payment of the applicable Notes may not be
accelerated because of an Event of Default with respect thereto. If we (in the
case of the Dollar Notes) or FFBV (in the case of the Euro Notes) exercise our
covenant defeasance option, payment of the applicable Notes may not be
accelerated because of an Event of Default specified in clause (4), (6), (7)
(with respect only to Significant Subsidiaries) or (8) under "-- Defaults" above
or because of the failure of the Company (in the case of the Dollar Notes) or
FFBV (in the case of the Euro Notes) to comply with clauses (3) and (4) of the
first paragraph under "-- Certain Covenants -- Covenants Applicable to the
Dollar Notes and the Euro Notes -- Merger and Consolidation" above. If we (in
the case of the Dollar Notes) or FFBV (in the case of the Euro Notes) exercise
our legal defeasance option or our covenant defeasance option, each applicable
Guarantor will be released from all of its obligations with respect to its
applicable Guaranty.

In order to exercise either of our or FFBV's defeasance options with
respect to a series of Notes, we (in the case of the Dollar Notes) or FFBV (in
the case of the Euro Notes) must irrevocably deposit in trust (the "defeasance
trust") with the related Trustee money, U.S. Government Obligations (in the case

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of the Dollar Notes or the Euro Notes) or European Governmental Obligations (in
the case of the Euro Notes) for the payment of principal and interest on the
Dollar Notes or the Euro Notes, as the case may be, to redemption or maturity,
as the case may be, and must comply with certain other conditions, including
delivery to the applicable Trustee of (i) an Opinion of Counsel to the effect
that holders of the applicable Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law) and (ii) an Opinion of Counsel in The
Netherlands to the effect that (A) holders of the Euro Notes will not recognize
income, gain or loss for Dutch federal or provincial income tax purposes as a
result of such legal defeasance or covenant defeasance, as applicable, and will
be subject to Dutch federal and provincial income tax on the same amounts, in
the same manner and at the same times as would have been the case if such legal
defeasance or covenant defeasance, as applicable, had not occurred, and (B)
payments from the defeasance trust will be free and exempt from any and all
withholding and other income taxes of whatever nature of The Netherlands or any
province thereof or any political subdivision thereof or therein having the
power to tax. Money denominated in currency other than Euros and U.S. Government
Obligations deposited in respect of the Euro Notes pursuant to this paragraph
shall be subject in their entirety (including principal, interest and premium,
if any) to a customary currency agreement that is of a duration not less than
the defeasance period that fixes the exchange rate of such money or U.S.
Government Obligations into Euros for the benefit of the Euro Notes Trustee. The
amount of such money and U.S. Government Obligations expressed in Euros will be
as provided in such currency agreement. The counterparty to such currency
agreement shall be a commercial bank organized in the United States having
capital and surplus in excess of $500.0 million or a commercial bank organized
under the laws of any country that is a member of the OECD having total assets
in excess of $500.0 million (or its foreign currency equivalent at the time).
Such counterparty may obtain from the Company and FFBV an opinion of counsel to
the effect that such currency agreement has been duly authorized and entered
into by the Company and FFBV.

CONCERNING THE TRUSTEE

The Bank of New York is to be the Dollar Notes Trustee under the Dollar
Notes Indenture and the Euro Notes Trustee under the Euro Notes Indenture. The
Bank of New York has been appointed as Registrar and Paying Agent with regard to
the Dollar Notes and the Euro Notes.

Each Indenture contains certain limitations on the rights of the related
Trustee, should it become a creditor of the Company or FFBV, as applicable, to
obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. Each Trustee
will be permitted to engage in other transactions; provided, however, if it
acquires any conflicting interest it must either eliminate such conflict within
90 days or apply to the SEC for permission to continue or resign.

The Holders of a majority in principal amount of the outstanding Dollar
Notes or Euro Notes, as the case may be, will have the right to direct the time,
method and place of conducting any proceeding for exercising any remedy
available to the related Trustee, subject to certain exceptions. If an Event of
Default under an Indenture occurs (and is not cured), the applicable Trustee
will be required, in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such provisions, such
Trustee will be under no obligation to exercise any of its rights or powers
under the related Indenture at the request of any Holder of the Dollar Notes or
the Euro Notes, as the case may be, unless such Holder shall have offered to
such Trustee security and indemnity satisfactory to it against any loss,
liability or expense and then only to the extent required by the terms of such
Indenture.

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS

No director, officer, employee, incorporator or stockholder of the Company,
FFBV or any Guarantor will have any liability for any obligations of the
Company, FFBV or any Guarantor under the Dollar Notes
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or the Euro Notes, as the case may be, any Guaranty or the Dollar Notes
Indenture or the Euro Notes Indenture or for any claim based on, in respect of,
or by reason of such obligations or their creation. Each Holder of the Dollar
Notes or (to the extent permitted under Netherlands law) the Euro Notes, as the
case may be, by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Dollar
Notes and the Euro Notes. Such waiver and release may not be effective to waive
liabilities under the U.S. federal securities laws, and it is the view of the
SEC that such a waiver is against public policy.

GOVERNING LAW

Each Indenture, Guaranty and the Dollar Notes and the Euro Notes will be
governed by, and construed in accordance with, the laws of the State of New York
without giving effect to applicable principles of conflicts of law to the extent
that the application of the law of another jurisdiction would be required
thereby.

LISTING OF EURO NOTES

Application has been made to list the Euro Notes on the Luxembourg Stock
Exchange.

PAYING AGENT AND REGISTRAR FOR THE EURO NOTES

FFBV has appointed The Bank of New York, as registrar and as paying agent
in respect of the Global Euro Notes (the "US Paying Agent") and Banque
Internationale a Luxembourg as paying agent in Luxembourg (the "Luxembourg
Paying Agent"). The US Paying Agent and the Luxembourg Paying Agent are
collectively referred to herein as the "Euro Paying Agents". FFBV will ensure
that for as long as any Euro Notes are outstanding there will always be a
registrar and a paying agent to perform the functions assigned to them in the
Euro Notes Indenture. FFBV has agreed to appoint the Luxembourg Paying Agent as
transfer agent in the event the Euro Notes are issued in definitive registered
form.

So long as the Euro Notes are listed on the Luxembourg Stock Exchange and
the rules of such Exchange so require, FFBV will maintain a paying agent and
transfer agent in Luxembourg. If the Euro Notes are listed on any other
securities exchange, FFBV will satisfy any requirement at such securities
exchange as to paying agents. So long as the Euro Notes are listed on the
Luxembourg Stock Exchange, any change in the paying agent or transfer agent
shall be notified to holders of Euro Notes in accordance with the procedures
described in "-- Notices".

NOTICES

So long as the Euro Notes are listed on the Luxembourg Stock Exchange and
it is required by the rules of the Luxembourg Stock Exchange, FFBV will make
publication of notices to the holders of the Euro Notes in a leading newspaper
having general circulation in Luxembourg or, if such publication is not
practicable, in one other leading daily newspaper with general circulation in
Europe, such newspaper being published on each business day in morning editions,
whether or not it is published in Saturday, Sunday or holiday editions. For so
long as the Euro Notes are listed on the Luxembourg Stock Exchange, a copy of
all notices will be provided by FFBV to the Luxembourg Stock Exchange.

CONSENT TO JURISDICTION AND SERVICE

The Euro Notes Indenture will provide that FFBV will appoint CT Corporation
System, 111 8th Avenue, 13th Floor, New York, New York 10011 as its agent for
actions brought under Federal or state securities laws brought in any Federal or
state court located in the Borough of Manhattan in The City of New York and will
submit to such jurisdiction.

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CERTAIN DEFINITIONS

"Acquisition" means the acquisition by the Company, directly or indirectly,
of 100% of the partnership interests of Ingersoll-Dresser Pump Company.

"Additional Assets" means any:

(1) property, plant or equipment used in a Related Business;

(2) the Capital Stock of a Person that becomes a Restricted Subsidiary
as a result of the acquisition of such Capital Stock by the Company or
another Restricted Subsidiary; or

(3) Capital Stock constituting a minority interest in any Person that
at such time is a Restricted Subsidiary;

provided, however, that any such Restricted Subsidiary described in clause (2)
or (3) above is primarily engaged in a Related Business.

"Affiliate" of any specified Person means:

(1) any other Person, directly or indirectly, controlling or
controlled by; or

(2) under direct or indirect common control with such specified
Person.

For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. For purposes of the covenants described
under "-- Certain Covenants -- Covenants Applicable to the Dollar Notes and the
Euro Notes -- Limitation on Restricted Payments", "-- Certain
Covenants -- Covenants Applicable to the Dollar Notes and the Euro
Notes -- Limitation on Affiliate Transactions" and "-- Certain
Covenants -- Covenants Applicable to the Dollar Notes and the Euro
Notes -- Limitation on Sales of Assets and Subsidiary Stock" only, "Affiliate"
shall also mean any beneficial owner of Capital Stock representing 5% or more of
the total voting power of the Voting Stock (on a fully diluted basis) of the
Company or of rights or warrants to purchase such Capital Stock (whether or not
currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.

"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of:

(1) any shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares or shares required by applicable law to be
held by a Person other than the Company or a Restricted Subsidiary);

(2) all or substantially all the assets of any division or line of
business of the Company or any Restricted Subsidiary; or

(3) any other assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or such
Restricted Subsidiary

(other than, in the case of clauses (1), (2) and (3)

(A) a disposition by a Restricted Subsidiary to the Company or by
the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary (or
to a Restricted Subsidiary so long as the aggregate fair market value of
all assets transferred to Restricted Subsidiaries pursuant to this
clause (A) does not exceed $50.0 million);

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(B) for purposes of the covenant described under "-- Certain
Covenants -- Covenants Applicable to the Dollar Notes and the Euro
Notes -- Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition that constitutes a Restricted Payment permitted by the
covenant described under "-- Certain Covenants -- Covenants Applicable
to the Dollar Notes and the Euro Notes -- Limitation on Restricted
Payments" or a Permitted Investment;

(C) sales or other dispositions of obsolete, worn-out or otherwise
unsuitable assets or excess equipment in the ordinary course of
business; and

(D) a disposition of assets with a fair market value of less than
$1,000,000).

Notwithstanding anything to the contrary set forth above, (x) unless, at
the time of such disposition, the Company has Investment Grade Status, a
disposition of Receivables and Related Assets shall be deemed to constitute an
Asset Disposition and (y) a disposition of all or substantially all the assets
of the Company and its Restricted Subsidiaries taken as a whole will be governed
by the provisions of the Indenture described above under the captions "-- Change
of Control" and/or "Merger and Consolidation" and not by the provisions of the
covenant described under "-- Covenants Applicable to the Dollar Notes and the
Euro Notes -- Limitation on Sales of Assets and Subsidiary Stock".

"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the applicable Notes, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).

"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing:

(1) the sum of the products of numbers of years from the date of
determination to the dates of each successive scheduled principal payment
of or redemption or similar payment with respect to such Indebtedness
multiplied by the amount of such payment by

(2) the sum of all such payments.

"Bank Indebtedness" means all Obligations pursuant to the Credit Agreement.

"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board and (in the
case of FFBV) the Board of Managing Directors.

"Business Day" means each day other than a Saturday, Sunday or a day on
which commercial banking institutions are authorized or required by law to close
in New York City and, in the case of the Euro Notes, Amsterdam, London or
Luxembourg.

"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.

"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.

"Code" means the Internal Revenue Code of 1986, as amended.

"Commodity Agreement" means, in respect of a Person, any forward contract,
commodity swap agreement, commodity option agreement or other similar agreement
or arrangement designed to protect such Person against fluctuations in commodity
prices.
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"Consent Decree" means the consent decree entered on July 28, 2000 in the
U.S. District Court for the District of Columbia in the matter of United States
of America v. Flowserve Corporation, Ingersoll-Dresser Pump Company and
Ingersoll-Rand Company relating to the purchase of Ingersoll-Dresser Pump
Company by Flowserve Corporation.

"Consent Decree Assets" means the assets identified in the Consent Decree
that Flowserve Corporation, Ingersoll-Dresser Pump Company and Ingersoll-Rand
Company have been ordered and directed to divest in connection with the
Acquisition.

"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (x) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for which internal financial statements are
available ending on or prior to the date of such determination to (y)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that:

(1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or
if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period;

(2) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the
date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for
such period shall be calculated on a pro forma basis as if such discharge
had occurred on the first day of such period and as if the Company or such
Restricted Subsidiary has not earned the interest income actually earned
during such period in respect of cash or Temporary Cash Investments used to
repay, repurchase, defease or otherwise discharge such Indebtedness;

(3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, EBITDA for
such period shall be reduced by an amount equal to EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to EBITDA (if
negative), directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of
the Company or any Restricted Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and
its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale);

(4) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction requiring
a calculation to be made hereunder, which constitutes all or substantially
all of an operating unit of a business, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto (including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such period; and

(5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period)
shall have made any Asset Disposition, any Investment or acquisition of
assets that

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would have required an adjustment pursuant to clause (3) or (4) above if
made by the Company or a Restricted Subsidiary during such period, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto as if such Asset Disposition, Investment or
acquisition occurred on the first day of such period.

For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting officer (and shall
include any applicable Pro Forma Cost Savings). If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest of
such Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months).

"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, without duplication:

(1) interest expense attributable to capital leases and the interest
expense attributable to leases constituting part of a Sale/Leaseback
Transaction;

(2) amortization of debt discount and debt issuance cost;

(3) capitalized interest;

(4) non-cash interest expenses;

(5) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing;

(6) net payments pursuant to Hedging Obligations;

(7) Preferred Stock dividends in respect of all Preferred Stock held
by Persons other than the Company or a Wholly Owned Subsidiary (other than
dividends payable solely in Capital Stock (other than Disqualified Stock)
of the issuer of such Preferred Stock);

(8) interest incurred in connection with Investments in discontinued
operations;

(9) interest accruing on any Indebtedness of any other Person to the
extent such Indebtedness is Guaranteed by (or secured by the assets of) the
Company or any Restricted Subsidiary and there shall have occurred and
continues an event of default under such Indebtedness or any payment is
actually made in respect of such Guarantee;

(10) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or trust; and

(11) any premiums, fees, discounts, expenses and losses on the sale of
Receivables and Related Assets (and any amortization thereof) payable in
connection with a Receivables Program, as determined on a consolidated
basis in conformity with GAAP.

"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:

(1) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that:

(A) subject to the exclusion contained in clause (4) below, the
Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income
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up to the aggregate amount of cash actually distributed by such Person
during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or
other distribution paid to a Restricted Subsidiary, to the limitations
contained in clause (3) below); and

(B) the Company's equity in a net loss of any such Person for such
period shall be included in determining such Consolidated Net Income;

(2) any net income (or loss) of any Person acquired by the Company or
a Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;

(3) any net income of any Restricted Subsidiary that is not a
Subsidiary Guarantor if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the
making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Company, except that:

(A) subject to the exclusion contained in clause (4) below, the
Company's equity in the net income of any such Restricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Restricted
Subsidiary during such period to the Company or another Restricted
Subsidiary as a dividend or other distribution (subject, in the case of
a dividend or other distribution paid to another Restricted Subsidiary,
to the limitation contained in this clause); and

(B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income;

(4) any gain (but not loss) realized upon the sale or other
disposition of any assets (other than any Consent Decree Assets) of the
Company, its consolidated Subsidiaries or any other Person (including
pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (but
not loss) realized upon the sale or other disposition of any Capital Stock
of any Person;

(5) extraordinary gains or losses; and

(6) the cumulative effect of a change in accounting principles.

Notwithstanding the foregoing, for the purposes of the covenant described under
"-- Certain Covenants -- Covenants Applicable to the Dollar Notes and the Euro
Notes -- Limitation on Restricted Payments" only, there shall be excluded from
Consolidated Net Income any repurchases, repayments or redemptions of
Investments, proceeds realized on the sale of the Investments or return of
capital to the Company or a Restricted Subsidiary to the extent such
repurchases, repayments, redemptions, proceeds or returns increase the amount of
Restricted Payments permitted under such covenant pursuant to clause (a)(3)(C)
thereof.

"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as the sum of:

(1) the par or stated value of all outstanding Capital Stock of the
Company plus

(2) paid-in capital or capital surplus relating to such Capital Stock
plus

(3) any retained earnings or earned surplus

less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock. In determining "Consolidated Net Worth," the Company shall
exclude the impact of any write-off of deferred financing fees occurring in
connection with any transaction subject to the covenant entitled "-- Merger and
Consolidation" for the purpose of which the determination is being made.
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"Credit Agreement" means the Credit Agreement by and among the Company,
certain of its Subsidiaries, the lenders referred to therein, Credit Suisse
First Boston, New York branch, as Syndication Agent, Bank of America, N.A., as
Administrative Agent, Collateral Agent and Swingline Lender, and ABN-AMRO N.V.,
Bank One, N.A. and Salomon Smith Barney, Inc., as Co-Documentation Agents,
together with the related documents thereto (including the term loans and
revolving loans thereunder, any guarantees and security documents), as amended,
extended, renewed, restated, refinanced, supplemented or otherwise modified (in
whole or in part, and without limitation as to amount, terms, conditions,
covenants and other provisions) from time to time, and any agreement (and
related document) governing Indebtedness incurred to Refinance, in whole or in
part, the borrowings and commitments then outstanding or permitted to be
outstanding under such Credit Agreement or a successor Credit Agreement, whether
by the same or any other lender or group of lenders.

"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.

"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.

"Designated Senior Indebtedness" with respect to a Person means:

(1) the Bank Indebtedness; and

(2) any other Senior Indebtedness of such Person which, at the date of
determination, has an aggregate principal amount outstanding of, or under
which, at the date of determination, the holders thereof are committed to
lend up to, at least $25.0 million and is specifically designated by such
Person in the instrument evidencing or governing such Senior Indebtedness
as "Designated Senior Indebtedness" for purposes of the applicable
Indenture.

"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable at the option of the holder) or upon the
happening of any event:

(1) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;

(2) is convertible or exchangeable at the option of the holder for
Indebtedness or Disqualified Stock; or

(3) is mandatorily redeemable or must be purchased upon the occurrence
of certain events or otherwise, in whole or in part;

in each case on or prior to the first anniversary of the Stated Maturity of the
applicable Notes; provided, however, that any Capital Stock that would not
constitute Disqualified Stock but for provisions thereof giving holders thereof
the right to require such Person to purchase or redeem such Capital Stock upon
the occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the applicable Notes shall not
constitute Disqualified Stock if:

(1) the "asset sale" or "change of control" provisions applicable to
such Capital Stock are not more favorable to the holders of such Capital
Stock than the terms applicable to the applicable Notes and described under
"-- Certain Covenants -- Covenants Applicable to the Dollar Notes and the
Euro Notes -- Limitation on Sales of Assets and Subsidiary Stock" and
"-- Certain Covenants -- Covenants Applicable to the Dollar Notes and the
Euro Notes -- Change of Control"; and

(2) any such requirement only becomes operative after compliance with
such terms applicable to the applicable Notes, including the purchase of
any Notes tendered pursuant thereto.

"Dollar Notes Guarantor" means FFBV, Flowserve International Limited, each
direct or indirect Subsidiary of the Company that is a guarantor of Senior
Indebtedness under the Credit Agreement and
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each direct or indirect domestic Restricted Subsidiary that is a guarantor of
any other Indebtedness of the Company.

"Dollar Notes Guaranty" means a Guarantee by a Dollar Notes Guarantor of
the Company's obligations with respect to the Dollar Notes.

"EBITDA" for any period means the sum of Consolidated Net Income, plus the
following to the extent deducted in calculating such Consolidated Net Income:

(1) all income tax expense of the Company and its consolidated
Restricted Subsidiaries;

(2) Consolidated Interest Expense;

(3) depreciation and amortization expense of the Company and its
consolidated Restricted Subsidiaries (excluding amortization expense
attributable to a prepaid operating activity item that was paid in cash in
a prior period);

(4) all other non-cash charges of the Company and its consolidated
Restricted Subsidiaries (excluding any such non-cash charge to the extent
that it represents an accrual of or reserve for cash expenditures in any
future period); and

(5) cash integration and restructuring charges in connection with the
Acquisition and taken with respect to periods ended on or prior to December
31, 2001, in an aggregate amount not to exceed $65.0 million;

in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated
Net Income to compute EBITDA only to the extent (and in the same proportion)
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.

"Eligible Indebtedness" means any indebtedness other than:

(1) Indebtedness in the form of, or represented by, bonds or other
securities or any guarantee thereof (other than a guarantee of Indebtedness
of the Company in the form of, or represented by, bonds or other
securities); and

(2) Indebtedness that is, or may be, quoted, listed or purchased and
sold on any stock exchange, automated trading system or over-the-counter or
other securities market (including, without prejudice to the generality of
the foregoing, the market for securities eligible for resale pursuant to
Rule 144A under the Securities Act).

"European Economic Area" means the member nations of the European Economic
Area pursuant to the Oporto Agreement on the European Economic Area dated May 2,
1992, as amended.

"Euro Equivalent" means with respect to any monetary amount in a currency
other than Euros, at any time of determination thereof, the amount of Euros
obtained by converting such foreign currency involved in such computation into
Euros at the spot rate for the purchase of Euros with the applicable foreign
currency as published in The Wall Street Journal in the "Exchange Rates" column
under the heading "Currency Trading" on the date two Business Days prior to such
determination.

"Euro Notes Guarantor" means the Company, Flowserve International Limited,
each direct or indirect Subsidiary of the Company that is a guarantor of Senior
Indebtedness under the Credit Agreement and each direct or indirect domestic
Restricted Subsidiary that is a guarantor of any other Indebtedness of the
Company.

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"Euro Notes Guaranty" means a Guarantee by a Euro Notes Guarantor of FFBV's
obligations with respect to the Euro Notes.

"European Governmental Obligation" means direct non-callable obligations
of, or non-callable obligations permitted by, any member nation of the European
Union, the payment or guarantee of which is secured by the full faith and credit
of the respective nation, provided that such nation has a credit rating at least
equal to that of the highest rated member nation of the European Economic Area.

"European Union" means the member nations to the third stage of economic
and monetary union pursuant to the Treaty of Rome establishing the European
Community, as amended by the Treaty on European Union, signed at Maastricht on
February 7, 1992.

"Excess Cash Flow", with respect to the Company, has the meaning specified
in the Credit Agreement as in effect on the Issue Date.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Exchange Notes" means the debt securities of the Company (in the case of
the Dollar Notes) and FFBV (in the case of the Euro Notes) issued pursuant to
the applicable Indenture in exchange for, and in an aggregate principal amount
at maturity equal to, the relevant Notes, in compliance with the terms of the
relevant Registration Rights Agreement.

"Facilities" means the Term Loan Facilities and the Revolving Credit
Facilities.

"Foreign Restricted Subsidiary" means a Restricted Subsidiary that is
incorporated in a jurisdiction other than the United States or a State thereof
or the District of Columbia and with respect to which more than 80% of any of
its sales, earnings or assets (determined on a consolidated basis in accordance
with GAAP) are located in, generated from or derived from operations located in
territories outside of the United States of America and jurisdictions outside
the United States of America.

"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in:

(1) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants;

(2) statements and pronouncements of the Financial Accounting
Standards Board;

(3) such other statements by such other entity as approved by a
significant segment of the accounting profession; and

(4) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.

All ratios and computations based on GAAP contained in the Indentures shall
be computed in conformity with GAAP.

"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person:

(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness of such Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise); or

(2) entered into for the purpose of assuring in any other manner the
obligee of such Indebtedness of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part);

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provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.

"Guarantor" means a Dollar Notes Guarantor or a Euro Notes Guarantor, as
applicable.

"Guaranty" means a Dollar Notes Guaranty or a Euro Notes Guaranty, as
applicable.

"Guaranty Agreement" means a supplemental indenture, in a form satisfactory
to the applicable Trustee, pursuant to which a Guarantor guarantees the
Company's obligations with respect to the Dollar Notes or FFBV's obligations
with respect to the Euro Notes on the terms provided for in the applicable
Indenture.

"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.

"Holder" or "Noteholder" means the Person in whose name a Dollar Note or a
Euro Note, as the case may be, is registered on the applicable Registrar's
books.

"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Person at the time it becomes a Restricted Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. The accretion
of principal of a non-interest bearing or other discount security shall not be
deemed the Incurrence of Indebtedness.

"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):

(1) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;

(2) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/ Leaseback Transactions entered into by such
Person;

(3) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);

(4) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance, bank guaranty or
similar credit transaction (other than obligations with respect thereto
securing obligations (other than obligations described in clauses (1)
through (3) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit, banker's acceptances, bank
guaranties or similar credit transactions are not drawn upon or, if and to
the extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following payment thereon);

(5) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock of such
Person or, with respect to any Preferred Stock of any Subsidiary of such
Person, the principal amount of such Preferred Stock to be determined in
accordance with the applicable Indenture (but excluding, in each case, any
accrued dividends);

(6) all obligations of the type referred to in clauses (1) through (5)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;

(7) all obligations of the type referred to in clauses (1) through (6)
of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such

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Person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets and the amount of the obligation so
secured; and

(8) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.

The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.

"Intercompany Loans" means the loans by FFBV to the Company or any of the
Company's Wholly Owned Subsidiaries.

"Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.

"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person.

For purposes of the definition of "Unrestricted Subsidiary", the definition
of "Restricted Payment" and the covenant described under "-- Certain
Covenants -- Covenants Applicable to the Dollar Notes and the Euro
Notes -- Limitation on Restricted Payments":

(1) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of
the net assets of any Subsidiary of the Company at the time that such
Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary,
the Company shall be deemed to continue to have a permanent "Investment" in
an Unrestricted Subsidiary equal to an amount (if positive) equal to (A)
the Company's "Investment" in such Subsidiary at the time of such
redesignation less (B) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of
such Subsidiary at the time of such redesignation; and

(2) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the Board of Directors.

"Investment Grade Status" means that the credit rating of the Company's
senior unsecured, non-credit-enhanced long-term debt is (a) "BBB-" or higher
according to Standard & Poor's Ratings Group or (b) "Baa 3" or higher according
to Moody's Investors Service, Inc.

"Issue Date" means the date on which the Dollar Notes or the Euro Notes, as
the case may be, are originally issued.

"Lenders" has the meaning specified in the Credit Agreement.

"Leverage Ratio" has the meaning specified in the Credit Agreement as in
effect on the Issue Date.

"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).

"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of

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assumption by the acquiring Person of Indebtedness or other obligations relating
to such properties or assets or received in any other noncash form), in each
case net of:

(1) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be accrued as a liability under GAAP, as a
consequence of such Asset Disposition;

(2) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon or other security agreement of any kind with respect to such
assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of
the proceeds from such Asset Disposition;

(3) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries as a result of such
Asset Disposition; and

(4) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with
the property or other assets disposed in such Asset Disposition and
retained by the Company or any Restricted Subsidiary after such Asset
Disposition.

"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.

"Obligations" means with respect to any Indebtedness all obligations for
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
and other amounts payable pursuant to the documentation governing such
Indebtedness.

"OECD" shall mean the Organization for Economic Cooperation and
Development.

"Permitted Employee Stock Purchase Loans" means loans, in an aggregate
amount outstanding at any time not to exceed $30.0 million, made by third
parties (other than any Affiliate of the Company) to employees of the Company
and its Subsidiaries who are participants in the Company's stock purchase
program to enable such employees to purchase common stock of the Company.

"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in:

(1) the Company, a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a
Related Business;

(2) another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related
Business;

(3) cash and Temporary Cash Investments;

(4) receivables owing to the Company or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances;

(5) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;

(6) loans or advances to employees made in the ordinary course of
business consistent with past practices of the Company or such Restricted
Subsidiary, but in any event not to exceed $5.0 million in the aggregate
outstanding at any one time;
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(7) guaranties of Permitted Employee Stock Purchase Loans;

(8) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments;

(9) any Person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as permitted
pursuant to the covenant described under "-- Certain Covenants -- Covenants
Applicable to the Dollar Notes and the Euro Notes -- Limitation on Sales of
Assets and Subsidiary Stock";

(10) so long as no Default shall have occurred and be continuing (or
result therefrom), in Unrestricted Subsidiaries in an aggregate amount
which, when taken together with the amount of all other Investments made
pursuant to this clause (10) which at such time have not been repaid, does
not exceed $25.0 million;

(11) so long as no Default shall have occurred and be continuing (or
result therefrom), in any Person in an aggregate amount which, when taken
together with the amount of all other Investments made pursuant to this
clause (11) which at such time have not been repaid, does not exceed $25.0
million; and

(12) a trust, limited liability company, special purpose entity or
other similar entity in connection with a Receivables Program; provided,
however, that (A) such Investment is made by a Receivables Subsidiary and
(B) the only assets transferred to such trust, limited liability company,
special purpose entity or other similar entity consist of Receivables and
Related Assets of such Receivables Subsidiary.

"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.

"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.

"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.

"Pro Forma Cost Savings" means, with respect to any period, the reduction
in costs that were (1) directly attributable to an asset acquisition and
calculated on a basis that is consistent with Regulation S-X under the
Securities Act in effect and applied as of the Issue Date; or (2) implemented by
the business that was the subject of any such asset acquisition within 6 months
of the date of such asset acquisition and that are supportable and quantifiable
by the underlying accounting records of such business, in the case of each of
(1) and (2), as if such reduction in costs had been effected as of the beginning
of such period.

"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.

"Receivables and Related Assets" means accounts receivable, instruments,
chattel paper, obligations, general intangibles and other similar assets,
including interest in merchandise or goods, the sale or lease of which give rise
to the foregoing, related contractual rights, guarantees, insurance proceeds,
collections, other related assets and proceeds of all the foregoing.

"Receivables Program" means with respect to any Person, any accounts
receivable securitization program pursuant to which such Person pledges, sells
or otherwise transfers or encumbers its accounts receivable, including a trust,
limited liability company, special purpose entity or other similar entity.

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"Receivables Subsidiary" means a Wholly Owned Subsidiary (i) created for
the purpose of financing receivables created in the ordinary course of business
of the Company and its Subsidiaries and (ii) the sole assets of which consist of
Receivables and Related Assets of the Company and its Subsidiaries and related
Permitted Investments.

"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.

"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company, FFBV or any Restricted Subsidiary existing on the
Issue Date or Incurred in compliance with the applicable Indenture, including
Indebtedness that Refinances Refinancing Indebtedness; provided, however, that:

(1) such Refinancing Indebtedness has a Stated Maturity no earlier
than the Stated Maturity of the Indebtedness being Refinanced;

(2) such Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being Refinanced; and

(3) such Refinancing Indebtedness has an aggregate principal amount
(or if Incurred with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced;

provided further, however, that Refinancing Indebtedness shall not include (A)
Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or FFBV
or (B) Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.

"Registration Rights Agreements" means the Dollar Notes Registration Rights
Agreement in respect of the Dollar Notes dated August 3, 2000, among the
Company, the Dollar Notes Guarantors, Credit Suisse First Boston Corporation,
Bank of America Securities LLC, ABN AMRO Incorporated and Banc One Capital
Markets, Inc. and the Euro Notes Registration Rights Agreement in respect of the
Euro Notes dated August 3, 2000 among FFBV, the Euro Notes Guarantors, Credit
Suisse First Boston (Europe) Limited, Bank of America International Limited, ABN
AMRO Bank N.V. and First Chicago Limited.

"Related Business" means any business in which the Company was engaged on
the Issue Date and any business related, ancillary or complementary to any
business of the Company in which the Company was engaged on the Issue Date or
any industrial manufacturing or related services business.

"Representative" means with respect to a Person any trustee, agent or
representative (if any) for an issue of Senior Indebtedness of such Person.

"Restricted Payment" with respect to any Person means:

(1) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock (including any
payment in connection with any merger or consolidation involving such
Person) or similar payment to the direct or indirect holders of its Capital
Stock (other than dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and dividends or distributions
payable solely to the Company or a Restricted Subsidiary, and other than
pro rata dividends or other distributions made by a Subsidiary that is not
a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other
than a corporation));

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(2) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company held by any Person or of any
Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital Stock of the
Company that is not Disqualified Stock);

(3) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated Obligations
of such Person (other than the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a sinking
fund obligation, principal installment or final maturity, in each case due
within one year of the date of such purchase, repurchase or other
acquisition); or

(4) the making of any Investment (other than a Permitted Investment)
in any Person.

In determining the amount of any Restricted Payment made in property other
than cash, such amount shall be the fair market value of such property at the
time of such Restricted Payment, as determined in good faith by the Board of
Directors.

"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.

"Revolving Credit Facility" means the revolving credit facility contained
in the Credit Agreement and any other facility or financing arrangement that
Refinances, in whole or in part, any such revolving credit facility.

"Sale/Leaseback Transaction" means an arrangement relating to property
owned by the Company or a Restricted Subsidiary on the Issue Date or thereafter
acquired by the Company or a Restricted Subsidiary whereby the Company or a
Restricted Subsidiary transfers such property to a Person and the Company or a
Restricted Subsidiary leases it from such Person.

"SEC" means the Securities and Exchange Commission.

"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.

"Senior Indebtedness" means with respect to any Person:

(1) Bank Indebtedness of or guaranteed by such Person, whether
outstanding on the Issue Date or thereafter Incurred;

(2) Indebtedness of such Person, whether outstanding on the Issue Date
or thereafter Incurred; and

(3) accrued and unpaid interest (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization
relating to such Person whether or not a claim for post-filing interest is
allowed or allowable in such proceeding) in respect of (A) such Bank
Indebtedness, (B) indebtedness of such Person for money borrowed and (C)
indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable

unless, in the case of clauses (1) and (2), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the Notes;
provided, however, that Senior Indebtedness shall not include:

(1) any obligation of such Person to any Subsidiary;

(2) any liability for Federal, state, local or other taxes owed or
owing by such Person;

(3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities);

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(4) any Indebtedness of such Person (and any accrued and unpaid
interest in respect thereof) which is subordinate or junior in any respect
to any other Indebtedness or other obligation of such Person; or

(5) that portion of any Indebtedness which at the time of Incurrence
is Incurred in violation of the applicable Indenture.

"Senior Subordinated Indebtedness" means, with respect to a Person, the
Dollar Notes (in the case of the Company), the Euro Notes (in the case of FFBV),
a Guaranty (in the case of a Guarantor) and any other Indebtedness of such
Person that specifically provides that such Indebtedness is to rank pari passu
with the Dollar Notes, the Euro Notes or such Guaranty, as the case may be, in
right of payment and is not subordinated by its terms in right of payment to any
Indebtedness or other obligation of such Person which is not Senior Indebtedness
of such Person.

"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.

"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).

"Subordinated Obligation" means, with respect to a Person, any Indebtedness
of such Person (whether outstanding on the Issue Date or thereafter Incurred)
which is subordinate or junior in right of payment to the Dollar Notes (in the
case of the Company), the Euro Notes (in the case of FFBV) or a Guaranty of such
Person, as the case may be, pursuant to a written agreement to that effect.

"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, association, partnership or other business entity of which
more than 50% of the total voting power of shares of Voting Stock is at the time
owned or controlled, directly or indirectly, by:

(1) such Person;

(2) such Person and one or more Subsidiaries of such Person; or

(3) one or more Subsidiaries of such Person.

"Temporary Cash Investments" means any of the following:

(1) any investment in direct obligations of the United States of
America, European Government Obligations or direct obligations of any other
European Union member state in which the Company or any of its Restricted
Subsidiaries has operations, or any agency thereof or obligations
guaranteed by the United States of America or any other European Union
member state in which the Company or any of its Restricted Subsidiaries has
operations, or any agency thereof;

(2) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000
(or the foreign currency equivalent thereof) and has outstanding debt which
is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a
registered broker-dealer or mutual fund distributor;

(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2) above;

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(4) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-2" (or higher) according to Moody's Investors
Service, Inc. or "A-2" (or higher) according to Standard and Poor's Ratings
Group; and

(5) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.

"Term Loan Facility" means the term loan facility contained in the Credit
Agreement and any other facility or financing arrangement that Refinances in
whole or in part any such term loan facility.

"Unrestricted Subsidiary" means:

(1) any Subsidiary of the Company that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of Directors in
the manner provided below; and

(2) any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors may designate any Subsidiary of the Company (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under the
covenant described under "-- Certain Covenants -- Covenants Applicable to the
Dollar Notes and the Euro Notes -- Limitation on Restricted Payments".

The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation (A) the Company could Incur $1.00 of additional Indebtedness
under paragraph (a) of the covenant described under "-- Certain
Covenants -- Covenants Applicable to the Dollar Notes and the Euro
Notes -- Limitation on Indebtedness" and (B) no Default shall have occurred and
be continuing. Any such designation by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the resolution of
the Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.

"U.S. Dollar Equivalent" means with respect to any monetary amount in a
currency other than U.S. dollars, at any time for determination thereof, the
amount of U.S. dollars obtained by converting such foreign currency involved in
such computation into U.S. dollars at the spot rate for the purchase of U.S.
dollars with the applicable foreign currency as published in The Wall Street
Journal in the "Exchange Rates" column under the heading "Currency Trading" on
the date two Business Days prior to such determination.

Except as described under "Certain Covenants -- Covenants Applicable to the
Dollar Notes and the Euro Notes -- Limitation on Indebtedness", whenever it is
necessary to determine whether the Company or FFBV has complied with any
covenant in the Indentures or a Default has occurred and an amount is expressed
in a currency other than U.S. dollars, such amount will be treated as the U.S.
Dollar Equivalent determined as of the date such amount is initially incurred in
such currency.

"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
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"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.

"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
or one or more Wholly Owned Subsidiaries.

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CERTAIN TAX CONSIDERATIONS

UNITED STATES

The following summary describes certain United States federal income tax
consequences of the exchange offer and the acquisition, ownership and
disposition of the notes by a United States Holder (as defined below) and the
notes by a Non-United States Holder (as defined below), subject to the
limitations stated herein. The summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), and regulations, rulings and judicial decisions
as of the date hereof, all of which may be repealed, revoked or modified so as
to result in federal income tax consequences different from those described
below. Such changes could be applied retroactively in a manner that could
adversely affect holders of the notes. It is therefore possible that the
consequences of the acquisition, ownership and disposition of the notes may
differ from the treatment described below.

The tax treatment of a holder of the notes may vary depending upon the
particular situation of the holder. This summary is limited to investors who
will hold the notes as capital assets within the meaning of section 1221 of the
Code and does not deal with holders that may be subject to special tax rules
(including, but not limited to, insurance companies, tax-exempt organizations,
financial institutions, dealers in securities or currencies, holders whose
functional currency is not the U.S. dollar or holders who will hold the notes as
a hedge against currency risks or as part of a straddle, synthetic security,
conversion transaction or other integrated investment comprised of the notes and
one or more other investments).

This summary is for general information only and does not address all
aspects of federal income taxation that may be relevant to holders of the notes
in light of their particular circumstances, and it does not address any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction. Prospective holders are urged to consult their own tax advisors as
to the particular tax consequences to them of acquiring, holding or disposing of
the notes.

As used herein, a "United States Holder" means a beneficial owner of a note
that is or which is (i) an individual that is a citizen or resident of the
United States, (ii) a corporation, or other entity taxable as a corporation for
U.S. federal income tax purposes, created or organized in or under the laws of
the United States or any political subdivision thereof, (iii) an estate the
income of which is subject to U.S. federal income taxation regardless of its
source, or (iv) a trust if (1) a U.S. court is able to exercise primary
supervision over the administration of the trust and (2) one or more U.S.
persons have the authority to control all substantial decisions of the trust. A
"Non-United States Holder" is a holder that is not a United States Holder.

EXCHANGE OFFER

The exchange of notes for new notes pursuant to the exchange offer will not
be a taxable event for the holders of the notes, and a holder will have the same
tax basis and holding period in the exchange notes as the outstanding notes.

UNITED STATES HOLDERS OF NOTES

Interest. Interest on the notes generally will be taxable to a United
States Holder as ordinary income at the time accrued or received, in accordance
with such United States Holder's method of accounting for U.S. federal income
tax purposes.

In the case of a euro note, the amount of interest required to be included
in income by a United States Holder will include the amount of additional
amounts and taxes, if any, withheld by Flowserve Finance on payments made on the
euro note. Thus, in the event of such withholding, a United States Holder would
be required to report gross income in an amount greater than the cash it
receives in respect of payments on its euro note. However, a United States
Holder could be eligible, subject to certain limitations, to claim such
withholding taxes as a credit or deduction for purposes of computing the amount
of its U.S. federal income tax liability (notwithstanding that the payment of
such taxes will be made by

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Flowserve Finance). Interest income on the euro notes will constitute foreign
source income and generally will be considered "passive" income (or "high
withholding tax interest" if the applicable withholding tax is imposed at a rate
of 5% or more) or "financial services" income for U.S. foreign tax credit
purposes. The rules relating to foreign tax credits and the timing thereof are
extremely complex and United States Holders should consult with their own tax
advisors with regard to the availability of a foreign tax credit and the
application of the foreign tax credit limitations to their particular
situations.

A cash basis United States Holder receiving an interest payment in euros
will be required to include in income the U.S. dollar value of such payment
(determined using the spot rate in effect on the date such payment is received)
regardless of whether such payment is subsequently converted into U.S. dollars.
No exchange gain or loss will be recognized by such holder if the euros are
converted to U.S. dollars on the date received. The U.S. federal income tax
consequences of the conversion of euro into U.S. dollars is described below. See
"-- Transaction in Euros."

An accrual basis United States Holder will be required to include in income
the U.S. dollar value of the amount of interest income that has accrued on a
euro note in a taxable year, determined by translating such income at the
average rate of exchange for the relevant interest accrual period or, with
respect to an interest accrual period that spans two taxable years, at the
average rate for the portion of such interest accrual period within the taxable
year. The average rate of exchange for an interest accrual period (or portion
thereof) is the simple average of the exchange rates for each business day of
such period (or such other average that is reasonably derived and consistently
applied). An accrual basis United States holder may elect to translate interest
income on a euro note using the spot rate in effect on the last day of an
interest accrual period (or the last day of the taxable year for the portion of
such period within the taxable year). In addition, a holder may elect to use the
spot rate in effect on the date of receipt (or payment) for such purpose if such
date is within five business days of the last date of an interest accrual
period. The election must be made in a statement filed with the taxpayer's
return and is applicable to all debt instruments for such year and thereafter
unless changed with the consent of the IRS.

Upon receipt of an interest payment on a euro note, an accrual basis United
States Holder will recognize ordinary gain or loss with respect to accrued
interest income in an amount equal to the difference between the U.S. dollar
value of the payment received (determined using the spot rate in effect on the
date such payment is received) in respect of such interest accrual period and
the U.S. dollar value of the interest income that has accrued during such
interest accrual period (as determined in the preceding paragraph). Any such
gain or loss will be treated as ordinary income or loss but generally will not
be treated as interest income or expense, except to the extent provided by
future regulations or administrative pronouncements of the IRS. The U.S. federal
income tax consequences of the conversion of euro into U.S. dollars is described
below. See "-- Transactions in Euros."

Market Discount and Premium. If a United States Holder purchases a note for an
amount that is less than its principal amount, the amount of the difference will
be treated as "market discount" for U.S. federal income tax purposes, unless
such difference is less than a specified de minimis amount.

Unless a United States Holder elects to accrue market discount as described
below, such United States Holder will be required to treat any partial principal
payment on, or any gain realized on the sale, exchange, retirement or other
disposition of, a note as ordinary income to the extent of the lesser of (i) the
amount of such payment or realized gain and (ii) the market discount that has
not previously been included in income and is treated as having accrued on such
note at the time of such payment or disposition. Market discount will be
considered to accrue on a straight-line basis during the period from the date of
acquisition to the maturity date of the note, unless the United States Holder
elects to accrue such discount on a constant-yield basis.

A United States Holder may be required to defer the deduction of all or a
portion of the interest paid or accrued on any indebtedness incurred or
maintained to purchase or carry a note until the maturity of the note or its
earlier disposition. A United States Holder may elect to include market discount
in income currently as it accrues (on either a straight-line or a constant-yield
basis), in which case such United

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States Holder will not be subject to the rules described above regarding the
treatment of gain as ordinary income upon the disposition of the note and upon
the receipt of certain cash payments and regarding the deferral of interest
deductions.

In the case of a euro note, any accrued market discount not taken into
income shall be translated into U.S. dollars at the spot rate on the date the
United States Holder disposes of the euro note (or receives a partial principal
payment to which the accrued market discount relates). No part of such accrued
market discount is treated as exchange gain or loss. With respect to a United
States Holder of a euro note that elects to include market discount into income
currently as it accrues, such accrued market discount shall be translated in
U.S. dollars at the average exchange rate for the accrual period in a manner
described above in "-- Interest."

If a United States Holder purchases a note for an amount that is greater
than the sum of all amounts payable on the note after its acquisition (other
than payments of stated interest), such United States Holder will be considered
to have purchased such note at a "premium" equal in amount to such excess, and
may elect (in accordance with applicable Code provisions) to amortize such
premium, on a constant yield method over the remaining term of the note (subject
to special rules concerning early call provisions). If an election to amortize
the premium is not made, the premium will decrease the gain or increase the loss
otherwise recognized on a taxable disposition of the note. In the case of a euro
note, the amount of amortizable premium is determined using the exchange
conventions applicable to payments of interest. See "-- Interest" above.

The election to include market discount in income currently or to amortize
premium, once made, applies to all debt obligations held or subsequently
acquired by the electing United States Holder on or after the first day of the
first taxable year to which the election applied and may not be revoked without
the consent of the IRS.

Dispositions. Upon the sale, exchange, redemption, retirement or other
disposition of a note, a United States Holder generally will recognize taxable
gain or loss equal to the difference between the amount realized on the sale,
exchange, redemption, retirement or other disposition and such holder's adjusted
tax basis in the note (generally equal to the cost of such note to such holder
and increased by any market discount previously includible in income by the
United States Holder and decreased by amortized premium with respect to the
note).

For these purposes, the amount realized on the sale, exchange, redemption,
retirement or other disposition of a note does not include any amount
attributable to accrued but unpaid interest, which will be taxable as ordinary
income unless previously taken into account. Except with respect to gains or
losses attributable to changes in currency exchange rates, as described below,
and except for any market discount, such gain or loss will be capital gain or
loss. Such gain or loss will generally be treated as U.S. source gain or loss.

In the case of a euro note, a United States Holder's tax basis in such note
generally will be the U.S. dollar value of the purchase price of such euro note
on the date of a purchase (determined by translating the purchase price into
U.S. dollars at the spot rate in effect on the date of purchase, adjusted by
market discount or premium as described above). Upon the sale, exchange,
redemption, retirement or other disposition of a euro note, a United States
holder generally will recognize gain or loss equal to the difference between the
amount realized on such sale, exchange, redemption, retirement or other
disposition (or, if it is realized in other than U.S. dollars, the U.S. dollar
value of the amount using the spot rate in effect on the date of such sale,
exchange, redemption, retirement or other disposition) and the holder's tax
basis in such euro note.

Gain or loss recognized by a United States Holder on the sale, exchange,
redemption, retirement or other disposition of a euro note that is attributable
to changes in the rate of exchange between the U.S. dollar and the euro will be
treated as ordinary income or loss and generally will not be treated as interest
income or expense except to the extent provided by future regulations or
administrative pronouncements of the IRS. Such foreign currency gain or loss is
recognized on the sale, exchange,

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redemption, retirement or other disposition of a euro note only to the extent of
total gain or loss recognized on such sale, exchange, redemption, retirement or
other disposition. Such foreign currency gain or loss will be treated as U.S.
source gain or loss.

As a result of certain limitations on the U.S. foreign tax credit under the
Code, a U.S. Holder may not be able to claim a U.S. foreign tax credit for
Netherlands withholding taxes, if any, imposed on the proceeds received upon the
sale, exchange, redemption, retirement or other disposition of a euro note by
Flowserve Finance. Prospective holders should consult their own tax advisors
concerning the application of the U.S. foreign tax credit rules to their
particular situations.

For certain non-corporate United States Holders (including individuals),
the rate of taxation of capital gains will depend upon (i) the holder's holding
period in the capital asset (with a preferential rate available for capital
assets held for more than one year) and (ii) the holder's marginal tax rate for
ordinary income. The deductibility of capital losses is subject to limitations.

Transactions in Euros. Euro received as interest on, or on the sale,
exchange, redemption, retirement or other disposition of, a euro note will have
a tax basis equal to their U.S. dollar value at the time such interest is
received or at the time payment is received in consideration of such sale
exchange, redemption, retirement or other disposition. The amount of gain or
loss recognized on a sale or other disposition of such euro will be equal to the
difference between (i) the amount of U.S. dollars, or the fair market value in
U.S. dollars of the other currency or property received in such sale or other
disposition and (ii) the tax basis of such euro.

A United States Holder that purchases a euro note with previously owned
euros would recognize gain or loss in an amount equal to the difference, if any,
between such holder's tax basis in such euros and the U.S. dollar fair market
value of such euro note on the date of purchase. Generally, any such gain or
loss will be ordinary income or loss and will not be treated as interest income
or expense, except to the extent provided by future regulations or
administrative pronouncements of the IRS. However, a United States Holder that
converts U.S. dollars to euro and immediately uses such euro to purchase a euro
note ordinarily would not recognize any exchange gain or loss in connection with
such conversion or purchase.

NON-UNITED STATES HOLDERS OF NOTES

Payments on Dollar Notes. Subject to the discussion below concerning backup
withholding, no U.S. federal withholding tax will be imposed with respect to the
payment of principal, premium, if any, or interest on a dollar note owned by a
Non-United States Holder (the "Portfolio Interest Exception"), provided (i) that
such Non-United States Holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of Flowserve
entitled to vote within the meaning of section 871(h)(3) of the Code and the
U.S. Treasury regulations thereunder, (ii) such Non-United States Holder is not
a controlled foreign corporation that is related, directly or indirectly, to
Flowserve through stock ownership, (iii) such Non-United States Holder is not a
bank whose receipt of interest on a dollar note is described in section
881(c)(3)(A) of the Code and (iv) such Non-United States Holder satisfies the
statement requirement (described generally below) set forth in section 871(h)
and section 881(c) of the Code and the U.S. Treasury regulations thereunder.

To satisfy the requirement referred to in (iv) above, the beneficial owner
of such dollar note, or a financial institution holding the dollar note on
behalf of such owner, must provide, in accordance with specified procedures, a
paying agent of our company with a statement to the effect that the beneficial
owner is not a United States Holder. Pursuant to U.S. Treasury regulations,
these requirements will be met if (1) the beneficial owner provides his name and
address, and certifies, under penalties of perjury, that he is not a United
States Holder (which certification may be made on an Internal Revenue Service
(the "IRS") Form W-8 or W-8BEN) or (2) a financial institution holding the
dollar note on behalf of the beneficial owner certifies, under penalties of
perjury, that such statement has been received by it and furnishes a paying
agent with a copy thereof.

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If a Non-United States Holder cannot satisfy the requirements of the
Portfolio Interest Exception described in (a) above, payments on a dollar note
made to such Non-United States Holder will be subject to a 30% withholding tax
unless the beneficial owner of the dollar note provides our company or our
paying agent, as the case may be, with a properly executed (1) IRS Form 1001 or
W-8BEN claiming an exemption from or reduction of withholding under the benefit
of a tax treaty or (2) IRS Form 4224 or W-8ECI stating that interest paid on the
dollar note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States.

Payments on Euro Notes. Subject to the discussion below concerning backup
withholding, no U.S. federal withholding tax will be imposed with respect to the
payment of principal, premium, if any, or interest on a euro note owed by a
Non-United States Holder.

U.S. Trade or Business Income. If a Non-United States Holder is engaged in
a trade or business in the United States and payments on a note are effectively
connected with the conduct of such trade or business, and, in the case of a euro
note, certain other conditions are satisfied, the Non-United States Holder,
although exempt from U.S. federal withholding tax as discussed above, will be
subject to U.S. federal income tax on such payment on a net income basis in the
same manner as if it were a United States Holder. In addition, if such
Non-United States Holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its effectively connected earnings and profits for
the taxable year, subject to adjustments.

Disposition. Any gain realized upon the sale, exchange, redemption,
retirement or other disposition of a note generally will not be subject to
United States federal income tax, except that gain realized upon the disposition
of a dollar note will be subject to United States federal income tax if (i) such
gain or income is effectively connected with a trade or business in the United
States of the Non-United States Holder or (ii) in the case of a Non-United
States Holder who is an individual, (y) such individual is present in the United
States for 183 days or more in the taxable year of such sale, exchange,
redemption, retirement or other disposition, and certain other conditions are
met or (z) such individual is a former citizen or former long-term resident of
the United States meeting certain qualifications.

Estate Tax. Notes beneficially owned by an individual who at the time of
death is a Non-United States Holder will not be subject to federal estate tax as
a result of such individual's death, provided that such individual does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of Flowserve or Flowserve Finance entitled to vote within
the meaning of section 871(h)(3) of the Code and provided that the interest
payments with respect to such dollar note would not have been, if received at
the time of such individual's death, effectively connected with the conduct of a
U.S. trade or business by such individual.

INFORMATION REPORTING AND BACKUP WITHHOLDING

Interest on a note and proceeds from a sale, exchange, redemption,
retirement or other disposition may be reported to the IRS and a 31% backup
withholding tax may apply to such amounts unless the holder (i) is a
corporation, (ii) provides an accurate taxpayer identification number (in the
case of a United States Holder) or a properly executed IRS Form W-8 (in the case
of a Non-United States Holder), or (iii) otherwise establishes a basis for
exemption. The amount of any backup withholding tax will be allowed as a credit
against the holder's U.S. federal income tax liability, provided that the
required information is furnished to the IRS. After December 31, 2000, the
requirements and procedures for establishing an exemption from information
reporting and backup withholding will change. Prospective holders should consult
their tax advisors as to their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption.

THE NETHERLANDS

This section contains a brief summary of a number of key Netherlands
taxation principles that are or could be relevant to the holders of the notes.
It does not address all aspects of Netherlands taxation that may be relevant to
holders of the notes in light of their particular circumstances. Prospective
holders are urged to consult their tax advisors as to the particular tax
consequences to them of acquiring, holding or disposing of the notes.
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THE NETHERLANDS

This section contains a brief summary of a number of key Netherlands
taxation principles that are or could be relevant to the holders of the notes.
It does not address all aspects of Netherlands taxation that may be relevant to
holders of the notes in light of their particular circumstances. Prospective
holders are urged to consult their tax advisors as to the particular tax
consequences to them of acquiring, holding or disposing of the notes.

This summary is based on current Netherlands law as of the date of this
prospectus, as well as on the double taxation treaties currently in force. Tax
regulations may change. Holders should be aware that recently the Netherlands
legislative authorities have adopted a proposal for an extensive change of
Netherlands personal income tax (and changes to corresponding elements in other
tax laws). The new personal income tax act will enter into force on January 1,
2001.

Flowserve Finance has been advised that under existing Netherlands tax law
the following Netherlands tax treatment will apply to the euro notes, provided:

(1) they do not carry interest or any other payment contingent on the
profits of, or on the distribution of profits by Flowserve Finance;

(2) they will not be redeemable in exchange for, convertible into or
linked to shares or other equity instruments issued or to be issued by
Flowserve Finance; and

(3) they do not have a maturity in excess of 30 years.

WITHHOLDING TAX

All payments under the euro notes can be made free of withholding or
deduction for or on account of any taxes of whatsoever nature imposed, levied,
withheld or assessed by the Netherlands or any political subdivision or taxing
authority thereof or therein.

TAXES ON INCOME AND CAPITAL GAINS

A holder of a euro note who derives income from a euro note or who realizes
a gain on the disposal or deemed disposal or redemption of a euro note will not
be subject to Netherlands taxation on income or capital gains, provided that:

(1) such holder is neither resident nor deemed to be resident in The
Netherlands;

(2) such holder does not have an enterprise or an interest in an
enterprise which is, in whole or in part, carried on through a permanent
establishment (or deemed permanent establishment) or a permanent
representative (or deemed permanent representative) in the Netherlands and
to which enterprise or part of an enterprise the euro notes are
attributable;

(3) such holder does not have a substantial interest or a deemed
substantial interest in Flowserve Finance or, if the holder does have such
an interest, it forms part of the assets of an enterprise; and

(4) such holder does not carry out and has not carried out employment
activities in the Netherlands nor carries out employment activities outside
the Netherlands the remuneration for which is subject to Netherlands wage
withholding tax and with which employment activities the holding of the
euro notes is connected.

NET WEALTH TAX

Netherlands net wealth tax will not be levied on a holder of a euro note
unless such holder is an individual and:

(1) the holder is, or is deemed to be, resident in The Netherlands for
the purpose of the relevant provisions; or

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(2) such euro note is attributable to an enterprise or part thereof
which is carried on through a permanent establishment (or deemed permanent
establishment) or a permanent representative (or deemed permanent
representative) in The Netherlands.

GIFT, ESTATE OR INHERITANCE TAXES

Netherlands gift, estate or inheritance taxes will not be levied upon the
acquisition of a euro note by way of gift by, or on the death of, a holder of a
euro note unless:

(1) the holder is, or is deemed to be, resident of The Netherlands for
the purpose of the relevant provisions; or

(2) the holder at the time of the gift has or at the time of his death
had an enterprise that is or was, in whole or in part, carried on through a
permanent establishment (or deemed permanent establishment) and to which
enterprise or part of an enterprise the euro notes are or were
attributable; or

(3) in the case of a gift of a euro note by any individual who, at the
date of the gift was not resident or deemed to be resident in The
Netherlands, such individual dies within 180 days after the date of the
gift, while being resident or deemed to be resident in The Netherlands.

CAPITAL TAX

There is no Netherlands capital tax payable in the Netherlands in respect
of or in connection with the execution, delivery and enforcement by legal
proceedings (including any foreign judgement in the courts of the Netherlands)
of the euro notes or the performance of FFBV's obligations under the euro notes,
other than capital tax that may be due by FFBV on capital contributions made or
deemed to be made to FFBV under the guarantee of the dollar notes.

OTHER TAXES AND DUTIES

There is no Netherlands registration tax, capital tax, stamp duty or any
other similar tax or duty other than court fees and contributions for the
registration with the Trade Register of the Chamber of Commerce payable in The
Netherlands in respect of or in connection with the execution, delivery and
enforcement by legal proceedings (including any foreign judgement in the courts
of The Netherlands) of the euro notes or the performance of Flowserve Finance's
obligation under the euro notes.

VAT

There is no Netherlands value added tax payable in consideration for the
issue of the euro notes, in respect of the payment of interest or principal
under the euro notes, or the transfer of a euro note.

A holder of a euro note will not become resident, or deemed to be resident,
in The Netherlands by reason only of the holding of a euro note or the
execution, delivery or enforcement of the euro notes or the performance by
Flowserve Finance of its obligation under the euro notes.

PROPOSED NETHERLANDS TAX LEGISLATION

Recently, the Netherlands legislative authorities have adopted a proposal
for an extensive change of the Netherlands personal income tax (and changes to
corresponding elements in other tax laws). This "Personal Income Tax Act 2001"
shall become effective on January 1, 2001. The Personal Income Tax Act 2001 will
substantially change the income tax position of a holder of euro notes who is
resident or deemed to be resident in The Netherlands. Under the new act, tax at
a rate of 30% will be due on a fictitious yield of 4% of the average market
value of the euro notes at the beginning and the end of each year. The
Netherlands income tax position for individuals holding the euro notes, who are
not resident or deemed to be resident in The Netherlands, will in principle
remain unaltered. Under the new act, the net wealth tax will be abolished.

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PROPOSED DIRECTIVE APPLICABLE TO INTEREST PAYMENTS

In May 1998, the European Commission presented to the Council of Ministers
of the European Union a proposal to oblige its member states to adopt either a
"withholding tax system" or an "information reporting system" in relation to
payments of interest, discounts and premiums. It is unclear whether this
proposal will be adopted, and if it is adopted, whether it will be adopted in
its current form. Once sufficient reassurances with regard to the application of
the same measures in dependent or associated territories and of equivalent
measures in the United States and key third countries have been obtained, the
Council of Ministers of the European Union will decide on the adoption and
implementation of the proposal no later than December 31, 2002.

The "withholding tax system" would require a paying agent established in a
member state to withhold tax at a minimum rate of 20% from any interest,
discount or premium paid to an individual resident in another member state,
unless such an individual presents a certificate obtained from the tax
authorities of the member state in which he is resident confirming that those
authorities are aware of the payment due to that individual. The "information
reporting system" would require a member state to supply to other member states
details of any payment of interest, discount or premium made by the paying
agents within its jurisdiction to an individual resident in another member
state. For these purposes, the term "paying agent" is widely defined and
includes an agent who is responsible for the payment of interest, discounts or
premiums for the immediate benefit of an individual beneficially entitled
thereto.

THE INCOME TAX SUMMARY SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION.
PROSPECTIVE HOLDERS OF THE NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER U.S. FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE EFFECTS OF CHANGES IN SUCH
LAWS.

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PLAN OF DISTRIBUTION

Based on positions taken by the staff of the SEC set forth in no-action
letters issued to Exxon Capital Holdings Corp. and Morgan Stanley & Co. Inc.,
among others, we believe that exchange notes issued pursuant to the Exchange
Offer in exchange for outstanding notes may be offered for resale, resold and
otherwise transferred by holders thereof under U.S. federal securities laws
(other than any holder which is (i) an "affiliate" of ours within the meaning of
Rule 405 under the Securities Act, (ii) a broker-dealer who acquired exchange
the notes directly from us, or (iii) broker-dealers who acquired exchange notes
as a result of market-making or other trading activities) without compliance
with the registration and prospectus delivery provisions for the Securities Act
provided that such exchange notes are acquired in the ordinary course of such
holders' business, and such holders are not engaged in, and do not intend to
engage in, and have no arrangement or understanding with any person to
participate in, a distribution of such exchange notes, provided that
broker-dealers ("Participating Broker-Dealers") receiving exchange notes in the
Exchange Offer will be subject to a prospectus delivery requirement with respect
to resales of such exchange notes. To date, the staff of the SEC has taken the
position that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to transactions involving an exchange of securities
such as the exchange pursuant to the Exchange Offer (other than a resale of an
unsold allotment from the sale of the outstanding notes to the Initial
Purchasers thereof) with the prospectus contained in the Registration Statement.
Pursuant to the Registration Rights Agreements, we have agreed to permit
Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use this prospectus in connection with the
resale of such exchange notes. We have agreed that, for a period of 180 days
after the Exchange Offer has been consummated, we will make this prospectus, and
any amendment or supplement to this prospectus, available to any broker-dealer
that requests such documents in the letter of transmittal.

Each holder of outstanding notes who wishes to exchange its outstanding
notes for exchange notes in the Exchange Offer will be required to make certain
representations to us as set forth in "The Exchange Offer". In addition, each
holder who is a broker-dealer and who receives Exchange Notes for its own
account in exchange for outstanding notes that were acquired by it as a result
of market-making activities or other trading activities, will be required to
acknowledge that it will deliver a prospectus in connection with any resale by
it of such exchange notes.

Holders who tender outstanding notes in the Exchange Offer with the
intention to participate in a distribution of the exchange notes may not rely
upon the Exxon Capital Holdings Corp., the Morgan Stanley & Co. Inc. or similar
no-action letters.

We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such exchange notes. The letter of
transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.

We have agreed to pay all expenses incidental to the Exchange Offer other
than commissions and concessions of any brokers or dealers and will indemnify
holders of the outstanding notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreements.

Exchange notes may only be offered in The Netherlands or elsewhere to
persons who trade or invest in securities in the conduct of their profession or
trade within the meaning of the Securities Transactions Supervision Act 1995
(Wet Toezicht Effectenverkeer 1995) and its implementing regulations (which
includes banks, securities intermediaries (including dealers and brokers),
insurance companies, pension
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160

funds, other institutional investors, and commercial enterprises which as an
ancillary activity regularly invest in securities).

LEGAL MATTERS

Certain legal matters in connection with the notes will be passed upon for
Flowserve by Shearman & Sterling, New York, New York. Certain Dutch company law
matters relating to Flowserve Finance will be passed upon by De Brauw Blackstone
Westbroek N.V., Amsterdam, The Netherlands.

EXPERTS

The consolidated financial statements of Flowserve Corporation at December
31, 1999 and 1998, and for each of the three years in the period ended December
31, 1999, appearing in this Registration Statement have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.

The financial statements of Innovative Valve Technologies as of December
31, 1999 and 1998 and for each of the three years in the period ended December
31, 1999 included in this prospectus have been so included in reliance on the
report of Arthur Andersen LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.

The financial statements of Ingersoll-Dresser Pump Company as of December
31, 1999 and 1998 and for each of the three years in the period ended December
31, 1999 included in this prospectus have been so included in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at:

- the Public Reference Room of the SEC, 450 Fifth Street, N.W., Washington
DC 20549;

- the public reference facilities at the SEC's regional offices located at
Seven World Trade Center, 13th Floor, New York, New York 10048 or 500
West Madison Street, Suite 1400, Chicago, Illinois 60661.

Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from the SEC's
Website at http://www.sec.gov. Reports and other information concerning us can
also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.

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161

The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to other documents we file with the SEC. The information
incorporated by reference is considered to be part of this prospectus, except
for any information superseded by information in this prospectus or in any
subsequently filed document that is incorporated by reference in this
prospectus. This prospectus incorporates by reference the documents set forth
below that we have previously filed with the SEC. These documents contain
important information about our company and our finances.

SEC FILING (FILE NO. 1-13179)                    PERIOD/DATE
-----------------------------                    -----------

Annual Report on Form 10-K...........  Year ended December 31, 1999
Proxy Statement......................  Dated March 16, 2000
Quarterly Report on Form 10-Q........  Quarter ended March 31, 2000 and
June 30, 2000
Current Reports on Form 8-K..........  July 20, 2000, August 2, 2000,
August 8, 2000, August 23, 2000
and August 30, 2000

GENERAL LISTING INFORMATION

LISTING

The outstanding euro notes are listed on the Luxembourg Stock Exchange. The
exchange euro notes are expected to be listed on the Luxembourg Stock Exchange
upon the expiration of the Exchange Offer. The Articles of Association of
Flowserve Finance and the legal notice relating to the issue of the exchange
euro notes will be deposited prior to the listing with the Chief Registrar of
the District Court in Luxembourg (Greffier en Chef du Tribunal d' Arrondissement
a Luxembourg), where such documents will be available for inspection and where
copies thereof can be obtained upon request. As long as the exchange euro notes
are listed on the Luxembourg Stock Exchange, an agent for making payments on,
and transfer of, exchange euro notes will be maintained in Luxembourg. In
connection with the Exchange Offer: (a) notice will be given to the Luxembourg
Stock Exchange and published in a Luxembourg newspaper announcing the beginning
of the registered exchange offer and, following the completion of such offer,
the results of such offer; (b) a Luxembourg exchange agent, through which all
relevant documents with respect to the registered exchange offer will be made
available, will be appointed and (c) the Luxembourg exchange agent will be able
to perform all agency functions to be performed by any exchange agent, including
providing a letter of transmittal and other relevant documents to holders, and
accepting such documents on behalf of us. The exchange euro notes will be
accepted for clearance through Euroclear and Clearstream and notice will be
given to the Luxembourg Stock Exchange and published in a Luxembourg newspaper
announcing the relevant Common Codes and International Securities Identification
Numbers. We have appointed Banque Internationale a Luxembourg S.A. as our
listing, paying and transfer agent in Luxembourg and The Bank of New York as our
paying and transfer agent in New York. We reserve the right to vary such
appointment. The paying agent in Luxembourg will act as intermediary between the
holders and us.

AUTHORIZED CAPITAL

The authorized capital of Flowserve Finance is E100,000. The issued and
outstanding share capital of Flowserve Finance is E20,000, all of which is held
by Flowserve International, Inc.

CONSENTS

We have obtained all necessary consents, approvals and authorizations in
connection with the issue of the exchange euro notes. The issue of the exchange
euro notes will be authorized by resolutions of the Board of Managing Directors
of Flowserve Finance.

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162

NO MATERIAL CHANGE

Except as disclosed in this prospectus, there has been no material change
in the financial position of Flowserve and its subsidiaries since June 30, 2000.

LITIGATION

Neither Flowserve nor any of its subsidiaries or affiliates is involved in
any litigation or arbitration proceedings which relate to claims or amounts
which are material in the context of the issue of the euro notes that may have,
or have had during the 12 months preceding the date of this prospectus, a
material adverse effect on the financial position of Flowserve, nor, so far as
any of them is aware, is any such proceeding pending or threatened.

RESPONSIBILITY STATEMENT

Having made all reasonable enquiries, Flowserve Finance confirms that, to
the best of its knowledge and belief, the information contained in this
prospectus with regard to Flowserve Finance and the euro notes is true and
accurate in all material respects, that this prospectus is not misleading and
that there are no other facts the omission of which would in the context of the
issue of the euro notes make any statement herein, whether of fact or opinion,
misleading in any material respect. Flowserve Finance accepts responsibility
accordingly.

PRESCRIPTION

Under New York's statute of limitations, any legal action upon the euro
notes in respect of principal or interest must be commenced within six years
after the payment thereof is due. Thereafter, such principal or interest will
become generally unenforceable.

MEETINGS

The indenture governing the euro notes does not specifically require
regular meetings of holders of the euro notes. However, under Section 13.07 of
the indenture governing the euro notes, the trustee, the paying agent and the
registrar may make reasonable rules for a meeting of holders of the euro notes.

AUDITORS

The consolidated accounts of Flowserve as of December 31, 1999 and 1998 and
for the three years in the period ended December 31, 1999 have been prepared in
accordance with U.S. GAAP and have been audited by Ernst & Young LLP in
accordance with United States generally accepted auditing standards. The
unaudited consolidated interim accounts for the six months ended June 30, 2000
and 1999 were prepared in accordance with U.S. GAAP.

DOCUMENTS

Copies of the following documents may be inspected at the specified office
of the paying and transfer agent in Luxembourg.

- Articles of Association of Flowserve Finance;

- The purchase agreement and registration rights agreement relating to the
euro notes;

- The indenture relating to the euro notes (which include the forms of the
respective note certificates); and

- This prospectus and registered exchange offer prospectus (if any).

Flowserve Finance intends to publish Dutch statutory accounts and it will
also publish its financial statements in accordance with U.S. GAAP. Copies of
such statutory accounts and financial statements will

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163

be available free of charge at the specified office of the paying and transfer
agent in Luxembourg for so long as the euro notes are listed on the Luxembourg
Stock Exchange.

CLEARING SYSTEMS

The euro notes have been accepted for clearance through the facilities of
Euroclear and Clearstream, Luxembourg. Relevant trading information is set forth
below.

ISIN       COMMON CODE
----       -----------

Euro notes due 2010.....................................

NOTICES

All notices shall be deemed to have been given upon (i) the mailing by
first class mail, postage prepaid, of such notices to holders of the euro notes
at their registered addresses as recorded in the register; and (ii) so long as
the euro notes are listed on the Luxembourg Stock Exchange and it is required by
the rules of the Luxembourg Stock Exchange, publication of such notice to the
holders of the euro notes in English in a leading newspaper having general
circulation in Luxembourg (which is expected to be the Luxemburger Wort) or, if
such publication is not practicable, in one other leading English language daily
newspaper with general circulation in Europe, such newspaper being published on
each business day in morning editions, whether or not it shall be published in
Saturday, Sunday or holiday editions.

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164

INDEX TO FINANCIAL STATEMENTS

PAGE
-----

FLOWSERVE CORPORATION
Audited Consolidated Financial Statements:
Report of Independent Auditors............................   F-2
Consolidated Balance Sheets at December 31, 1999 and
1998...................................................   F-3
Consolidated Statements of Income for the Years Ended
December 31, 1999, 1998 and 1997.......................   F-4
Consolidated Statements of Comprehensive (Loss) Income for
the Years Ended December 31, 1999, 1998 and 1997.......   F-4
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997...........   F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and
1997...................................................   F-6
Notes to Consolidated Financial Statements................   F-7
Interim Consolidated Financial Statements (unaudited):
Consolidated Balance Sheets -- June 30, 2000 (unaudited)
and December 31, 1999..................................   F-36
Consolidated Statements of Income -- Six Months Ended June
30, 2000 and 1999
(unaudited)............................................   F-37
Consolidated Statements of Comprehensive Income -- Six
Months Ended June 30, 2000 and 1999 (unaudited)........   F-37
Consolidated Statements of Cash Flows -- Six Months Ended
June 30, 2000 and 1999 (unaudited).....................   F-38
Notes to Consolidated Financial Statements................   F-39

INNOVATIVE VALVE TECHNOLOGIES, INC.
Report of Independent Public Accountants..................   F-50
Consolidated Balance Sheets at December 31, 1999 and
1998...................................................   F-51
Consolidated Statements of Operations for the Years Ended
December 31, 1999, 1998 and
1997...................................................   F-52
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1999, 1998 and 1997...   F-53
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and
1997...................................................   F-54
Notes to Consolidated Financial Statements................   F-55

INGERSOLL-DRESSER PUMP COMPANY
Audited Consolidated Financial Statements:
Report of Independent Accountants.........................   F-70
Consolidated Balance Sheets at December 31, 1999 and
1998...................................................   F-71
Consolidated Statements of Income for the Years Ended
December 31, 1999, 1998 and 1997.......................   F-72
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and
1997...................................................   F-73
Consolidated Statements of Partners' Equity for the Years
Ended December 31, 1999, 1998 and 1997.................   F-74
Notes to Consolidated Financial Statements................   F-75
Interim Condensed Consolidated Financial Statements
(unaudited):
Condensed Consolidated Balance Sheets at June 30, 2000
(unaudited) and
December 31, 1999......................................   F-100
Condensed Consolidated Statements of Income for the Six
Months ended June 30, 2000 and 1999 (unaudited)........   F-101
Condensed Consolidated Statements of Cash Flows for the
Six Months ended June 30, 2000 and 1999 (unaudited)....   F-102
Notes to Condensed Consolidated Financial Statements......   F-103

F-1

165

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Flowserve Corporation

We have audited the accompanying consolidated balance sheets of Flowserve
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Flowserve
Corporation and subsidiaries at December 31, 1999 and 1998, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.

In 1998, as discussed in Note 6 to the consolidated financial statements,
the Company changed its method of accounting for costing its inventory, and as
discussed in Note 8, changed its method of accounting for certain defined
compensation arrangements.

Ernst & Young LLP

Dallas, Texas
February 10, 2000 except for Note 16,
as to which date is July 14, 2000 and
Note 15, as to which date
is August 9, 2000

F-2

166

FLOWSERVE CORPORATION

CONSOLIDATED BALANCE SHEETS

ASSETS

DECEMBER 31,
-----------------------
1999         1998
----------   ----------
(AMOUNTS IN THOUSANDS)

Current assets:
Cash and cash equivalents.................................   $ 30,463     $ 24,928
Accounts receivable, net..................................    213,625      234,191
Inventories...............................................    168,356      199,286
Prepaids and other current assets.........................     41,344       28,885
--------     --------
Total current assets..............................    453,788      487,290
Property, plant and equipment, net..........................    209,976      209,032
Intangible assets, net......................................     96,435       99,875
Other assets................................................     77,952       74,000
--------     --------
Total assets................................................   $838,151     $870,197
========     ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..........................................   $ 72,103     $ 76,745
Notes payable.............................................        734        3,488

Income taxes..............................................      7,878       17,472
Accrued liabilities.......................................    111,820      107,028
Long-term debt due within one year........................      3,125       14,393
--------     --------
Total current liabilities.........................    195,660      219,126
Long-term debt due after one year...........................    198,010      186,292
Post-retirement benefits and deferred items.................    136,207      120,015
Commitments and contingencies
Shareholders' equity
Serial preferred stock, $1.00 par value, no shares
issued.................................................         --           --
Common shares, $1.25 par value............................     51,856       51,856
Shares authorized -- 120,000
Shares issued and outstanding -- 41,484
Capital in excess of par value............................     67,963       70,698
Retained earnings.........................................    344,254      353,249
--------     --------
464,073      475,803
Treasury stock, at cost -- 4,071 and 3,817 shares.........    (93,448)     (90,404)
Accumulated other comprehensive income....................    (62,351)     (40,635)
--------     --------
Total shareholders' equity........................    308,274      344,764
--------     --------
Total liabilities and shareholders' equity..................   $838,151     $870,197
========     ========

See accompanying notes to consolidated financial statements.

F-3

167

FLOWSERVE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31,
---------------------------------------------
1999            1998            1997
-------------   -------------   -------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

Sales....................................................   $1,061,272      $1,083,086      $1,152,196
Cost of sales............................................      697,928         667,753         703,319
----------      ----------      ----------
Gross profit.............................................      363,344         415,333         448,877
Selling and administrative expense.....................      275,884         265,556         285,890
Research, engineering and development expense..........       25,645          26,372          26,893
Merger transaction and restructuring expense...........       15,860              --          44,531
Merger integration expense.............................       14,207          38,326           6,982
----------      ----------      ----------
Operating income.........................................       31,748          85,079          84,581
Interest expense.......................................       15,504          13,175          13,275
Other income, net......................................       (2,001)         (1,253)         (7,107)
Gain on sale of subsidiary.............................           --              --         (11,376)
----------      ----------      ----------
Earnings before income taxes.............................       18,245          73,157          89,789
Provision for income taxes...............................        6,068          25,502          38,223
----------      ----------      ----------
Earnings before cumulative effect of change in accounting
principle..............................................       12,177          47,655          51,566
Cumulative effect of change in accounting principle......           --          (1,220)             --
----------      ----------      ----------
Net earnings.............................................   $   12,177      $   48,875      $   51,566
==========      ==========      ==========
Earnings per share (basic and diluted)
Before cumulative effect of change in accounting
principle...........................................   $     0.32      $     1.20      $     1.26
Cumulative effect of change in accounting principle....           --             .03              --
----------      ----------      ----------
Net earnings per share...................................   $     0.32      $     1.23      $     1.26
==========      ==========      ==========
Average shares outstanding...............................       37,856          39,898          40,896

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

YEAR ENDED DECEMBER 31,
------------------------------------
1999         1998         1997
----------   ----------   ----------
(AMOUNTS IN THOUSANDS)

Net earnings.............................................  $   12,177   $   48,875   $   51,566
Other comprehensive expense:
Foreign currency translation adjustments...............      20,874        9,861       24,002
Nonqualified pension plan adjustment...................         842           --           --
----------   ----------   ----------
Other comprehensive expense..............................      21,716        9,861       24,002
----------   ----------   ----------
Comprehensive (loss) income..............................  $   (9,539)  $   39,014   $   27,564
==========   ==========   ==========

See accompanying notes to consolidated financial statements.

F-4

168

FLOWSERVE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

1999                 1998                 1997
------------------   ------------------   ------------------
SHARES     AMOUNT    SHARES     AMOUNT    SHARES     AMOUNT
-------   --------   -------   --------   -------   --------
(AMOUNTS IN THOUSANDS)

COMMON SHARES
Beginning balance -- January
1...........................   41,484   $ 51,856    41,484   $ 51,856    41,482   $ 51,854
Stock activity under stock
plans.......................       --         --        --         --         2          2
-------   --------   -------   --------   -------   --------
Ending balance -- December
31..........................   41,484   $ 51,856    41,484   $ 51,856    41,484   $ 51,856
-------   --------   -------   --------   -------   --------
CAPITAL IN EXCESS OF PAR VALUE
Beginning balance -- January
1...........................            $ 70,698             $ 70,655             $ 72,434
Stock activity under stock
plans.......................              (2,735)                  43               (1,779)
-------   --------   -------   --------   -------   --------
Ending balance -- December
31..........................            $ 67,963             $ 70,698             $ 70,655
-------   --------   -------   --------   -------   --------
RETAINED EARNINGS
Beginning balance -- January
1...........................            $353,249             $326,681             $298,563
Stock activity under stock
plans.......................                  --                   --                    3
Net earnings...................              12,177               48,875               51,566
Cash dividends declared........             (21,172)             (22,307)             (23,451)
-------   --------   -------   --------   -------   --------
Ending balance -- December
31..........................            $344,254             $353,249             $326,681
-------   --------   -------   --------   -------   --------
TREASURY STOCK
Beginning balance -- January
1...........................   (3,817)  $(90,404)     (881)  $(23,145)   (1,081)  $(27,455)
Stock activity under stock
plans.......................      154      3,903       184      4,782       200      4,310
Treasury stock repurchases.....     (315)    (5,250)   (2,841)   (64,508)       --         --
Rabbi Trust adjustment.........      (93)    (1,697)     (279)    (7,533)       --         --
-------   --------   -------   --------   -------   --------
Ending balance -- December
31..........................   (4,071)  $(93,448)   (3,817)  $(90,404)     (881)  $(23,145)
-------   --------   -------   --------   -------   --------
ACCUMULATED OTHER COMPREHENSIVE
INCOME
Beginning balance -- January
1...........................            $(40,635)            $(30,774)            $ (6,772)
Foreign currency translation
adjustment..................             (20,874)              (9,861)             (24,002)
Nonqualified pension plan
adjustment..................                (842)                  --                   --
-------   --------   -------   --------   -------   --------
Ending balance -- December
31..........................            $(62,351)            $(40,635)            $(30,774)
-------   --------   -------   --------   -------   --------
TOTAL SHAREHOLDERS' EQUITY
Beginning balance -- January
1...........................   37,667   $344,764    40,603   $395,273    40,401   $388,624
Net changes in shareholders'
equity......................     (254)   (36,490)   (2,936)   (50,509)      202      6,649
-------   --------   -------   --------   -------   --------
Ending balance -- December
31..........................   37,413   $308,274    37,667   $344,764    40,603   $395,273
=======   ========   =======   ========   =======   ========

See accompanying notes to consolidated financial statements.

F-5

169

FLOWSERVE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31,
------------------------------
1999       1998       1997
--------   --------   --------
(AMOUNTS IN THOUSANDS)

CASH FLOWS -- OPERATING ACTIVITIES:
Net earnings..............................................  $ 12,177   $ 48,875   $ 51,566
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation...........................................    35,045     35,110     35,277
Amortization...........................................     4,554      4,189      3,656
Gain on sale of subsidiary, net of income taxes........        --         --     (7,417)
Loss on the sale of fixed assets.......................       440         57         33
Cumulative effect of change in accounting principle....        --     (1,220)        --
Change in operating assets and liabilities, net of
effects of acquisitions and dispositions:
Accounts receivable..................................    12,723      3,015    (18,401)
Inventories..........................................    28,359    (11,507)    (9,943)
Loss on impairment of facilities and equipment.......     2,834         --         --
Prepaid expenses.....................................   (12,910)     8,718    (10,287)
Other assets.........................................       436    (11,066)   (13,232)
Accounts payable.....................................    (1,919)     5,654      1,574
Accrued liabilities..................................     6,333    (25,848)    48,806
Income taxes.........................................   (12,395)     1,051     (2,005)
Post-retirement benefits and deferred items..........     8,072     (3,709)    13,195
Net deferred taxes...................................    (1,817)     1,033     (1,477)
Other................................................        --       (248)    (1,342)
--------   --------   --------
Net cash provided by operating activities...................    81,932     54,104     90,003
--------   --------   --------
CASH FLOWS -- INVESTING ACTIVITIES:
Capital expenditures, net of disposals....................   (40,535)   (38,249)   (39,560)
Payments for acquisitions, net of cash acquired...........    (5,743)   (19,951)   (10,461)
Proceeds from sale of subsidiary..........................        --         --     18,793
Other.....................................................        --       (427)     1,777
--------   --------   --------
Net cash flows used by investing activities.................   (46,278)   (58,627)   (29,451)
--------   --------   --------
CASH FLOWS -- FINANCING ACTIVITIES:
Net repayments under lines of credit......................   (13,645)    (2,314)       576
Payments on long-term debt................................    (6,370)   (20,212)   (15,760)
Proceeds from long-term debt..............................    18,776     76,950        929
Repurchase of common stock................................    (5,250)   (64,508)        --
Proceeds from issuance of common stock....................      (529)     4,764      2,584
Dividends paid............................................   (21,172)   (22,307)   (26,121)
Other.....................................................      (842)        --         --
--------   --------   --------
Net cash flows used by financing activities.................   (29,032)   (27,627)   (37,792)
--------   --------   --------
Effect of exchange rate changes.............................    (1,087)    (1,524)    (3,091)
--------   --------   --------
Net change in cash and cash equivalents.....................     5,535    (33,674)    19,669
Cash and cash equivalents at beginning of year..............    24,928     58,602     38,933
--------   --------   --------
Cash and cash equivalents at end of year....................  $ 30,463   $ 24,928   $ 58,602
========   ========   ========
Taxes paid..................................................  $ 19,336   $ 23,579   $ 27,636
Interest paid...............................................    16,128     11,190     13,420

See accompanying notes to consolidated financial statements.

F-6

170

FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 1: SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly and majority-owned subsidiaries. Intercompany profits,
transactions and balances have been eliminated. Investments in unconsolidated
affiliated companies, which represent all nonmajority ownership interests, are
carried on the equity basis, which approximates the Company's equity interest in
their underlying net book value.

USE OF ESTIMATES

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

BASIS OF COMPARISON

Certain amounts in 1998 and 1997 have been reclassified or restated to
conform with the 1999 presentation.

BUSINESS COMBINATIONS

Business combinations accounted for under the pooling of interests method
of accounting combine the assets, liabilities and shareholders' equity of the
acquired entity with the Company's respective accounts at recorded values.
Prior-period financial statements have been restated to give effect to the
transactions as if they had occurred at the beginning of all periods presented.

Business combinations accounted for under the purchase method of accounting
include the results of operations of the acquired business from the date of
acquisition. Net assets of the companies acquired are recorded at their fair
value to the Company at the date of acquisition and any excess of purchase price
over fair value of the identifiable assets is recorded as goodwill.

REVENUE RECOGNITION

Revenues and costs are generally recognized as units are shipped. Revenue
for certain longer-term contracts is recognized based on the percentage of
completion. Progress billings are generally shown as a reduction of inventory
unless such billings are in excess of accumulated costs, in which case such
balances are included in accrued liabilities.

SHORT-TERM INVESTMENTS AND CREDIT RISK

The Company places its temporary cash investments with financial
institutions and, by policy, limits the amount of credit exposure to any one
financial institution. These investments, with an original maturity of three
months or less when purchased, are classified cash equivalents. They are highly
liquid with principal values not subject to significant risk of change due to
interest rate fluctuations. Credit risk is also limited due to the large number
of customers in the Company's customer base, the Company's diverse product line
and the dispersion of the Company's customers across many geographic regions. As
of December 31, 1999, the Company does not believe that it had significant
concentrations of credit risk.

F-7

171
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ACCOUNTS RECEIVABLE

Accounts receivable are stated net of the allowance for doubtful accounts
of $5,705 and $4,533 at December 31, 1999 and 1998, respectively.

INVENTORIES

Inventories are stated at lower of cost or market. Cost is determined for
certain inventories by the last-in, first-out (LIFO) method and for other
inventories by the first-in, first-out (FIFO) method.

PROPERTY, PLANT AND EQUIPMENT, AND DEPRECIATION

Property, plant and equipment are stated on the basis of cost. Depreciation
is computed by the straight-line method based on the estimated useful lives of
the depreciable assets for financial statement purposes and by accelerated
methods for income tax purposes. The estimated useful lives of the assets are:

Buildings, improvements, furniture and fixtures.......   5 to 35 years
Machinery and equipment...............................   3 to 12 years
Capital leases........................................   3 to 25 years

INTANGIBLES

The excess cost over the fair value of net assets acquired (goodwill) is
amortized on a straight-line basis over 15 to 40 years. The carrying value of
goodwill is reviewed if the facts and circumstances suggest that it may be
impaired. If this review indicates that goodwill will not be recoverable, as
determined based on the undiscounted cash flows of the entity acquired over the
remaining amortization period, the Company's carrying value of the goodwill will
be adjusted accordingly. Accumulated amortization was $21,531 and $14,062 as of
December 31, 1999 and 1998, respectively.

HEDGING/FORWARD CONTRACTS

The Company is party to forward contracts for purposes of hedging certain
transactions denominated in foreign currencies. The Company has a
risk-management and derivatives policy statement outlining the conditions in
which the Company can enter into hedging or forward transactions. Gains and
losses on forward contracts qualifying as hedges are deferred and included in
the measurement of the related foreign currency transaction. Gains and losses on
hedges of existing assets or liabilities are included in the carrying amounts of
those assets or liabilities and are ultimately recognized in income as part of
those carrying amounts. Gains and losses related to hedges of anticipated
transactions are recognized in income as the transactions occur. The carrying
amounts in the Company's financial instruments approximate fair value as defined
under Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures
about Fair Value of Financial Instruments." Fair value is estimated by reference
to quoted prices by financial institutions. The Company is exposed to
credit-related losses in the event of nonperformance by counterparties to
financial instruments, but it expects all counterparties to meet their
obligations, given their high credit ratings. As of December 31, 1999, the
Company had no significant outstanding hedges or forward contracts with third
parties.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities of the Company's foreign affiliates, other than
those located in highly inflationary countries, are translated at current
exchange rates, while income and expenses are translated at average rates for
the period. For entities in highly inflationary countries, a combination of
current and historical rates is used to determine currency gains and losses
resulting from financial-statement translation and those resulting from
transactions. Translation gains and losses are reported as a component of
shareholders'
F-8

172
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

equity, except for those associated with highly inflationary countries, which
are reported directly in the consolidated statements of income.

ACCOUNTING DEVELOPMENTS

In 1999, the Company adopted Financial Accounting Standards Board Statement
of Position (SOP) No. 98-1, "Accounting for Costs of Software Developed or
Obtained for Internal Use." SOP 98-1 is effective for fiscal periods beginning
after December 15, 1998, and establishes guidelines to determine whether
software-related costs should be capitalized or expensed. The adoption of this
standard did not materially impact Flowserve's reported financial position,
results of operation or cash flows.

In 1999, the Financial Accounting Standards Board also issued one Statement
of Financial Accounting Standard (SFAS) that was applicable to the Company  --
SFAS No. 137, "Deferral of the Effective Date of SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 is now effective
for fiscal years beginning after June 15, 2000. This standard is not expected to
materially impact Flowserve's reported financial position, results of operations
or cash flows.

EARNINGS PER SHARE

Earnings per share is presented in accordance with SFAS No. 128, "Earnings
Per Share." The Company's potentially dilutive common stock equivalents have
been immaterial for all periods presented. Accordingly, basic earnings per share
is equal to diluted earnings per share and is presented on the same line for
income statement presentation.

INCOME TAXES

The Company accounts for income taxes under the liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes."

STOCK-BASED COMPENSATION

The Company follows Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB No. 25), and related interpretations in
accounting for its employee stock options. Under APB No. 25, no compensation
expense is recorded if the exercise price of the Company's stock options equals
the market price of the underlying stock on the date of grant. Accordingly, the
Company has no compensation expense recorded.

NOTE 2: MERGER

On July 22, 1997, shareholders of Durco International Inc. (Durco) and
BW/IP, Inc. (BW/IP) voted to approve a merger between Durco and BW/IP in a
stock-for-stock merger of equals that was accounted for as a pooling of
interests transaction. As part of the merger agreement, the Company changed its
name from Durco to Flowserve Corporation. The Company issued approximately
16,914,000 shares of common stock in connection with the merger. BW/IP
shareholders received 0.6968 shares of the Company's common stock for each
previously owned share of BW/IP stock.

The consolidated financial statements, including the accompanying notes
thereto, have been restated for all periods prior to the merger to include the
financial position, results of operations, and cash flows of BW/IP and Durco as
if the merger had occurred at the beginning of all periods presented.

In connection with the merger, the Company recorded a one-time charge of
$11,900 for merger-related expenses in 1997. These expenses included severance
and other expenses triggered by the merger

F-9

173
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and investment banking fees, legal fees, and other costs related to the merger,
which are primarily nondeductible for tax purposes.

In 1997, the Company developed a merger integration program that includes
facility rationalizations in North America and Europe, organizational
realignments at the corporate and division levels, procurement initiatives,
investments in training, and support for the service and repair operations. In
the fourth quarter of 1997, the Company recognized a one-time restructuring
charge of $32,600 related to this program. Other nonrecurring expenses related
to the merger (merger integration expense) were incurred in 1999, 1998 and 1997
in order to achieve the planned synergies. These expenses of $14,200, $38,300
and $7,000, respectively, were principally for costs for consultants, relocation
and training.

As of June 30, 1999, the restructuring portion of the merger integration
had been completed. The Company paid severance to approximately 331 employees at
a cost of $22,400. Expenditures charged to the 1997 restructuring reserve were:

OTHER EXIT
SEVERANCE     COSTS       TOTAL
---------   ----------   --------

Balance at October 27, 1997...........................   $22,400     $10,200     $ 32,600
Cash expenditures.....................................    (3,400)       (500)      (3,900)
Noncash expenditures..................................        --      (1,200)      (1,200)
-------     -------     --------
Balance at December 31, 1997..........................    19,000       8,500       27,500
Cash expenditures.....................................   (16,300)     (3,100)     (19,400)
Noncash expenditures..................................        --      (5,400)      (5,400)
-------     -------     --------
Balance at December 31, 1998..........................     2,700          --        2,700
Cash expenditures.....................................    (2,700)         --       (2,700)
Noncash expenditures..................................        --          --           --
-------     -------     --------
Balance at December 31, 1999..........................   $    --     $    --     $     --
=======     =======     ========

NOTE 3: RESTRUCTURING

In the fourth quarter of 1999, the Company initiated a restructuring
program that included a one-time charge of $15,860 recorded as restructuring
expense. The restructuring charge related to the planned closure of 10
facilities and a corresponding reduction in workforce at those locations, as
well as at other locations that are part of the restructuring.

The restructuring program is expected to result in a net reduction of
approximately 300 employees at a cost of $12,900. In addition, exit costs
associated with the facilities closings are estimated at $2,960. As of December
31, 1999, the program had resulted in a net reduction of 64 employees.

Expenditures charged to the 1999 restructuring reserve were:

OTHER EXIT
SEVERANCE     COSTS       TOTAL
---------   ----------   -------

Balance at December 24, 1999...........................   $12,900      $2,960     $15,860
Cash expenditures......................................      (102)         --        (102)
Noncash expenditures...................................        --          --          --
-------      ------     -------
Balance at December 31, 1999...........................   $12,798      $2,960     $15,758
=======      ======     =======

F-10

174
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4: ACQUISITIONS AND DISPOSITIONS

In October 1999, the Company purchased certain assets and liabilities of
Honeywell's industrial control-valve product line and production equipment
located near Frankfurt, Germany. The Company expects to complete the phased move
of this operation to its existing control-valve manufacturing facilities in
Europe by March 2000. This business generated revenues of about $7 million in
1999. In October 1999, the Company also acquired R&C Valve Service, Inc. The
assets of this company were integrated into the Company's existing service
center network during the fourth quarter of 1999.

In July 1998, the Company purchased certain assets and liabilities of the
Valtek Engineering Division of Allen Power Engineering, Limited, from Rolls
Royce plc. The Valtek Engineering Division was the British licensee for many of
Flowserve's control-valve products, with exclusive territorial rights for
portions of Europe, the Middle East and Africa since 1971.

In September 1998, the Company acquired the remaining 49% ownership
interest in Durametallic Asia Pte. Ltd., a fluid sealing manufacturer located in
Singapore, from its joint-venture partner. Also in 1998, the Company acquired
the outstanding shares of ARS Lokeren NV, a Belgian company, and ZAR Beheer BV,
a Dutch company, which specialize in the service and repair of industrial
valves, with service and repair facilities near Rotterdam, the Netherlands, and
Ghent and Antwerp, Belgium.

In 1997, the Company purchased the 49% remaining shares of its joint
venture in Argentina, Byron Jackson Argentina I.C.S.A., and purchased the
engineered pump business of Stork Pompen, B.V.

The Company sold its wholly owned Metal Fab subsidiary for $18,793 in
December 1997 and realized a pretax gain of $11,376. In addition, in 1997 the
Company sold its Filtration Systems Division.

NOTE 5: STOCK PLANS

The Company maintains shareholder-approved stock option plans, which in
1999 provided for the grant of an additional 1,900,000 options to purchase
shares of the Company's common stock. At December 31, 1999, approximately
1,089,500 options were available for grant. Options under these plans have been
granted to officers and employees to purchase shares of common stock at or above
the fair market value at the date of grant. Generally, these options, whether
granted from the current or prior plans, become exercisable over staggered
periods, but expire after 10 years from the date of the grant. The plan provides
that any option may include a stock appreciation right; however, none has been
granted since 1989. The aggregate number of shares exercisable was 2,117,816 at
December 31, 1999; 1,703,171 at December 31, 1998; and 1,707,677 at December 31,
1997.

Stock options issued to officers and other employees were:

1999                   1998                   1997
--------------------   --------------------   --------------------
WEIGHTED               WEIGHTED               WEIGHTED
AVERAGE                AVERAGE                AVERAGE
EXERCISE               EXERCISE               EXERCISE
SHARES      PRICE      SHARES      PRICE      SHARES      PRICE
---------   --------   ---------   --------   ---------   --------

Number of shares under option:
Outstanding at beginning of
year.........................  2,831,614    $23.49    2,246,557    $25.05    1,842,239    $22.83
Granted.........................  1,249,501     18.29      794,240     18.50      690,270     26.53
Exercised.......................    (28,149)    11.63     (167,867)    20.32     (285,952)    14.30
Cancelled.......................   (130,037)    23.88      (41,316)    25.80           --        --
---------    ------    ---------    ------    ---------    ------
Outstanding at end of year......  3,922,929    $21.86    2,831,614    $23.49    2,246,557    $25.05
=========    ======    =========    ======    =========    ======

F-11

175
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The weighted average contractual life of options outstanding is 7.4 years.
Additional information relating to the range of options outstanding at December
31, 1999, is as follows:

OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
------------------------------------------   ----------------------------------
WEIGHTED
AVERAGE                      WEIGHTED           NUMBER            WEIGHTED
REMAINING                     AVERAGE        EXERCISABLE AT        AVERAGE
CONTRACTUAL     NUMBER      EXERCISE PRICE     DECEMBER 31,      EXERCISE PRICE
RANGE OF EXERCISE PRICES PER SHARE     LIFE       OUTSTANDING     PER SHARE            1999            PER SHARE
----------------------------------  -----------   -----------   --------------   -----------------   --------------

$ 5.95 - $11.76..................       2.0           33,106        $ 8.58              33,106           $ 8.58
$11.76 - $27.44..................       7.9        3,131,773        $19.67           1,427,444           $21.54
$27.44 - $39.20..................       5.8          758,050        $31.48             657,266           $31.72
---------                         ---------
3,922,929                         2,117,816
=========                         =========

Pro forma information regarding net earnings and earnings per share is
required by SFAS No. 123, which also requires that the information be determined
as if the Company had accounted for its stock options granted subsequent to
December 31, 1994, under the fair value method of that Statement. The "fair
value" for these options at the date of grant was estimated using a binomial
option pricing model (a modified Black-Scholes model). The assumptions used in
this valuation are as follows:

YEAR ENDED DECEMBER 31,
-------------------------
1999      1998      1997
-----     -----     -----

Risk-free interest rate.....................................   6.1%      5.6%      5.5%
Dividend yield..............................................   3.3%      3.3%      2.0%
Stock volatility............................................  32.5%     34.1%     35.5%
Average expected life (years)...............................   9.1       8.6       8.1

The options granted had a weighted average "fair value" per share on date
of grant of $5.75 in 1999, $6.14 in 1998 and $10.69 in 1997. For purposes of pro
forma disclosure, the estimated fair value of the options is amortized to
expense over the options vesting periods.

The Company's pro forma information is as follows:

YEAR ENDED DECEMBER 31,
---------------------------
1999      1998      1997
-------   -------   -------

Net earnings
As reported...........................................  $12,177   $48,875   $51,566
Pro forma.............................................    8,671    47,030    48,224
Earnings per share (basic and diluted)
As reported...........................................  $  0.32   $  1.23   $  1.26
Pro forma.............................................     0.23      1.18      1.18

Because the determination of the fair value of all options granted includes
an expected volatility factor and because additional option grants are expected
to be made each year, the above pro forma disclosures are not representative of
pro forma effects for future years.

The amended restricted stock plan as approved by shareholders in 1999
authorizes the grant of up to 250,000 shares of the Company's common stock. In
general, the shares cannot be transferred for a period of at least one but not
more than 10 years and are subject to forfeiture during the restriction period.
The fair value of the shares is amortized to compensation expense over the
periods in which the restrictions lapse. Restricted stock grants were 181,213
shares in 1999, 10,165 shares in 1998 and 21,700 shares in 1997. The weighted
average fair value of the restricted stock grants at date of grant was $18.66 in
1999,

F-12

176
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$24.07 in 1998 and $27.73 in 1997. Total compensation expense recognized in the
income statement for all stock-based awards was $878 in 1999, $485 in 1998 and
$510 in 1997.

NOTE 6: DETAILS OF CERTAIN CONSOLIDATED BALANCE SHEET CAPTIONS

INVENTORIES

Inventories and the method of determining cost were:

DECEMBER 31,
--------------------
1999        1998
--------    --------

Raw materials..........................................  $ 29,674    $ 26,088
Work in process and finished goods.....................   182,493     226,843
Less: Progress billings................................    (5,746)    (15,024)
--------    --------
206,421     237,907
LIFO reserve...........................................   (38,065)    (38,621)
--------    --------
Net inventory..........................................  $168,356    $199,286
========    ========
Percent of inventory accounted for by LIFO.............        64%         61%
Percent of inventory accounted for by FIFO.............        36%         39%

The U.S. operations of the former BW/IP changed its method of accounting
for inventory to LIFO during 1998. Because the December 31, 1997, BW/IP
inventory valued at FIFO is the opening LIFO inventory, there is neither a
cumulative effect to January 1, 1998, nor pro forma amounts of retroactively
applying the change to LIFO. The effect of the change in 1998 was not
significant.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment were:

DECEMBER 31,
---------------------
1999        1998
---------   ---------

Land..................................................  $  16,311   $  17,856
Buildings, improvements, furniture and fixtures.......    189,561     179,588
Machinery, equipment, capital leases and construction
in progress.........................................    293,310     290,730
---------   ---------
499,182     488,174
Less: Accumulated depreciation........................   (289,206)   (279,142)
---------   ---------
Net property, plant and equipment.....................  $ 209,976   $ 209,032
=========   =========

F-13

177
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

OTHER ASSETS

Other assets were:

DECEMBER 31,
-------------------
1999        1998
-------     -------

Pension assets..........................................  $    --     $11,461
Deferred tax assets.....................................   33,914      22,098
Deferred compensation funding...........................   13,773      10,408
Investments in unconsolidated affiliates................    7,091       5,331
Prepaid financing fees..................................    2,882         935
Long-term notes receivable..............................    1,978       2,914
Other...................................................   18,314      20,853
-------     -------
Total...................................................  $77,952     $74,000
=======     =======

ACCRUED LIABILITIES

Accrued liabilities were:

DECEMBER 31,
--------------------
1999        1998
--------    --------

Wages and other compensation...........................  $ 56,285    $ 62,249
Accrued restructuring, current portion.................    15,758       2,730
Accrued commissions and royalties......................     8,876       7,494
Other..................................................    30,901      34,555
--------    --------
Total..................................................  $111,820    $107,028
========    ========

POST-RETIREMENT BENEFITS AND DEFERRED ITEMS

Post-retirement benefits and deferred items were:

DECEMBER 31,
--------------------
1999        1998
--------    --------

Post-retirement benefits...............................  $ 65,359    $ 64,311
Deferred compensation..................................    19,251      13,231
Deferred taxes.........................................    26,233      16,977
Other..................................................    25,364      25,496
--------    --------
Total..................................................  $136,207    $120,015
========    ========

F-14

178
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7: DEBT AND LEASE OBLIGATIONS

Long-term debt, including capital lease obligations, consisted of:

DECEMBER 31,
-------------------
1999       1998
--------   --------

Senior Notes, interest of 7.14% and 7.17%...............  $ 50,000   $ 58,333
Revolving credit agreement, interest at 7.07% in 1999
and 5.50% in 1998.....................................   140,000    124,000
Loan, due annually through 2002, interest at 8.94%......    10,156     12,321
Credit agreements, average interest rate 6.20% in
1998..................................................        --      2,935
Capital lease obligations and other.....................       979      3,096
--------   --------
201,135    200,685
Less amounts due within one year........................     3,125     14,393
--------   --------
Total long-term debt....................................  $198,010   $186,292
========   ========

Maturities of long-term debt, including capital lease obligations, for the
next five years are:

2000......................................................  $  3,125
2001......................................................     3,125
2002......................................................     9,906
2003......................................................    10,000
2004......................................................    10,000
Thereafter................................................   164,979
--------
Total.....................................................  $201,135
========

In October 1999, the Company entered into a five-year $600,000 revolving
credit agreement that replaced the Company's existing $200,000 agreement. As of
December 31, 1999, the Company had commitments available of $460,000, and
$140,000 was outstanding. The Company has an interest-rate swap that fixes
$50,000 usage of the revolving credit facility at 6.74%.

In connection with a German acquisition, the Company converted a
deutsche-mark obligation through a currency swap agreement against its U.S.
dollar private placement to fund the acquisition. The effective rate on the loan
swap was 8.94%. Unrealized gains and losses on the hedge are not recognized in
income, but are shown in the cumulative translation adjustment account included
in shareholders' equity with the related amounts due to and from the
counterparty included in long-term debt. The maturity and repayment terms of the
swap match precisely the maturity and repayment term of the underlying debt.

In 1992, the Company issued $50,000 Senior Notes requiring annual payments
of $8,333 through 1999, bearing interest at 7.92%. The final payment was made
May 17, 1999. In 1996, the Company issued $30,000 Senior Notes requiring annual
principal payments of $6,000 commencing in 2002, bearing interest of 7.14%. In
1997, the Company issued $20,000 in Senior Notes, bearing interest of 7.17% with
principal payments of $4,000 due annually, commencing in 2003.

The provisions of the credit agreements require the Company to meet or
exceed specified financial covenants that are defined in the agreements. The
agreements also contain limitations or restrictions relating to new indebtedness
and liens, disposition of assets, and payment of dividends or other
distributions. All such covenants were met in each of the years presented. The
most restrictive of these include a debt-to-capital ratio and a minimum tangible
net worth requirement.

F-15

179
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1998, the Company had short-term credit facilities
available from banks under which it could borrow at local market rates up to
$58,500. Under these facilities, the Company had borrowings outstanding of
$3,488 at December 31, 1998. The weighted average interest rate on these
borrowings at December 31, 1998, was 6.0%. Borrowings against these facilities
were used primarily to support the operations of foreign subsidiaries. These
short-term credit facilities were terminated in 1999 and replaced by additional
available credit under the revolving credit agreement.

As of December 31, 1999, the Company had contingent obligations of $10,518
relating to bank guarantees and credit lines and $27,083 relating to outstanding
letters of credit and performance bonds.

The Company has noncancelable operating leases for certain offices, service
and quick response centers, certain manufacturing and operations facilities, and
machinery, equipment and automobiles. Rental expense relating to operating
leases was $11,648 in 1999, $11,798 in 1998 and $15,000 in 1997.

The future minimum lease payments under noncancelable operating leases are:

2000.......................................................  $ 8,243
2001.......................................................    5,870
2002.......................................................    4,594
2003.......................................................    3,085
2004.......................................................    2,837
Thereafter.................................................    4,096
-------
Total......................................................  $28,725
=======

NOTE 8: DEFERRED COMPENSATION -- RABBI TRUST

In September 1998, the Company adopted the provisions of EITF No. 97-14,
"Accounting for Deferred Compensation Arrangements Where Amounts Earned Are Held
in a Rabbi Trust and Invested." This standard established new guidelines for
deferred compensation arrangements where amounts earned by an employee are
invested in the employer's stock that is placed in a Rabbi Trust. The EITF
requires that the Company's stock held in the trust be recorded at historical
cost, the corresponding deferred compensation liability recorded at the current
fair value of the Company's stock, and the stock held in the Rabbi Trust
classified as treasury stock. The difference between the historical cost of the
stock and the fair value of the liability at September 30, 1998, has been
recorded as a cumulative effect of a change in accounting principle of $1,220,
net of tax. Prior-year financial statements have not been restated to reflect
the change in accounting principle. The effect of the change on 1997 income
before the cumulative effect would have been a reduction of $490. Subsequent to
the adoption of the provision, the effect on continuing operations has been
immaterial.

NOTE 9: RETIREMENT BENEFITS

The Company sponsors several noncontributory defined benefit pension plans,
covering substantially all U.S. employees, which provide benefits based on years
of service and compensation. Retirement benefits for all other employees are
provided through defined contribution pension plans, cash balance pension plans
and government-sponsored retirement programs. All defined benefit pension plans
are funded based on independent actuarial valuations to provide for current
service and an amount sufficient to amortize unfunded prior service over periods
not to exceed 30 years.

F-16

180
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net defined benefit pension expense (including both qualified and
nonqualified plans) was:

YEAR ENDED DECEMBER 31,
------------------------------
1999       1998       1997
--------   --------   --------

Service cost-benefits earned during the period.......  $  7,817   $  6,411   $  5,627
Interest cost on projected benefit obligations.......    14,978     14,704     13,931
Gain on plan assets..................................   (19,137)   (18,086)   (16,284)
Unrecognized prior service (benefit) cost............      (311)       537       (427)
Unrecognized net (asset) obligation..................      (529)      (499)       576
--------   --------   --------
Net defined benefit pension expense..................  $  2,818   $  3,067   $  3,423
========   ========   ========

The following table reconciles the plans' funded status to amounts
recognized in the Company's consolidated balance sheets:

DECEMBER 31,
--------------------
1999       1998
--------   ---------

Projected benefit obligations.........................  $208,745   $ 226,463
Plan assets, at fair value............................   239,133     225,260
--------   ---------
Plan assets in excess of (less than) projected benefit
obligations.........................................    30,388      (1,203)
Unrecognized net transition asset.....................      (716)       (942)
Unrecognized net gain.................................   (14,616)       (622)
Unrecognized prior service (cost) benefit.............   (21,426)      2,612
--------   ---------
Net pension liability.................................  $ (6,370)  $    (155)
========   =========
Discount rate.........................................      7.50%       6.75%
Rate of increase in compensation levels...............       4.5%   4.0%-8.0%
Long-term rate of return on assets....................       9.5%        9.5%

Following is a reconciliation of the defined benefit pension obligations:

DECEMBER 31,
-------------------
1999       1998
--------   --------

Beginning benefit obligation............................  $226,463   $210,878
Service cost............................................     7,817      6,411
Interest cost...........................................    14,978     14,704
Plan amendments.........................................   (21,617)        --
Actuarial (gain) loss...................................    (4,293)     7,725
Benefits paid...........................................   (14,603)   (13,154)
Curtailments............................................        --       (101)
--------   --------
Ending benefit obligation...............................  $208,745   $226,463
========   ========

F-17

181
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Following is a reconciliation of the defined benefit pension assets:

DECEMBER 31,
-------------------
1999       1998
--------   --------

Beginning plan assets...................................  $225,260   $219,860
Return on plan assets...................................    28,081     18,093
Company contributions...................................       395        462
Benefits paid...........................................   (14,603)   (13,155)
--------   --------
Ending plan assets......................................  $239,133   $225,260
========   ========

The Company sponsors several defined contribution pension plans covering
substantially all U.S. and Canadian employees and certain other foreign
employees. Employees may contribute to these plans, and these contributions are
matched in varying amounts by the Company. The Company may also make additional
contributions for eligible employees. Defined contribution pension expense for
the Company was $7,712 in 1999, $7,309 in 1998 and $7,733 in 1997. Effective
July 1, 1999, three existing defined benefit programs for U.S. employees were
consolidated into one program. The plan was amended to reflect the conversion of
primarily final-average-pay methodologies into a cash balance design and
resulted in lowering the defined benefit pension obligation by $21,617 in 1999.
In conjunction with this change, new employee groups became eligible to
participate in the plan.

The Company also sponsors several defined benefit post-retirement health
care plans covering approximately 60% of future retirees and most current
retirees in the United States. These plans are for medical and dental benefits
and are provided through insurance companies and health maintenance
organizations. The plans include participant contributions, deductibles,
coinsurance provisions and other limitations, and are integrated with Medicare
and other group plans. The plans are funded as insured benefits and health
maintenance organization premiums are incurred.

Net post-retirement benefit expense comprised:

YEAR ENDED DECEMBER 31,
---------------------------
1999      1998      1997
-------   -------   -------

Service cost -- benefits earned during the period.........  $   957   $   882   $   916
Interest cost on accumulated post-retirement benefit
obligations.............................................    3,841     3,749     3,652
Amortization of unrecognized prior service cost...........   (1,333)   (1,497)   (2,012)
-------   -------   -------
Net post-retirement benefit expense.......................  $ 3,465   $ 3,134   $ 2,556
=======   =======   =======

Following is a reconciliation of the accumulated post-retirement benefits
obligations:

DECEMBER 31,
-----------------
1999      1998
-------   -------

Beginning accumulated post-retirement benefit
obligation..............................................  $57,313   $53,072
Service cost..............................................      957       882
Interest cost.............................................    3,841     3,749
Plan amendments...........................................   (7,565)       --
Actuarial (gain) loss.....................................   (1,396)    3,460
Benefits paid.............................................   (4,105)   (3,850)
-------   -------
Ending accumulated post-retirement benefit obligation.....  $49,045   $57,313
=======   =======

F-18

182
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table presents the components of post-retirement benefit
amounts recognized in the Company's consolidated balance sheet:

DECEMBER 31,
-----------------
1999      1998
-------   -------

Actuarial present value of accumulated post-retirement
benefit obligations:....................................  $49,045   $57,313
Unrecognized prior service benefit........................   13,568     7,369
Unrecognized net gain (loss)..............................    1,059      (371)
-------   -------
Accrued post-retirement benefits..........................  $63,672   $64,311
=======   =======
Discount rate.............................................     7.50%     6.75%

The assumed ranges for the annual rates of increase in per capita costs for
periods prior to Medicare were 7.5% for 1999 with a gradual decrease to 6.0% for
2002 and future years, and for periods after Medicare, 5.5% for 1999 with a
gradual decrease to 5.0% for 2002 and future years.

Increasing the assumed rate of increase in post-retirement benefit costs by
1% in each year would increase net post-retirement benefit expense by
approximately $304 and accumulated post-retirement benefit obligations by
$3,379. Reducing the assumed rate of decrease in post-retirement benefit costs
by 1% in each year would reduce net post-retirement benefit expense by
approximately $280 and accumulated benefit obligations by $3,093.

The Company made contributions to the defined benefit post-retirement plan
of $4,105 in 1999 and $3,850 in 1998.

NOTE 10: CONTINGENCIES

As of December 31, 1999, the Company was involved as a "potentially
responsible party" (PRP) at five former public waste disposal sites that may be
subject to remediation under pending government procedures. The sites are in
various stages of evaluation by federal and state environmental authorities. The
projected cost of remediating these sites, as well as the Company's alleged
"fair share" allocation, is uncertain and speculative until all studies have
been completed and the parties have either negotiated an amicable resolution or
the matter has been judicially resolved. At each site, there are many other
parties who have similarly been identified, and the identification and location
of additional parties is continuing under applicable federal or state law. Many
of the other parties identified are financially strong and solvent companies
that appear able to pay their share of the remediation costs. Based on the
Company's preliminary information about the waste disposal practices at these
sites and the environmental regulatory process in general, the Company believes
that it is likely that ultimate remediation liability costs for each site will
be apportioned among all liable parties, including site owners and waste
transporters, according to the volumes and/or toxicity of the wastes shown to
have been disposed of at the sites.

The Company is a defendant in numerous pending lawsuits (which include, in
many cases, multiple claimants) that seek to recover damages for alleged
personal injury allegedly resulting from exposure to asbestos-containing
products formerly manufactured and distributed by the Company. All such products
were used within self-contained process equipment, and management does not
believe that there was any emission of ambient asbestos fiber during the use of
this equipment.

The Company is also a defendant in several other products liability
lawsuits that are insured, subject to the applicable deductibles, and certain
other noninsured lawsuits received in the ordinary course of business.
Management believes that the Company has adequately accrued estimated losses for
such lawsuits. No insurance recovery has been projected for any of the insured
claims, because management

F-19

183
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

currently believes that all will be resolved within applicable deductibles. The
Company is also a party to other noninsured litigation that is incidental to its
business, and, in management's opinion, will be resolved without a material
impact on the Company's financial statements.

Although none of the aforementioned gives rise to any additional liability
that can now be reasonably estimated, the Company believes such costs will be
immaterial. The Company will continue to evaluate these contingent loss
exposures and, if they develop, recognize expense as soon as such losses can be
reasonably estimated.

NOTE 11: SHAREHOLDERS' EQUITY

In 1997, the Company increased its authorized $1.25 par value common stock
from 60,000,000 to 120,000,000 shares. The authorized shares were increased in
connection with the merger of Durco and BW/IP resulting in the formation of
Flowserve Corporation. At both December 31, 1999 and 1998, the Company had
authorized 1,000,000 shares of $1.00 par value preferred stock.

Each share of the Company's common stock contains a preferred stock
purchase right. These rights are not currently exercisable and trade in tandem
with the common stock. The rights become exercisable and trade separately in the
event of certain significant changes in common stock ownership or on the
commencement of certain tender offers that, in either case, may lead to a change
of control of the Company. Upon becoming exercisable, the rights provide
shareholders the opportunity to acquire a new series of Company preferred stock
to be then automatically issued at a preestablished price. In the event of
certain forms of acquisition of the Company, the rights also provide Company
shareholders the opportunity to purchase shares of the acquiring Company's
common stock from the acquirer at a 50% discount from the current market value.
The rights are redeemable for $0.022 per right by the Company at any time prior
to becoming exercisable and will expire in August 2006.

At December 31, 1999, approximately 2,210,323 shares of common stock were
reserved for exercise of stock options and for grants of restricted stock.

NOTE 12: INCOME TAXES

The provision (benefit) for taxes on income consisted of the following:

YEAR ENDED DECEMBER 31,
-----------------------------
1999      1998       1997
--------   -------   --------

Current:
U.S. federal................................  $  1,179   $ 1,226   $ 30,461
Non-U.S.....................................     8,836    13,798     17,752
State and local.............................     1,630       438      5,485
--------   -------   --------
Total current.......................    11,645    15,462     53,698
--------   -------   --------
Deferred:
U.S. federal................................   (11,780)    7,915    (15,585)
Non-U.S.....................................     6,777     1,409      1,012
State and local.............................      (574)      716       (902)
--------   -------   --------
Total deferred......................    (5,577)   10,040    (15,475)
--------   -------   --------
Total provision.....................  $  6,068   $25,502   $ 38,223
========   =======   ========

F-20

184
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The provision for taxes on income was different from the statutory
corporate rate due to the following:

YEAR ENDED DECEMBER 31,
-----------------------
1999     1998     1997
-----    -----    -----

U.S. federal income tax rate...........................  35.0%    35.0%    35.0%
Non-U.S. tax rate differential and utilization of
operating loss carryforwards.........................   0.7      2.6      2.2
Merger transaction expenses............................    --       --      3.7
State and local income taxes, net......................   2.7      1.4      3.2
Utilization of tax credits.............................  (1.6)    (1.5)    (2.7)
Foreign sales corporation..............................  (2.2)    (2.6)    (1.8)
Other net..............................................  (1.3)      --      3.0
----     ----     ----
Effective tax rate.....................................  33.3%    34.9%    42.6%
====     ====     ====

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's consolidated deferred tax assets and liabilities were:

DECEMBER 31,
-----------------
1999      1998
-------   -------

Deferred tax assets related to:
Post-retirement benefits................................  $23,989   $17,556
Net operating loss carryforwards........................    4,837    11,553
Compensation accruals...................................    9,773     8,131
Inventories.............................................       --     7,892
Credit carryforwards....................................    5,410     3,679
Loss on dispositions....................................    1,852     2,462
Warranty and accrued liabilities........................    2,542     1,258
Restructuring charge....................................    9,013       988
Other...................................................    4,851     9,914
-------   -------
Total deferred tax assets.......................   62,267    63,433
Less valuation allowances...............................    7,763     8,655
-------   -------
Net deferred tax assets.........................   54,504    54,778
-------   -------
Deferred tax liabilities related to:
Property, plant and equipment...........................   12,520    13,563
Goodwill................................................   10,610    12,225
Other...................................................    2,183     5,376
-------   -------
Total deferred tax liabilities..................   25,313    31,164
-------   -------
Deferred tax assets, net..................................  $29,191   $23,614
=======   =======

The Company has recorded valuation allowances to reflect the estimated
amount of deferred tax assets that may not be realized due to the expiration of
net operating loss and foreign tax credit carryforwards. The net changes in the
valuation allowances were attributable to utilization and expiration of net
operating loss carryforwards partially offset by an increase in expected
nonutilization of net operating loss and credit carryforwards. The Company had
approximately $13,000 of net operating loss carryforwards at December 31, 1999,
the majority of which was generated in non-U.S. jurisdictions in which net
operating losses do not expire.

F-21

185
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Earnings before income taxes comprised:

YEAR ENDED DECEMBER 31,
----------------------------
1999      1998      1997
--------   -------   -------

U.S....................................................  $(21,116)  $27,326   $48,897
Non-U.S................................................    39,361    45,831    40,892
--------   -------   -------
$ 18,245   $73,157   $89,789
========   =======   =======

Undistributed earnings of the Company's non-U.S. subsidiaries amounted to
approximately $137,000 at December 31, 1999. These earnings are considered to be
indefinitely reinvested and, accordingly, no additional U.S. income taxes or
non-U.S. withholding taxes have been provided. Determination of the amount of
additional taxes that would be payable if such earnings were not considered
indefinitely reinvested is not practical.

NOTE 13: SEGMENT INFORMATION

Flowserve is principally engaged in the worldwide design, manufacture,
distribution and service of industrial flow management equipment. The Company
provides pumps, valves, mechanical seals and flow management services primarily
for the refinery and pipeline segments of the petroleum industry, the
chemical-processing industry, the power-generation industry and other industries
requiring flow management products.

The Company has three divisions, each of which constitutes a business
segment. Each division manufactures different products and is defined by the
type of products and services provided. Each division has a president, who
reports directly to the Office of the Chief Executive, and a Division
Controller. For decision-making purposes, the Chief Executive Officer, Chief
Financial Officer and other members of upper management use financial
information generated and reported at the division level.

The Rotating Equipment Division designs, manufactures and distributes pumps
and related equipment. The Flow Control Division designs, manufactures and
distributes automated and manual quarter-turn valves, control valves and valve
actuators, and related components. The Flow Solutions Division designs,
manufactures and distributes mechanical seals and sealing systems and provides
service and repair for flow control equipment used in process industries. The
Company also has a corporate headquarters that does not constitute a separate
division or business segment. Amounts classified as All Other include Corporate
Headquarters costs, other minor entities that are not considered separate
segments and businesses subsequently divested. See Note 4: Acquisitions and
Dispositions.

F-22

186
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company evaluates segment performance and allocates resources based on
profit or loss excluding merger transaction, integration, restructuring and
interest expense, other income and income taxes. The accounting policies of the
reportable segments are the same as described in Note 1: Significant Accounting
Policies. Intersegment sales and transfers are recorded at cost plus a profit
margin. This intersegment profit is eliminated in consolidation.

YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------------------
ROTATING      FLOW       FLOW                  CONSOLIDATED
EQUIPMENT   CONTROL    SOLUTIONS   ALL OTHER      TOTAL
---------   --------   ---------   ---------   ------------

Sales to external customers............  $347,159    $283,670   $423,658    $  6,785     $1,061,272
Intersegment sales.....................     6,011      11,650     14,841     (32,502)            --
Segment operating income(1)............    19,927      23,536     55,882     (37,530)        61,815
Segment operating income (before all
special items).......................    23,095      25,069     56,148     (31,631)        72,681
Depreciation and amortization..........    10,246       9,824     12,998       6,531         39,599
Identifiable assets....................  $222,999    $213,322   $292,015    $109,815     $  838,151
Capital expenditures...................    12,377       4,583     17,068       6,507         40,535

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

(1) Excludes merger transaction, integration, restructuring, interest expense,
other income and income taxes.

YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------------
ROTATING      FLOW       FLOW                  CONSOLIDATED
EQUIPMENT   CONTROL    SOLUTIONS   ALL OTHER      TOTAL
---------   --------   ---------   ---------   ------------

Sales to external customers............  $365,806    $298,918   $412,076    $  6,286     $1,083,086
Intersegment sales.....................     5,663      14,253     16,436     (36,352)            --
Segment operating income(1)............    39,078      43,826     65,113     (24,612)       123,405
Depreciation and amortization..........    11,535      11,290     13,186       3,288         39,299
Identifiable assets....................  $285,618    $233,120   $266,485    $ 84,974     $  870,197
Capital expenditures...................    13,416       9,284     15,049         500         38,249

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

(1) Excludes merger transaction, integration, restructuring, interest expense,
other income and income taxes.

YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------------
ROTATING      FLOW       FLOW                  CONSOLIDATED
EQUIPMENT   CONTROL    SOLUTIONS   ALL OTHER      TOTAL
---------   --------   ---------   ---------   ------------

Sales to external customers............  $403,801    $305,150   $415,321    $ 27,924     $1,152,196
Intersegment sales.....................     9,000      12,001     14,780     (35,781)            --
Segment operating income(1)............    50,969      46,981     62,728     (24,584)       136,094
Depreciation and amortization..........     9,767       9,160     13,286       6,720         38,933
Identifiable assets....................  $301,176    $219,074   $257,531    $102,244     $  880,025
Capital expenditures...................    14,623       8,140     11,733       5,064         39,560

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

(1) Excludes merger transaction, integration, restructuring, interest expense,
other income and income taxes.

F-23

187
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RECONCILIATION OF SEGMENT INFORMATION TO CONSOLIDATED AMOUNTS

Significant items from the Company's reportable segments can be reconciled
to the consolidated amounts as follows:

YEAR ENDED DECEMBER 31,
------------------------------------
1999         1998         1997
----------   ----------   ----------

SALES
Total sales for reportable segments..............  $1,054,487   $1,076,800   $1,124,272
Total intersegment sales for reportable
segments.......................................      32,502       36,352       35,781
Other sales......................................       6,785        6,286       27,924
Elimination of intersegment sales................     (32,502)     (36,352)     (35,781)
----------   ----------   ----------
Total sales......................................  $1,061,272   $1,083,086   $1,152,196
==========   ==========   ==========

YEAR ENDED DECEMBER 31,
------------------------------------
1999         1998         1997
----------   ----------   ----------

PROFIT OR LOSS
Total segment operating income...................  $   99,345   $  148,017   $  160,678
Corporate expenses and other.....................      37,530       24,612       24,584
Restructuring and merger transaction expense.....      15,860           --       44,531
Merger integration expense.......................      14,207       38,326        6,982
Interest expense.................................      15,504       13,175       13,275
Other income.....................................      (2,001)      (1,253)      (7,107)
Gain on sale of subsidiary.......................          --           --      (11,376)
----------   ----------   ----------
Earnings before income taxes.....................  $   18,245   $   73,157   $   89,789
==========   ==========   ==========

YEAR ENDED DECEMBER 31,
------------------------------------
1999         1998         1997
----------   ----------   ----------

ASSETS
Total assets for reportable segments.............  $  728,336   $  785,223   $  777,781
Other assets.....................................     141,911      106,552      125,826
Elimination of intercompany receivables..........     (32,096)     (21,578)     (23,582)
----------   ----------   ----------
Total assets.....................................  $  838,151   $  870,197   $  880,025
==========   ==========   ==========

F-24

188
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GEOGRAPHIC INFORMATION

The Company attributes revenues to different geographic areas based on the
facilities location. Long-lived assets are classified based on the geographic
area in which the assets are located. Sales related to and investment in
identifiable assets by geographic area are as follows:

YEAR ENDED
DECEMBER 31, 1999
-----------------------
LONG-LIVED
SALES        ASSETS
----------   ----------

United States.........................................  $  611,374    $243,107
Europe................................................     270,850      81,616
Other(1)..............................................     179,048      28,559
----------    --------
Consolidated total....................................  $1,061,272    $353,282
==========    ========

YEAR ENDED
DECEMBER 31, 1998
-----------------------
LONG-LIVED
SALES        ASSETS
----------   ----------

United States.........................................  $  629,117    $250,999
Europe................................................     279,117      81,058
Other(1)..............................................     174,852      28,751
----------    --------
Consolidated total....................................  $1,083,086    $360,808
==========    ========

YEAR ENDED
DECEMBER 31, 1997
-----------------------
LONG-LIVED
SALES        ASSETS
----------   ----------

United States.........................................  $  691,337    $228,056
Europe................................................     261,289      78,400
Other(1)..............................................     199,570      32,991
----------    --------
Consolidated total....................................  $1,152,196    $339,447
==========    ========

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

(1) Includes Canada, Latin America and Asia/Pacific. No individual geographic
segment within this group represents 10% or more of consolidated totals.

MAJOR CUSTOMER INFORMATION

The Company has not received revenues from any customer that represent 10%
or more of consolidated revenues for any of the years presented.

F-25

189
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 14: UNAUDITED QUARTERLY FINANCIAL DATA

1999(A)                             1998 (B)
---------------------------------    ---------------------------------
QUARTER                    4TH      3RD      2ND      1ST       4TH      3RD      2ND      1ST
-------                   ------   ------   ------   ------    ------   ------   ------   ------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)

Net sales...............  $262.7   $254.0   $275.2   $269.4    $279.3   $264.8   $280.7   $258.3
Gross profit............    84.3     88.3     93.9     96.8     108.5     99.6    106.0    101.2
Net earnings before
special items.........     8.6      6.8     11.4     12.7      19.0     17.6     20.2     18.1
Net earnings............   (11.6)     4.9      8.5     10.4       7.2     16.1     12.5     13.1
Earnings per share
before special items
(basic and diluted)...  $ 0.23   $ 0.18   $ 0.30   $ 0.34    $ 0.50   $ 0.44   $ 0.50   $ 0.44
Earnings per share
(basic and diluted)...   (0.31)    0.13     0.22     0.28      0.20     0.40     0.31     0.32

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

(a) Net earnings in 1999 include merger expenses of $14.2 million, restructuring
expenses of $15.9 million, other nonrecurring items for inventory and fixed
asset impairment of $5.1 million (included in costs of goods sold), and
executive separation contracts and certain costs related to fourth-quarter
1999 facility closures of $5.8 million (included in selling and
administrative expense), resulting in a reduction in net earnings of $27.3
million, or $0.72 per share after tax.

(b) Net earnings in 1998 included merger expenses of $38.3 million, an
obligation under an executive employment agreement of $3.8 million (included
in selling and administrative expense) and the benefit of the cumulative
effect of an accounting change of $1.2 million, resulting in a reduction in
net earnings of $26.1 million, or $0.65 per share after tax.

NOTE 15: SUBSEQUENT EVENTS

On November 18, 1999, the Company announced that it had signed a definitive
agreement to acquire all outstanding stock of Innovative Valve Technologies,
Inc. (Invatec) for $1.62 per share, or about $15.7 million. In addition, the
Company would assume Invatec's projected debt and related obligations of about
$84.0 million, plus certain transaction-related expenses. Invatec, headquartered
in Houston, Texas, had unaudited 1999 net revenues of $161.0 million and is
principally engaged in providing comprehensive maintenance, repair, replacement
and value-added distribution services for valves, piping systems,
instrumentation and other process-system components for industrial customers. On
January 6, 2000, the Company's offer to purchase all outstanding shares of
common stock expired with approximately 92.3% of the total outstanding shares
tendered. The Company then implemented a statutory merger of Invatec and
acquired all of the remaining outstanding shares.

On February 9, 2000, the Company announced that it had signed a definitive
agreement to acquire Ingersoll-Dresser Pumps (IDP) for $775 million in cash. The
Acquisition closed August 8, 2000. IDP is a wholly owned business unit of
Ingersoll-Rand Company and recorded 1999 sales of $838.0 million and operating
income of $62.4 million after special items. The transaction was accounted for
as a purchase and was financed with a combination of bank financing and senior
subordinated notes. Flowserve received $1,425 million of financing in connection
with the acquisition and repaid its existing indebtedness at the date of the
acquisition. In connection with the acquisition, the Company announced that it
would be closing certain operating facilities and reducing its workforce.

F-26

190
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 16: GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS

In connection with the IDP acquisition and as part of the related
financing, the Company and a newly formed Dutch subsidiary, Flowserve Finance
B.V., issued an aggregate of $375 million of dollar-denominated senior
subordinated notes (the dollar Notes) and euro-denominated senior subordinated
notes (the euro Notes, and together with the dollar Notes, the Notes) in private
placements pursuant to Rule 144A and Regulation S. The dollar Notes and the euro
Notes are expected to be general unsecured obligations of the Company and
Flowserve Finance B.V., respectively, subordinated in right of payment to all
existing and future senior indebtedness of the Company and Flowserve Finance
B.V., respectively, and guaranteed on a full, unconditional, joint and several
basis by the Company's wholly owned domestic subsidiaries and, in the case of
the euro Notes, by the Company.

The following condensed consolidating financial information presents:

(1) Condensed consolidating balance sheets as of December 31, 1999 and
1998 and the related statements of income and cash flows for each of the
three years in the period ended December 31, 1999, of (a) Flowserve
Corporation, the parent; (b) the guarantor subsidiaries; (c) the
nonguarantor subsidiaries; and the Company on a consolidated basis, and

(2) Elimination entries necessary to consolidate Flowserve
Corporation, the parent, with guarantor and nonguarantor subsidiaries.

Investments in subsidiaries are accounted for by the parent using the
equity method of accounting. The guarantor and nonguarantor subsidiaries are
presented on a combined basis. The principal elimination entries eliminate
investments in subsidiaries and intercompany balances and transactions. Separate
financial statements for the guarantor subsidiaries and the nonguarantor
subsidiaries are not presented because management believes that such financial
statements would not be meaningful to investors.

F-27

191
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FLOWSERVE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
--------   ------------   ------------   ------------   ------------

Sales..............................  $140,710     $519,035       $472,563       $(71,036)     $1,061,272
Cost of sales......................    72,042      380,302        316,620        (71,036)        697,928
--------     --------       --------       --------      ----------
Gross Profit.......................    68,668      138,733        155,943             --         363,344
Selling and administrative
expense.......................    61,195      121,417         93,272             --         275,884
Research, engineering and
development expense...........     5,265       16,546          3,834             --          25,645
Merger transaction and
restructuring expense.........        --       13,674          2,186             --          15,860
Merger integration expense.......        --       13,514            693             --          14,207
--------     --------       --------       --------      ----------
Operating income...................     2,208      (26,418)        55,958             --          31,748
Interest expense.................     2,064       16,845          2,580         (5,985)         15,504
Other (income) expense, net......    (1,935)     (15,490)         9,439          5,985          (2,001)
Equity in earnings of
subsidiaries..................   (10,915)          --             --         10,915              --
--------     --------       --------       --------      ----------
Earnings (loss) before income
taxes............................    12,994      (27,773)        43,939        (10,915)         18,245
Provision (benefit) for income
taxes............................       817       (8,027)        13,278             --           6,068
--------     --------       --------       --------      ----------
Net earnings.............  $ 12,177     $(19,746)      $ 30,661       $(10,915)     $   12,177
========     ========       ========       ========      ==========

F-28

192
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FLOWSERVE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
--------   ------------   ------------   ------------   ------------

Sales..............................  $153,292     $582,691       $441,701       $(94,598)     $1,083,086
Cost of sales......................   104,383      374,684        283,284        (94,598)        667,753
--------     --------       --------       --------      ----------
Gross Profit.......................    48,909      208,007        158,417             --         415,333
Selling and administrative
expense.......................    41,076      135,887         88,593             --         265,556
Research, engineering and
development expense...........     5,361       16,618          4,393             --          26,372
Merger integration expense.......     5,976       24,325          8,025             --          38,326
--------     --------       --------       --------      ----------
Operating income (loss)............    (3,504)      31,177         57,406             --          85,079
Interest expense.................     4,513        6,974          3,244         (1,556)         13,175
Other (income) expense, net......    (5,738)      (6,166)         9,095          1,556          (1,253)
Equity in earnings of
subsidiaries..................   (49,287)          --             --         49,287
--------     --------       --------       --------      ----------
Earnings before income taxes.......    47,008       30,369         45,067        (49,287)         73,157
Provision (benefit) for income
taxes............................      (647)       9,663         16,486             --          25,502
--------     --------       --------       --------      ----------
Earnings before cumulative effect
of change in accounting
principle........................    47,655       20,706         28,581        (49,287)         47,655
Cumulative effect of change in
accounting principle.............    (1,220)          --             --             --          (1,220)
--------     --------       --------       --------      ----------
Net earnings.............  $ 48,875     $ 20,706       $ 28,581       $(49,287)     $   48,875
========     ========       ========       ========      ==========

F-29

193
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FLOWSERVE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
--------   ------------   ------------   ------------   ------------

Sales..............................  $188,673     $604,141       $452,504       $(93,122)     $1,152,196
Cost of sales......................   120,018      382,223        294,200        (93,122)        703,319
--------     --------       --------       --------      ----------
Gross Profit.......................    68,655      221,918        158,304             --         448,877
Selling and administrative
expense.......................    60,415      125,674         99,801             --         285,890
Research, engineering and
development expense...........     4,978       14,363          7,552             --          26,893
Merger transaction and
restructuring expense.........    33,019          714         10,798             --          44,531
Merger integration expense.......        --           --          6,982             --           6,982
--------     --------       --------       --------      ----------
Operating income (loss)............   (29,757)      81,167         33,171             --          84,581
Interest expense.................     3,428        8,224          4,114         (2,491)         13,275
Other (income) expense, net......    (7,143)      (5,376)         2,921          2,491          (7,107)
Equity in earnings loss of
subsidiaries..................   (71,710)          --             --         71,710              --
Gain on sale of subsidiary.......        --           --        (11,376)                       (11,376)
--------     --------       --------       --------      ----------
Earnings before income taxes.......    45,668       78,319         37,512        (71,710)         89,789
Provision (benefit) for income
taxes............................    (5,898)      26,822         17,299                         38,223
--------     --------       --------       --------      ----------
Net earnings.............  $ 51,566     $ 51,497       $ 20,213       $(71,710)     $   51,566
========     ========       ========       ========      ==========

F-30

194
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FLOWSERVE CORPORATION
CONSOLIDATED BALANCE SHEETS
FOR THE YEAR ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
--------   ------------   ------------   ------------   ------------

Current assets:
Cash and cash equivalents................  $     --     $    889       $ 29,966     $      (392)     $ 30,463
Inter-company receivables................   194,594          930          7,640        (203,164)           --
Accounts receivable, net.................    16,702       94,639        102,284              --       213,625
Inventories..............................    17,811       76,580         73,965              --       168,356
Prepaids and other current assets........        --       34,639         11,733          (5,028)       41,344
--------     --------       --------     -----------      --------
Total current assets.............   229,107      207,677        225,588        (208,584)      453,788
Property, plant and equipment, net.........    33,223      118,356         58,397              --       209,976
Investment in subsidiaries.................   403,643      273,430             --        (677,073)           --
Inter-company receivables..................    60,432      209,138         20,674        (290,244)           --
Intangible assets, net.....................     2,744       39,045         54,646              --        96,435
Other assets...............................    40,954       35,175          1,823              --        77,952
--------     --------       --------     -----------      --------
Total assets.....................  $770,103     $882,821       $361,128     $(1,175,901)     $838,151
========     ========       ========     ===========      ========
Current liabilities:
Accounts payable.........................  $ 12,481     $ 31,659       $ 32,164     $    (4,201)     $ 72,103
Inter-company payables...................   159,578       21,494         22,092        (203,164)           --
Notes payable............................       734           --             --              --           734
Income taxes.............................     3,592           --          5,505          (1,219)        7,878
Accrued liabilities......................    11,813       64,963         35,044              --       111,820
Long-term debt due within one year.......       870          387          1,868              --         3,125
--------     --------       --------     -----------      --------
Total current liabilities........   189,068      118,503         96,673        (208,584)      195,660
Long-term debt due after one year..........     4,610      190,000          3,400              --       198,010
Total Inter-company loans payable..........   233,473       16,479         40,292        (290,244)           --
Post-retirement benefits and deferred
items....................................    34,678       86,640         14,889              --       136,207

Shareholder's Equity:
Serial preferred stock, $1.00 par
value.................................        --           --             --              --            --
Common shares, $1.25 par value...........    51,856            1         71,933         (71,934)       51,856
Capital in excess of par value...........    67,963      168,495         91,238        (259,733)       67,963
Retained earnings........................   344,254      357,605         46,468        (404,073)      344,254
--------     --------       --------     -----------      --------
464,073      526,101        209,639        (735,740)      464,073
Treasury stock at cost.....................   (93,448)        (612)         1,837          (1,225)      (93,448)
Accumulated other comprehensive income.....   (62,351)     (54,290)        (5,602)         59,892       (62,351)
--------     --------       --------     -----------      --------
Total shareholders' equity.......   308,274      471,199        205,874        (677,073)      308,274
--------     --------       --------     -----------      --------
Total liabilities and shareholders'
equity...................................  $770,103     $882,821       $361,128     $(1,175,901)     $838,151
========     ========       ========     ===========      ========

F-31

195
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FLOWSERVE CORPORATION
CONSOLIDATED BALANCE SHEETS
FOR THE YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
--------   ------------   ------------   ------------   ------------

Current assets:
Cash and cash equivalents.................  $     --     $     --       $ 31,062      $  (6,134)      $ 24,928
Inter-company receivables.................     8,101       57,828         45,213       (111,142)            --
Accounts receivable, net..................    14,543      109,098        110,550             --        234,191
Inventories...............................    31,087       94,627         73,572             --        199,286
Prepaids and other current assets.........    26,298       16,060          6,986        (20,459)        28,885
--------     --------       --------      ---------       --------
Total current assets..............    80,029      277,613        267,383       (137,735)       487,290
--------     --------       --------      ---------       --------
Property, plant and equipment, net..........    29,377      122,073         57,582             --        209,032
Investments in subsidiaries.................   354,144      110,185             --       (464,329)            --
Inter-company receivables...................   170,268           --         34,628       (204,896)            --
Intangible assets, net......................     5,621       35,219         59,035             --         99,875
Other assets................................    56,759       12,360          4,881             --         74,000
--------     --------       --------      ---------       --------
Total assets......................  $696,198     $557,450       $423,509      $(806,960)      $870,197
========     ========       ========      =========       ========
Current liabilities:
Accounts payable..........................  $  7,062     $ 44,782       $ 31,035      $  (6,134)      $ 76,745
Inter-company payables....................    53,029           --         58,113       (111,142)            --
Notes payable.............................     3,488           --             --             --          3,488
Income taxes..............................        --       27,264         10,667        (20,459)        17,472
Accrued liabilities.......................    30,446       40,503         36,079             --        107,028
Long-term debt due within one year........    (2,522)       8,790          8,125             --         14,393
--------     --------       --------      ---------       --------
Total current liabilities.........    91,503      121,339        144,019       (137,735)       219,126
--------     --------       --------      ---------       --------
Long-term debt due after one year...........   130,855       51,603          3,834             --        186,292
Total Inter-company loans payable...........    52,610       63,405         88,881       (204,896)            --
Post-retirement benefits and deferred
items.....................................    76,466       27,440         16,109             --        120,015
Shareholder's Equity:
Serial preferred stock, $1.00 par value...        --           --             --             --             --
Common shares, $1.25 par value............    51,856            1         32,680        (32,681)        51,856
Capital in excess of par value............    70,698       10,148        130,779       (140,927)        70,698
Retained earnings.........................   353,249      293,013         22,628       (315,641)       353,249
--------     --------       --------      ---------       --------
475,803      303,162        186,087       (489,249)       475,803
Treasury stock at cost......................   (90,404)         613           (125)          (488)       (90,404)
Accumulated other comprehensive income......   (40,635)     (10,112)       (15,296)        25,408        (40,635)
--------     --------       --------      ---------       --------
Total shareholders' equity........   344,764      293,663        170,666       (464,329)       344,764
--------     --------       --------      ---------       --------
Total liabilities and shareholders'
equity....................................  $696,198     $557,450       $423,509      $(806,960)      $870,197
========     ========       ========      =========       ========

F-32

196
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FLOWSERVE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT     SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
---------   ------------   ------------   ------------   ------------

Cash Flows -- Operating Activities:
Net earnings.................................  $  12,177    $ (19,746)      $ 30,661      $ (10,915)      $ 12,177
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation...............................      2,771       18,003         14,271             --         35,045
Amortization...............................        450        1,484          2,620             --          4,554
Loss on sale of fixed assets...............        232          294            (86)            --            440
Change in operating assets and liabilities,
net of effects of acquisitions and
dispositions:
Accounts receivable...................     (2,159)      14,459            423             --         12,723
Inventories...........................     13,276       18,047         (2,964)            --         28,359
Intercompany receivable and
payables............................    161,256     (340,917)       (80,885)       260,546             --
Loss on impairment of facilities and
equipment...........................      2,834           --             --             --          2,834
Prepaid expenses......................    (15,236)       6,359         (4,033)            --        (12,910)
Other assets..........................     18,232      (28,125)        10,329             --            436
Accounts payable......................      1,610      (13,123)         3,852          5,742         (1,919)
Accrued liabilities...................    (18,633)      24,460            506             --          6,333
Income taxes..........................     24,051      (28,483)        (7,963)            --        (12,395)
Post-retirement benefits and deferred
items...............................    (29,941)      47,176         (9,163)            --          8,072
Net deferred taxes....................     13,037      (11,695)        (3,159)            --         (1,817)
---------    ---------       --------      ---------       --------
Net cash provided by (used in)
operating activities................    183,957     (311,807)       (45,591)       255,373         81,932
---------    ---------       --------      ---------       --------
Cash Flows -- Investing Activities:
Capital expenditures, net of disposals.......     (3,940)     (14,580)       (22,015)            --        (40,535)
Payments for acquisitions, net of cash
acquired...................................     (5,743)          --             --             --         (5,743)
---------    ---------       --------      ---------       --------
Net cash flows used in investing
activities..........................     (9,683)     (14,580)       (22,015)            --        (46,278)
---------    ---------       --------      ---------       --------
Cash Flows -- Financing Activities:
Net repayments under lines of credit.........        638       (8,403)        (5,880)            --        (13,645)
Payments on long-term debt...................     (8,333)          --          1,963             --         (6,370)
Proceeds from long-term debt.................   (117,912)     138,397         (1,709)            --         18,776
Repurchase of common stock...................     (5,250)          --             --             --         (5,250)
Proceeds from issuance of common stock.......       (529)          --             --             --           (529)
Dividends paid...............................    (21,172)          --             --             --        (21,172)
Other........................................         --      241,460          7,329       (249,631)          (842)
---------    ---------       --------      ---------       --------
Net cash flows used in financing activities....   (152,558)     371,454          1,703       (249,631)       (29,032)
---------    ---------       --------      ---------       --------
Effect of exchange rate changes................    (21,716)     (44,178)        64,807             --         (1,087)
---------    ---------       --------      ---------       --------
Net change in cash and cash equivalents........         --          889         (1,096)         5,742          5,535
Cash and cash equivalents at beginning of
year.........................................         --           --         31,062         (6,134)        24,928
---------    ---------       --------      ---------       --------
Cash and cash equivalents at end of year.......  $      --    $     889       $ 29,966      $    (392)      $ 30,463
=========    =========       ========      =========       ========

F-33

197
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FLOWSERVE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
--------   ------------   ------------   ------------   ------------

Cash Flows -- Operating Activities:
Net earnings..................................  $ 48,875     $ 20,706       $ 28,581       $(49,287)      $ 48,875
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation...............................     3,213       16,647         15,250             --         35,110
Amortization...............................    (1,153)       1,842          3,500             --          4,189
Gain on sale of subsidiary, net of income
taxes....................................        --           --             --             --             --
Loss on sale of fixed assets...............        --          (71)           128             --             57
Cumulative effect of change in accounting
principle................................    (1,220)          --             --             --         (1,220)
Change in operating assets and liabilities,
net of effects of acquisitions and
dispositions:
Accounts receivable......................     7,530       (8,755)         4,240             --          3,015
Inventories..............................      (769)     (10,458)          (280)            --        (11,507)
Intercompany receivable and payables.....   (48,682)      20,804        (54,576)        82,454             --
Prepaid expenses.........................     3,233        1,377          4,108             --          8,718
Other assets.............................    10,296       13,817        (35,179)            --        (11,066)
Accounts payable.........................       315       16,780         (5,308)        (6,133)         5,654
Accrued liabilities......................   (20,102)     (10,349)         4,603             --        (25,848)
Income taxes.............................    (1,820)      16,160        (13,289)            --          1,051
Post-retirement benefits and deferred
items.................................    23,063       (5,080)       (21,692)            --         (3,709)
Net deferred taxes.......................   (12,353)       4,157          9,229             --          1,033
Other....................................        --           --           (248)            --           (248)
--------     --------       --------       --------       --------
Net cash provided by (used in)
operating activities................    10,426       77,577        (60,933)        27,034         54,104
--------     --------       --------       --------       --------
Cash Flows -- Investing Activities:
Capital expenditures, net of disposals........    15,871      (16,804)       (37,316)            --        (38,249)
Payments for acquisitions, net of cash
acquired...................................   (19,951)          --             --             --        (19,951)
Other.........................................        --           --           (427)            --           (427)
--------     --------       --------       --------       --------
Net cash flows used in investing
activities..........................    (4,080)     (16,804)       (37,743)            --        (58,627)
--------     --------       --------       --------       --------
Cash Flows -- Financing Activities:
Net repayments under lines of credit..........    (4,678)         410          1,954             --         (2,314)
Payments on long-term debt....................        --           --        (20,212)            --        (20,212)
Proceeds from long-term debt..................    73,153      (14,600)        18,397             --         76,950
Repurchase of common stock....................   (64,508)          --             --             --        (64,508)
Proceeds from issuance of common stock........     4,764           --             --             --          4,764
Dividends paid................................   (22,307)          --             --             --        (22,307)
Other.........................................    (6,492)     (44,968)        84,628        (33,168)            --
--------     --------       --------       --------       --------
Net cash flows provided by (used in) financing
activities....................................   (20,068)     (59,158)        84,767        (33,168)       (27,627)
--------     --------       --------       --------       --------
Effect of exchange rate changes.................    (9,621)      (7,328)        15,425             --         (1,524)
--------     --------       --------       --------       --------
Net change in cash and cash equivalents.........   (23,343)      (5,713)         1,516         (6,134)       (33,674)
Cash and cash equivalents at beginning of
year..........................................    23,343        5,713         29,546             --         58,602
--------     --------       --------       --------       --------
Cash and cash equivalents at end of year........  $     --     $     --       $ 31,062       $ (6,134)      $ 24,928
========     ========       ========       ========       ========

F-34

198
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FLOWSERVE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
--------   ------------   ------------   ------------   ------------

Cash Flows -- Operating Activities:
Net earnings..................................  $ 51,566     $ 51,497       $ 20,213       $(71,710)      $ 51,566
Adjustments to reconcile net earnings to cash
provided by operating activities:..........                                                                  --
Depreciation...............................     5,098        7,775         22,404             --         35,277
Amortization...............................        --          777          2,879             --          3,656
Gain on sale of subsidiary, net of income
taxes....................................    (7,417)          --             --             --         (7,417)
Loss on sale of fixed assets...............        33           --             --             --             33
Change in operating assets and liabilities,
net of effects of acquisitions and
dispositions:
Accounts receivable...................     3,464      (22,322)           457             --        (18,401)
Inventories...........................    (3,966)      (4,982)          (995)            --         (9,943)
Intercompany receivable and
payables............................   (46,930)      61,126         (8,609)        (5,587)            --
Prepaid expenses......................   (20,003)      (2,933)        12,649             --        (10,287)
Other assets..........................    (1,486)       9,213        (20,959)            --        (13,232)
Accounts payable......................        71        1,473             30             --          1,574
Accrued liabilities...................    41,880      (21,328)        28,254             --         48,806
Income taxes..........................    (1,605)       9,428         (9,828)            --         (2,005)
Post-retirement benefits and deferred
items...............................    19,776       (7,037)           456             --         13,195
Net deferred taxes....................       195       (9,297)         7,625             --         (1,477)
Other.................................    (1,342)          --             --             --         (1,342)
--------     --------       --------       --------       --------
Net cash provided by (used in) operating
activities............................    39,334       73,390         54,576        (77,297)        90,003
--------     --------       --------       --------       --------
Cash Flows -- Investing Activities:
Capital expenditures, net of disposals........    (6,667)      (9,367)       (23,526)            --        (39,560)
Payments for acquisitions, net of cash
acquired...................................   (10,461)          --             --             --        (10,461)
Proceeds from sale of subsidiary..............    18,793           --             --             --         18,793
Other.........................................     1,777           --             --             --          1,777
--------     --------       --------       --------       --------
Net cash flows used in investing
activities............................     3,442       (9,367)       (23,526)            --        (29,451)
--------     --------       --------       --------       --------
Cash Flows -- Financing Activities:
Net repayments under lines of credit..........     2,027         (458)          (993)            --            576
Payments on long-term debt....................   (15,760)          --             --             --        (15,760)
Proceeds from long-term debt..................    26,956      (14,706)       (11,321)            --            929
Proceeds from issuance of common stock........     2,584           --             --             --          2,584
Dividends paid................................   (26,121)          --             --             --        (26,121)
Other.........................................     2,668      (42,181)       (37,784)        77,297             --
--------     --------       --------       --------       --------
Net cash flows used in financing activities.....    (7,646)     (57,345)       (50,098)        77,297        (37,792)
--------     --------       --------       --------       --------
Effect of exchange rate changes.................   (24,048)      (2,784)        23,741             --         (3,091)
--------     --------       --------       --------       --------
Net change in cash and cash equivalents.........    11,082        3,894          4,693             --         19,669
Cash and cash equivalents at beginning of
year..........................................    12,261        1,819         24,853             --         38,933
--------     --------       --------       --------       --------
Cash and cash equivalents at end of year........  $ 23,343     $  5,713       $ 29,546       $     --       $ 58,602
========     ========       ========       ========       ========

F-35

199

FLOWSERVE CORPORATION

CONSOLIDATED BALANCE SHEETS

JUNE 30,     DECEMBER 31,
2000           1999
-----------   ------------
(UNAUDITED)
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)

ASSETS

Current assets:
Cash and cash equivalents.................................   $ 14,495       $ 30,463
Accounts receivable, net..................................    246,331        213,625
Inventories...............................................    210,617        168,356
Prepaids and other current assets.........................     37,094         41,344
--------       --------
Total current assets..............................    508,537        453,788
Property, plant and equipment, net..........................    221,336        209,976
Intangible assets, net......................................    151,352         96,435
Other assets................................................     80,851         77,952
--------       --------
Total assets......................................   $962,076       $838,151
========       ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable..........................................   $ 76,802       $ 72,103
Notes payable.............................................        531            734
Income taxes..............................................      8,904          7,878
Accrued liabilities.......................................     96,957        111,820
Long-term debt due within one year........................         44          3,125
--------       --------
Total current liabilities.........................    183,238        195,660
Long-term debt due after one year...........................    315,348        198,010
Postretirement benefits and deferred items..................    146,963        136,207
Commitments and contingencies
Shareholders' equity:
Serial preferred stock, $1.00 par value
Shares authorized -- 1,000.............................         --             --
Shares issued and outstanding -- None
Common stock, $1.25 par value
Shares authorized -- 120,000
Shares issued and outstanding -- 41,484................     51,856         51,856
Capital in excess of par value..............................     67,697         67,963
Retained earnings...........................................    368,754        344,254
--------       --------
488,307        464,073
Treasury stock at cost - 4,065 and 4,071 shares.............    (93,226)       (93,448)
Accumulated other comprehensive expense.....................    (78,554)       (62,351)
--------       --------
Total shareholders' equity........................    316,527        308,274
--------       --------
Total liabilities and shareholders' equity........   $962,076       $838,151
========       ========

See accompanying notes to consolidated financial statements.

F-36

200

FLOWSERVE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

SIX MONTHS ENDED
JUNE 30,
-----------------------
2000         1999
----------   ----------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)

Sales.......................................................   $584,462     $544,583
Cost of sales...............................................    382,070      353,903
--------     --------
Gross profit................................................    202,392      190,680
Selling and administrative expense........................    142,220      133,314
Research, engineering and development expense.............     12,353       13,199
Merger integration expense................................         --        7,838
--------     --------
Operating income............................................     47,819       36,329
Interest expense..........................................     13,576        7,203
Other (income) expense, net...............................     (3,161)         525
--------     --------
Earnings before income taxes................................     37,404       28,601
Provision for income taxes..................................     12,905        9,724
--------     --------
Net earnings................................................   $ 24,499     $ 18,877
========     ========
Earnings per share (basic and diluted)......................   $   0.65     $    .50
========     ========
Average shares outstanding..................................     37,810       37,771
========     ========

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

SIX MONTHS ENDED
JUNE 30,
----------------------
2000         1999
---------    ---------
(AMOUNTS IN THOUSANDS)

Net earnings................................................    $24,499      $18,877
Foreign currency translation adjustments..................     16,202        3,878
-------      -------
Comprehensive income........................................    $ 8,297      $14,999
=======      =======

See accompanying notes to consolidated financial statements.

F-37

201

FLOWSERVE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

SIX MONTHS ENDED
JUNE 30,
----------------------
2000         1999
---------    ---------
(AMOUNTS IN THOUSANDS)

CASH FLOWS -- OPERATING ACTIVITIES:
Net earnings..............................................  $ 24,499     $ 18,877
Adjustments to reconcile net earnings to net cash (used)
provided by operating activities:
Depreciation...........................................    16,474       19,187
Amortization...........................................     3,902        2,008
Net (Gain) Loss on the sale of fixed assets............      (148)          55
Change in assets and liabilities, net of effects of
acquisitions:
Accounts receivable..................................    (7,773)         757
Inventories..........................................   (19,651)      12,570
Prepaid expenses.....................................     9,191          925
Other assets.........................................    (6,935)      (1,148)
Accounts payable.....................................    (6,537)      (7,485)
Accrued liabilities..................................   (30,946)     (12,140)
Income taxes.........................................     5,071       (7,794)
Postretirement benefits and deferred items...........     6,773       (3,636)
Net deferred taxes...................................      (474)         (31)
--------     --------
Net cash flows (used) provided by operating activities......    (6,554)      22,145
CASH FLOWS -- INVESTING ACTIVITIES:
Capital expenditures, net of disposals....................   (12,434)     (20,201)
Payment for acquisitions, net of cash acquired............   (21,703)          --
--------     --------
Net cash flows used by investing activities.................   (34,137)     (20,201)
CASH FLOWS -- FINANCING ACTIVITIES:
Net (repayments) borrowings under short-term debt.........    (3,079)         729
Payments on long-term debt including revolving credit
facility...............................................   (96,405)      (9,256)
Proceeds from long-term debt including revolving credit
facility...............................................   125,134       11,890
Treasury share purchases..................................        --       (3,333)
Other stock activity......................................       239         (679)
Dividends paid............................................        --      (10,575)
--------     --------
Net cash flows provided (used) by financing activities......    25,889      (11,224)
Effect of exchange rate changes.............................    (1,166)        (952)
--------     --------
Net change in cash and cash equivalents.....................   (15,968)     (10,232)
Cash and cash equivalents at beginning of year..............    30,463       24,928
--------     --------
Cash and cash equivalents at end of period..................  $ 14,495     $ 14,696
========     ========
Taxes paid..................................................  $  8,205     $ 17,905
Interest paid...............................................  $ 12,107     $  8,276

See accompanying notes to consolidated financial statements.

F-38

202

FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

1. ACCOUNTING POLICIES -- BASIS OF PRESENTATION

The accompanying consolidated balance sheet as of June 30, 2000, and the
related consolidated statements of income and comprehensive income for the three
months and six months ended June 30, 2000 and 1999, and the statements of cash
flows for the six months ended June 30, 2000 and 1999, are unaudited. In
management's opinion, all adjustments comprising normal recurring adjustments
necessary for a fair presentation of such financial statements have been made.
The accompanying consolidated financial statements and notes in this Form 10-Q
are presented as permitted by Regulation S-X and do not contain certain
information included in the Company's annual financial statements and notes to
the financial statements. Accordingly, the accompanying consolidated financial
information should be read in conjunction with the Company's 1999 Annual Report.
Interim results are not necessarily indicative of results to be expected for a
full year.

2. INVENTORIES

Inventories are stated at lower of cost or market. Cost is determined for
certain inventories by the last-in, first-out (LIFO) method and for other
inventories by the first-in, first-out (FIFO) method.

Inventories and the method of determining costs were:

JUNE 30,   DECEMBER 31,
2000         1999
--------   ------------

Raw materials...............................................  $ 31,839     $ 29,674
Work in process and finished goods..........................   230,810      182,493
Less: Progress billings.....................................   (14,213)      (5,746)
--------     --------
248,436      206,421
LIFO reserve................................................   (37,819)     (38,065)
--------     --------
Net inventory...............................................  $210,617     $168,356
========     ========
Percent of inventory accounted for by LIFO..................        62%          64%
Percent of inventory accounted for by FIFO..................        38%          36%

3. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In 1999, the Financial Accounting Standards Board issued one Statement of
Financial Accounting Standard (SFAS) that was applicable to the Company -- SFAS
No. 137, "Deferral of the Effective Date of SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 is now effective
for fiscal years beginning after June 15, 2000. In June 2000, in conjunction
with this standard, the Board also issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities." SFAS No. 138 amends the
accounting and reporting standards of SFAS No. 133 for certain derivative
instruments and certain hedging activities which have caused implementation
difficulties. These standards are not expected to materially impact Flowserve's
reported financial position, results of operations or cash flows.

In addition, in December 1999, the Securities and Exchange Commission staff
issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial
Statements. This SAB does not change any of the existing rules on revenue
recognition. Rather, the SAB provides additional guidance for transactions not
addressed by existing rules. The Company is required to review its revenue
recognition policies by the fourth quarter of fiscal year 2000 to determine that
its recognition criteria is in compliance with the SAB interpretations. Any
change in accounting principle required in order to comply with the SAB may be
reported as a cumulative catch-up adjustment at that time. The Company is
currently

F-39

203
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

reviewing its revenue recognition policies and does not feel that any change in
accounting required would have a material impact Flowserve's reported financial
position, results of operations or cash flows.

4. RESTRUCTURING

In the fourth quarter of 1999, the Company initiated a restructuring
program that included a one-time charge of $15,860 recorded as restructuring
expense. The restructuring charge related to the planned closure of 10
facilities and a corresponding reduction in workforce at those locations, as
well as at other locations that are part of the restructuring.

The restructuring program is expected to result in a net reduction of
approximately 300 employees at a cost of $12,900. In addition, exit costs
associated with the facilities closings are estimated at $2,960. As of June 30,
2000, the program had resulted in a net reduction of 149 employees.

Expenditures charged to the 1999 restructuring reserve were:

OTHER EXIT
SEVERANCE     COSTS       TOTAL
---------   ----------   -------

Balance at December 24, 1999...........................   $12,900     $ 2,960     $15,860
Cash expenditures......................................      (102)         --        (102)
-------     -------     -------
Balance at December 31, 1999...........................    12,798       2,960      15,758
Cash expenditures......................................    (1,693)       (583)     (2,276)
-------     -------     -------
Balance at March 31, 2000..............................    11,105       2,377      13,482
Cash expenditures......................................    (1,311)     (1,013)     (2,324)
-------     -------     -------
Balance at June 30, 2000...............................   $ 9,794     $ 1,364     $11,158
=======     =======     =======

5. ACQUISITION

On January 13, 2000, the Company acquired Innovative Valve Technologies,
Inc. (Invatec), a company which is principally engaged in providing
comprehensive maintenance, repair, replacement and value-added distribution
services for valves, piping systems, instrumentation and other process-system
components for industrial customers.

The purchase involved acquiring all of the outstanding stock of Invatec and
assuming Invatec's existing debt and related obligations. The transaction was
accounted for under the purchase method of accounting and was financed by
utilizing funds from the Company's working capital. The results of operations
for Invatec are included in the Company's condensed consolidated financial
statements from the date of acquisition. The purchase price was approximately
$18.3 million in cash. Liabilities of $94.9 million were simultaneously paid off
through borrowings under Flowserve's revolving credit agreement.

The purchase price has been allocated to the net assets acquired based
primarily on information furnished by management of the acquired company.

The following unaudited pro forma information presents the consolidated
results of operations as if the acquisition occurred on January 1, 1999, after
giving effect to certain adjustments, including, goodwill amortization, interest
and related income tax effects. The pro forma information does not purport to
represent what the Company's results of operations actually would have been had
such transactions or events occurred on the dates specified, or to project the
Company's results of operations for any future period. Pro forma information has
not been presented for 2000 as results prior to the acquisition, (January 1,
2000 to January 12, 2000), are not material.

F-40

204
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999

HISTORICAL
------------------------
INNOVATIVE                   PRO FORMA
FLOWSERVE      VALVE        PRO FORMA     COMBINED
CORP.     TECHNOLOGIES   ADJUSTMENTS     COMPANY
---------   ------------   -----------    ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Net Sales......................................  $544,583      $87,103        $    --      $631,686
Cost of Sales..................................   353,903       60,902             --       414,805
--------      -------        -------      --------
Gross Profit...................................   190,680       26,201             --       216,881
Selling and administrative expense...........   133,314       22,062            (28)(a)   155,348
Research, engineering and development
expense...................................    13,199           --             --        13,199
Merger integration expense...................     7,838           --             --         7,838
--------      -------        -------      --------
Operating Income...............................    36,329        4,139             28        40,496
Interest expense.............................     7,203        6,197         (3,464)(b)     9,936
Loss on assets held for sale.................        --        3,810                        3,810
Other expense (income), net..................       525          (60)            --           465
--------      -------        -------      --------
Earnings before income taxes...................    28,601       (5,808)         3,492        26,285
Provision for income taxes.....................     9,724         (547)          (109)(c)     9,068
--------      -------        -------      --------
Net income (loss)..............................  $ 18,877      $(5,261)       $ 3,601      $ 17,217
========      =======        =======      ========
Earnings per share (basic and diluted).........  $   0.50      $    --        $    --      $   0.46
Weighted average shares outstanding (basic and
diluted).....................................    37,771        9,665             --        37,771

PRO FORMA ADJUSTMENTS

Selling and administrative expense:
(a) Represents incremental decrease in annual goodwill
amortization based on decrease of $4,279 in estimated
goodwill originating from the acquisition and the
reduction of the amortization period from 40 to 20
years.................................................      (28)
Interest expense:
(b) Represents reduction in consolidated interest expense
related to debt financing prior to the acquisition
date..................................................   (3,464)
Provision for income taxes:
(c) Represents income tax adjustment required to arrive at
a combined company pro forma effective tax rate of
34.5%.................................................     (109)

6. SEGMENT INFORMATION

The Company has three divisions, each of which constitutes a business
segment. Each division manufactures different products and is defined by the
type of products and services provided. Each division has a President, who
reports directly to the Chief Executive Officer, and a Division Controller. For
decision-making purposes, the Chief Executive Officer, Chief Financial Officer
and other members of upper management use financial information generated and
reported at the division level. The Company also has a corporate headquarters
that does not constitute a separate division or business segment.

F-41

205
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

Amounts classified as All Other include Corporate Headquarters costs and
other minor entities that are not considered separate segments. The Company
evaluates segment performance and allocates resources based on profit or loss
excluding merger integration, interest expense, other income or expense and
income taxes. Intersegment sales and transfers are recorded at cost plus a
profit margin. Minor reclassifications have been made to certain previously
reported information to conform to the current business configuration.

ROTATING      FLOW       FLOW                  CONSOLIDATED
SIX MONTHS ENDED JUNE 30, 2000           EQUIPMENT   CONTROL    SOLUTIONS   ALL OTHER      TOTAL
------------------------------           ---------   --------   ---------   ---------   ------------

Sales to external customers............  $152,854    $129,754   $298,732    $  3,122      $584,462
Intersegment sales.....................     2,891       5,448      9,700     (18,039)           --
Segment operating income...............    10,108      16,195     35,350     (13,834)       47,819
Identifiable assets....................  $238,745    $210,143   $428,899    $ 84,289      $962,076

ROTATING      FLOW       FLOW                  CONSOLIDATED
SIX MONTHS ENDED JUNE 30, 1999           EQUIPMENT   CONTROL    SOLUTIONS   ALL OTHER      TOTAL
------------------------------           ---------   --------   ---------   ---------   ------------

Sales to external customers............  $187,077    $143,694   $210,341    $  3,471      $544,583
Intersegment sales.....................     2,632       7,998      7,573     (18,203)           --
Segment operating income (before
special items).......................    11,548      15,094     27,945     (10,420)       44,167
Identifiable assets....................  $248,850    $212,684   $271,506    $111,968      $845,008

Reconciliation of the total segment operating income before special items
to consolidated earnings before income taxes follows:

SIX MONTHS ENDED
JUNE 30,
-----------------
2000      1999
-------   -------

Total segment operating income (before special items).......  $61,653   $54,587
Corporate expenses and other................................   13,834    10,420
Merger integration expense..................................       --     7,838
Interest expense............................................   13,576     7,203
Other (income) expense......................................   (3,161)      525
-------   -------
Earnings before income taxes................................  $37,404   $28,601
=======   =======

7. SUBSEQUENT EVENT

On November 18, 1999, the Company announced that it had signed a definitive
agreement to acquire all outstanding stock of Innovative Valve Technologies,
Inc. (Invatec) for $1.62 per share, or about $15.7 million. In addition, the
Company would assume Invatec's projected debt and related obligations of about
$84.0 million, plus certain transaction-related expenses. Invatec, headquartered
in Houston, Texas, had unaudited 1999 net revenues of $161.0 million and is
principally engaged in providing comprehensive maintenance, repair, replacement
and value-added distribution services for valves, piping systems,
instrumentation and other process-system components for industrial customers. On
January 6, 2000, the Company's offer to purchase all outstanding shares of
common stock expired with approximately 92.3% of the total outstanding shares
tendered. The Company then implemented a statutory merger of Invatec and
acquired all of the remaining outstanding shares.

F-42

206

FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

On February 9, 2000, the Company announced that it had signed a definitive
agreement to acquire Ingersoll-Dresser Pump Company (IDP) for $775 million in
cash. The Acquisition closed August 8, 2000. IDP is a wholly owned business unit
of Ingersoll-Rand Company and recorded 1999 sales of $838.0 million and
operating income of $62.4 million after special items. The transaction was
accounted for as a purchase and was financed with a combination of bank
financing and senior subordinated notes. Flowserve received $1,425 million of
financing in connection with the acquisition and repaid its existing
indebtedness at the date of the acquisition. In connection with the acquisition,
the Company announced that it would be closing certain operating facilities and
reducing its workforce.

8. GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS

In connection with the IDP acquisition and as part of the related
financing, the Company and a newly formed Dutch subsidiary, Flowserve Finance
B.V. issued an aggregate of $375 million of dollar-denominated senior
subordinated notes (the dollar notes) and euro-denominated senior subordinated
notes (the euro Notes, and together with the dollar Notes, the Notes) in private
placements pursuant to Rule 144A and Regulation S. The Notes contain
registration rights, as defined. The dollar Notes and the euro Notes are to be
general unsecured obligations of the Company and Flowserve Finance B.V.,
respectively. Subordinated in right of payment to all existing and future senior
indebtedness of the Company and Flowserve Finance B.V., respectively, and
guaranteed on a full, unconditional, join and several basis by the Company's
wholly owned domestic subsidiaries and, in the case of the euro Notes, by the
Company.

The following condensed consolidating financial information presents:

(1) Condensed consolidating balance sheets as of June 30, 2000 and
December 31, 1999 and the related statements of income and cash flows for
the six months ended June 30, 2000 and 1999, of (a) Flowserve Corporation,
the parent; (b) the guarantor subsidiaries; (c) the nonguarantor
subsidiaries; and the Company on a consolidated basis, and

(2) Elimination entries necessary to consolidate Flowserve
Corporation, the parent, with guarantor and nonguarantor subsidiaries.

Investments in subsidiaries are accounted for by the parent using the
equity method of accounting. The guarantor and nonguarantor subsidiaries are
presented on a combined basis. The principal elimination entries eliminate
investments in subsidiaries and intercompany balances and transactions. Separate
financial statements for the guarantor subsidiaries and the nonguarantor
subsidiaries are not presented because management believes that such financial
statements would not be meaningful.

F-43

207
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2000

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
--------   ------------   ------------   ------------   ------------
(AMOUNTS IN THOUSANDS)

Sales..............................  $ 83,031     $336,255       $207,945       $(42,769)      $584,462
Cost of sales......................    53,698      234,367        136,774        (42,769)       382,070
--------     --------       --------       --------       --------
Gross Profit.......................    29,333      101,888         71,171             --        202,392
Selling and administrative
expense.......................    23,918       74,485         43,817             --        142,220
Research, engineering and
development expense...........     3,099        7,423          1,831             --         12,353
--------     --------       --------       --------       --------
Operating income...................     2,316       19,980         25,523             --         47,819
Interest expense.................        96       13,224          1,326         (1,070)        13,576
Other income, net................    (3,584)      (5,153)         4,506          1,070         (3,161)
Equity in (earnings) loss of
subsidiaries..................   (20,181)          --             --         20,181             --
--------     --------       --------       --------       --------
Earnings before income taxes.......    25,985       11,909         19,691        (20,181)        37,404
Provision for income taxes.........     1,486        4,716          6,703             --         12,905
--------     --------       --------       --------       --------
Net earnings.......................  $ 24,499     $  7,193       $ 12,988       $(20,181)      $ 24,499
========     ========       ========       ========       ========

F-44

208
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT      SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
------------   ------------   ------------   ------------   ------------
(AMOUNTS IN THOUSANDS)

Sales............................    $ 74,020       $275,287       $236,641       $(41,365)      $544,583
Cost of sales....................      53,454        183,600        158,214        (41,365)       353,903
--------       --------       --------       --------       --------
Gross Profit.....................      20,566         91,687         78,427             --        190,680
Selling and administrative
expense.....................      30,415         54,956         47,943             --        133,314
Research, engineering and
development expense.........       2,443          8,865          1,891             --         13,199
Merger integration expense.....          --          6,767          1,071             --          7,838
--------       --------       --------       --------       --------
Operating income.................     (12,292)        21,099         27,522             --         36,329
Interest expense...............       1,079          5,309          1,420           (605)         7,203
Other income, net..............      (1,005)        (3,098)         4,023            605            525
Equity in (earnings) loss of
subsidiaries................     (26,003)            --             --         26,003             --
--------       --------       --------       --------       --------
Earnings before income taxes.....      13,637         18,888         22,079        (26,003)        28,601
Provision for income taxes.......      (5,240)         7,053          7,911             --          9,724
--------       --------       --------       --------       --------
Net earnings.....................    $ 18,877       $ 11,835       $ 14,168       $(26,003)      $ 18,877
========       ========       ========       ========       ========

F-45

209
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED BALANCE SHEETS
FOR THE PERIOD ENDED JUNE 30, 2000

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
--------   ------------   ------------   ------------   ------------
(AMOUNTS IN THOUSANDS)

Current assets:
Cash and cash equivalents..........  $     --    $       --    $     25,457   $   (10,962)     $ 14,495
Inter-company receivables..........        --        33,151          10,622       (43,773)           --
Accounts receivable, net...........    22,804       121,924         101,603            --       246,331
Inventories........................    13,921       125,905          70,791            --       210,617
Prepaids and other current
assets..........................    12,594        16,549           7,951            --        37,094
--------    ----------    ------------   -----------      --------
Total current assets.......    49,319       297,529         216,424       (54,735)      508,537
Property, plant and equipment, net...    35,682       130,804          54,850            --       221,336
Investment in subsidiaries...........   409,796       241,677              --      (651,473)           --
Inter-company receivables............   118,065       224,678          14,784      (357,527)           --
Intangible assets, net...............     7,994        88,347          55,011            --       151,352
Other assets.........................    30,615        47,947           2,289            --        80,851
--------    ----------    ------------   -----------      --------
Total assets...............  $651,471    $1,030,982    $    343,358   $(1,063,735)     $962,076
========    ==========    ============   ===========      ========
Current liabilities:
Accounts payable...................  $  4,831    $   49,727    $     33,207   $   (10,963)     $ 76,802
Inter-company payables.............    18,574         2,325          22,873       (43,772)           --
Notes payable......................        15           473              43            --           531
Income taxes.......................        19         4,842           4,043            --         8,904
Accrued Liabilities................    13,408        53,522          30,027            --        96,957
Long-term debt due within one
year............................        --            --              44            --            44
--------    ----------    ------------   -----------      --------
Total current
liabilities..............    36,847       110,889          90,237       (54,735)      183,238
Long-term debt due after one year....        90       313,009           2,249            --       315,348
Inter-company payables...............   250,625        21,645          85,256      (357,526)           --
Post-retirement benefits and deferred
items..............................    47,382        81,972          17,609            --       146,963
Shareholders' equity:
Serial preferred stock, $1.00 par
value...........................        --            --              --            --            --
Common shares, $1.25 par value.....    51,856             1          84,463       (84,464)       51,856
Capital in excess of par value.....    67,697       185,423          81,438      (266,861)       67,697
Retained earnings..................   368,754       361,918          52,158      (414,076)      368,754
--------    ----------    ------------   -----------      --------
488,307       547,342         218,059      (765,401)      488,307
Treasury stock at cost...............   (93,226)         (612)             --           612       (93,226)
Accumulated other comprehensive
income.............................   (78,554)      (43,263)        (70,052)      113,315       (78,554)
--------    ----------    ------------   -----------      --------
Total shareholders'
equity...................   316,527       503,467         148,007      (651,474)      316,527
Total liabilities and
shareholders' equity.....  $651,471    $1,030,982    $    343,358   $(1,063,735)     $962,076
========    ==========    ============   ===========      ========

F-46

210
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED BALANCE SHEETS
FOR THE YEAR ENDED DECEMBER 31, 1999

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
--------   ------------   ------------   ------------   ------------

Current assets:
Cash and cash equivalents......  $     --     $    889       $ 29,966     $      (392)     $ 30,463
Inter-company receivables......   194,594          930          7,640        (203,164)           --
Accounts receivable, net.......    16,702       94,639        102,284              --       213,625
Inventories....................    17,811       76,580         73,965              --       168,356
Prepaids and other current
assets......................        --       34,639         11,733          (5,028)       41,344
--------     --------       --------     -----------      --------
Total current assets...   229,107      207,677        225,588        (208,584)      453,788
Property, plant and equipment,
net............................    33,223      118,356         58,397              --       209,976
Investment in subsidiaries.......   403,643      273,430             --        (677,073)           --
Inter-company receivables........    60,432      209,138         20,674        (290,244)           --
Intangible assets, net...........     2,744       39,045         54,646              --        96,435
Other assets.....................    40,954       35,175          1,823              --        77,952
--------     --------       --------     -----------      --------
Total assets...........  $770,103     $882,821       $361,128     $(1,175,901)     $838,151
========     ========       ========     ===========      ========
Current liabilities:
Accounts payable...............  $ 12,481     $ 31,659       $ 32,164     $    (4,201)     $ 72,103
Inter-company payables.........   159,578       21,494         22,092        (203,164)           --
Notes payable..................       734           --             --              --           734
Income taxes...................     3,592           --          5,505          (1,219)        7,878
Accrued liabilities............    11,813       64,963         35,044              --       111,820
Long-term debt due within one
year........................       870          387          1,868              --         3,125
--------     --------       --------     -----------      --------
Total current
liabilities..........   189,068      118,503         96,673        (208,584)      195,660
Long-term debt due after one
year...........................     4,610      190,000          3,400              --       198,010
Total Inter-company loans
payable........................   233,473       16,479         40,292        (290,244)           --
Post-retirement benefits and
deferred items.................    34,678       86,640         14,889              --       136,207

Shareholder's Equity:
Serial preferred stock, $1.00
par value...................        --           --             --              --            --
Common shares, $1.25 par
value.......................    51,856            1         71,933         (71,934)       51,856
Capital in excess of par
value.......................    67,963      168,495         91,238        (259,733)       67,963
Retained earnings..............   344,254      357,605         46,468        (404,073)      344,254
--------     --------       --------     -----------      --------
464,073      526,101        209,639        (735,740)      464,073
Treasury stock at cost...........   (93,448)        (612)         1,837          (1,225)      (93,448)
Accumulated other comprehensive
income.........................   (62,351)     (54,290)        (5,602)         59,892       (62,351)
--------     --------       --------     -----------      --------
Total shareholders'
equity...............   308,274      471,199        205,874        (677,073)      308,274
--------     --------       --------     -----------      --------
Total liabilities and
shareholders' equity...........  $770,103     $882,821       $361,128     $(1,175,901)     $838,151
========     ========       ========     ===========      ========

F-47

211
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
--------   ------------   ------------   ------------   ------------
(AMOUNTS IN THOUSANDS)

CASH FLOWS -- OPERATING ACTIVITIES:
Net earnings...........................  $ 24,499     $  7,193       $ 12,988       $(20,181)      $ 24,499
Adjustments to reconcile net earnings to
cash provided by operating activities:
Depreciation...........................     3,193        8,669          4,612             --         16,474
Amortization...........................       220        2,536          1,146             --          3,902
Loss on sale of fixed assets...........        --            4           (152)            --           (148)
Change in operating assets and
liabilities, net of effects of
acquisitions and dispositions:
Accounts Receivable....................    (6,102)       2,656         (4,327)            --         (7,773)
Inventories............................     3,891      (22,846)          (696)            --        (19,651)
Intercompany receivable and payables...     6,956      (30,011)        48,655        (25,600)            --
Prepaid expenses.......................   (12,594)      22,974          3,839         (5,028)         9,191
Other assets...........................     5,309          133        (12,377)            --         (6,935)
Accounts payable.......................    (7,650)       5,084          2,790         (6,761)        (6,537)
Accrued liabilities....................     1,595      (28,844)        (3,697)            --        (30,946)
Income taxes...........................    (3,573)       4,643          2,782          1,219          5,071
Post-retirement benefits and deferred
items................................    12,705       (5,357)          (575)            --          6,773
Net deferred taxes.....................        --         (973)           499             --           (474)
--------     --------       --------       --------       --------
Net cash provided by operating
activities.............................    28,449      (34,139)        55,487        (56,351)        (6,554)
--------     --------       --------       --------       --------
CASH FLOWS -- INVESTING ACTIVITIES:
Capital expenditures, net of
disposals............................    (5,651)      (2,908)        (3,875)            --        (12,434)
Payments for acquisitions, net of cash
acquired.............................   (21,703)          --             --             --        (21,703)
--------     --------       --------       --------       --------
Net cash flows used in investing
activities.............................   (27,354)      (2,908)        (3,875)            --        (34,137)
--------     --------       --------       --------       --------
CASH FLOWS -- FINANCING ACTIVITIES:
Net repayments under lines of credit...    (1,589)          86         (1,576)            --         (3,079)
Payments on long-term debt.............    (4,520)     (88,716)        (3,169)            --        (96,405)
Proceeds from long-term debt...........        --      123,009          2,125             --        125,134
Proceeds from issuance of common
stock................................       239        2,370         (2,370)            --            239
Dividends paid.........................        --          286           (286)            --             --
Other..................................   (13,063)     (11,905)       (20,813)        45,781             --
--------     --------       --------       --------       --------
Net cash flows used by financing
activities.............................   (18,933)      25,130        (26,089)        45,781         25,889
--------     --------       --------       --------       --------
Effect of exchange rate changes..........    17,838       11,028        (30,032)            --         (1,166)
--------     --------       --------       --------       --------
Net change in cash and cash
equivalents............................        --         (889)        (4,509)       (10,570)       (15,968)
Cash and cash equivalents at beginning of
year...................................        --          889         29,966           (392)        30,463
--------     --------       --------       --------       --------
Cash and cash equivalents at end of
period.................................  $     --     $     --       $ 25,457       $(10,962)      $ 14,495
========     ========       ========       ========       ========

F-48

212
FLOWSERVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999

GUARANTOR     NONGUARANTOR                  CONSOLIDATED
PARENT      SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS      TOTAL
------------   ------------   ------------   ------------   ------------
(AMOUNTS IN THOUSANDS)

CASH FLOWS -- OPERATING
ACTIVITIES:
Net earnings.....................    $ 18,877       $ 11,835       $ 14,168       $(26,003)      $ 18,877
Adjustments to reconcile net
earnings to cash provided by
operating activities:
Depreciation...................       2,567          8,111          8,509             --         19,187
Amortization...................         215          1,393            400             --          2,008
Loss on sale of fixed assets...          --           (104)           159             --             55
Change in operating assets and
liabilities, net of effects of
acquisitions and dispositions:
Accounts Receivable............      (2,745)        15,320        (11,818)            --            757
Inventories....................       6,217          9,522         (3,169)            --         12,570
Intercompany receivable and
payables....................      25,588        (70,556)         3,590         41,378             --
Prepaid expenses...............      23,380           (385)        (1,611)       (20,459)           925
Other assets...................      20,006        (19,509)        (1,645)            --         (1,148)
Accounts payable...............        (857)        (7,785)          (888)         2,045         (7,485)
Accrued liabilities............     (11,740)         2,281         (2,681)            --        (12,140)
Income taxes...................         403        (26,973)        (1,683)        20,459         (7,794)
Post-retirement benefits and
deferred items..............     (42,989)        40,537         (1,184)            --         (3,636)
Net deferred taxes.............      (6,622)         6,197            394             --            (31)
--------       --------       --------       --------       --------
Net cash provided by operating
activities.....................      32,300        (30,116)         2,541         17,420         22,145
--------       --------       --------       --------       --------
CASH FLOWS -- INVESTING
ACTIVITIES:
Capital expenditures, net of
disposals...................      (4,101)       (10,547)        (5,553)            --        (20,201)
--------       --------       --------       --------       --------
Net cash flows used in investing
activities.....................      (4,101)       (10,547)        (5,553)            --        (20,201)
--------       --------       --------       --------       --------
CASH FLOWS -- FINANCING
ACTIVITIES:
Net repayments under lines of
credit......................         (64)         2,552         (1,759)            --            729
Payments on long-term debt.....      (9,256)            --             --             --         (9,256)
Proceeds from long-term debt...          --         15,922         (4,032)            --         11,890
Repurchase of common stock.....      (3,333)        (1,225)         1,225             --         (3,333)
Proceeds from issuance of
common stock................        (679)            --             --             --           (679)
Dividends paid.................     (10,575)            --             --             --        (10,575)
Other..........................        (301)        23,681         (8,005)       (15,375)            --
--------       --------       --------       --------       --------
Net cash flows used by financing
activities.....................     (24,208)        40,930        (12,571)       (15,375)       (11,224)
--------       --------       --------       --------       --------
Effect of exchange rate
changes........................      (3,876)          (267)         3,191             --           (952)
--------       --------       --------       --------       --------
Net change in cash and cash
equivalents....................         115             --        (12,392)         2,045        (10,232)
Cash and cash equivalents at
beginning of year..............          --             --         31,062         (6,134)        24,928
--------       --------       --------       --------       --------
Cash and cash equivalents at end
of period......................    $    115       $     --       $ 18,670       $ (4,089)      $ 14,696
========       ========       ========       ========       ========

F-49

213

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Innovative Valve Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of Innovative Valve
Technologies, Inc., (a Delaware corporation) and subsidiaries (collectively, the
"Company"), as of December 31, 1998 and 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statements
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Innovative Valve Technologies, Inc. and subsidiaries, as of December 31, 1998
and 1999, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Houston, Texas
March 3, 2000

F-50

214

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

DECEMBER 31
---------------------------
1998           1999
------------   ------------

CURRENT ASSETS:
Cash......................................................  $         --   $    951,060
Accounts receivable, net of allowance of $1,562,104 and
$2,178,511.............................................    29,524,687     28,921,174
Inventories, net..........................................    26,007,804     26,091,730
Prepaid expenses and other current assets.................     2,476,351      3,229,498
Deferred tax asset........................................     4,481,256      1,473,849
------------   ------------
Total current assets..............................    62,490,098     60,667,311
PROPERTY AND EQUIPMENT, net.................................    19,469,804     18,212,576
GOODWILL, net...............................................    96,175,294     52,497,739
PATENT COSTS, net...........................................       490,552        426,160
OTHER NONCURRENT ASSETS, net................................     5,074,090        454,640
------------   ------------
$183,699,838   $132,258,426
============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current maturities of long-term debt......................  $    580,140   $    633,754
Credit facility...........................................            --     76,304,741
Convertible subordinated debt.............................            --     11,668,875
Accounts payable and accrued expenses.....................    19,364,587     21,037,808
Makeup amount obligation..................................            --      5,616,105
------------   ------------
Total current liabilities.........................    19,944,727    115,261,283
CREDIT FACILITY.............................................    70,570,584             --
LONG-TERM DEBT, net of current maturities...................       400,834             --
CONVERTIBLE SUBORDINATED DEBT...............................    11,668,875             --
OTHER LONG-TERM LIABILITIES.................................     1,909,774        440,554
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value, 30,000,000 shares
authorized, 9,664,562 and 10,220,117 issued and
outstanding............................................         9,665         10,220
Additional paid-in capital................................    90,960,972     85,450,413
Retained deficit..........................................   (11,765,593)   (68,904,044)
------------   ------------
Total stockholders' equity........................    79,205,044     16,556,589
------------   ------------
$183,699,838   $132,258,426
============   ============

The accompanying notes are an integral part of these consolidated financial
statements.

F-51

215

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31
-----------------------------------------
1997           1998           1999
-----------   ------------   ------------

REVENUES............................................  $58,620,946   $154,616,945   $160,991,139
COST OF OPERATIONS..................................   40,987,435    107,568,111    115,956,154
-----------   ------------   ------------
Gross profit......................................   17,633,511     47,048,834     45,034,985
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........   15,638,815     40,479,744     40,367,906
SPECIAL COMPENSATION EXPENSE........................    7,613,386             --             --
NONRECURRING COSTS..................................           --      2,189,599             --
-----------   ------------   ------------
Income (loss) from operations.......................   (5,618,690)     4,379,491      4,667,079
OTHER INCOME (EXPENSE):
Interest income (expense), net....................   (2,901,039)    (5,621,182)   (12,724,071)
Loss on assets held for sale......................           --             --     (3,809,712)
Impairment of goodwill............................           --             --    (39,073,380)
Other.............................................       (2,957)       246,654        174,003
-----------   ------------   ------------
(2,903,996)    (5,374,528)   (55,433,160)
-----------   ------------   ------------
LOSS BEFORE INCOME TAX..............................   (8,522,686)      (995,037)   (50,766,081)
PROVISION (BENEFIT) FOR INCOME TAX..................   (1,022,722)       419,936      6,372,370
-----------   ------------   ------------
NET LOSS............................................  $(7,499,964)  $ (1,414,973)  $(57,138,451)
===========   ============   ============
NET LOSS BEFORE DIVIDENDS APPLICABLE TO PREFERRED
STOCK.............................................  $(7,499,964)  $ (1,414,973)  $(57,138,451)
PREFERRED STOCK DIVIDENDS...........................     (156,957)            --             --
-----------   ------------   ------------
NET LOSS APPLICABLE TO COMMON SHARES................  $(7,656,921)  $ (1,414,973)  $(57,138,451)
===========   ============   ============
Loss per share:
Basic and Diluted.................................  $     (2.25)  $      (0.16)  $      (5.90)
===========   ============   ============
Weighted average common shares outstanding -- Basic
and Diluted.......................................    3,397,980      9,024,915      9,691,959
===========   ============   ============

The accompanying notes are an integral part of these consolidated financial
statements.

F-52

216

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

COMMON STOCK       ADDITIONAL
--------------------     PAID-IN       RETAINED
SHARES     AMOUNT      CAPITAL       DEFICIT         TOTAL
----------   -------   -----------   ------------   ------------

BALANCE, December 31, 1996.......   1,481,919   $ 1,482   $ 1,298,471   $ (2,693,699)  $ (1,393,746)
SSI preferred stock
dividends...................          --        --            --       (156,957)      (156,957)
Issuance of SSI common stock...     222,650       223     2,604,782             --      2,605,005
Exercise of SSI common stock
warrant and options.........     714,769       715     4,554,141             --      4,554,856
Issuance of common stock to
certain executives..........     242,839       243     5,008,675             --      5,008,918
Public offering, net of
offering costs..............   3,852,500     3,853    44,018,053             --     44,021,906
Issuances of common stock in
acquisitions................     185,661       185     2,129,794             --      2,129,979
Redemption of SSI redeemable
preferred stock and payment
of indebtedness to Philip...   1,189,860     1,189    10,598,119             --     10,599,308
Net loss.......................          --        --            --     (7,499,964)    (7,499,964)
----------   -------   -----------   ------------   ------------
BALANCE, December 31, 1997.......   7,890,198     7,890    70,212,035    (10,350,620)    59,869,305
Issuances of common stock in
acquisitions................   1,749,052     1,749    20,483,297             --     20,485,046
Exercise of stock options......      25,312        26       265,640             --        265,666
Net loss.......................          --        --            --     (1,414,973)    (1,414,973)
----------   -------   -----------   ------------   ------------
BALANCE, December 31, 1998.......   9,664,562     9,665    90,960,972    (11,765,593)    79,205,044
Makeup amount obligation.......          --        --    (6,516,104)            --     (6,516,104)
Warrants issued to the
syndicate of lenders........          --        --       106,101             --        106,101
Issuances of stock in partial
payment of makeup
obligation..................     555,555       555       899,444             --        899,999
Net loss.......................          --        --            --    (57,138,451)   (57,138,451)
----------   -------   -----------   ------------   ------------
BALANCE, December 31, 1999.......  10,220,117   $10,220   $85,450,413   $(68,904,044)  $ 16,556,589
==========   =======   ===========   ============   ============

The accompanying notes are an integral part of these consolidated financial
statements.

F-53

217

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31
------------------------------------------
1997           1998           1999
------------   ------------   ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................   $ (7,499,964)  $ (1,414,973)  $(57,138,451)
Adjustments to reconcile net loss to net cash
used in operating activities --
Depreciation and amortization................      1,235,940      4,321,854      4,851,098
Deferred taxes...............................      4,982,917     (1,690,870)     6,019,892
Special compensation expense.................      7,613,386             --             --
Nonrecurring costs...........................             --      1,989,599             --
Loss on assets held for sale.................             --             --      3,809,712
Impairment of goodwill.......................             --             --     39,073,380
Gain on sale of property and equipment.......             --        (18,345)       (18,233)
(Increase) decrease in --
Accounts receivable........................     (1,219,537)    (3,600,442)       712,993
Inventories, net...........................     (4,187,410)    (4,485,014)    (2,299,053)
Prepaid expenses and other current
assets..................................        424,535       (755,654)    (1,386,958)
Other noncurrent assets, net...............      1,141,616     (1,208,550)       527,218
Increase (decrease) --
Accounts payable and accrued expenses......     (2,806,726)    (5,518,177)     2,886,275
------------   ------------   ------------
Net cash used in operating activities......       (315,243)   (12,380,572)    (2,962,127)
------------   ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment.............     (1,062,366)    (4,707,457)    (2,391,516)
Proceeds from sale of property and equipment....         17,137        168,619        957,762
Business acquisitions, net of cash acquired of
$499,436, $818,416 and $ --..................    (51,555,833)   (39,438,029)            --
------------   ------------   ------------
Net cash used in investing activities...    (52,601,062)   (43,976,867)    (1,433,754)
------------   ------------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of debt..............................     29,348,272        209,425             --
Repayments of debt..............................    (27,981,507)    (5,209,853)      (366,316)
Net borrowings under Credit Facility............     11,750,000     58,820,584      5,734,157
Repayments of convertible subordinated debt.....             --        (81,396)            --
Payments on non-compete obligations.............       (152,662)      (134,268)       (20,900)
Repayment of debt of Philip.....................     (2,981,789)            --             --
Proceeds from sale/exercise of SSI common stock
warrant......................................      1,216,855             --             --
Proceeds from exercise of Invatec stock
options......................................             --        208,497
Proceeds from sale of common stock, net of
offering costs...............................     44,021,906             --             --
Preferred stock dividends.......................       (156,957)            --             --
------------   ------------   ------------
Net cash provided by financing
activities............................     55,064,118     53,812,989      5,346,941
------------   ------------   ------------
NET INCREASE (DECREASE) IN CASH...................      2,147,813     (2,544,450)       951,060
CASH, beginning of period.........................        396,637      2,544,450             --
------------   ------------   ------------
CASH, end of period...............................   $  2,544,450   $         --   $    951,060
============   ============   ============

The accompanying notes are an integral part of these consolidated financial
statements.

F-54

218

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Innovative Valve Technologies, Inc. ("Invatec" or the "Company") was
incorporated in Delaware in March 1997 to create the leading single-source
provider of comprehensive maintenance, repair, replacement and value-added
distribution services for industrial valves and related process-system
components throughout North America. Except for its purchase of Steam Supply &
Rubber Co., Inc. and three related entities (collectively, "Steam Supply") in
July 1997, Invatec conducted no operations of its own prior to the closing on
October 28, 1997 of (i) its initial public offering (the "IPO") of its common
stock, par value $.001 per share ("Common Stock"), (ii) its purchase of
Industrial Controls & Equipment, Inc. and three related entities (collectively,
"ICE/VARCO") and Southern Valve Services, Inc. and a related entity
(collectively, "SVS") and (iii) a merger (the "SSI Merger") in which The Safe
Seal Company, Inc. ("SSI") became its subsidiary. Earlier in 1997, SSI had
purchased Harley Industries, Inc. ("Harley"), GSV, Inc. ("GSV") and Plant
Specialities, Inc. ("PSI"). SSI and its subsidiaries were affiliates of Invatec
prior to the SSI Merger. Subsequent to the IPO, Invatec has acquired thirteen
businesses.

RECENT DEVELOPMENTS

The Company's customers consist primarily of petroleum refining, chemical,
petrochemical, power and pulp and paper plants, the businesses of which tend to
be cyclical. Margins in those industries are highly sensitive to demand cycles
and the Company's customers in those industries have historically tended to
delay capital projects, expensive turnarounds and other maintenance projects
during slow periods. Commencing with the second quarter of 1998 and continuing
through 1999, the Company's business was negatively impacted by significant
slowdowns experienced by its customers in the petroleum refining, petrochemical,
chemical, and pulp and paper industries.

As a result of the above-described downturns affecting the Company's
customers, the Company's level of business declined during 1998 and 1999 and the
Company's earnings for the last three quarters of 1998 fell significantly short
of expectations. Consequently, this decline in earnings resulted in a severe
reduction in the market price of the Company's Common Stock. Declining earnings
also ultimately resulted in the Company defaulting on its credit facility (the
"Old Credit Facility") as a result of failing to meet certain financial
covenants which required specific levels of earnings in relation to debt. This
default left the Company unable to borrow funds for acquisitions. The Company
remained in default under the Old Credit Facility from July 20, 1998 through
March 25, 1999. The Company's acquisition program has been effectively suspended
since July 1998 as a result of the low price of the Company's common stock and
its inability to borrow funds under the Old Credit Facility. See further
discussion of the Company's Credit Facility at Footnote 6.

The Company amended its Old Credit Facility on March 26, 1999 to provide
for a new credit facility (the "New Credit Facility") expiring on April 20, 2000
and consisting of a $35 million stationary term component and up to a $45
million revolving line of credit from its existing bank group. The New Credit
Facility prohibited the Company from making acquisitions and provided for
increasingly high overall borrowing costs. As a result, the Company began
working with an investment banking firm in April 1999 to develop a financial
restructuring plan for the Company and otherwise explore strategic alternatives.
After numerous discussions with private investors regarding an infusion of
equity capital and with potential acquirors of the Company regarding a sale of
stock or assets of the Company or certain of its subsidiaries, on November 18,
1999, the Company entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Flowserve Corporation ("Flowserve") and a wholly-owned
subsidiary of Flowserve. Flowserve is a publicly-traded U.S. corporation. The
Merger Agreement provided for the acquisition of Invatec for a price of $1.62
per share in cash pursuant to a tender offer (the "Tender Offer") made by the
Flowserve subsidiary for all outstanding shares of Invatec Common Stock, par
value $.001 per share (the

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INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

"Flowserve Transaction"). The Tender Offer commenced on November 22, 1999, and
closed on January 6, 2000. See further discussion of the Merger at Footnote 18.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

For financial reporting purposes, SSI is presented as the "accounting
acquiror" of Steam Supply, ICE/VARCO, SVS, Harley, GSV and PSI (collectively,
the "Initial Acquired Businesses"), and, as used herein, the term "Company"
means (i) SSI and its consolidated subsidiaries prior to October 31, 1997 and
(ii) Invatec and its consolidated subsidiaries (including SSI) on that date and
thereafter.

For accounting purposes, the effective dates of the acquisitions of the
Initial Acquired Businesses in 1997 are as follows: (i) Harley -- January 31;
(ii) GSV -- February 28; (iii) PSI -- May 31; (iv) Steam Supply -- July 31, and
(v) ICE/VARCO and SVS -- October 31. Following the IPO, the Company acquired
thirteen businesses (together with the Initial Acquired Businesses, the
"Acquired Businesses") in 1997 and 1998. The Company accounted for the Acquired
Businesses in accordance with the purchase method of accounting.

The financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

RECLASSIFICATION

Certain prior year balances have been reclassified to conform with the
current year presentation.

INVENTORY

Inventories are valued at the lower of cost or market utilizing the
first-in, first-out method.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
The costs of major improvements are capitalized. Expenditures for maintenance,
repairs and minor improvements are expensed as incurred. When property and
equipment are sold or retired, the cost and related accumulated depreciation are
removed and the resulting gain or loss is included in results of operations.

GOODWILL

Goodwill represents the excess of the aggregate purchase price paid by the
Company in the acquisition of businesses accounted for as purchases over the
fair market value of the net assets acquired. Goodwill is amortized on a
straight-line basis over 40 years. Goodwill amortization expense was
approximately $467,000, $2,163,000, and $2,466,000 for the years ended December
31, 1997, 1998, and 1999 respectively.

The Company periodically evaluates the recoverability of intangibles
resulting from business acquisitions and measures the amount of impairment, if
any, by assessing current and future levels of income and cash flows as well as
other factors, such as business trends and prospects and market and economic
conditions and assuming the acquired business continues to be owned.

During 1998, Company management designed and implemented a restructuring
plan to improve the Company's cost structure, streamline operations and divest
the Company of underperforming assets. As part of this initiative, management
decided to divest a portion of one of its Acquired Businesses that was

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INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

incurring significant operating losses. This subsidiary was engaged primarily in
the distribution of commodity valve products and related process system
components. Management determined that the products distributed by the
subsidiary did not fit into its long-term vision of providing high quality
repair services and value-added distribution of engineered products.
Accordingly, certain assets of this subsidiary were sold effective July 31,
1999. The carrying value of these assets held for sale was reduced to fair value
based upon the final negotiated sales price with the buyer, less costs to sell.
The resulting adjustment of approximately $3.8 million to reduce assets held for
sale to fair value and goodwill related to the assets held for sale was recorded
in the June 30, 1999 consolidated statements of operations. The Company applied
the proceeds from the sale of the assets to reduce its outstanding balance under
the Credit Facility. Pro forma net sales for the operations associated with the
impaired assets were approximately $11.3 million, $7.8 million, and $3.1 million
in 1997, 1998, and the six month period ended June 30, 1999, respectively. The
pro forma operating losses of such operations for the applicable periods were
approximately ($0.1) million, ($0.3) million, and ($0.4) million, respectively.

An analysis in accordance with Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," was performed by comparing the Company's
net book value to the price offered in the Tender Offer previously described in
Footnote 1. The Tender Offer for all of the outstanding Invatec shares totaled
approximately $16.6 million, which is approximately $39.0 million below the
Company's historical cost basis in its net assets (total stockholders' equity of
$55.6 million as of December 31, 1999, prior to recording the following impact
of the goodwill impairment.) Since the Company's evaluation of other long-lived
assets for impairment did not indicate that they were impaired, goodwill has
been reduced by approximately $39.0 million. This provision is reflected in the
December 31, 1999, consolidated statements of operations. The acquisition of
Invatec by Flowserve subsequent to December 31, 1999 (see Footnote 18) was
accounted for by Flowserve using the purchase method of accounting, which
requires an allocation of the purchase price to the assets acquired and
liabilities assumed based on fair value as determined by Flowserve. The
Company's consolidated financial statements have been prepared on the historical
cost basis of accounting in accordance with generally accepted accounting
principles which may be greater or less than the fair value of the assets and
liabilities as determined by Flowserve. See Footnote 18 for a description of
certain terms, conditions and termination events relating to the Merger.

DEBT ISSUE COSTS

Debt issue costs related to the Company's Credit Facility (see Note 6) are
included in other noncurrent assets at December 31, 1998, and in prepaid
expenses and other current assets at December 31, 1999, and are amortized to
interest expense over the scheduled maturity of the debt. Debt issue costs, net
of accumulated amortization were approximately $412,000 and $65,000 at December
31, 1998 and 1999, respectively.

EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted
average common shares outstanding. Diluted earnings per share is computed by
dividing net income by the weighted average number of common shares and common
equivalent shares outstanding.

STOCK-BASED COMPENSATION

In accordance with SFAS No. 123, the Company has elected to use the method
APB Opinion No. 25 prescribes to measure its compensation costs attributable to
stock-based compensation and to include in Footnote 10 of these consolidated
financial statements the pro forma effect on those costs using the fair value
approach that SFAS No. 123 otherwise requires.

F-57

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INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INCOME TAXES

The Company follows the liability method of accounting for income taxes in
accordance with SFAS No. 109. Under this method, deferred income taxes are
recorded based upon differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the underlying assets or liabilities are recovered
or settled.

Prior to the Acquisitions, certain Acquired Businesses' stockholders were
taxed under the provisions of subchapter S of the Internal Revenue Code. Under
these provisions, the stockholders paid income taxes on their proportionate
share of their companies' earnings. Because the stockholders were taxed
directly, their businesses paid no federal income tax and only certain state
income taxes. The Company filed consolidated federal income tax returns that
include the operations of the Acquired Businesses for periods subsequent to
their respective acquisition dates.

REVENUE RECOGNITION

Revenue is recognized as products are sold and as services are performed.

CASH FLOW RELATED ITEMS

Cash payments for interest during 1997, 1998 and 1999 were approximately
$1,954,000, $4,628,000 and $8,158,000, respectively. Cash payments for taxes
during 1997, 1998 and 1999 were $306,000, $1,695,000, and $879,000,
respectively. Noncash activities for the year ended December 31, 1997 consisted
of approximately $10.6 million of obligations and preferred stock owned by a
related party which were converted into Common Stock. Noncash activities for the
year ended December 31, 1998 consisted of approximately $1.2 million reduction
of convertible subordinated debt in connection with finalization of the purchase
consideration of a 1997 acquisition and the issuance of warrants to the
Company's syndicate of lenders. Noncash activities for the year ended December
31, 1999 consisted of the issuance of 555,555 shares of Common Stock to former
owners of one of the Acquired Businesses as partial payment of a contractual
obligation discussed in footnote 3.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

SPECIAL COMPENSATION EXPENSE

In 1997, SSI recorded a special non-cash compensation expense of
approximately $2.6 million related to the issuance of 221,595 shares of Common
Stock to three members of executive management and to Computerized Accounting &
Tax Services, Inc. ("CATS"), a related party, to attract such individuals and
CATS to effect the IPO. For financial statement presentation purposes, these
shares were valued at approximately $11.70 per share, which was the fair market
value of the shares at the time of issuance.

During 1997, Invatec recorded a special non-cash compensation expense of
approximately $5.0 million related to (i) its issuance of 242,839 shares of
Common Stock to six members of executive management and CATS to attract them to
effect the IPO and (ii) its grant to certain of its officers of options to
purchase 202,589 shares of Common Stock at an exercise price of $1.00 per share.
For financial statement presentation purposes, the shares were valued at
approximately $11.70 per share and the options were valued at approximately
$10.70 per option share.

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INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NONRECURRING COSTS

During 1998, the Company recorded nonrecurring costs of approximately $1.4
million in write-offs of capitalized costs of abandoned projects, including a
friction welding system, and $0.8 million of accrued severance costs.

3. ACQUISITIONS:

1997

The aggregate consideration paid by the Company to purchase Acquired
Businesses in 1997 (as described in Footnote 1) was $52.2 million in cash and
assumed debt, $17.2 million in the form of short-term notes and subordinated
notes convertible into common shares and 185,661 shares of Common Stock.

Of the total purchase price paid for the Acquisitions, $23.2 million was
allocated to net assets acquired, and the remaining $48.9 million was recorded
as goodwill.

1998

The aggregate consideration paid by the Company to purchase Acquired
Businesses in 1998 (as described in Footnote 1) was $38.2 million in cash and
assumed debt, $0.4 million in the form of subordinated notes convertible into
common shares and 1,749,052 shares of Common Stock.

Of the total purchase price paid for the Acquisitions, $13.4 million was
allocated to net assets acquired, and the remaining $44.9 million was recorded
as goodwill. Purchase accounting for these acquisitions has been finalized.

Three of the acquisition agreements for the Additional Acquired Businesses
contain provisions requiring the Company to pay additional amounts (the "Makeup
Amount") to the former shareholders of each acquired business on the first
anniversary of that acquisition if the price of Invatec Common Stock on that
anniversary date is below a certain level. Two of those acquisition agreements
were entered into on July 9, 1998, and give Invatec the option of paying up to
one-half of the Makeup Amount in cash, with the remainder paid in Common Stock
valued at the market price on the anniversary date. The third agreement was
entered into on June 29, 1998 and gives Invatec the option of paying the entire
Makeup Amount in cash or Common Stock valued at the market price on the
anniversary date.

The Makeup Amount is approximately $6.5 million and was recorded as a
liability with a corresponding offset to additional paid in capital. Effective
December 13, 1999, 555,555 shares were issued to the former shareholders of one
of the Acquired Businesses in partial payment of the Makeup Amount, thereby
reducing the Makeup Amount to approximately $5.6 million. As of December 31,
1999, no additional shares of Invatec Common Stock had been issued to the former
shareholders of the other two Acquired Businesses, and the Company's management
negotiated a discount in the payment of the Makeup Amount with the former
shareholders contingent upon such cash payment being made to the shareholders by
January 31, 2000. The discounted amount was paid to the former shareholders on
January 6, 2000.

F-59

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INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

DECEMBER 31
ESTIMATED     ---------------------------
USEFUL LIVES       1998           1999
------------   ------------   ------------

Land.........................................          --     $  1,716,839   $  1,390,898
Buildings....................................    30 years        6,635,878      6,254,880
Leasehold improvements.......................    30 years        2,910,874      3,127,346
Furniture and fixtures.......................   3-5 years        4,884,500      4,818,073
Machinery and equipment......................     5 years       23,249,259     24,488,437
------------   ------------
39,397,350     40,079,634
Less -- Accumulated depreciation...........                  (19,927,546)   (21,867,058)
------------   ------------
Property and equipment, net................                 $ 19,469,804   $ 18,212,576
============   ============

5. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Activity in the Company's allowance for doubtful accounts consists of the
following:

DECEMBER 31
------------------------------------
1997         1998         1999
----------   ----------   ----------

Balance, at beginning of year....................  $   25,000   $1,079,857   $1,562,104
Additions........................................     102,243      107,787    1,012,572
Deductions.......................................     (80,810)    (413,151)    (396,165)
Allowance for doubtful accounts at acquisition
dates..........................................   1,033,424      787,611           --
----------   ----------   ----------
Balance, at end of year..........................  $1,079,857   $1,562,104   $2,178,511
==========   ==========   ==========

Inventory consists of the following:

DECEMBER 31
-------------------------
1998          1999
-----------   -----------

Finished goods.....................................  $21,785,485   $22,271,942
Work in process....................................    4,222,319     3,819,788
-----------   -----------
$26,007,804   $26,091,730
===========   ===========

Accounts payable and accrued expenses consist of the following:

DECEMBER 31
-------------------------
1998          1999
-----------   -----------

Accounts payable, trade............................  $ 8,086,157   $ 9,603,813
Accrued compensation and benefits..................    1,357,717     2,417,973
Accrued insurance..................................    1,733,133       652,365
Interest and fees payable..........................    1,067,020     5,161,722
Other accrued expenses.............................    7,120,560     3,201,935
-----------   -----------
$19,364,587   $21,037,808
===========   ===========

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224
INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. CREDIT FACILITY:

The Company's Old Credit Facility was a $90 million three-year revolving
credit facility the Company used for acquisitions and general corporate
purposes. Declining earnings during 1998 ultimately resulted in the Company
defaulting in July 1998 on its Old Credit Facility as a result of failing to
meet certain financial covenants requiring specific levels of earnings in
relation to debt. This default left the Company unable to borrow funds for
acquisitions. The Company remained in default under the loan agreement from July
20, 1998 through March 25, 1999. The Company's acquisition program has been
effectively suspended since July 1998 as a result of the low price of the
Company's Common Stock and its inability to borrow funds.

In March 1999, the Company and its existing syndicate of lenders agreed to
amend the Company's credit facility to put into place the New Credit Facility.
The Company's credit facility was reduced from $90 million to $80 million and
restructured to be comprised of a stationary term component of $35 million and a
revolving credit facility of up to $45 million up to a maximum loan amount of
$76.5 million, the proceeds of which may be used only for general corporate and
working capital purposes. The Company's domestic subsidiaries have guaranteed
the repayment of all amounts due under the facility, and repayment is secured by
pledges of the capital stock, and all or substantially all of the assets, of
those subsidiaries. The New Credit Facility prohibits acquisitions and the
payment of cash dividends, restricts the ability of the Company to incur other
indebtedness and requires the Company to comply with certain financial
covenants. These financial covenants include provisions for maintenance of
certain levels of earnings before interest, taxes, depreciation, amortization,
certain levels of cash flows as defined by the New Credit Facility and other
items specified in the loan agreement. The amount of availability under the New
Credit Facility is now governed by a borrowing base which consists primarily of
the accounts receivable and inventory of the Company and its subsidiaries,
although the amount available under the revolving portion of the credit facility
will decrease over time and upon the occurrence of certain specified events,
such as a sale of assets outside the ordinary course of business. In addition,
the Company and the subsidiaries are now required to (i) meet substantially more
stringent reporting covenants, (ii) submit to collateral audits and (iii)
deposit all revenues and receipts into lockbox accounts. Interest accrues at the
prime rate as in effect from time to time, plus 2%, payable monthly. On October
22, 1999, and in contemplation of the Company's entering into the Merger
Agreement, the syndicate of lenders entered into the Third Amendment to Loan
Agreement (the "Third Amendment") with the Company, waiving certain defaults and
suspending the breach of certain other covenants constituting an event of
default until January 31, 2000. The Third Amendment also reduced the maximum
aggregate loan amount under the Credit Facility to $76.0 million and revised the
maturity date to January 31, 2000. However, at December 31, 1999, the Company
exceeded the limit by approximately $0.3 million. In addition, fees accrue each
quarter at the rate of 1.5% of the unpaid principal balance under the New Credit
Facility. These fees of approximately $4.3 million are accrued at December 31,
1999, but, as provided in the Third Amendment, the fees will be waived if the
Company repays all obligations under the Credit Facility by January 31, 2000.
The entire Credit Facility was repaid on January 6, 2000, and the contingent
fees were waived.

In connection with the New Credit Facility, the syndicate of lenders were
issued warrants to purchase up to 482,262 shares of the common stock of the
Company, exercisable at $0.73 per share (10% below the market price of such
common stock as of March 25, 1999), and granted certain registration rights with
respect to the shares issuable upon exercise of the warrants. The warrants do
not have an expiration date. The estimated fair value of the warrants at the
date issued was $0.21 per share using a Black-Scholes option pricing model. The
fair value of the warrants was recorded as deferred loan costs and is being
amortized over the term of the Credit Facility. Under the Third Amendment, if
the Company repays all obligations under the Credit Facility by January 31,
2000, the syndicate of lenders has agreed to return these warrants to the
Company for cancellation. The entire Credit Facility was repaid on January 6,
2000, and the warrants were returned to the Company.

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INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1999 the Company's outstanding borrowings under the Credit
Facility were $76.3 million, bearing interest at 10.50%.

7. LONG-TERM DEBT:

Long-term debt consists of the following:

DECEMBER 31,
-------------------
1998       1999
--------   --------

Notes payable to former stockholders of Spin Safe, with
annual installments of $100,000 beginning January 15,
1998, non-interest bearing, due January 15, 2001,
unsecured.................................................  $280,906   $200,000
Installment notes payable; interest ranging from 5.09% to
10%, payable in monthly installments through 2006; secured
by certain assets.........................................   700,068    433,754
--------   --------
980,974    633,754
Less: current maturities....................................   580,140    633,754
--------   --------
$400,834   $     --
========   ========

Notes payable outstanding at December 31, 1999, were subsequently paid in
January 2000 (see Footnote 18). Therefore, the notes payable are classified as
current liabilities in the accompanying December 31, 1999 consolidated balance
sheet.

8. CONVERTIBLE SUBORDINATED DEBT:

At December 31, 1999, outstanding convertible subordinated debt consisted
of approximately $5.1 million aggregate principal amount of 5.0% notes due in
2002, $1.6 million aggregate principal amount of 5.5% notes due in 2004, $4.6
million aggregate principal amount of 5.5% notes due in 2002 and $0.4 million
aggregate principal amount of 5.0% notes due 2003. These notes are convertible
into shares of Common Stock at initial conversion prices ranging from $16.90 to
$22.20 per share at the option of the holder in whole at any time. In connection
with the proposed Merger, the Company's management negotiated a discount in the
payment of the convertible subordinated notes with the holders of the notes if
such payment was made by January 31, 2000. The discounted payments were made to
the holders on January 6, 2000, therefore, the convertible subordinated debt is
classified as current liabilities in the accompanying December 31, 1999
consolidated balance sheet.

F-62

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INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. INCOME TAXES:

The provision (benefit) for income taxes consisted of:

YEAR ENDED DECEMBER 31,
---------------------------------------
1997          1998          1999
-----------   -----------   -----------

Current:
U.S. Federal................................  $(1,026,565)  $(1,089,396)  $(2,031,653)
State.......................................      513,854       661,728       284,949
-----------   -----------   -----------
Total current benefit.......................     (512,711)     (427,668)   (1,746,704)
Deferred:
U.S. Federal................................     (478,127)      711,237     7,794,214
State.......................................      (31,884)      136,367       324,860
-----------   -----------   -----------
Total deferred provision (benefit)..........     (510,011)      847,604     8,119,074
-----------   -----------   -----------
Total income tax provision (benefit)..........  $(1,022,722)  $   419,936   $ 6,372,370
===========   ===========   ===========

Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate tax rate to income before income
taxes as follows:

YEAR ENDED DECEMBER 31
-----------------------
1997     1998     1999
-----    -----    -----

Statutory federal income tax benefit........................   (34)%    (34)%    (34)%
Special compensation charge.................................    22%      --       --
Nondeductible goodwill......................................     2%      43%      25%
Other nondeductible expenses................................     3%      --       (5)%
State taxes, net of federal benefit of 34%..................     4%      33%       1%
Other.......................................................     1%      (1)%      4%
Allowance for valuation of deferred tax assets..............   (10)%     --       21%
---      ---      ---
Effective income tax rate...................................   (12)%     41%      12%
===      ===      ===

F-63

227
INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net deferred tax assets consist of the following:

DECEMBER 31
-------------------------
1998          1999
----------   ------------

Current deferred tax assets:
Accrued liabilities and valuation allowances not
currently deductible..........................  $4,481,256   $  4,266,563
----------   ------------
4,481,256      4,266,563
Noncurrent deferred tax assets:
Net operating losses.............................   3,025,914      5,721,664
Special compensation charge......................     802,050        802,050
Amortization of intangibles......................          --      1,272,787
Other............................................          --             --
----------   ------------
3,827,964      7,796,501
Valuation allowance................................          --    (10,589,215)
----------   ------------
Total deferred tax assets..........................  $8,309,220   $  1,473,849
==========   ============
Noncurrent deferred tax liabilities:
Depreciation of property, plant and equipment....  $ (700,812)  $   (246,482)
Amortization of intangibles......................    (206,734)            --
----------   ------------
(907,546)      (246,482)
----------   ------------
Net deferred tax assets............................  $7,401,674   $  1,227,367
==========   ============

The Company records a valuation allowance for deferred tax assets when
management believes it is more likely than not the asset will not be realized.
Management has recorded a valuation allowance for this deferred tax asset as of
December 31, 1999. The net operating loss carryforwards of approximately $15.4
million will only be realizable to the extent that the operating facilities
generate income in the future.

Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences representing deferred
tax assets and liabilities result principally from the following:

YEAR ENDED DECEMBER 31,
----------------------------------
1997        1998        1999
---------   --------   -----------

Deferred tax provision (benefit) during the year
Net operating loss..............................  $ 644,022   $     --   $        --
Special compensation charge.....................   (802,050)        --            --
Depreciation....................................    128,843    302,804    (1,079,422)
Accrued expenses................................    366,400    544,800    (1,390,719)
Valuation allowance.............................   (847,226)        --    10,589,215
---------   --------   -----------
Total...................................  $(510,011)  $847,604   $ 8,119,074
=========   ========   ===========

Certain deferred tax assets and liabilities were recorded with respect to
purchase accounting for the Acquired Business during the year ended December 31,
1998.

F-64

228
INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. STOCKHOLDERS' EQUITY:

REVERSE STOCK SPLIT

Prior to the SSI Merger, SSI and Invatec each effected a 0.68-for-one
reverse stock split of its outstanding common stock. The accompanying financial
statements have been prepared as if these splits had been effected as of the
beginning of the earliest period presented.

SSI MERGER

As a result of the SSI Merger: (i) the shares of SSI Common Stock and
redeemable preferred stock outstanding as of October 31, 1997 were converted
into shares of Common Stock; (ii) outstanding options and a warrant to purchase
shares of SSI Common Stock were converted into options to purchase Common Stock;
and (iii) SSI's authorized capital stock became 1,000 shares of SSI Common
Stock, par value $1.00 per share, all of which have been issued and are
outstanding and owned by Invatec. All share and per share information for the
periods shown, except authorized shares, have been restated to reflect the
merger as of the beginning of the earliest period presented.

INVATEC COMMON STOCK

Invatec sold 3,852,500 shares of Common Stock in the IPO. The initial price
to the public in the IPO was $13.00, and Invatec's proceeds from the IPO, net of
an underwriting discount of $3.5 million and IPO expenses of $2.6 million,
including approximately $1.5 million of expenses which were initially funded
through advances obtained from Philip Services Corp. (collectively, with its
subsidiaries), totaled $44.0 million.

At December 31, 1999, the Company had reserved 600,769 shares of Common
Stock for issuance on conversion of its outstanding convertible subordinated
notes described in Note 8, 1,650,000 shares of Common Stock for issuance on the
exercise of stock options under Invatec's 1997 Incentive Plan, of which options
to purchase a total of 1,145,670 shares then were exercisable at exercise prices
ranging from $1.00 per share to $17.00 per share and 482,262 for warrants issued
to the Company's syndicate of lenders. The Company has not reserved a specific
number of shares of Common Stock for issuance in payment of any Makeup Amount
that may be due to certain former shareholders of the three 1998 Additional
Acquired Businesses discussed in Note 3 because the Company has the option of
paying the obligation in cash.

Invatec's certificate of incorporation authorizes the issuance of up to
30.0 million shares of Common Stock, of which 10,220,117 shares were issued and
outstanding as of December 31, 1999, and 5.0 million shares of preferred stock,
none of which has been issued.

STOCK OPTIONS

In 1996, the Company began a management stock option program that was
discontinued in 1997. Under this program, the Company granted both shares of
Common Stock and options to purchase shares of Common Stock to certain members
of management. The options vested monthly and were exercisable at any time
following the six-month period ending June 30 or December 31 in which the
options were earned. The Company had reserved 200,000 shares of Common Stock for
issuance in this program. During 1996, the Company granted 4,513 shares of
Common Stock and options to purchase 71,899 shares of Common Stock. The options
had an exercise price of $10.00 per share and are exercisable through July 1,
2001. In 1996, the Company recorded non-cash compensation expense of $26,548 for
the 4,513 shares issued with a fair market value of $5.88 per share. No
compensation expense was recorded for the options granted in 1996 because their
exercise price exceeded the fair market value of the underlying shares ($5.88
per share). Prior to 1996, the Company had, from time to time, granted options
to key employees

F-65

229
INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

at or above the market value of the Common Stock. The options granted had
exercise prices ranging from $5.00 to $20.00 per share. All but 50,000 options
expired in 1996. The remaining options were exercised in June 1997.

1997 INCENTIVE PLAN

The Company has adopted an incentive plan (the "Incentive Plan") that
provides for the granting or awarding of stock options and other
performance-based awards to key employees, nonemployee directors and independent
contractors of the Company and its subsidiaries. The Incentive Plan aims to
attract and retain the services of key employees and qualified independent
directors and contractors by making stock option and other performance-based
awards tied to the growth and performance of the Company. At December 31, 1999,
Invatec had reserved 1,500,000 shares of Common Stock for use under the
Incentive Plan. Beginning in the second quarter of 1998, the number of shares
available for that use became the greater of 1,500,000 or 15% of the number of
shares of Common Stock outstanding on the last day of the preceding quarter.

The following table summarizes the stock options outstanding at December
31, 1999 and changes during the three years then ended:

WEIGHTED-
SHARES UNDER      AVERAGE
OPTION      EXERCISE PRICE
------------   --------------

Balance at December 31, 1996.......................     121,899         $ 7.94
Warrants converted to options....................      15,000          10.00
Granted..........................................   1,310,389           9.97
Exercised........................................     (50,000)          5.00
Cancelled........................................      (1,540)         10.00
---------
Balance at December 31, 1997.......................   1,395,748           9.97
Granted..........................................     586,236           3.40
Exercised........................................     (23,500)          8.87
Cancelled........................................    (502,500)         11.51
---------
Balance at December 31, 1998.......................   1,455,984           6.81
Granted..........................................          --             --
Exercised........................................          --             --
Cancelled........................................     (24,500)         11.16
---------
Balance at December 31, 1999.......................   1,431,484           6.74
=========
Available for grant at December 31, 1999...........     195,016
=========

The options outstanding at December 31, 1999 have exercise prices from
$1.00 to $17.00 per share and a weighted average remaining contractual life of
5.02 years.

At December 31, 1997, 1998, and 1999, the number of options exercisable was
533,873, 558,198, and 1,145,670, respectively, and the weighted average exercise
price of those options was $9.97, $7.96, and $6.70, respectively. Subsequent to
December 31, 1999, options with $1 exercise price were redeemed for the value of
the options and the remaining options were cancelled.

The Company accounts for options by applying APB Opinion No. 25, under
which no compensation expense (other than described in Footnote 2) has been
recognized. No options were granted in 1999.

F-66

230
INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

If the Company had recorded 1997, 1998 and 1999 compensation cost for
option grants consistent with SFAS No. 123, net loss and loss per share would
have been resulted by the following pro forma amounts:

YEAR ENDED DECEMBER 31
----------------------------------------
1997          1998           1999
-----------   -----------   ------------

Net Loss:
As Reported................................  $(7,499,964)  $(1,414,973)  $(57,138,451)
Pro forma..................................  $(8,350,661)  $(3,001,219)  $(65,045,306)
Loss Per Share:
Basic
As Reported.............................  $     (2.25)  $     (0.16)  $      (5.90)
Pro forma...............................  $     (2.50)  $     (0.33)  $      (6.71)

The pro forma compensation cost may not be representative of that to be
expected in future years because options vest over several years and additional
awards may be made each year.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model, with the following weighted average
assumptions used for grants in 1997 and 1998 respectively: dividend yield of 0%
and 0%; expected volatility of 48.43% and 50.27%; risk-free interest rate of
6.09% and 4.94%; and expected lives of 6.92 years and 7.0 years.

WARRANTS

During 1997, Philip exercised warrants to purchase 680,768 shares of SSI
Common Stock at an exercise price of $6.32 per share. Consideration for the
exercise consisted of approximately $3.3 million of Philip promissory notes and
approximately $1.2 million in cash. The Company used the Philip notes as part of
the consideration it paid for Harley. See footnote 6 for the information
regarding warrants issued to the Company's syndicate of lenders.

11. EARNINGS PER SHARE:

The computation of earnings (loss) per share of Common Stock is presented
in accordance with SFAS No. 128, "Earnings Per Share," based on the following
shares of Common Stock outstanding:

1997        1998        1999
---------   ---------   ---------

Issued and outstanding at January 1..................  1,481,919   7,890,198   9,664,562
Issued to acquire businesses (weighted)..............     25,016   1,116,316          --
Issued in connection with the Company's IPO
(weighted).........................................    726,445          --          --
Issued in redemption of SSI Preferred Stock
(weighted).........................................    228,192          --          --
Issued in connection with SSI and Invatec merger
(weighted).........................................    170,105          --          --
Issued in partial payment of the Makeup Amount
(weighted).........................................         --          --      27,397
Issued for stock options exercised and warrants
exercised (weighted)...............................    766,303      18,401          --
---------   ---------   ---------
Weighted average shares outstanding -- Basic and
Diluted............................................  3,397,980   9,024,915   9,691,959
=========   =========   =========

Common share equivalents including options to purchase 10,301 shares of
Common Stock and $12.5 million of subordinated debt convertible into Common
Stock at prices ranging from $16.90 to

F-67

231
INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$22.20 per share, outstanding at December 31, 1997, were not included in the
computation of diluted EPS as their effect on EPS was antidilutive.

Common share equivalents including options to purchase 258,583 shares of
Common Stock, approximately 2.5 million shares of Common Stock assumed to be
issued for guaranteed stock prices, and $11.7 million of subordinated debt
convertible into Common Stock at prices ranging between $16.90 and $22.20 per
share, outstanding at December 31, 1998, were not included in the computation of
diluted EPS as their effect on EPS was antidilutive.

Common share equivalents including options to purchase 201,589 shares of
Common Stock, warrants to purchase 482,262 shares of Common Stock, approximately
3.5 million shares of Common Stock assumed to be issued for guaranteed stock
prices, and $11.7 million of subordinated debt convertible into Common Stock at
prices ranging between $16.90 and $22.20 per share, outstanding at December 31,
1999, were not included in the computation of diluted EPS as their effect on EPS
was antidilutive.

12. REDEEMABLE PREFERRED STOCK:

In 1995, SSI issued and sold 20,000 shares of its redeemable preferred
stock to Philip for $2.0 million ($100 per share). In the SSI Merger in 1997,
these shares, together with accrued dividends thereon, were converted into
154,958 shares of Common Stock.

13. COMMITMENTS AND CONTINGENCIES:

OPERATING LEASES

The Company leases warehouse space, office facilities and vehicles under
noncancelable leases. Rental expense for 1997, 1998 and 1999 was approximately
$822,400, $2,765,553, and $3,105,000 respectively. The following represents
future minimum rental payments under noncancelable operating leases:

Year ending December 31 --
2000...................................................  $3,007,486
2001...................................................   2,382,838
2002...................................................   1,406,691
2003...................................................     523,289
2004...................................................     399,462
Thereafter.............................................   1,317,372
----------
$9,037,138
==========

LITIGATION

In the ordinary course of its business, the Company has become involved in
various legal actions. Management, after consultation with legal counsel, does
not believe that the outcome of these legal actions will have a material effect
on the Company's financial position or results of operations.

14. CERTAIN TRANSACTIONS:

The Company had a management agreement with CATS, an entity then related by
common ownership. Management fee expense for 1997 was approximately $353,000.
This agreement terminated in 1997.

F-68

232
INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. EMPLOYEE BENEFIT PLANS:

The Company maintains certain 401(k) plans which allow eligible employees
to defer a portion of their income through contributions to the plans. The
Company contributed approximately $59,000, $596,000 and $793,000 to its plans
during the years ended December 31, 1997, 1998, and 1999 respectively.

16. RELATIONSHIP WITH PHILIP:

In 1996, Philip agreed to make certain advances to SSI to enable SSI, or
its successors, to pursue a possible initial public offering. As a result of
Philip's financial support of SSI's acquisition of Harley, Philip became a
related party of the Company for financial statement presentation purposes
effective January 31, 1997. In June 1997, Invatec entered into a funding
arrangement with Philip pursuant to which Philip advanced funds to Invatec to
pay costs related to the IPO and Invatec assumed SSI's obligation to repay the
Philip advances and the related deferred offering costs funded with these
advances.

In connection with the IPO, Invatec issued 1,036,013 shares of Common Stock
to Philip as payment of $8.6 million of indebtedness owed to Philip. Immediately
after the IPO, Invatec repaid the remaining $3.0 million of indebtedness owed to
Philip in cash.

17. SERVICE AND DISTRIBUTION AGREEMENTS:

The Company purchases, sells and services various products under service
and distribution agreements with its major suppliers. In general, these
agreements are cancelable by the suppliers upon 30 to 60 days notice. Management
does not anticipate cancellation of these agreements.

18. SUBSEQUENT EVENTS (UNAUDITED):

On November 18, 1999, the Company entered into an Agreement and Plan of
Merger with Flowserve. On November 22, 1999, Flowserve commenced the Tender
Offer to purchase all shares of Common Stock at a price of $1.62 per share. The
Tender Offer was successfully completed on January 6, 2000 and the Merger was
effective as of January 13, 2000.

In connection with the proposed merger, Company management negotiated
discounted amounts (which are not reflected in the accompanying consolidated
financial statements) with certain holders of convertible subordinated debt, its
syndicate of lenders, holders of preferred stock of one of the Acquired
Businesses, and former owners in regard to Makeup Amount obligations. The total
amount discounted was approximately $10.8 million as follows: $3.8 million
reduction in convertible subordinated debt, $4.3 million in waived bank fees,
$2.2 million reduction in the Makeup Amount obligation, and $0.5 million in
other obligations. The obligations were discounted contingent upon the
discounted payments being made by January 31, 2000. The discounted obligations
were paid prior to January 31, 2000. Post-merger costs such as employment
agreements, severance and other employee- or restructuring-related costs are not
reflected in the accompanying consolidated financial statements. Also, in
connection with the Tender Offer, all options with $1 exercise price were
redeemed for the value of the options and the remaining options were cancelled.

Subsequent to December 31, 1999, the Company and two of its principal
officers were named as defendants in a lawsuit alleging misrepresentation.
Management believes that this lawsuit is without merit and, accordingly, no
provision has been made in the accompanying financial statements for this
matter. The outcome of this lawsuit is not determinable at this time.

F-69

233

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners and Management Committee of
Ingersoll-Dresser Pump Company

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of cash flows and of partners' equity
present fairly, in all material respects, the financial position of
Ingersoll-Dresser Pump Company and its subsidiaries (the "Company") at December
31, 1999 and 1998, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

PricewaterhouseCoopers LLP

Florham Park, NJ
February 18, 2000, except for Note 1
"Acquisition of Halliburton's Interest" and
Note 16 for which the dates are September 12,
2000 and June 22, 2000, respectively.

F-70

234

INGERSOLL-DRESSER PUMP COMPANY

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
---------------------
1999        1998
---------   ---------
(IN THOUSANDS)

ASSETS

Current assets:
Cash and cash equivalents.................................  $  49,859   $  28,456
Marketable securities.....................................      3,268       3,607
Accounts and notes receivable, less allowance for doubtful
accounts of $7,928 in 1999 and $6,631 in 1998..........    200,215     209,352
Due from partners.........................................      1,924      56,293
Inventories, net of progress payments.....................    110,220     116,055
Prepaid expenses..........................................      4,888       8,978
Deferred income taxes.....................................     12,600      10,474
Other current assets......................................      3,244       3,966
---------   ---------
386,218     437,181
Investments in and advances with partially-owned equity
companies.................................................     12,279      12,686
Due from partners...........................................         --     227,534
Property, plant and equipment, at cost:
Land, buildings and improvements..........................    108,574     113,964
Machinery and equipment...................................    179,924     240,592
Less -- accumulated depreciation..........................   (114,094)   (243,714)
---------   ---------
174,404     110,842
Intangible assets, net......................................     78,090         381
Goodwill, net...............................................    141,447       8,198
Other assets................................................      4,004       3,730
---------   ---------
Total assets......................................  $ 796,442   $ 800,552
=========   =========

LIABILITIES AND PARTNERS' EQUITY

Current liabilities:
Trade accounts payable and accruals.......................  $ 195,043   $ 224,827
Due to partners...........................................     14,125       9,602
Customers' advance payments...............................        886       4,512
Short-term borrowings.....................................      1,302         733
---------   ---------
211,356     239,674
Deferred income taxes.......................................     25,307       1,914
Postemployment liabilities..................................     67,159      79,727
Other non-current liabilities...............................         99         141
---------   ---------
Total liabilities.................................    303,921     321,456
---------   ---------
Commitments and contingencies (Note 8)
Partners' equity:
Contributed capital....................................    425,953     377,357
Accumulated earnings...................................     92,446     131,733
---------   ---------
518,399     509,090
Accumulated other comprehensive loss...................    (25,878)    (29,994)
---------   ---------
Partners' equity..................................    492,521     479,096
---------   ---------
Total liabilities and partners' equity............  $ 796,442   $ 800,552
=========   =========

The accompanying notes are an integral part of these financial statements.

F-71

235

INGERSOLL-DRESSER PUMP COMPANY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1999        1998        1997
---------   ---------   ---------
(IN THOUSANDS)

Net sales...................................................  $838,390    $907,168    $865,092
Cost of goods sold..........................................   610,745     661,067     637,173
Selling, general and administrative expenses................   165,031     172,719     166,749
Restructuring charges.......................................       200       3,600      19,500
--------    --------    --------
Operating income..........................................    62,414      69,782      41,670
Interest expense............................................     1,362       1,620       1,316
Other income, net...........................................     7,446       7,061       4,202
--------    --------    --------
Earnings before income taxes..............................    68,498      75,223      44,556
Provision for income taxes..................................    18,965      16,573      13,228
--------    --------    --------
Net earnings..............................................  $ 49,533    $ 58,650    $ 31,328
========    ========    ========

The accompanying notes are an integral part of these financial statements.

F-72

236

INGERSOLL-DRESSER PUMP COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1999        1998        1997
---------   ---------   ---------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings..............................................  $ 49,533    $ 58,650    $ 31,328
Adjustments to arrive at net cash provided by operating
activities:
Depreciation and amortization..........................    18,251      18,971      20,096
Loss(gain) on sale of property, plant and equipment....       508        (695)       (192)
Equity earnings/losses, net of dividends...............      (284)        136         352
Deferred income taxes..................................      (214)       (874)     (1,095)
Other non-cash activity................................     2,500       1,453       1,392
Changes in assets and liabilities
(Increase) decrease in:
Accounts and notes receivable.....................    (2,320)     (9,838)    (19,639)
Inventories.......................................     4,383        (762)     (4,270)
Other current and noncurrent assets...............       810         437       5,281
(Decrease) increase in:
Accounts payable and accruals.....................   (13,880)      6,030      36,697
Other current and noncurrent liabilities..........    (5,742)      3,920      (6,645)
--------    --------    --------
Net cash provided by operating activities.................    53,545      77,428      63,305
--------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures......................................   (18,218)    (20,285)    (16,326)
Proceeds from sales of property, plant and equipment......        --       1,728         505
Increase in marketable securities.........................      (178)       (369)       (294)
Cash (invested in) or advances (to) from equity
companies..............................................       700         704        (673)
--------    --------    --------
Net cash used in investing activities..................   (17,696)    (18,222)    (16,788)
--------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings..............       684        (510)        160
Increase in Due from partners.............................   (12,643)    (69,320)    (43,138)
--------    --------    --------
Net cash used in financing activities..................   (11,959)    (69,830)    (42,978)
--------    --------    --------
Effect of exchange rate changes on cash and cash
equivalents..........................................    (2,487)        680      (4,143)
--------    --------    --------
Net increase (decrease) in cash and cash equivalents...    21,403      (9,944)       (604)
Cash and cash equivalents -- beginning of year..............    28,456      38,400      39,004
--------    --------    --------
Cash and cash equivalents -- end of year....................  $ 49,859    $ 28,456    $ 38,400
========    ========    ========
Cash paid during the year for:
Interest..................................................  $  1,274    $  1,322    $    959
========    ========    ========
Taxes.....................................................  $ 22,591    $ 15,424    $  8,604
========    ========    ========

The accompanying notes are an integral part of these statements.

F-73

237

INGERSOLL-DRESSER PUMP COMPANY

CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY

ACCUMULATED
OTHER            TOTAL
CONTRIBUTED   ACCUMULATED   COMPREHENSIVE    COMPREHENSIVE
CAPITAL      EARNINGS     INCOME (LOSS)    INCOME (LOSS)      TOTAL
-----------   -----------   --------------   --------------   ---------
(IN THOUSANDS)

At January 1, 1997............   $ 377,357     $ 41,755        $(18,066)                      $ 401,046
Net income....................                   31,328                         $ 31,328         31,328
Other comprehensive income
Foreign currency translation
adjustment...............                                  (16,018)         (16,018)       (16,018)
--------
Total comprehensive income....                                                    15,310
---------     --------        --------         --------      ---------
At December 31, 1997..........     377,357       73,083         (34,084)                        416,356
Net income....................                   58,650                           58,650         58,650
Other comprehensive loss
Foreign currency translation
adjustment...............                                    4,090            4,090          4,090
--------
Total comprehensive income....                                                    62,740
---------     --------        --------         --------      ---------
At December 31, 1998..........     377,357      131,733         (29,994)                        479,096
Net income....................                   49,533                           49,533         49,533
Offset of Due from partners...    (282,312)                                                    (282,312)
Other comprehensive income
Foreign currency translation
adjustment...............                                  (20,747)         (20,747)       (20,747)
--------
Total comprehensive income....                                                  $ 28,786
========
Effect of push-down accounting
for Ingersoll-Rand's
purchase of Halliburton's
interest....................     330,908      (88,820)         24,863                         266,951
---------     --------        --------                       ---------
At December 31, 1999..........   $ 425,953     $ 92,446        $(25,878)                      $ 492,521
=========     ========        ========                       =========

The accompanying notes are an integral part of these statements.

F-74

238

INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

1. SUMMARY OF FORMATION AND OPERATIONS

BACKGROUND AND FORMATION

On October 1, 1992, Ingersoll-Rand Company ("Ingersoll-Rand") and Dresser
Industries, Inc. ("Dresser Industries") (collectively the "Original Partners")
entered into a partnership agreement for the formation of Ingersoll-Dresser Pump
Company (the "Company"), a general partnership owned 51 percent by
Ingersoll-Rand Company and 49 percent by Dresser Industries, Inc. Upon
formation, the Original Partners contributed substantially all of the operating
assets (excluding domestic cash) and certain related liabilities which comprised
their worldwide centrifugal and reciprocating pumps businesses. The Original
Partners retained certain liabilities arising prior to the formation of the
partnership and guaranteed receivables contributed at inception. In September
1998, Dresser Industries completed a merger with Halliburton Company
("Halliburton") and transferred its interest in the Company to Halliburton.

On December 30, 1999, IDP Acquisition, LLC, a wholly-owned subsidiary of
Ingersoll-Rand, acquired Halliburton's interest in the Company. Indirectly,
Ingersoll-Rand wholly-owns the Company. During 1999, Ingersoll-Rand announced
its plans to sell the Company.

OPERATIONS

The Company principally serves the oil production and refining, chemical
process, marine, agricultural, electric utility and general manufacturing
industries. The Company was managed by a committee, on which, prior to the
acquisition of the Halliburton interest, the partners had proportionate
representation, based on their respective interest in the Company.

ACQUISITION OF HALLIBURTON'S INTEREST

As described above, on December 30, 1999, IDP Acquisition, LLC, a
wholly-owned subsidiary of Ingersoll-Rand, acquired Halliburton's interest in
the Company for $377,480. The cost of this acquisition in excess of the book
value of Halliburton's 49% interest, $266,951, has been recorded by the Company
using push-down accounting. Accordingly, the excess of the purchase price over
the book value of Halliburton's interest was allocated to the net tangible and
identifiable intangible assets based on their respective fair values and the
balance charged to goodwill. In addition, Halliburton's 49% interest in
accumulated earnings and foreign currency translation adjustment were eliminated
and charged to contributed capital.

The excess of Ingersoll-Rand's basis over the book value of Halliburton's
49% interest has been allocated to the assets and liabilities of the Company as
follows:

Total consideration......................................   $377,480
Book value of Halliburton's 49% interest.................    110,529
--------
Basis in excess of book value..........................    266,951
Fair value greater(less) than book value of Halliburton's
49% interest:
Inventory..............................................      3,430
Other current assets...................................       (572)
Property, plant and equipment..........................     71,276
Intangible assets......................................     76,884
Non-current liabilities................................    (17,528)
--------
Goodwill............................................   $133,461
========

F-75

239
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

PROFORMA INFORMATION (UNAUDITED)

If Ingersoll-Rand had acquired Halliburton's interest in the Company as of
January 1, 1999 or January 1, 1998, operating income would have been decreased
by $11,146 per year due to increased depreciation and amortization expense.
There would be no effect on net sales.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND CONSOLIDATION

The consolidated financial statements of the Company include all domestic
and foreign wholly-owned and majority-owned subsidiaries. All material
intercompany transactions and balances have been eliminated. Partially-owned
equity companies are accounted for under the equity method.

USE OF ESTIMATES

In conformity with generally accepted accounting principles, management has
used estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.

CASH EQUIVALENTS AND MARKETABLE SECURITIES

The Company considers all highly liquid investments consisting primarily of
treasury bills and notes, time deposits and commercial paper with a maturity of
three months or less when purchased, to be cash equivalents. Marketable
securities consist primarily of treasury bills, which are carried at cost, which
approximates market value.

INVENTORIES

Inventories are generally stated at cost, which is not in excess of market.
Cost is based on the first-in, first-out (FIFO) method or average cost.

PROPERTY AND DEPRECIATION

Property, plant and equipment is recorded at cost. The Company principally
uses accelerated depreciation methods for assets placed in service prior to
December 31, 1994 and the straight-line method for assets acquired subsequent to
that date. Property, plant and equipment are depreciated over the assets' useful
lives of 3-40 years. See Note 1 for a discussion of IDP Acquisition, LLC's
acquisition of the 49% interest owned by Halliburton and its impact on property,
plant and equipment. Depreciation expense was $17,910, $18,580 and $19,859 in
1999, 1998 and 1997, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents, accounts receivable,
short-term borrowings, and accounts payable are a reasonable estimate of their
fair value due to the short-term maturities of these instruments. See Note 13
for fair value of foreign exchange contracts.

INTANGIBLE ASSETS AND GOODWILL

Goodwill, which is the excess of the purchase price of acquisitions over
the fair value of the net assets acquired, is being amortized on a straight-line
basis over various periods not exceeding 40 years. Intangible assets represent
costs allocated to patents, tradenames, drawings, assembled workforce and other
specifically identifiable assets arising from business acquisitions. These
assets are amortized on a straight-

F-76

240
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

line basis over their estimated useful lives ranging from 9 to 40 years, with a
weighted average life of 20 years. Goodwill and intangible assets relate
primarily to the acquisition by IDP Acquisition, LLC of the 49% interest in the
Company owned by Halliburton as described in Note 1. Intangible assets are
evaluated for impairment whenever circumstances indicate that the carrying
amounts may not be recoverable. Any impairment would be recognized when the
expected future operating cash flows derived from such intangible asset is less
than their carrying value.

INCOME TAXES

The Company is a partnership and generally does not provide for U.S.
federal and state income taxes since all partnership income and losses are
allocated to the partners for inclusion in their respective income tax returns.
Income taxes are provided on the taxable earnings of foreign subsidiaries. The
Company applies Statement of Financial Accounting Standards ("SFAS") No. 109 for
determining deferred income taxes. Deferred taxes are provided on temporary
differences between assets and liabilities for financial reporting and tax
purposes as measured by enacted tax rates expected to apply when temporary
differences are settled or realized. A valuation allowance is established for
deferred tax assets for which realization is not likely.

ENVIRONMENTAL COSTS

Environmental expenditures relating to current operations are expensed or
capitalized as appropriate. Expenditures relating to existing conditions caused
by past operations, which do not contribute to current or future revenues, are
expensed. Costs to prepare environmental site evaluations and feasibility
studies are accrued when the Company commits to perform them. Any liabilities
for remediation costs would be recorded when they are probable and reasonably
estimable, generally the earlier of completion of feasibility studies or the
Company's commitment to a plan of action. The assessment of the liability is
calculated based on existing technology, does not reflect any offset for
possible recoveries from insurance companies and is not discounted. The only
environmental liabilities known to exist were caused prior to formation of the
partnership and remain the responsibility of the Original Partners.

RESEARCH, ENGINEERING AND DEVELOPMENT COSTS

Research and development expenditures, including some engineering costs,
are expensed when incurred and amounted to $2,984, $3,768 and $3,602 in 1999,
1998 and 1997, respectively.

FOREIGN CURRENCY

Assets and liabilities of foreign entities, where the local currency is the
functional currency, have been translated at year-end exchange rates, and income
and expenses have been translated using weighted average-for-the-year exchange
rates. Adjustments resulting from translation have been recorded in partners'
equity and are included in net earnings only upon sale or liquidation of the
underlying foreign investment.

For foreign subsidiaries where the U.S. dollar is the functional currency,
inventory and property balances and related income statement accounts have been
translated using historical exchange rates and resulting gains and losses have
been credited or charged to net earnings.

Foreign currency transactions and translations increased (decreased) other
income by $86, $(1,094) and $887 in 1999, 1998 and 1997, respectively.

The Company hedges certain foreign currency transactions and firm foreign
currency commitments by entering into forward foreign exchange contracts
(forward contracts). Gains and losses associated with currency rate changes on
forward contracts hedging foreign currency transactions are recorded currently
in

F-77

241
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

income. Gains and losses on forward contracts hedging firm foreign currency
commitments are deferred off-balance sheet and included as a component of the
related transaction; however, a loss is not deferred if deferral would lead to
the recognition of a loss in future periods. Cash flows resulting from forward
contracts are accounted for as hedges of identifiable transactions or events and
classified in the same category as the cash flows from the items being hedged.

REVENUE RECOGNITION AND WARRANTIES

Sales of products are recorded for financial reporting purposes generally
when the products are shipped. Estimated provisions for warranties are recorded
based on known problems and past experience.

STOCK-BASED COMPENSATION

SFAS No. 123, "Accounting for Stock-Based Compensation," requires companies
to measure employee stock compensation plans based on the fair value method of
accounting or to continue to apply APB No. 25, "Accounting for Stock Issued to
Employees," and provide pro forma footnote disclosures under the fair value
method in SFAS No. 123. The Company continues to apply the principles of APB No.
25 and has provided pro forma fair value disclosures in Note 14.

NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." As amended, this
Statement will become effective for the Company beginning January 1, 2001. The
Statement requires all derivatives to be recognized as assets or liabilities on
the balance sheet and measured at fair value. Changes in the fair value of
derivatives will be recognized in earnings or other comprehensive income,
depending on the designated purpose of the derivative. The Company is currently
evaluating the impact of adopting the standard and will comply as required.

In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial
Statements." As amended in June 2000, this bulletin will become effective in the
fourth quarter of 2000. SAB 101 expresses the SEC staff's view regarding the
application of generally accepted accounting principles to revenue recognition
in financial statements. The Company is currently evaluating the impact of
adopting the bulletin and will comply as required.

SUPPLEMENTAL CASH FLOW INFORMATION

Non-cash investing activity of $266,951 for the year ended December 31,
1999 relates to the acquisition by IDP Acquisition, LLC of Halliburton's
interest in the Company as described in Note 1. Non-cash financing activity for
the year ended December 31, 1999 relates to the reclassification of the Due from
Partners of $282,312 to equity as a result of the announced plans to sell the
Company.

F-78

242
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

3. INVENTORIES

At December 31, inventories were as follows:

1999       1998
--------   --------

Raw materials and supplies..................................  $ 17,430   $ 19,348
Work-in-process.............................................    46,671     50,806
Finished goods..............................................    46,119     45,901
--------   --------
Total.............................................  $110,220   $116,055
========   ========

Work-in-process inventory is stated after deducting customer progress
payments of $11,498 and $12,177 in 1999 and 1998, respectively.

4. INTANGIBLES AND GOODWILL

At December 31, intangibles were as follows:

1999      1998
-------   ------

Assembled Workforce.........................................  $18,400   $   --
Computer Software...........................................    4,100       --
Drawings....................................................   31,100       --
Distribution Network........................................    7,100       --
Trademarks..................................................   15,800       --
Other.......................................................    2,362    1,248
Less -- amortization........................................     (772)    (867)
-------   ------
Total.............................................  $78,090   $  381
=======   ======

Amortization of intangible assets was $133, $183 and $29 in 1999, 1998 and
1997, respectively.

At December 31, goodwill was as follows:

1999      1998
--------   -------

Goodwill....................................................   142,661     9,214
Less -- amortization........................................    (1,214)   (1,016)
--------   -------
Total.............................................  $141,447   $ 8,198
========   =======

Amortization of goodwill was $208 in 1999, 1998 and 1997.

F-79

243
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

5. TRADE ACCOUNTS PAYABLE AND ACCRUALS

At December 31, trade accounts payable and accruals were as follows:

1999       1998
--------   --------

Trade accounts payable......................................  $ 81,268   $ 98,695
Accrued:
Compensation..............................................    35,622     33,912
Vacation..................................................    10,433     11,084
Income taxes..............................................     9,693     10,758
Taxes other than income...................................     6,719      8,294
Warranty expense..........................................    11,255     13,178
Commissions...............................................    10,786     13,540
Other.....................................................    29,267     35,366
--------   --------
$195,043   $224,827
========   ========

6. INVESTMENTS IN PARTIALLY-OWNED EQUITY COMPANIES

The Company has three investments, 50 percent in Niigata Worthington, 36.6
percent in Industrias Medina and 25 percent in Thompsons, Kelly & Lewis Pty.
Ltd., which operate in similar lines of business. The Company's investments in
and amounts due (to) from partially-owned equity companies amounted to $12,409
and $(130), respectively, at December 31, 1999 and $12,125 and $561,
respectively, at December 31, 1998. The Company's investment in Industrias
Medina is valued at zero at December 31, 1999 and 1998. The Company's equity in
the net earnings of its partially-owned equity companies was $756, $286, and
$795 in 1999, 1998 and, 1997, respectively. The Company received dividends based
on its equity interests in these companies of $472, $422, and $1,147 in 1999,
1998, and 1997, respectively. The Company received royalties from
partially-owned equity companies, included in other income, of $992, $875 and
$1,200 in 1999, 1998 and 1997, respectively.

In 1997, the Company established a reserve of $2.5 million for the
estimated impact on outstanding receivables of the economic crisis in the
Asia-Pacific region. During 1999, this reserve was released and recorded as
other income as management believes the situation has now sufficiently improved
and no reserve is considered necessary.

Summarized financial information for these partially-owned equity companies
at December 31, was:

1999      1998
-------   -------

Current assets..............................................  $42,189   $43,317
Property, plant and equipment, net..........................   23,567    24,317
Other assets................................................    3,365       750
-------   -------
Total assets......................................  $69,121   $68,384
=======   =======
Current liabilities.........................................  $26,934   $32,048
Long-term debt..............................................    5,933     2,813
Other liabilities...........................................    1,222       821
Total shareowners' equity.........................   35,032    32,702
-------   -------
Total liabilities and shareowners' equity.........  $69,121   $68,384
=======   =======

F-80

244
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1999        1998         1997
---------   ---------   ----------

Net sales..............................................   $84,349     $82,380     $104,308
=======     =======     ========
Gross profit...........................................   $19,489     $18,788     $ 24,650
=======     =======     ========
Net earnings...........................................   $ 2,617     $ 1,536     $  2,449
=======     =======     ========

7. CREDIT FACILITIES

Credit facilities have been arranged with banks outside the United States
under which the Company's foreign operating units may borrow on an overdraft or
short-term note basis. Available foreign lines of credit were $14,827, of which
$13,525 was unused at December 31, 1999.

8. COMMITMENTS AND CONTINGENCIES

The Company is involved in various litigation, claims and administrative
proceedings, including environmental matters, arising in the normal course of
business. Amounts recorded for identified contingent liabilities are estimates,
which are reviewed periodically and adjusted to reflect additional information
when it becomes available. Subject to the uncertainties inherent in estimating
future costs for contingent liabilities, management believes that recovery or
liability with respect to these matters would not have a material effect on the
financial condition or the results of operations of the Company for any year.

In the normal course of business, the Company has issued several direct and
indirect guarantees, including performance letters of credit, totaling
approximately $97,308 at December 31, 1999. Management believes these guarantees
will not adversely affect the consolidated financial statements.

As of December 31, 1999 and 1998, the Company had no significant
concentrations of credit risk in trade receivables due to the large number of
customers which comprise its receivable base and their dispersion across
different industries and countries.

All principal manufacturing facilities are owned by the Company. Certain
office and warehouse facilities, transportation vehicles and data processing
equipment are leased. Total rental expense was $4,067, $5,033 and $5,375 in
1999, 1998 and 1997, respectively. Minimum lease payments required under
noncancellable operating leases with terms in excess of one year for the next
five years and thereafter, are as follows: $3,005 in 2,000, $1,794 in 2001,
$1,471 in 2002, $919 in 2003, $591 in 2004 and $256 thereafter.

The Company has entered into employment contracts with a number of its key
executives and employees providing severance and stay bonuses, which become
effective upon the sale of the Company by Ingersoll-Rand.

9. INCOME TAXES

Earnings before income taxes for the years ended December 31 were
attributable to the following jurisdictions:

1999      1998      1997
-------   -------   -------

United States...........................................  $30,808   $48,315   $17,461
Foreign.................................................   37,690    26,908    27,095
-------   -------   -------
Total.........................................  $68,498   $75,223   $44,556
=======   =======   =======

F-81

245
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

The provision for income taxes is summarized for the years ended December
31 as follows:

1999      1998      1997
-------   -------   -------

Current tax expense:
United States.........................................  $   195   $   516   $   572
Foreign...............................................   18,984    16,931    13,751
-------   -------   -------
Total current.........................................   19,179    17,447    14,323
-------   -------   -------
Deferred tax expense (benefit):
Foreign...............................................    2,106      (874)   (1,095)
Valuation allowance...................................   (2,320)       --        --
-------   -------   -------
Total deferred........................................     (214)     (874)   (1,095)
-------   -------   -------
Total provision for income taxes......................  $18,965   $16,573   $13,228
=======   =======   =======

During the year, the Company experienced a change in circumstances
regarding the realizability of the net operating loss carryforward deferred tax
asset associated with the Company's German operations. As a result of a
significant, positive trend in the level of profitability of these German
operations, a full reversal of the $2,320 valuation allowance against this
deferred tax asset was deemed appropriate.

The provision for income taxes differs from the amount of income taxes
determined by applying the applicable U.S. statutory income tax rate to pretax
income as a result of the following differences:

PERCENT OF PRETAX INCOME
------------------------
1999     1998     1997
------   ------   ------

Statutory U.S. rates........................................   35.0%    35.0%    35.0%
Increase (decrease) in rates resulting from:
U.S. tax on partnership earnings not provided.............  (15.2)   (22.1)   (11.8)
Foreign operations........................................   11.2      9.1      6.5
Valuation allowance.......................................   (3.3)      --       --
-----    -----    -----
Effective tax rate..........................................   27.7%    22.0%    29.7%
=====    =====    =====

The primary reason for the difference is that no U.S. federal or state
taxes are levied upon the Company because it is a partnership for U.S. tax
purposes. Under U.S. tax law, such taxes are levied upon the partners rather
that the partnership.

F-82

246
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

A summary of the deferred tax accounts at December 31 follows:

1999      1998
--------   -------

Current deferred assets and (liabilities):
Differences between book and tax bases in inventory and
receivables............................................  $    (73)  $   587
Differences between book and tax expense for other
employee related benefits and allowances...............       560       902
Other reserves and valuation allowances in excess of tax
deductions.............................................     6,876     3,339
Other differences between tax and financial statement
values.................................................     5,237     5,646
--------   -------
Gross current deferred net tax assets.............    12,600    10,474
--------   -------
Noncurrent deferred tax assets and (liabilities):
Book depreciation in excess of tax depreciation...........    (2,413)   (2,925)
Difference between book and tax basis in plant and
equipment and identifiable intangibles resulting from
pushdown accounting....................................   (23,458)       --
Net operating loss carryforwards..........................       564     3,331
--------   -------
Gross noncurrent deferred net tax (liabilities) and
assets...............................................   (25,307)      406
Less: deferred tax valuation allowances................        --    (2,320)
--------   -------
Total net deferred tax (liabilities) and assets...  $(12,707)  $ 8,560
========   =======

10. RESTRUCTURING

In the first quarter of 1996, the Company decided to close a steel foundry
at one of its operations. In connection with this restructuring of its
operations, the Company charged $4,500 to operating income for the year ended
December 31, 1996, primarily for severance payments and pension benefits
associated with work force reductions of 43 foundry employees, of which 35 were
hourly and 8 were salaried. Other exit costs associated with the shutdown of
$100, $500 and $200 were charged to operating income in 1997, 1998 and 1999,
respectively.

Operational restructuring reserve at March 31, 1996.......   $ 4,500
Payments applied against restructuring reserve in
1996.................................................      (405)
-------
Operational restructuring reserve at December 31, 1996....     4,095
Payments applied against restructuring reserve in
1997.................................................    (4,095)
-------
Operational restructuring reserve at December 31, 1997....   $    --
=======

In the first quarter of 1997, the Company approved a restructuring plan to
close the pattern makers operations and to consolidate the administration of two
of its operations. Pattern maker and administrative personnel were reduced by 18
employees, of which 6 were hourly and 12 were salaried. Restructuring expense of
$1,600 was charged to operating income for the year ended December 31, 1997. The
main components of the restructuring were termination benefits of $1,300 and
other expenses of $300, all of which was paid during 1997.

In the fourth quarter of 1997, the Company approved another restructuring
plan to reduce administrative and sales personnel, consolidate repair and
service operations and discontinue certain product lines. Personnel were reduced
by 226 employees, of which 127 were hourly and 99 were salaried. The Company
recognized charges of $17,800 to operating income for the year ended December
31, 1997, primarily for severance payments, pension and medical payments and
$1,200 for inventory write-offs. Other exit costs associated with the shutdown
of $3,100 and $2,400 of inventory write-offs were charged to

F-83

247
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

operating income in 1998. The inventory write-offs have been included in cost of
goods sold in the respective years.

In connection with the plan described above, the Company has incurred
expenses associated with the operational restructuring as follows:

Operational restructuring reserve at November 20, 1997....  $ 17,800
Payments applied against restructuring reserve in
1997.................................................    (1,045)
--------
Operational restructuring reserve at December 31, 1997....    16,755
Payments applied against restructuring reserve in
1998.................................................   (15,385)
--------
Operational restructuring reserve at December 31, 1998....     1,370
Payments applied against restructuring reserve in
1999.................................................    (1,370)
--------
Operational restructuring reserve at December 31, 1999....  $     --
========

11. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

The Company sponsors both pension and postretirement plans that cover most
domestic employees and certain employees in other countries.

PENSION

The Company's domestic salaried pension plans principally provide benefits
based on a career-average earnings formula. The Company's domestic hourly
pension plans provide benefits under flat-benefit formulas. Foreign plans
provide benefits based on earnings and years of service. Some of the foreign
plans require employee contributions based on the employee's earnings. The
Company's policy is to fund an amount which could be in excess of the pension
cost expensed, subject to the limitations posed by current statutes or tax
regulations.

Assets of the domestic pension plans are invested in equity securities,
cash equivalents and debt securities. Assets of foreign pension plans are
invested principally in equity securities.

OTHER POSTRETIREMENT BENEFITS

The Company funds other postretirement benefit costs principally on a
pay-as-you-go basis, with the retiree paying a portion of the costs. In
situations where full-time employees retire from the Company between age 55 and
65, most are eligible to receive, at a cost to the retiree, certain health care
benefits identical to those available to active employees. After attaining age
65, an eligible retiree's health care benefit coverage becomes coordinated with
Medicare, with the retiree paying a portion of the cost of the coverage.

F-84

248
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Summary information on the Company's plans at December 31, was as follows:

PENSION BENEFITS       OTHER BENEFITS
-------------------   -------------------
1999       1998       1999       1998
--------   --------   --------   --------

Change in benefit obligation
Benefit obligation at beginning of
year..................................  $ 92,830   $ 84,096   $ 37,923   $ 30,083
Service cost.............................     6,920      6,584        891        822
Interest cost............................     6,332      5,957      2,587      2,478
Plan participants' contributions.........     1,041      1,111        207        168
Amendments...............................        20        915         --         --
Plan transfers...........................     1,348         --         --         --
Actuarial (gain) loss....................    (1,532)    (1,689)    (2,339)     6,582
Benefits paid............................    (4,353)    (4,330)    (2,417)    (2,210)
Expenses paid............................      (265)      (288)        --         --
Special termination benefit..............        --         39         --         --
Foreign exchange translation.............    (2,613)       435         --         --
--------   --------   --------   --------
Benefit obligation at end of year........    99,728     92,830     36,852     37,923
--------   --------   --------   --------
Change in plan assets
Fair value of plan assets at beginning of
year..................................    68,096     54,489         --         --
Actual return on plan assets.............     7,454      8,496         --         --
Employer contribution....................    11,203      7,046         --         --
Plan participants' contributions.........     1,041      1,111         --         --
Benefits paid............................    (3,530)    (2,451)        --         --
Expenses paid............................      (265)      (288)        --         --
Foreign exchange translation.............      (561)      (307)        --         --
--------   --------   --------   --------
Fair value of plan assets at end of
year..................................    83,438     68,096         --         --
Funded status............................   (16,290)   (24,734)   (36,852)   (37,923)
Unrecognized net actuarial (gain)........    (4,797)    (7,763)    (3,902)    (5,407)
Unrecognized prior service cost..........     4,470      8,780     (3,603)    (7,695)
Unrecognized transition obligation.......     1,660      3,798         --         --
--------   --------   --------   --------
Net amount recognized....................  $(14,957)  $(19,919)  $(44,357)  $(51,025)
========   ========   ========   ========
Amounts recognized in the balance sheet
consist of:
Prepaid (accrued) benefit cost...........  $    408   $ (2,244)  $     --   $     --
Accrued benefit liability................   (16,049)   (17,918)   (44,357)   (51,025)
Intangible asset.........................       684        243         --         --
--------   --------   --------   --------
Net amount recognized....................  $(14,957)  $(19,919)  $(44,357)  $(51,025)
========   ========   ========   ========

F-85

249
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Weighted-average assumptions as of December 31 were as follows:

PENSION BENEFITS    OTHER BENEFITS
----------------    --------------
1999      1998     1999     1998
------    ------    -----    -----

Discount rate
U.S. plans..........................................   7.5%      6.8%      7.5%     6.8%
Foreign plans.......................................   6.0%      6.3%       --       --
Expected return on plan assets
U.S. plans..........................................   9.0%      9.0%       --       --
Foreign plans.......................................   7.8%      8.0%       --       --
Rate of compensation increase
U.S. plans..........................................   5.3%      4.5%       --       --
Foreign plans.......................................   3.5%      3.9%       --       --

For measurement purposes, the per capita cost of covered health care
benefits was assumed to increase at 6.0 percent for pre-65 benefits and 5.7
percent for post-65 benefits from 1999 to 2000. The rate was assumed to decrease
gradually to 4.5 percent by 2003 and remain at that level thereafter.

PENSION BENEFITS              OTHER BENEFITS
---------------------------   ------------------------
1999      1998      1997      1999     1998     1997
-------   -------   -------   ------   ------   ------

Components of net periodic
benefit cost
Service cost.................  $ 6,920   $ 6,584   $ 6,327   $  891   $  822   $  630
Interest cost................    6,332     5,957     5,420    2,587    2,478    2,024
Expected return on net
assets....................   (6,020)   (5,015)   (3,609)      --       --       --
Amortization of transition
obligation................      701       713       709       --       --       --
Amortization of prior service
cost......................    1,232     1,016     1,063     (589)    (589)    (589)
Recognized net actuarial
gain......................      (42)     (162)      (52)     (96)    (232)    (790)
-------   -------   -------   ------   ------   ------
Net periodic benefit cost....  $ 9,123   $ 9,093   $ 9,858   $2,793   $2,479   $1,275
=======   =======   =======   ======   ======   ======

The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $73,203, $60,456, and $50,284, respectively, as of
December 31, 1999, and $70,258, $59,916, and $41,871, respectively, as of
December 31, 1998.

Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percent-point change in
assumed health care cost trend rates would have the following effects:

1-PERCENTAGE      1-PERCENTAGE
POINT INCREASE    POINT DECREASE
--------------    --------------

Effect on total of service and interest cost
components.............................................      $  250            $  186
Effect on postretirement benefit obligation..............      $2,948            $2,690

Most of the Company's domestic employees are covered by savings and other
defined contribution plans. Employer contributions are determined based on
criteria specific to the individual plans and amounted to $3,301, $3,384 and
$3,367 in 1999, 1998 and 1997, respectively.

F-86

250
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

The Company's contribution relating to foreign defined contribution plans,
insured plans and other foreign benefit plans were $1,726, $2,514 and $2,320 in
1999, 1998 and 1997 respectively.

12. RELATED PARTY TRANSACTIONS

In the normal course of business, the Company engaged in sales and
purchases of manufactured products with the Original Partners. Ingersoll-Rand
provides services, such as accounting, legal and tax services to the Company.
For this the Company paid a flat fee of $3,600 in 1999, 1998 and 1997. The fee
was determined by mutual agreement of the Original Partners based on the
estimated costs of the services provided. Management believes that the fee is
reasonable, but may not necessarily be indicative of the costs that would have
been incurred had the Company performed these functions.

The Company recorded sales of $1,185, $1,979 and $3,124 and purchases of
$5,087, $5,550 and $4,409 with the Original Partners and their affiliates in
1999, 1998 and 1997, respectively. They received rent from the Original Partners
and their affiliates of $688, $749 and $668 in 1999, 1998 and 1997,
respectively. The Company performs accounting services for several foreign
locations of Ingersoll-Rand for a fee of $647, $1,003 and $1,197 in 1999, 1998
and 1997, respectively.

Due to Ingersoll-Rand's intent to sell the Company, Ingersoll-Rand does not
plan to reimburse the Company for advances and loans from the Company. Therefore
the advances and loans due from Ingersoll-Rand have been offset and charged to
Contributed Capital at December 31, 1999.

Amounts due (to) from Original Partners are summarized as follows:

DECEMBER 31, 1999
---------------------------------------
INGERSOLL-RAND   HALLIBURTON    TOTAL
--------------   -----------   --------

Trade accounts receivable.........................     $  1,885       $     39     $  1,924
========       ========     ========
Accounts payable..................................     $(14,125)      $     --     $(14,125)
========       ========     ========

DECEMBER 31, 1998
---------------------------------------
INGERSOLL-RAND   HALLIBURTON    TOTAL
--------------   -----------   --------

Trade accounts receivable.........................     $  1,406       $     64     $  1,470
Advances and loans................................     $ 35,834       $ 18,989     $ 54,823
--------       --------     --------
$ 37,240       $ 19,053     $ 56,293
========       ========     ========
Advances -- non-current...........................     $109,098       $118,436     $227,534
========       ========     ========
Accounts payable..................................     $ (9,602)      $     --     $ (9,602)
========       ========     ========

Foreign loans, included in advances above, bear interest at rates from 2.5%
to 4.75%. Interest income from these advances of $2,696, $4,601 and $3,025 have
been included in other income in 1999, 1998 and 1997. Other third party interest
income, also included in other income, was $1,315, $2,130 and $2,437 in 1999,
1998 and 1997.

13. FINANCIAL INSTRUMENTS

The Company maintains significant operations in foreign countries. As a
result of these global activities, the Company is exposed to changes in foreign
currency exchange rates, which affect the results of operations and financial
condition. The Company manages exposure to changes in foreign currency exchange
rates through its normal operating and financing activities, as well as through
the use of financial instruments.

F-87

251
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Generally, the only financial instruments the Company utilizes are forward
exchange contracts.

The purpose of the Company's hedging activities is to mitigate the impact
of changes in foreign currency exchange rates. The Company attempts to hedge
transaction exposures through natural offsets. To the extent that this is not
practicable, major exposure areas considered for hedging include foreign
currency denominated receivables and payables, intercompany loans, firm
committed transactions, anticipated sales and purchases, and dividends relating
to foreign subsidiaries. The following table summarizes by major currency the
contractual amounts of the Company's forward contracts in U.S. dollars. Foreign
currency amounts are translated at year-end rates at the respective reporting
date. The "buy" amounts represent the U.S. equivalent of commitments to purchase
foreign currencies, and the "sell" amounts represent the U.S. equivalents of
commitments to sell foreign currencies. Some of the forward contracts involve
the exchange of two foreign currencies according to local needs in foreign
subsidiaries.

At December 31, the contractual amounts were:

1999               1998
----------------   -----------------
BUY      SELL      BUY      SELL
-------   ------   -------   -------

British pounds..................................  $26,719   $3,359   $12,647   $ 4,112
Deutsche marks..................................      748       --     3,501       878
Dutch guilders..................................       --       --       969       969
French francs...................................    2,105       --        --       313
Italian lire....................................   11,797       --     9,785        --
Euros...........................................   26,649    3,096        --        --
Spanish pesetas.................................    4,421    1,386       540     4,571
Others..........................................    5,191       --       398     2,654
-------   ------   -------   -------
Total.................................  $77,630   $7,841   $27,840   $13,497
=======   ======   =======   =======

Forward contracts utilized by the Company had maturities of one to twelve
months.

The Company's forward contracts that hedge transactions or firm commitments
do not subject the Company to risk due to foreign exchange rate movement, since
gains and losses on these contracts generally offset losses and gains on the
assets, liabilities or other transactions being hedged. Contracts purchased to
mitigate the variability of future cash flows of foreign subsidiaries bear
market risk to the extent actual transacted amounts vary from the forecasted
amounts. All gains and losses on these contracts have been included in earnings.

The counterparties to the Company's forward contracts consist of a number
of major international financial institutions. The credit ratings and
concentration of risk of these financial institutions are monitored on a
continuing basis and present no significant credit risk to the Company.

F-88

252
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

The following table summarizes the estimated fair value of the Company's
remaining financial instruments at December 31:

1999      1998
-------   -------

Forward contracts
Contract (notional) amounts:
Buy contracts..........................................  $77,630   $27,840
Sell contracts.........................................    7,841    13,497
Fair (market) values:
Buy contracts..........................................   77,910    21,312
Sell contracts.........................................    7,884    14,493

Fair value of forward contracts are based on dealer quotes at the
respective reporting dates.

14. STOCK BASED COMPENSATION PLANS

The Company offers two stock based compensation plans to certain eligible
employees. These programs -- the Ingersoll-Dresser Pump Phantom Stock Option
Plan (the "Phantom Stock Plan") and the Ingersoll-Dresser Pump Long-Term
Incentive Performance Plan (the "Long-Term Incentive Plan") -- are designed to
reward the executive management of the Company for their contribution to the
long term success of the Company and its Original Partners.

Under the terms of the Phantom Stock Plan eligible employees receive
phantom options, the exercise price of which is based on the fair market value
of the common stock of the Original Partners. These phantom options vest ratably
over a three-year period and expire 10 years after the date of the grant. Upon
exercise, the phantom option holder is entitled to a cash payment equal to the
difference between the fair market value of the Original Partners' common stock
at the date of grant and the date the phantom option is exercised. The Company
made an initial grant of phantom options to eligible employees on January 1,
1995, although the grant was deemed to have taken place on January 1, 1994 for
vesting purposes. The maximum number of shares of common stock, with respect to
which phantom options may be exercised pursuant to the Phantom Stock Option
Plan, is 5,000,000 each of Ingersoll-Rand and Halliburton (formerly Dresser
Industries). The phantom options based on the fair market value of the
Ingersoll-Rand common stock can be exercised independently of the phantom
options based on the Halliburton common stock, and vice versa. The Phantom Stock
Plan does not issue shares, or options to purchase shares, in the common stock
of the Original Partners. Subsequent to the purchase of Halliburton's interest
in the Company by IDP Acquisition, LLC, the Phantom Stock Plan continues to be
based on the common stock values of the Original Partners.

F-89

253
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Changes in phantom options outstanding under the Phantom Stock Plan were as
follows:

SHARES ON WHICH PHANTOM               OPTION PRICE
OPTIONS ARE BASED                RANGE PER SHARE
----------------------------   ------------------------------
INGERSOLL-RAND   HALLIBURTON   INGERSOLL-RAND    HALLIBURTON
--------------   -----------   --------------   -------------

As of December 31, 1996.........      241,905        340,226     $21.25-$23.25    $19.13-$24.32
Granted.......................      155,296        127,886             29.88            31.19
Exercised.....................     (134,254)      (197,395)     21.25- 23.25     19.13- 24.32
--------       --------
As of December 31, 1997.........      262,947        270,717     $21.25-$29.88    $19.13-$31.19
Granted.......................      147,917        169,463             40.69            41.81
Exercised.....................     (100,270)       (89,440)     21.25- 29.88     19.13- 31.19
--------       --------
As of December 31, 1998.........      310,594        350,740     $21.25-$40.69    $19.13-$41.81
Granted.......................       90,007         84,899             47.31            29.66
Exercised.....................     (133,331)       (51,316)     21.25- 40.69     19.13- 41.81
--------       --------
As of December 31, 1999.........      267,270        384,323     $21.25-$47.31    $19.13-$41.81
========       ========

The following table summarizes information concerning currently outstanding
and exercisable phantom options:

INGERSOLL-RAND
------------------------------------------------------
OPTIONS       OUTSTANDING      OPTIONS
OUTSTANDING AT     OPTIONS     EXERCISABLE AT
OPTION    DECEMBER 31,     REMAINING     DECEMBER 31,
PRICE         1999           LIFE            1999
------   --------------   -----------   --------------

$21.25        4,473            5             4,473
23.25       21,049            6            21,049
29.88       38,037            7             2,800
40.69      113,704            8            19,848
47.31       90,007            9            29,972

HALLIBURTON
------------------------------------------------------
OPTIONS       OUTSTANDING      OPTIONS
OUTSTANDING AT     OPTIONS     EXERCISABLE AT
OPTION    DECEMBER 31,     REMAINING     DECEMBER 31,
PRICE         1999           LIFE            1999
------   --------------   -----------   --------------

$19.13        4,637            5             4,637
24.31       60,868            6            60,868
31.19       70,324            7            44,221
41.81      163,595            8            50,741
29.66       84,899            9            28,271

Under the terms of the Long-Term Incentive Plan, qualifying employees were
awarded Ingersoll-Dresser Performance Units, which were based upon the value of
one share of Ingersoll-Rand common stock and one share of Halliburton common
stock. Cash payments were awarded to participants based on increases in the
value of the Original Partners' common stock, and the return on invested capital
of the Company. The Plan was based on a four-year cycle that ended on December
31, 1998. An interim payment was made after two years and the final payment was
paid in February 1999. In the period between payouts, the increase in the value
of the units was credited to individual participant accounts in the form of
so-called common stock equivalents. The number of common stock equivalents
credited to participants' accounts at December 31, 1998, was 42,238. The
Long-Term Incentive Plan does not issue shares, or options to purchase shares,
in the common stock of the Original Partners.

F-90

254
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

As permitted by SFAS No. 123, "Accounting for Stock Based Compensation"
("SFAS 123"), the Company continues to account for its stock-based compensation
plans in accordance with Accounting Principles Board Option No. 25, "Accounting
for Stock Issued to Employees," and its related interpretations. Accordingly,
compensation expense of $4,163, $4,257 and $10,100 has been recognized in
operating income for the years ended December 31, 1999, 1998 and 1997,
respectively. Due to the nature of the plans, as described above, the Company
determined that had compensation cost been determined consistent with the
methodology presented under SFAS 123, there would be no impact on the Company's
net income.

15. BUSINESS SEGMENT INFORMATION

Effective January 1, 1998, the Company adopted SFAS No. 131 "Disclosure
About Segments of an Enterprise and Related Information.," SFAS No. 131 requires
disclosure of certain financial and descriptive information about operating
segments. In addition, SFAS No. 131 requires disclosures about products and
services, and geographic areas. Operating segments are defined as components of
a Company engaging in business activities for which separate financial
information is available and evaluated regularly by the chief operating decision
maker in assessing performance and allocating resources.

The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies, except that the
operating segments results are prepared on a management basis that is consistent
with the manner in which the Company desegregates financial information for
internal review and decision making. The Company evaluates performance based on
operating income contribution rates.

INDUSTRIAL PRODUCTS

The Industrial Products Segment refers to operations that produce standard
products typically furnished to customers requiring a low level of
customization. These pumps are largely sold through distributors and serve a
variety of general manufacturing applications.

ENGINEERED PRODUCTS

The Engineered Products Segment refers to operations that produce custom
engineered pumps based on client specifications. These pumps service the oil
production and refining, chemical process, marine, agricultural and electric
utility markets.

F-91

255
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

A summary of operations by reportable segments for the years ended December
31, was as follows:

1999       1998       1997
--------   --------   --------

INDUSTRIAL PRODUCTS
Sales..............................................  $268,656   $330,084   $331,075
========   ========   ========
Operating income...................................  $ 11,907   $ 30,331   $ 33,973
========   ========   ========
Operating income as a percentage of sales..........       4.4%       9.2%      10.3%
========   ========   ========
Depreciation and amortization......................  $ 11,184   $  7,802   $  8,078
========   ========   ========
ENGINEERED PRODUCTS
Sales..............................................  $569,734   $577,084   $534,017
========   ========   ========
Operating income...................................  $ 48,431   $ 47,522   $ 31,121
========   ========   ========
Operating income as a percentage of sales..........       8.5%       8.2%       5.8%
========   ========   ========
Depreciation and amortization......................  $  7,067   $ 11,169   $ 12,018
========   ========   ========
TOTAL
Sales..............................................  $838,390   $907,168   $865,092
========   ========   ========
Operating income from reportable segments..........    60,338     77,853     65,094
Restructuring expense..............................       200      3,600     19,500
Unallocated corporate (income) expenses............    (2,276)     4,471      3,924
--------   --------   --------
Total operating income.............................  $ 62,414   $ 69,782   $ 41,670
========   ========   ========
Operating income as a percentage of sales..........       7.4%       7.7%       4.8%
========   ========   ========
Depreciation and amortization......................  $ 18,251   $ 18,971   $ 20,096
========   ========   ========

Geographic customer sales by destination for the years ended December 31
were as follows:

1999       1998       1997
--------   --------   --------

SALES
United States......................................  $353,756   $344,923   $291,100
Foreign............................................   484,634    562,245    573,992
--------   --------   --------
Total......................................  $838,390   $907,168   $865,092
========   ========   ========

Long-lived asset information by geographic area as of December 31 was as
follows:

1999       1998
--------   --------

Long-lived assets
United States.............................................  $268,214   $ 68,337
Foreign...................................................   142,010     67,500
Due from partners.........................................        --    227,534
--------   --------
Total.............................................  $410,224   $363,371
========   ========

F-92

256
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

16. GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS

On August 8, 2000, Flowserve Corporation ("Flowserve") acquired the Company
from the Partners. In connection with its purchase of the Company, Flowserve
issued unsecured senior subordinated notes. The notes will be unconditionally
guaranteed, jointly and severally, by certain subsidiaries of Flowserve,
including its existing and subsequently acquired domestic subsidiaries.

Accordingly, the following condensed consolidating financial information
presents:

(1) Condensed consolidating financial statements at December 31, 1999
and 1998 and for the years ended December 31, 1999, 1998 and 1997, of (a)
the guarantor subsidiaries ("domestic"); (b) the nonguarantor subsidiaries
("foreign"); and (c) the Company on a consolidated basis, and

(2) Elimination entries necessary to consolidate the guarantor and
nonguarantor subsidiaries.

Investments in subsidiaries are accounted for by the parent using the
equity method of accounting. The guarantor and nonguarantor subsidiaries are
presented on a combined basis. The principal elimination entries eliminate
investments in subsidiaries and intercompany balances and transactions.

F-93

257
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Separate financial statements for the guarantor subsidiaries and the
nonguarantor subsidiaries are not presented because management believes that
such financial statements would not be meaningful to investors.

CONDENSED CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1999
----------------------------------------------
DOMESTIC   FOREIGN    ELIMINATIONS     TOTAL
--------   --------   ------------   ---------

ASSETS

Current assets:
Cash and cash equivalents.....................  $  6,038   $ 43,821   $         --   $  49,859
Marketable securities.........................        --      3,268             --       3,268
Accounts and notes receivable, net............    81,168    119,047             --     200,215
Accounts receivable from affiliates...........     3,765     50,984        (54,749)         --
Due from partners.............................     1,547        377             --       1,924
Inventories, net of progress payments.........    61,930     47,240          1,050     110,220
Other current assets..........................     2,724     18,008             --      20,732
--------   --------   ------------   ---------
157,172    282,745        (53,699)    386,218
Investment in affiliates........................   180,437         --       (180,437)         --
Property, plant and equipment, at cost:.........   145,237    143,330            (69)    288,498
Less -- accumulated depreciation..............   (55,248)   (58,869)            23    (114,094)
--------   --------   ------------   ---------
89,989     84,461            (46)    174,404
Intangibles.....................................    65,943     12,147             --      78,090
Goodwill........................................   112,783     28,664             --     141,447
Other assets....................................    11,064      3,666          1,553      16,283
--------   --------   ------------   ---------
Total assets..........................  $617,388   $411,683   $   (232,629)  $ 796,442
========   ========   ============   =========

LIABILITIES AND PARTNERS' EQUITY

Current liabilities:
Trade accounts payable and accruals...........  $ 72,292   $122,593   $        158   $ 195,043
Accounts payable from affiliates..............    48,589      5,245        (53,834)         --
Due to partners...............................    13,538        587             --      14,125
Other current liabilities.....................        --      2,188             --       2,188
--------   --------   ------------   ---------
134,419    130,613        (53,676)    211,356
Deferred income taxes...........................        --     25,307             --      25,307
Postemployment liabilities......................    50,689     16,470             --      67,159
Other non-current liabilities...................        99         --             --          99
--------   --------   ------------   ---------
Total liabilities.....................   185,207    172,390        (53,676)    303,921
--------   --------   ------------   ---------
Partners' equity:
Capital Stock.................................        --     96,374        (96,374)         --
Contributed capital...........................   377,562    121,032        (72,641)    425,953
Accumulated earnings..........................    54,619     37,657            170      92,446
--------   --------   ------------   ---------
432,181    255,063       (168,845)    518,399
Accumulated other comprehensive loss..........        --    (15,770)       (10,108)    (25,878)
--------   --------   ------------   ---------
Partners' equity......................   432,181    239,293       (178,953)    492,521
--------   --------   ------------   ---------
Total liabilities and partners'
equity..............................  $617,388   $411,683   $   (232,629)  $ 796,442
========   ========   ============   =========

F-94

258
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONDENSED CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1998
------------------------------------------------
DOMESTIC     FOREIGN    ELIMINATIONS     TOTAL
---------   ---------   ------------   ---------

ASSETS

Current assets:
Cash and cash equivalents...................  $      --   $  28,456    $      --     $  28,456
Marketable securities.......................         --       3,607           --         3,607
Accounts and notes receivable, net..........     86,460     122,892           --       209,352
Accounts receivable from affiliates.........    (16,314)     39,343      (23,029)           --
Due from partners...........................      1,246      55,047           --        56,293
Inventories, net of progress payments.......     64,921      50,541          593       116,055
Other current assets........................      4,897      18,521           --        23,418
---------   ---------    ---------     ---------
141,210     318,407      (22,436)      437,181
Investment in affiliates......................    180,437                 (180,437)           --
Due from partners.............................    227,534          --           --       227,534
Property, plant and equipment, at cost:.......    175,499     179,125          (68)      354,556
Less -- accumulated depreciation............   (117,743)   (126,017)          46      (243,714)
---------   ---------    ---------     ---------
57,756      53,108          (22)      110,842
Other assets..................................     14,471       8,972        1,552        24,995
---------   ---------    ---------     ---------
Total assets........................  $ 621,408   $ 380,487    $(201,343)    $ 800,552
=========   =========    =========     =========

LIABILITIES AND PARTNERS' EQUITY

Current liabilities:
Trade accounts payable and accruals.........  $  86,544   $ 138,443    $    (160)    $ 224,827
Accounts payable to affiliates..............     30,410      (8,548)     (21,862)           --
Due to partners.............................      8,963         639           --         9,602
Other current liabilities...................         --       5,245           --         5,245
---------   ---------    ---------     ---------
125,917     135,779      (22,022)      239,674
Postemployment liabilities....................     57,529      22,198           --        79,727
Other non-current liabilities.................        112       1,943           --         2,055
---------   ---------    ---------     ---------
Total liabilities...................    183,558     159,920      (22,022)      321,456
---------   ---------    ---------     ---------
Partners' equity:
Capital Stock...............................         --      96,374      (96,374)           --
Contributed capital.........................    360,301      89,195      (72,139)      377,357
Accumulated earnings........................     77,549      54,884         (700)      131,733
---------   ---------    ---------     ---------
437,850     240,453     (169,213)      509,090
Accumulated other comprehensive loss........         --     (19,886)     (10,108)      (29,994)
---------   ---------    ---------     ---------
Partners' equity....................    437,850     220,567     (179,321)      479,096
---------   ---------    ---------     ---------
Total liabilities and partners'
equity............................  $ 621,408   $ 380,487    $(201,343)    $ 800,552
=========   =========    =========     =========

F-95

259
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 1999
---------------------------------------------
DOMESTIC   FOREIGN    ELIMINATIONS    TOTAL
--------   --------   ------------   --------

Net sales........................................  $442,593   $430,593     $(34,796)    $838,390
Cost of goods sold...............................   339,526    305,687      (34,468)     610,745
Selling, general and administrative expenses.....    89,994     75,093          (56)     165,031
Restructuring charges............................       200         --           --          200
--------   --------     --------     --------
Operating income...............................    12,873     49,813         (272)      62,414
Interest expense.................................        --      1,362           --        1,362
Dividend Income..................................     9,562         --       (9,562)          --
Other income (expense), net......................     7,984       (538)          --        7,446
--------   --------     --------     --------
Earnings before income taxes...................    30,419     47,913       (9,834)      68,498
Provision for income taxes.......................       872     18,093           --       18,965
--------   --------     --------     --------
Net earnings...................................  $ 29,547   $ 29,820     $ (9,834)    $ 49,533
========   ========     ========     ========

FOR THE YEAR ENDED DECEMBER 31, 1998
---------------------------------------------
DOMESTIC   FOREIGN    ELIMINATIONS    TOTAL
--------   --------   ------------   --------

Net sales........................................  $466,081   $476,693   $    (35,606)  $907,168
Cost of goods sold...............................   353,540    343,093        (35,566)   661,067
Selling, general and administrative expenses.....    94,693     78,026             --    172,719
Restructuring charges............................     2,200      1,440            (40)     3,600
--------   --------   ------------   --------
Operating income...............................    15,648     54,134             --     69,782
Interest expense.................................        --      1,620             --      1,620
Dividend Income..................................    27,085         --        (27,085)        --
Other income (expense), net......................     6,501        560             --      7,061
--------   --------   ------------   --------
Earnings before income taxes...................    49,234     53,074        (27,085)    75,223
Provision for income taxes.......................       515     16,058             --     16,573
--------   --------   ------------   --------
Net earnings...................................  $ 48,719   $ 37,016   $    (27,085)  $ 58,650
========   ========   ============   ========

FOR THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------------
DOMESTIC   FOREIGN    ELIMINATIONS    TOTAL
--------   --------   ------------   --------

Net sales........................................  $443,404   $460,683   $    (38,995)  $865,092
Cost of goods sold...............................   337,637    338,416        (38,880)   637,173
Selling, general and administrative expenses.....    85,735     81,176           (162)   166,749
Restructuring charges............................     4,804     14,696             --     19,500
--------   --------   ------------   --------
Operating income...............................    15,228     26,395             47     41,670
Interest expense.................................        --      1,316             --      1,316
Dividend income..................................       713         --           (713)        --
Other income (expense), net......................     2,196      2,006             --      4,202
--------   --------   ------------   --------
Earnings before income taxes...................    18,137     27,085           (666)    44,556
Provision for income taxes.......................       572     12,656             --     13,228
--------   --------   ------------   --------
Net earnings...................................  $ 17,565   $ 14,429   $       (666)  $ 31,328
========   ========   ============   ========

F-96

260
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 1999
---------------------------------------------
DOMESTIC   FOREIGN    ELIMINATIONS    TOTAL
--------   --------   ------------   --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings...................................  $ 29,547   $ 29,820     $ (9,834)    $ 49,533
Adjustments to arrive at net cash provided by
operating activities:
Depreciation and amortization...............     9,775      8,476           --       18,251
Loss (gain) on sale of property, plant and
equipment.................................       508         --           --          508
Equity earnings/losses, net of dividends....      (284)        --           --         (284)
Deferred income taxes.......................        --       (214)          --         (214)
Other non-cash activity.....................     2,500         --           --        2,500
Changes in assets and liabilities
(Increase) decrease in assets.............    (7,836)   (20,554)      31,263        2,873
(Decrease) increase in liabilities........     3,890      7,479      (30,991)     (19,622)
--------   --------     --------     --------
Net cash provided by operating activities...    38,100     25,007       (9,562)      53,545
--------   --------     --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...........................    (8,788)    (9,430)          --      (18,218)
Increase in marketable securities..............        --       (178)          --         (178)
Cash (invested in) or advances (to) from equity
companies...................................       (61)       761           --          700
--------   --------     --------     --------
Net cash used in investing activities.......    (8,849)    (8,847)          --      (17,696)
--------   --------     --------     --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings...        --        684           --          684
Dividends paid by affiliates...................        --     (9,562)       9,562           --
(Increase) decrease in Due from partners.......   (23,213)    10,570           --      (12,643)
--------   --------     --------     --------
Net cash used in financing activities.......   (23,213)     1,692        9,562      (11,959)
--------   --------     --------     --------
Effect of exchange rate changes on cash and
cash equivalents..........................        --     (2,487)          --       (2,487)
--------   --------     --------     --------
Net increase (decrease) in cash and cash
equivalents...............................     6,038     15,365           --       21,403
Cash and cash equivalents -- beginning of year...        --     28,456           --       28,456
--------   --------     --------     --------
Cash and cash equivalents -- end of year.........  $  6,038   $ 43,821     $     --     $ 49,859
========   ========     ========     ========

F-97

261
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 1998
---------------------------------------------
DOMESTIC   FOREIGN    ELIMINATIONS    TOTAL
--------   --------   ------------   --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings...................................  $ 48,719   $ 37,016     $(27,085)    $ 58,650
Adjustments to arrive at net cash provided by
operating activities:
Depreciation and amortization...............     9,649      9,322           --       18,971
Loss(gain) on sale of property, plant and
equipment.................................      (210)      (485)          --         (695)
Equity earnings/losses, net of dividends....       136         --           --          136
Deferred income taxes.......................        --       (874)          --         (874)
Other non-cash activity.....................       621        832           --        1,453
Changes in assets and liabilities
(Increase) decrease in assets.............     7,469    (19,459)       1,827      (10,163)
(Decrease) increase in liabilities........    26,652    (14,875)      (1,827)       9,950
--------   --------     --------     --------
Net cash provided by operating activities...    93,036     11,477      (27,085)      77,428
--------   --------     --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...........................    (6,731)   (13,554)          --      (20,285)
Proceeds from sales of property, plant and
equipment...................................       518      1,210           --        1,728
Increase in marketable securities..............        --       (369)          --         (369)
Cash (invested in) or advances (to) from equity
companies...................................       329        375           --          704
--------   --------     --------     --------
Net cash used in investing activities.......    (5,884)   (12,338)          --      (18,222)
--------   --------     --------     --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings...        --       (510)          --         (510)
Dividends paid by affiliates...................        --    (27,085)      27,085           --
(Increase) decrease in Due from partners.......   (87,500)    18,180           --      (69,320)
--------   --------     --------     --------
Net cash used in financing activities.......   (87,500)    (9,415)      27,085      (69,830)
--------   --------     --------     --------
Effect of exchange rate changes on cash and
cash equivalents..........................        --        680           --          680
--------   --------     --------     --------
Net increase (decrease) in cash and cash
equivalents...............................      (348)    (9,596)          --       (9,944)
Cash and cash equivalents -- beginning of year...       348     38,052           --       38,400
--------   --------     --------     --------
Cash and cash equivalents -- end of year.........  $     --   $ 28,456     $     --     $ 28,456
========   ========     ========     ========

F-98

262
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------------
DOMESTIC   FOREIGN    ELIMINATIONS    TOTAL
--------   --------   ------------   --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings...................................  $ 17,559   $ 14,435      $ (666)     $ 31,328
Adjustments to arrive at net cash provided by
operating activities:
Depreciation and amortization...............    11,395      8,701          --        20,096
Loss(gain) on sale of property, plant and
equipment.................................      (192)        --          --          (192)
Equity earnings/losses, net of dividends....       352         --          --           352
Deferred income taxes.......................        --     (1,095)         --        (1,095)
Other non-cash activity.....................        --      1,392          --         1,392
Changes in assets and liabilities
(Increase) decrease in assets.............   (11,133)    (8,304)        809       (18,628)
(Decrease) increase in liabilities........     8,311     22,567        (826)       30,052
--------   --------      ------      --------
Net cash provided by operating activities...    26,292     37,696        (683)       63,305
--------   --------      ------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...........................    (9,065)    (7,261)         --       (16,326)
Proceeds from sales of property, plant and
equipment...................................       505         --          --           505
Increase in marketable securities..............        --       (294)         --          (294)
Sale (purchase) of investment in affiliates,
net.........................................       640         --        (640)           --
Cash (invested in) or advances (to) from equity
companies...................................    (1,788)     1,115          --          (673)
--------   --------      ------      --------
Net cash used in investing activities.......    (9,708)    (6,440)       (640)      (16,788)
--------   --------      ------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings...        --        160          --           160
Return of affiliate capital....................        --       (610)        610            --
Dividends paid by affiliates...................        --       (713)        713            --
(Increase) decrease in Due from partners.......   (16,236)   (26,902)         --       (43,138)
--------   --------      ------      --------
Net cash used in financing activities.......   (16,236)   (28,065)      1,323       (42,978)
--------   --------      ------      --------
Effect of exchange rate changes on cash and
cash equivalents..........................        --     (4,143)         --        (4,143)
--------   --------      ------      --------
Net increase (decrease) in cash and cash
equivalents...............................       348       (952)         --          (604)
Cash and cash equivalents -- beginning of year...        --     39,004          --        39,004
--------   --------      ------      --------
Cash and cash equivalents -- end of year.........  $    348   $ 38,052      $   --      $ 38,400
========   ========      ======      ========

F-99

263

INGERSOLL-DRESSER PUMP COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

JUNE 30,    DECEMBER 31,
2000          1999
---------   ------------
(IN THOUSANDS)

ASSETS

Current assets:
Cash and cash equivalents.................................  $  23,566    $  49,859
Marketable securities.....................................      2,043        3,268
Accounts and notes receivable, less allowance for doubtful
accounts of $9,517 in 2000 and $7,928 in 1999..........    178,848      200,215
Due from partners.........................................      1,965        1,924
Inventories, net of progress payments.....................    122,117      110,220
Prepaid expenses..........................................      9,390        4,888
Deferred income taxes.....................................      8,800       12,600
Other current assets......................................      4,548        3,244
---------    ---------
351,277      386,218
Investments in and advances with partially-owned equity
companies.................................................     14,145       12,279
Property, plant and equipment, at cost:.....................    281,546      288,498
Less -- accumulated depreciation..........................   (116,683)    (114,094)
---------    ---------
Net property, plant and equipment......................    164,863      174,404
Intangible assets, net......................................     75,622       78,090
Goodwill, net...............................................    139,675      141,447
Other assets................................................      3,017        4,004
---------    ---------
Total assets......................................  $ 748,599    $ 796,442
=========    =========

LIABILITIES AND PARTNERS' EQUITY

Current liabilities:
Trade accounts payable and accruals.......................  $ 187,420    $ 195,043
Due to partners...........................................        188       14,125
Customers' advance payments...............................      2,502          886
Short-term borrowings.....................................        768        1,302
---------    ---------
190,878      211,356
Deferred income taxes.......................................     24,789       25,308
Postemployment liabilities..................................     67,688       67,158
Other non-current liabilities...............................         90           99
---------    ---------
Total liabilities.................................    283,445      303,921
---------    ---------
Partners' equity:
Contributed capital.......................................    414,558      425,953
Accumulated earnings......................................     89,982       92,446
---------    ---------
504,540      518,399
Accumulated other comprehensive loss......................    (39,386)     (25,878)
---------    ---------
Partners' equity..................................    465,154      492,521
---------    ---------
Total liabilities and partners' equity............  $ 748,599    $ 796,442
=========    =========

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-100

264

INGERSOLL-DRESSER PUMP COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

FOR THE SIX MONTHS
ENDED JUNE 30,
-------------------
2000       1999
--------   --------
(IN THOUSANDS)

Net sales...................................................  $363,409   $399,490
Cost of goods sold..........................................   279,792    295,575
Selling, general and administrative expense.................    77,672     81,317
--------   --------
Operating income..........................................     5,945     22,598
Interest expense............................................       530        765
Other income, net...........................................       712      3,167
--------   --------
Earnings before income taxes..............................     6,127     25,000
Provision for income taxes..................................     8,591     10,005
--------   --------
Net earnings (loss).......................................  $ (2,464)  $ 14,995
========   ========

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-101

265

INGERSOLL-DRESSER PUMP COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

FOR THE SIX MONTHS
ENDED JUNE 30,
-------------------
2000       1999
--------   --------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss).......................................  $ (2,464)  $ 14,995
Adjustments to arrive at net cash provided by operating
activities:
Depreciation and amortization..........................    14,909      9,934
Loss(gain) on sale of property, plant and equipment....       (52)       (67)
Equity earnings/losses, net of dividends...............       588        286
Changes in assets and liabilities:
(Increase) decrease in assets........................    (2,764)    35,895
(Decrease) increase in liabilities...................   (11,920)   (34,642)
--------   --------
Net cash (used in) provided by operating activities....    (1,703)    26,401
--------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures......................................    (4,804)    (5,886)
Proceeds from sales of property, plant and equipment......       348        243
Decrease in marketable securities.........................       975      1,470
Cash (invested in) or advances (to) from equity
companies..............................................    (2,430)       314
--------   --------
Net cash used in investing activities..................    (5,911)    (3,859)
--------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings..............      (532)       145
Cash transferred to Partners..............................   (16,355)        --
Increase in Due to (from) partners........................        --    (26,368)
--------   --------
Net cash used in financing activities..................   (16,887)   (26,223)
--------   --------
Effect of exchange rate changes on cash and cash
equivalents...........................................    (1,792)    (2,333)
--------   --------
Net increase (decrease) in cash and cash equivalents...   (26,293)    (6,014)
Cash and cash equivalents -- beginning of year..............    49,859     28,456
--------   --------
Cash and cash equivalents -- end of year....................  $ 23,566   $ 22,442
========   ========

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-102

266

INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

NOTE 1

The accompanying unaudited interim financial statements and related notes
should be read in conjunction with the consolidated financial statements of
Ingersoll-Dresser Pump Company (the "Company") and related notes for the year
ended December 31, 1999. In the opinion of management, the accompanying
condensed consolidated financial statements contain all adjustments (all of
which are of a normal recurring nature) necessary to present fairly the
consolidated unaudited financial position and results of operations for the six
months ended June 30, 2000, and 1999.

NOTE 2

On December 30, 1999, IDP Acquisition, LLC, a wholly-owned subsidiary of
Ingersoll-Rand, acquired Halliburton's interest in the Company for $377,480. The
cost of this acquisition in excess of the book value of Halliburton's 49%
interest, $266,951, has been recorded by the Company using pushdown accounting.
Accordingly, the excess of the purchase price over the book value of
Halliburton's interest was allocated to the net tangible and identifiable
intangible assets based on their respective fair values and the balance charged
to goodwill. In addition, Halliburton's 49% interest in accumulated earnings and
foreign currency translation adjustment were eliminated and charged to
contributed capital. The step up in the basis of property, plant and equipment
as a result of pushdown accounting are being depreciated over the asset's useful
lives of 3-40 years. Identifiable intangibles and goodwill resulting from
pushdown accounting are being amortized over their useful lives of 9-40 years,
with a weighted average life of 20 years for identifiable intangibles.

NOTE 3

Inventories are generally stated at cost, which is not in excess of market.
Cost is based on the first-in, first-out (FIFO) method or average cost. The
composition of inventories follows:

JUNE 30,   DECEMBER 31,
2000         1999
--------   ------------

Raw materials and supplies..................................  $ 23,944     $ 17,430
Work-in-process.............................................    55,583       46,671
Finished goods..............................................    42,590       46,119
--------     --------
Total.............................................  $122,117     $110,220
========     ========

Work-in-process inventory is stated after deducting customer progress
payments of $13,902 and $11,498 in 2000 and 1999, respectively.

NOTE 4

The components of comprehensive income (loss) are as follows:

FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------
2000        1999
--------    --------

Net earnings................................................  $ (2,464)   $ 14,995
Other comprehensive income -- foreign currency translation
adjustment................................................   (13,508)    (19,371)
--------    --------
Comprehensive income (loss).................................  $(15,972)   $ (4,376)
========    ========

F-103

267
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

NOTE 5

The decrease in earnings (loss) for the six months ended June 30, 2000 of
($2,464) as compared to the six months ended June 30, 1999 is primarily the
result of a decrease in sales for the period and the following:

- Operating income for the six months ended June 30, 2000 is negatively
impacted by a $3,400 adjustment to increase inventory at December 31,
1999 resulting from pushdown accounting for Ingersoll-Rand's acquisition
of the remaining 49% interest in the Company.

- Increased depreciation and amortization expense as a result of applying
pushdown accounting as described in Note 2 of $5,573.

- Increase in effective tax rate as a result of earnings in foreign
jurisdictions with higher tax rates and losses in the domestic business,
which has no tax impact as a result of the Company being a United States
partnership (approximate $6,100 impact).

- Benefit of the change in the Company's vacation policy, effective January
1, 2000, for certain employees such that vacation is earned ratably over
the year. Accordingly, included in administrative, selling and service
engineering expense for the six months ended June 30, 2000 is a $2,547
reduction in the vacation accrual recorded at December 31, 1999.

NOTE 6

A summary of operations by reportable segment is as follows:

FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------
2000        1999
--------    --------

Sales
Engineered products.......................................  $235,616    $262,450
Industrial products.......................................   127,793     137,040
--------    --------
Total.............................................  $363,409    $399,490
========    ========
Operating Income
Engineered products.......................................  $  5,936    $ 15,276
Industrial products.......................................     3,505       7,749
Unallocated corporate income (expenses)...................    (3,496)       (427)
--------    --------
Total.............................................  $  5,945    $ 22,598
========    ========

The increase in the unallocated corporate expense is primarily due to the
amortization of goodwill and identifiable intangibles related to the pushdown
accounting for Ingersoll-Rand's acquisition of the remaining 49% interest in the
Company as described in Note 2.

No significant changes in assets by geographic area have occurred since
December 31, 1999.

NOTE 7

The Company is involved in various litigations, claims and administrative
proceedings, including environmental matters, arising from the normal course of
business. Amounts recorded for identified contingent liabilities are estimates,
which are reviewed periodically and adjusted to reflect additional

F-104

268
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

information when it becomes available. Subject to the uncertainties inherent in
estimating future costs for contingent liabilities, management believes that
recovery or liability with respect to these matters would not have a material
effect on the financial condition or the results of operations of the Company
for any year.

The Company has entered into employment contacts with a number of key
executive and employees providing severance and stay bonuses, which become
effective upon the sale of the Company by Ingersoll-Rand.

NOTE 8

On August 8, 2000, Flowserve Corporation ("Flowserve") acquired the Company
from Ingersoll-Rand for $775,000. In connection with its purchase of the
Company, Flowserve issued unsecured senior subordinated notes. The notes will be
unconditionally guaranteed, jointly and severally, by certain subsidiaries of
Flowserve, including its existing and subsequently acquired domestic
subsidiaries.

Accordingly, the following condensed consolidating financial information
presents:

(1) Condensed consolidating financial statements at June 30, 2000 and
December 31, 1999 and for the six months ended June 30, 2000 and 1999, of
(a) the guarantor subsidiaries ("domestic"); (b) the nonguarantor
subsidiaries ("foreign"); and (c) the Company on a consolidated basis, and

(2) Elimination entries necessary to consolidate the guarantor and
nonguarantor subsidiaries.

F-105

269
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONDENSED CONSOLIDATING BALANCE SHEET

JUNE 30, 2000
----------------------------------------------
DOMESTIC   FOREIGN    ELIMINATIONS     TOTAL
--------   --------   ------------   ---------

ASSETS

Current assets:
Cash and cash equivalents.....................  $    113   $ 23,453    $      --     $  23,566
Marketable securities.........................        --      2,043           --         2,043
Accounts and notes receivable, net............    68,575    110,273           --       178,848
Accounts receivable from affiliates...........     4,164     43,855      (48,019)           --
Due from partners.............................     1,756        209           --         1,965
Inventories, net of progress payments.........    63,003     59,293         (179)      122,117
Other current assets..........................     4,288     18,450           --        22,738
--------   --------    ---------     ---------
141,899    257,576      (48,198)      351,277
Investment in affiliates........................   180,437         --     (180,437)           --
Property, plant and equipment, at cost:.........   146,387    135,227          (68)      281,546
Less -- accumulated depreciation..............   (60,754)   (55,949)          20      (116,683)
--------   --------    ---------     ---------
85,633     79,278          (48)      164,863
Intangibles.....................................    64,152     11,470           --        75,622
Goodwill........................................   111,363     28,312           --       139,675
Other assets....................................    10,655      4,954        1,553        17,162
--------   --------    ---------     ---------
Total assets..........................  $594,139   $381,590    $(227,130)    $ 748,599
========   ========    =========     =========

LIABILITIES AND PARTNERS' EQUITY

Current liabilities:
Trade accounts payable and accruals...........  $ 81,908   $107,975    $  (2,463)    $ 187,420
Accounts payable from affiliates..............    42,561      5,101      (47,662)           --
Due to partners...............................        18        170           --           188
Other current liabilities.....................        --      3,270           --         3,270
--------   --------    ---------     ---------
124,487    116,516      (50,125)      190,878
Deferred income taxes...........................        --     24,789           --        24,789
Postemployment liabilities......................    51,323     16,365           --        67,688
Other non-current liabilities...................        90         --           --            90
--------   --------    ---------     ---------
Total liabilities.....................   175,900    157,670      (50,125)      283,445
--------   --------    ---------     ---------
Partners' equity:
Capital Stock.................................        --     96,374      (96,374)           --
Contributed capital...........................   371,507    119,509      (76,458)      414,558
Accumulated earnings..........................    46,732     37,319        5,931        89,982
--------   --------    ---------     ---------
418,239    253,202     (166,901)      504,540
Accumulated other comprehensive loss..........        --    (29,282)     (10,104)      (39,386)
--------   --------    ---------     ---------
Partners' equity......................   418,239    223,920     (177,005)      465,154
--------   --------    ---------     ---------
Total liabilities and partners'
equity..............................  $594,139   $381,590    $(227,130)    $ 748,599
========   ========    =========     =========

F-106

270
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 1999
----------------------------------------------
DOMESTIC   FOREIGN    ELIMINATIONS     TOTAL
--------   --------   ------------   ---------

ASSETS

Current assets:
Cash and cash equivalents.....................  $  6,038   $ 43,821    $      --     $  49,859
Marketable securities.........................        --      3,268           --         3,268
Accounts and notes receivable, net............    81,168    119,047           --       200,215
Accounts receivable from affiliates...........     3,765     50,984      (54,749)           --
Due from partners.............................     1,547        377           --         1,924
Inventories, net of progress payments.........    61,930     47,240        1,050       110,220
Other current assets..........................     2,724     18,008           --        20,732
--------   --------    ---------     ---------
157,172    282,745      (53,699)      386,218
Investment in affiliates........................   180,437         --     (180,437)           --
Property, plant and equipment, at cost:.........   145,237    143,330          (69)      288,498
Less -- accumulated depreciation..............   (55,248)   (58,869)          23      (114,094)
--------   --------    ---------     ---------
89,989     84,461          (46)      174,404
Intangibles.....................................    65,943     12,147           --        78,090
Goodwill........................................   112,783     28,664           --       141,447
Other assets....................................    11,064      3,666        1,553        16,283
--------   --------    ---------     ---------
Total assets..........................  $617,388   $411,683    $(232,629)    $ 796,442
========   ========    =========     =========

LIABILITIES AND PARTNERS' EQUITY

Current liabilities:
Trade accounts payable and accruals...........  $ 72,292   $122,593    $     158     $ 195,043
Accounts payable from affiliates..............    48,589      5,245      (53,834)           --
Due to partners...............................    13,538        587           --        14,125
Other current liabilities.....................        --      2,188           --         2,188
--------   --------    ---------     ---------
134,419    130,613      (53,676)      211,356
Deferred income taxes...........................        --     25,307           --        25,307
Postemployment liabilities......................    50,689     16,470           --        67,159
Other non-current liabilities...................        99         --           --            99
--------   --------    ---------     ---------
Total liabilities.....................   185,207    172,390      (53,676)      303,921
--------   --------    ---------     ---------
Partners' equity:
Capital Stock.................................        --     96,374      (96,374)           --
Contributed capital...........................   377,562    121,032      (72,641)      425,953
Accumulated earnings..........................    54,619     37,657          170        92,446
--------   --------    ---------     ---------
432,181    255,063     (168,845)      518,399
Accumulated other comprehensive loss..........        --    (15,770)     (10,108)      (25,878)
--------   --------    ---------     ---------
Partners' equity......................   432,181    239,293     (178,953)      492,521
--------   --------    ---------     ---------
Total liabilities and partners'
equity..............................  $617,388   $411,683    $(232,629)    $ 796,442
========   ========    =========     =========

F-107

271
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEAR ENDED JUNE 30, 2000
---------------------------------------------
DOMESTIC   FOREIGN    ELIMINATIONS    TOTAL
--------   --------   ------------   --------

Net sales........................................  $192,040   $186,730     $(15,361)    $363,409
Cost of goods sold...............................   156,922    138,228      (15,358)     279,792
Selling, general and administrative expenses.....    47,518     35,919       (5,765)      77,672
Restructuring charges............................        --         --           --           --
--------   --------     --------     --------
Operating income...............................   (12,400)    12,583        5,762        5,945
Interest expense.................................        --        530           --          530
Dividend Income..................................     2,154         --       (2,154)          --
Other income (expense), net......................     2,626     (1,914)          --          712
--------   --------     --------     --------
Earnings before income taxes...................    (7,620)    10,139        3,608        6,127
Provision for income taxes.......................       263      8,328           --        8,591
--------   --------     --------     --------
Net earnings...................................  $ (7,883)  $  1,811     $  3,608     $ (2,464)
========   ========     ========     ========

FOR THE YEAR ENDED JUNE 30, 1999
---------------------------------------------
DOMESTIC   FOREIGN    ELIMINATIONS    TOTAL
--------   --------   ------------   --------

Net sales........................................  $214,588   $199,253     $(14,351)    $399,490
Cost of goods sold...............................   168,049    141,877      (14,351)     295,575
Selling, general and administrative expenses.....    44,291     37,463         (437)      81,317
Restructuring charges............................        --         --           --           --
--------   --------     --------     --------
Operating income...............................     2,248     19,913          437       22,598
Interest expense.................................        --        765           --          765
Dividend Income..................................     8,993         --       (8,993)          --
Other income (expense), net......................     3,376       (209)          --        3,167
--------   --------     --------     --------
Earnings before income taxes...................    14,617     18,939       (8,556)      25,000
Provision for income taxes.......................       669      9,336           --       10,005
--------   --------     --------     --------
Net earnings...................................  $ 13,948   $  9,603     $ (8,556)    $ 14,995
========   ========     ========     ========

F-108

272
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE SIX MONTHS ENDED JUNE 30, 2000
---------------------------------------------
DOMESTIC   FOREIGN    ELIMINATIONS    TOTAL
--------   --------   ------------   --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.......................................  $(7,883)   $  1,811     $ 3,608      $ (2,464)
Adjustments to arrive at net cash provided by
operating activities:
Depreciation and amortization...................   10,420       8,308      (3,819)       14,909
Loss(gain) on sale of property, plant and
equipment.....................................      (52)         --          --           (52)
Equity earnings/losses, net of dividends........      588          --          --           588
Changes in assets and liabilities
(Increase) decrease in assets.................    9,757      (7,020)     (5,501)       (2,764)
(Decrease) increase in liabilities............   (7,469)     (8,009)      3,558       (11,920)
-------    --------     -------      --------
Net cash provided by operating activities.......    5,361      (4,910)     (2,154)       (1,703)
-------    --------     -------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...............................   (1,044)     (3,760)         --        (4,804)
Proceeds from sales of property, plant and
equipment.......................................      272          76          --           348
Increase in marketable securities..................       --         975          --           975
Cash (invested in) or advances (to) from equity
companies.......................................   (2,430)         --          --        (2,430)
-------    --------     -------      --------
Net cash used in investing activities...........   (3,202)     (2,709)         --        (5,911)
-------    --------     -------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings.......       --        (532)         --          (532)
Dividends paid by affiliates.......................       --      (2,154)      2,154            --
Cash transferred to Partners.......................   (8,084)     (8,271)         --       (16,355)
-------    --------     -------      --------
Net cash used in financing activities...........   (8,084)    (10,957)      2,154       (16,887)
-------    --------     -------      --------
Effect of exchange rate changes on cash and cash
equivalents...................................       --      (1,792)         --        (1,792)
-------    --------     -------      --------
Net increase (decrease) in cash and cash
equivalents...................................   (5,925)    (20,368)         --       (26,293)
Cash and cash equivalents -- beginning of year.......    6,038      43,821          --        49,859
-------    --------     -------      --------
Cash and cash equivalents -- end of year.............  $   113    $ 23,453     $    --      $ 23,566
=======    ========     =======      ========

F-109

273
INGERSOLL-DRESSER PUMP COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE SIX MONTHS ENDED JUNE 30, 1999
---------------------------------------------
DOMESTIC   FOREIGN    ELIMINATIONS    TOTAL
--------   --------   ------------   --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings....................................  $ 13,948   $  9,603     $(8,556)     $ 14,995
Adjustments to arrive at net cash provided by
operating activities:
Depreciation and amortization.................     5,157      4,777          --         9,934
Loss(gain) on sale of property, plant and
equipment..................................        --        (67)         --           (67)
Equity earnings/losses, net of dividends......       286         --          --           286
Changes in assets and liabilities
(Increase) decrease in assets..............    (7,560)    41,966       1,489        35,895
(Decrease) increase in liabilities.........   (16,526)   (16,190)     (1,926)      (34,642)
--------   --------     -------      --------
Net cash provided by operating activities.....    (4,695)    40,089      (8,993)       26,401
--------   --------     -------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................    (3,148)    (2,738)         --        (5,886)
Proceeds from sales of property, plant and
equipment.....................................       243         --          --           243
Increase in marketable securities...............        --      1,470          --         1,470
Cash (invested in) or advances (to) from equity
companies.....................................       314         --          --           314
--------   --------     -------      --------
Net cash used in investing activities.........    (2,591)    (1,268)         --        (3,859)
--------   --------     -------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings....        --        145          --           145
Dividends paid by affiliates....................        --     (8,993)      8,993            --
Cash transferred to Partners....................        --         --          --
(Increase) decrease in Due from partners........     7,304    (33,672)         --       (26,368)
--------   --------     -------      --------
Net cash used in financing activities.........     7,304    (42,520)      8,993       (26,223)
--------   --------     -------      --------
Effect of exchange rate changes on cash and
cash equivalents...........................        --     (2,333)         --        (2,333)
--------   --------     -------      --------
Net increase (decrease) in cash and cash
equivalents................................        18     (6,032)         --        (6,014)
Cash and cash equivalents -- beginning of year....        --     28,456          --        28,456
--------   --------     -------      --------
Cash and cash equivalents -- end of year..........  $     18   $ 22,424     $    --      $ 22,442
========   ========     =======      ========

F-110

274

PRINCIPAL EXECUTIVE OFFICE OF FLOWSERVE FINANCE B.V.
Parallelweg 6
Etten-Leur 4870 AA
The Netherlands

INDEPENDENT ACCOUNTANTS

PRICEWATERHOUSECOOPERS LLP
2001 Ross Avenue, Suite 1800
Dallas, Texas 75201

LEGAL ADVISORS

To the Company

SHEARMAN & STERLING
599 Lexington Avenue
New York, New York 10022-6069

As to Dutch Law

DE BRAUW BLACKSTONE WESTBROEK N.V.
LINKLATERS & ALLIANCE
Tripolis 300
Burgerweeshuispad 301
Postbus 75084
1070 AB Amsterdam, The Netherlands

TRUSTEE, REGISTRAR, PRINCIPAL PAYING AND TRANSFER AGENT

THE BANK OF NEW YORK
101 Barclay Street, Floor 21 West
New York, New York 10286

LISTING AGENT, PAYING AGENT AND TRANSFER AGENT

BANQUE INTERNATIONALE A LUXEMBOURG S.A.
69 route d'Esch
L-1470 Luxembourg

275

FLOWSERVE LOGO

Offer To Exchange
12 1/4% Senior Subordinated Notes due 2010
for all Outstanding
12 1/4% Senior Subordinated Notes due 2010
($290,000,000 aggregate principal amount outstanding)

and

Offer To Exchange
12 1/4% Senior Subordinated Notes due 2010
for all Outstanding
12 1/4% Senior Subordinated Notes due 2010
(E100,000,000 aggregate principal amount outstanding)

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

PROSPECTUS
-----------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS EXCHANGE
OFFER OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FLOWSERVE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT
RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

276

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Sections 722 through 726 of the New York Business Corporation Law (the
"BCL) grant New York corporations broad powers to indemnify their present and
former directors and officers and those of affiliated corporations against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with threatened,
pending or completed actions, suits or proceedings to which they are parties or
are threatened to be made parties by reason of being or having been such
directors or officers, subject to specified conditions and exclusions; give a
director or officer who successfully defends an action the right to be so
indemnified; and permit a corporation to buy directors' and officers' liability
insurance. Such indemnification is not exclusive of any other rights to which
those indemnified may be entitled under any by-laws, agreement, vote of
shareholders or otherwise.

Section 402(b) of the BCL permits a New York corporation to include in its
certificate of incorporation a provision eliminating the potential monetary
liability of a director to the corporation or its stockholders for breach of
fiduciary duty as a director, provided that such provision shall not eliminate
the liability of a director (i) for any breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for improper payment of dividends, improper purchase of the shares of the
corporation, improper distribution of assets to shareholders after dissolution
of the corporation and improper making of any loan, or (iv) for any transaction
from which the director receives an improper personal benefit or other
advantage.

Flowserve's Restated Certificate of Incorporation includes the provision
permitted by Section 402(b) of the BCL.

Flowserve's By-Laws provide that Flowserve shall indemnify its present or
future directors and officers from and against any and all liabilities and
expenses to the maximum extent permitted by the BCL as the same presently exists
or to the greater extent permitted by any amendment hereafter adopted.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

See the index to exhibits appears immediately following the signature
pages of this Amendment to the Registration Statement.

(b) Financial Statement Schedules

Not applicable

ITEM 22. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities securities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

II-1

277

The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of Form S-4 within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the date
of responding to the request.

The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction that was not
the subject of and included in the Registration Statement when it became
effective.

II-2

278

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Irving, Texas on the
26th day of September, 2000.

FLOWSERVE CORPORATION, as Registrant

By:     /s/ C. SCOTT GREER
----------------------------------
Name: C. Scott Greer
Title: Chairman, President and
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 26th day of September, 2000. Each person whose
signature appears below hereby authorizes Ronald F. Shuff and Renee J. Hornbaker
and each of them, with full power of substitution, to execute in the name and on
behalf of such person any amendment or any post-effective amendment to this
Registration Statement and to file the same, with any exhibits thereto and other
documents in connection therewith, making such changes in this Registration
Statement as the Registrant deems appropriate, and appoints Ronald F. Shuff and
Renee J. Hornbaker and each of them, with full power of substitution,
attorney-in-fact to sign any amendment and any post-effective amendment to this
Registration Statement and to file the same, with any exhibits thereto and other
documents in connection therewith.

SIGNATURES                                                  TITLE
----------                                                  -----

/s/ C. SCOTT GREER                      Chairman, President and Chief Executive Officer
-----------------------------------------------------      (Principal Executive Officer)
C. Scott Greer

/s/ RENEE J. HORNBAKER                    Vice President and Chief Financial Officer (Principal
-----------------------------------------------------      Financial Officer)
Renee J. Hornbaker

/s/ RICK L. JOHNSON                     Vice President Business Development and Controller
-----------------------------------------------------      (Principal Accounting Officer)
Rick L. Johnson

/s/ WILLIAM C. RUSNACK                    Director, Chairman of Audit/Finance Committee
-----------------------------------------------------
William C. Rusnack

/s/ DIANE C. HARRIS                     Director, Member Audit/Finance Committee
-----------------------------------------------------
Diane C. Harris

/s/ CHARLES M. RAMPACEK                   Director, Member Audit/Finance Committee
-----------------------------------------------------
Charles M. Rampacek

/s/ JAMES O. ROLLANS                     Director, Member Audit/Finance Committee
-----------------------------------------------------
James O. Rollans

II-3

279

INDEX TO EXHIBITS

EXHIBIT NO.                                DESCRIPTION
-----------                                -----------

2.1*            -- Agreement and Plan of Merger dated as of May 6, 1997,
among the Registrant, Bruin Acquisition Corp. and BW/IP,
Inc. ("BW/IP") was filed as Annex 1 to the Joint Proxy
Statement/Prospectus which is part of the Registration
Statement on Form S-4, dated June 19, 1997.
2.2*            -- Agreement and Plan of Merger among Flowserve Corporation,
Forrest Acquisition Sub., Inc. and Innovative Valve
Technologies, Inc., dated as of November 18, 1999, was
filed as Exhibit 99(c)(1) to the Schedule 14D-1 Tender
Offer Statement and Statement on Schedule 13D dated
November 22, 1999.
2.3*            -- Purchase Agreement among the Registrant, Flowserve RED
Corporation, IDP Acquisition, LLC and Ingersoll-Rand
Company dated as of February 9, 2000 was filed as Exhibit
2.1 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2000.
2.4*            -- Amendment No. 1 dated as of July 14, 2000 to the Purchase
Agreement dated as of February 9, 2000 by and among the
Registrant, Flowserve Red Corporation, IDP Acquisition,
LLC and Ingersoll-Rand Company was filed as Exhibit 2.1
to the Registrant's Form 8-A on July 20, 2000
3.1*            -- 1988 Restated Certificate of Incorporation of The Duriron
Company, Inc. was filed as Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1988.
3.2*            -- 1989 Amendment to Certificate of Incorporation was filed
as Exhibit 3.2 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1989.
3.3*            -- By-Laws of The Duriron Company, Inc. (as restated) were
filed as Exhibit 3.2 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1987.
3.4*            -- 1996 Certificate of Amendment of Certificate of
Incorporation was filed as Exhibit 3.4 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995.
3.5*            -- Amendment No. 1 to Restated Bylaws was filed as Exhibit
3.5 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995.
3.6*            -- April 1997 Certificate of Amendment of Certificate of
Incorporation was filed as part of Annex VI to the Joint
Proxy Statement/Prospectus which is part of the
Registration Statement on Form S-4, dated June 19, 1997.
3.7*            -- July 1997 Certificate of Amendment of Certificate of
Incorporation was filed as Exhibit 3.6 to the
Registrant's Quarterly Report on Form 10-Q, for the
Quarter ended June 30, 1997.
4.1*            -- Lease agreement and indenture, dated as of January 1,
1995 and bond purchase agreement dated January 27, 1995,
in connection with an 8% Taxable Industrial Development
Revenue Bond, City of Albuquerque, New Mexico. (Relates
to a class of indebtedness that does not exceed 10% of
the total assets of the Registrant. The Registrant will
furnish a copy of the documents to the SEC upon request.)
4.2*            -- Rights Agreement dated as of August 1, 1986 between the
Registrant and BankOne, N.A., as Rights Agent, which
includes as Exhibit B thereto the Form of Rights
Certificate which was filed as Exhibit 1 to the
Registrant's Registration Statement on Form 8-A on August
13, 1986.
4.3*            -- Amendment dated August 1, 1996, to Rights Agreement was
filed as Exhibit 4.5 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996.
4.4*            -- Amendment No. 2 dated as of June 1, 1998, to the Rights
Agreement dated as of August 13, 1986, and amended as of
August 1, 1996, was filed as Exhibit 1 to the
Registrant's Form 8-A/A dated June 11, 1998.

280

EXHIBIT NO.                                DESCRIPTION
-----------                                -----------

4.5*            -- Rate Swap Agreement in the amount of $25,000,000 between
the Registrant and National City Bank dated November 14,
1996 was filed as Exhibit 4.9 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996.
4.6*            -- Rate Swap Agreement in the amount of $25,000,000 between
the Registrant and Key Bank National Association dated
October 28, 1996 was filed as Exhibit 4.10 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996.
4.7             -- Indenture dated as of August 8, 2000, between the
Registrant, the guarantors identified therein and The
Bank of New York, as trustee for $290,000,000 aggregate
principal amount of 12.25% Senior Subordinated Notes due
August 15, 2000.
4.8             -- Indenture dated as of August 8, 2000, between Flowserve
Finance B.V., the guarantors identified therein and The
Bank of New York, as Trustee for #100,000,000 aggregate
principal amount of 12.25% Senior Subordinated Notes due
August 15, 2000.
4.9**           -- Form of Exchange Note.
4.10            -- Dollar Notes Registration Rights Agreement dated August
3, 2000, among the Registrant, the Dollar Notes
Guarantors, Credit Suisse First Boston, Bank of America
Securities Inc, ABN AMRO Incorporated and Banc One
Capital Markets, Inc.
4.11            -- Euro Notes Registration Rights Agreement dated August 3,
2000, among FFBV, the Euro Notes Guarantors, Credit
Suisse First Boston (Europe) Limited, Bank of America
International Limited, ABN AMRO International Limited and
First Chicago Limited.
5.1**           -- Opinion and Consent of Shearman & Sterling regarding
validity of the exchange notes.
8.1**           -- Opinion and Consent of Shearman & Sterling regarding tax
matters.
10.1*            -- Flowserve Corporation Incentive Compensation Plan for
Senior Executives, as amended and restated effective
January 1, 1994 (the "Incentive Plan"), was filed as
Exhibit 10.1 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993.
10.2*            -- Amendment No. 1 to the Incentive Plan was filed as
Exhibit 10.2 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995.
10.3*            -- Amendment No. 2 to the Incentive Plan was filed as
Exhibit 10.3 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998.
10.4*            -- Amendment No. 3 to the Incentive Plan was filed as
Exhibit 10.4 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1998.
10.5*            -- Supplemental Pension Plan for Salaried Employees was
filed as Exhibit 10.4 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1987.
10.6*            -- Flowserve Corporation amended and restated Director
Deferral Plan was filed as Attachment A to the
Registrant's definitive 1996 Proxy Statement filed on
March 10, 1996.
10.7*            -- Form of Change in Control Agreement between all executive
officers and the Registrant was filed as Exhibit 10.6 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996.
10.8*            -- First Master Benefit Trust Agreement dated October 1,
1987 was filed as Exhibit 10.24 to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1987.
10.9*            -- Amendment No. 1 to the first Master Benefit Trust
Agreement dated October 1, 1987 was filed as Exhibit
10.24 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993.

281

EXHIBIT NO.                                DESCRIPTION
-----------                                -----------

10.10*           -- Amendment No. 2 to First Master Benefit Trust Agreement
was filed as Exhibit 10.25 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.
10.11*           -- Second Master Benefit Trust Agreement dated October 1,
1987 was filed as Exhibit 10.12 to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1987.
10.12*           -- First Amendment to Second Master Benefit Trust Agreement
was filed as Exhibit 10.26 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.
10.13*           -- Long-Term Incentive Plan (the "Long-Term Plan"), as
amended and restated effective November 1, 1993 was filed
as Exhibit 10.8 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993.
10.14*           -- Amendment No. 1 to the Long-Term Plan was filed as
Exhibit 10.13 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995.
10.15*           -- Flowserve Corporation 1989 Stock Option Plan as amended
and restated effective January 1, 1997 was filed as
Exhibit 10.14 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1996.
10.16*           -- Flowserve Corporation Second Amendment to the 1989 Stock
Option Plan as previously amended and restated was filed
as Exhibit 10.14 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998.
10.17*           -- Flowserve Corporation 1989 Restricted Stock Plan (the
"1989 Restricted Stock Plan") as amended and restated
effective January 1, 1997 was filed as Exhibit 10.15 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996.
10.18*           -- Amendment No. 1 to the 1989 Restricted Stock Plan as
amended and restated was filed as Exhibit 10.33 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997.
10.19*           -- Flowserve Corporation Retirement Compensation Plan for
Directors ("Director Retirement Plan") was filed as
Exhibit 10.15 to the Registrant's Annual Report to Form
10-K for the year ended December 31, 1988.
10.20*           -- Amendment No. 1 to Director Retirement Plan was filed as
Exhibit 10.21 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995.
10.21*           -- The Registrant's Benefit Equalization Pension Plan (the
"Equalization Plan") was filed as Exhibit 10.16 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1989.
10.22*           -- Amendment # 1 dated December 15, 1992 to the Equalization
Plan was filed as Exhibit 10.18 to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1992.
10.23*           -- Flowserve Corporation Executive Equity Incentive Plan as
amended and restated effective July 21, 1999, was filed
as Exhibit 10.2 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999.
10.24*           -- Flowserve Corporation Deferred Compensation Plan for
Executives was filed as Exhibit 10.19 to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1992.
10.25*           -- Executive Life Insurance Plan of Flowserve Corporation
was filed as Exhibit 10.29 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995.
10.26*           -- Executive Long-Term Disability Plan of The Duriron
Company, Inc. was filed as Exhibit 10.30 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995.

282

EXHIBIT NO.                                DESCRIPTION
-----------                                -----------

10.27*           -- Flowserve Corporation 1997 Stock Option Plan was included
as Exhibit A to the Registrant's 1997 Proxy Statement
which was filed on March 17, 1997.
10.28*           -- First Amendment to the Flowserve Corporation 1997 Stock
Option Plan was filed as Exhibit 10.28 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998.
10.29*           -- Amendment No. 2 to the Flowserve Corporation 1997 Stock
Option Plan was filed as Exhibit 10.29 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1999.
10.30*           -- Flowserve Corporation 1999 Stock Option Plan was included
as Exhibit A to the Registrant's 1999 Proxy Statement
which was filed on March 15, 1999.
10.31*           -- Amendment No. 1 to the Flowserve Corporation 1999 Stock
Option Plan was filed as Exhibit 10.31 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1999.
10.32*           -- BW/IP International, Inc. Supplemental Executive
Retirement Plan as amended and restated was filed as
Exhibit 10.27 to the Registrant's Quarterly Report on
Form 10-Q for the quarter entered March 31, 1998.
10.33*           -- Flowserve Corporation 1998 Restricted Stock Plan was
included as Exhibit A to the Registrant's 1999 Proxy
Statement which was filed on April 9, 1998.
10.34*           -- Amendment No. 1 to the Flowserve Corporation 1998
Restricted Stock Plan was filed as Exhibit 10 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999.
10.35*           -- Amendment No. 2 to the Flowserve Corporation 1998
Restricted Stock Plan was filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999.
10.36*           -- Amendment No. 1 to the amended and restated Director
Deferral Plan was filed as Exhibit 10.32 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997.
10.37*           -- Amendment No. 2 to the amended and restated Director
Deferral Plan was filed as Exhibit 10.34 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
10.38*           -- Form of Employment Agreement between the Registrant and
certain executive officers was filed as Exhibit 10.31 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997.
10.39*           -- Employment Agreement, effective July 22, 1997, between
the Registrant and Bernard G. Rethore was filed as
Exhibit 10.53 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997.
10.40*           -- Amended Employment Agreement, effective November 24,
1999, between the Registrant and Bernard G. Rethore.
10.41*           -- Amendment No. 1 to Amended Employment Agreement,
effective February 29, 2000, between the Registrant and
Bernard G. Rethore was filed Exhibit 10.41 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 2000.
10.42*           -- Employment Agreement, effective July 1, 1999, between the
Registrant and C. Scott Greer was filed as Exhibit 10.2
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999.
10.43*           -- Loan Agreement between the Registrant and C. Scott Greer
was filed as Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1999.
10.44*           -- Amendments to form of change in control agreement between
all executive officers and the Registrant was filed as
Exhibit 10.44 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 2000.

283

EXHIBIT NO.                                DESCRIPTION
-----------                                -----------

10.45            -- Credit Agreement among the Registrant, certain of its
subsidiaries referred to therein, the lenders referred to
therein, Credit Suisse First Boston, New York branch, as
syndication agent, Bank of America, N.A., as
administrative agent, collateral agent and swingline
lender, and ABN-AMRO Bank N.V., Bank One, N.A. and
Salomon Smith Barney, Inc., as co-documentation agents,
dated August 8,2000.
10.46            -- Security Agreement among the Registrant, certain of its
subsidiaries referred to therein and Bank of America,
N.A. dated as of August 8, 2000.
12.1             -- Statements regarding computation of ratios.
13.1*            -- 1999 Annual Report to Shareholders was filed on the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998.
21.1             -- Subsidiaries of the Registrant.
23.1             -- Consent of Ernst & Young LLP.
23.2             -- Consent of PricewaterhouseCoopers LLP.
23.3             -- Consent of Arthur Andersen.
23.4**           -- Consent of Shearman & Sterling (included in Exhibit 5.1).
25.1**           -- Statement of Eligibility of the Trustee, on Form T-1.
27.1*            -- Financial Data Schedule was filed as Exhibit 27 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000.
99.1*            -- Press Release dated July 24, 2000, was filed as Exhibit
99.1 on Form 8-K as filed August 2, 2000.
99.2*            -- Press Release dated July 28, 2000, was filed as Exhibit
99.1 on Form 8-K as filed August 2, 2000.
99.3**           -- Form of Letter of Transmittal.
99.4**           -- Form of Notice of Guaranteed Delivery.
99.5**           -- Form of Exchange Agent Agreement.

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

*  Previously filed.

**  To be filed by amendment.

1
EXECUTION COPY

EXHIBIT 4.7

================================================================================

Flowserve Corporation
Issuer

The Guarantors named herein

12-1/4% Senior Subordinated Securities Due 2010

----------

INDENTURE

Dated as of August 8, 2000

----------

The Bank of New York
Trustee

================================================================================

2

CROSS-REFERENCE TABLE

TIA                                                   Indenture
Section                                                  Section
-------                                                 ---------

310(a)(1)       ....................................... 7.10
(a)(2)       ....................................... 7.10
(a)(3)       ....................................... N.A.
(a)(4)       ....................................... N.A.
(b)          ....................................... 7.08; 7.10
(c)          ....................................... N.A.
311(a)          ....................................... 7.11
(b)          ....................................... 7.11
(c)          ....................................... N.A.
312(a)          ....................................... 2.05
(b)          ....................................... 13.03
(c)          ....................................... 13.03
313(a)          ....................................... 7.06
(b)(1)       ....................................... N.A.
(b)(2)       ....................................... 7.06
(c)          ....................................... 11.02
(d)          ....................................... 7.06
314(a)          ....................................... 4.02; 4.11; 13.02
(b)          ....................................... N.A.
(c)(1)       ....................................... 13.04
(c)(2)       ....................................... 13.04
(c)(3)       ....................................... N.A.
(d)          ....................................... N.A.
(e)          ....................................... 13.05
(f)          ....................................... 4.10
315(a)          ....................................... 7.01
(b)          ....................................... 7.05; 13.02
(c)          ....................................... 7.01
(d)          ....................................... 7.01
(e)          ....................................... 6.11
316(a)(last sentence) ................................. 13.06
(a)(1)(A)    ....................................... 6.05
(a)(1)(B)    ....................................... 6.04
(a)(2)       ....................................... N.A.
(b)          ....................................... 6.07
317(a)(1)       ....................................... 6.08
(a)(2)       ....................................... 6.09
(b)          ....................................... 2.04
318(a)          ....................................... 13.01

N.A. means Not Applicable.

Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.

3

TABLE OF CONTENTS

Page
----

ARTICLE 1

Definitions and Incorporation by Reference

SECTION 1.01.  Definitions...............................................................................1
SECTION 1.02.  Other Definitions........................................................................31
SECTION 1.03.  Incorporation by Reference of Trust
Indenture Act.......................................................31
SECTION 1.04.  Rules of Construction....................................................................32
SECTION 1.05.  Acts of Holders..........................................................................32

ARTICLE 2

The Securities

SECTION 2.01.  Form and Dating..........................................................................34
SECTION 2.02.  Execution and Authentication.............................................................34
SECTION 2.03.  Registrar and Paying Agent...............................................................35
SECTION 2.04.  Paying Agent To Hold Money in Trust......................................................35
SECTION 2.05.  Securityholder Lists.....................................................................36
SECTION

2.06.  Transfer and Exchange....................................................................36
SECTION 2.07.  Replacement Securities...................................................................36
SECTION 2.08.  Outstanding Securities...................................................................37
SECTION 2.09.  Temporary Securities.....................................................................38
SECTION 2.10.  Cancellation.............................................................................38
SECTION 2.11.  Defaulted Interest.......................................................................38
SECTION 2.12.  CUSIP Numbers............................................................................38
SECTION 2.13.  Issuance of Additional Securities........................................................39

ARTICLE 3

Redemption

SECTION 3.01.  Notices to Trustee.......................................................................39
SECTION 3.02.  Selection of Securities To Be Redeemed...................................................40
SECTION 3.03.  Notice of Redemption.....................................................................40
SECTION 3.04.  Effect of Notice of Redemption...........................................................41
SECTION 3.05.  Deposit of Redemption Price..............................................................41
SECTION 3.06.  Securities Redeemed in Part..............................................................41

1

4

ARTICLE 4

Covenants

SECTION 4.01.  Payment of Securities....................................................................42
SECTION 4.02.  SEC Reports..............................................................................42
SECTION 4.03.  Limitation on Indebtedness...............................................................42
SECTION 4.04.  Limitation on Restricted Payments........................................................47
SECTION 4.05.  Limitation on Restrictions on Distributions
from Restricted Subsidiaries........................................50
SECTION 4.06.  Limitation on Sales of Assets and
Subsidiary Stock....................................................52
SECTION 4.07.  Limitation on Affiliate Transactions.....................................................57
SECTION 4.08.  Limitation on the Sale or Issuance of
Capital Stock of
Restricted Subsidiaries.............................................58
SECTION 4.09.  Change of Control........................................................................59
SECTION 4.10.  Excess Cash Flow Repurchase Offer........................................................61
SECTION 4.11.  Future Guarantors........................................................................64 
SECTION 4.12.  Compliance Certificate...................................................................64
SECTION 4.13.  Further Instruments and Acts.............................................................65

ARTICLE 5

Successor Company

SECTION 5.01.  When Company May Merge or Transfer
Assets..............................................................65

ARTICLE 6

Defaults and Remedies

SECTION 6.01.  Events of Default........................................................................67
SECTION 6.02.  Acceleration.............................................................................70
SECTION 6.03.  Other Remedies...........................................................................70
SECTION 6.04.  Waiver of Past Defaults..................................................................71
SECTION 6.05.  Control by Majority......................................................................71
SECTION 6.06.  Limitation on Suits......................................................................71
SECTION 6.07.  Rights of Holders to Receive Payment.....................................................72
SECTION 6.08.  Collection Suit by Trustee...............................................................72
SECTION 6.09.  Trustee May File Proofs of Claim.........................................................72
SECTION 6.10.  Priorities...............................................................................73
SECTION 6.11.  Undertaking for Costs....................................................................73
SECTION 6.12.  Waiver of Stay or Extension Laws.........................................................73

2

5

ARTICLE 7

Trustee

SECTION 7.01.  Duties of Trustee........................................................................74
SECTION 7.02.  Rights of Trustee........................................................................75
SECTION 7.03.  Individual Rights of Trustee.............................................................76
SECTION 7.04.  Trustee's Disclaimer.....................................................................77
SECTION 7.05.  Notice of Defaults.......................................................................77
SECTION 7.06.  Reports by Trustee to Holders............................................................77
SECTION 7.07.  Compensation and Indemnity...............................................................77
SECTION 7.08.  Replacement of Trustee...................................................................78
SECTION 7.09.  Successor Trustee by Merger..............................................................79
SECTION 7.10.  Eligibility; Disqualification............................................................80
SECTION 7.11.  Preferential Collection of Claims
Against Company.....................................................80

ARTICLE 8

Discharge of Indenture; Defeasance

SECTION 8.01.  Discharge of Liability on
Securities; Defeasance..............................................80
SECTION 8.02.  Conditions to Defeasance.................................................................81
SECTION 8.03.  Application of Trust Money...............................................................83
SECTION 8.04.  Repayment to Company.....................................................................83
SECTION 8.05.  Indemnity for Government Obligations.....................................................83
SECTION 8.06.  Reinstatement............................................................................83

ARTICLE 9

Amendments

SECTION 9.01.  Without Consent of Holders...............................................................84
SECTION 9.02.  With Consent of Holders..................................................................85
SECTION 9.03.  Compliance with Trust Indenture Act......................................................86
SECTION 9.04.  Revocation and Effect of Consents and
Waivers.............................................................86
SECTION 9.05.  Notation on or Exchange of Securities....................................................87
SECTION 9.06.  Trustee To Sign Amendments...............................................................87

ARTICLE 10

Subordination

SECTION 10.01.  Agreement To Subordinate................................................................88
SECTION 10.02.  Liquidation, Dissolution, Bankruptcy....................................................88
SECTION 10.03.  Default on Senior Indebtedness of the
Company.............................................................88
SECTION 10.04.  Acceleration of Payment of Securities...................................................90
SECTION 10.05.  When Distribution Must Be Paid Over.....................................................90

3

6

SECTION 10.06.  Subrogation.............................................................................90
SECTION 10.07.  Relative Rights.........................................................................91
SECTION 10.08.  Subordination May Not Be Impaired by
Company.............................................................91
SECTION 10.09.  Rights of Trustee and Paying Agent......................................................91
SECTION 10.10.  Distribution or Notice to
Representative......................................................92
SECTION 10.11.  Article 10 Not To Prevent Events of Default
or Limit Right To Accelerate........................................92
SECTION 10.12.  Trust Moneys Not Subordinated...........................................................92
SECTION 10.13.  Trustee Entitled To Rely................................................................92
SECTION 10.14.  Trustee To Effectuate Subordination. ...................................................93
SECTION 10.15.  Trustee Not Fiduciary for Holders of Senior
Indebtedness of the Company.........................................93
SECTION 10.16.  Reliance by Holders of Senior Indebtedness
of the Company on Subordination
Provisions..........................................................93

ARTICLE 11

Subsidiary Guaranties

SECTION 11.01.  Guaranties..............................................................................94
SECTION 11.02.  Limitation on Liability.................................................................96
SECTION 11.03.  Successors and Assigns..................................................................96
SECTION 11.04.  No Waiver...............................................................................97
SECTION 11.05.  Modification............................................................................97
SECTION 11.06.  Release of Subsidiary Guarantor.........................................................97

ARTICLE 12

Subordination of Subsidiary Guaranties

SECTION 12.01.  Agreement To Subordinate................................................................98
SECTION 12.02.  Liquidation, Dissolution, Bankruptcy....................................................98
SECTION 12.03.  Default on Senior Indebtedness of
Subsidiary Guarantor................................................98
SECTION 12.04.  Demand for Payment.....................................................................100
SECTION 12.05.  When Distribution Must Be Paid Over....................................................100
SECTION 12.06.  Subrogation............................................................................100
SECTION 12.07.  Relative Rights........................................................................101
SECTION 12.08.  Subordination May Not Be Impaired by
Company............................................................101
SECTION 12.09.  Rights of Trustee and Paying Agent.....................................................101
SECTION 12.10.  Distribution or Notice to
Representative.....................................................102
SECTION 12.11.  Article 12 Not To Prevent Events of Default
or Limit Right To Demand Payment...................................102

4

7

SECTION 12.12.  Trustee Entitled To Rely...............................................................102
SECTION 12.13.  Trustee To Effectuate Subordination....................................................103
SECTION 12.14.  Trustee Not Fiduciary for Holders of
Senior Indebtedness of Subsidiary
Guarantor..........................................................103
SECTION 12.15.  Reliance by Holders of Senior Indebtedness
of Subsidiary Guarantors on
Subordination Provisions...........................................103

ARTICLE 13

Miscellaneous

SECTION 13.01.  Trust Indenture Act Controls...........................................................104
SECTION 13.02.  Notices................................................................................104
SECTION 13.03.  Communication by Holders with Other
Holders............................................................105
SECTION 13.04.  Certificate and Opinion as to Conditions
Precedent..........................................................105
SECTION 13.05.  Statements Required in Certificate or
Opinion............................................................105
SECTION 13.06.  When Securities Disregarded............................................................105
SECTION 13.07.  Rules by Trustee, Paying Agent and
Registrar..........................................................106
SECTION 13.08.  Legal Holidays.........................................................................106
SECTION 13.09.  Governing Law..........................................................................106
SECTION 13.10.  No Recourse Against Others.............................................................106
SECTION 13.11.  Successors.............................................................................106
SECTION 13.12.  Multiple Originals.....................................................................107
SECTION 13.13.  Table of Contents; Headings............................................................107

Rule 144A/Regulation S Appendix

Exhibit 1 - Form of Initial Security

Exhibit A - Form of Exchange Security or Private Exchange Security

5

8

INDENTURE dated as of August 8, 2000, among
Flowserve Corporation, a New York corporation (the
"Company"), the GUARANTORS named herein and The Bank
of New York, a New York banking corporation (the
"Trustee").

Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Company's
Initial Securities, Exchange Securities and Private Exchange Securities
(collectively, the "Securities"):

ARTICLE 1

Definitions and Incorporation by Reference

SECTION 1.01. Definitions.

"Acquisition" means the acquisition by the Company, directly
or indirectly, of 100% of the partnership interests of Ingersoll-Dresser Pump
Company.

"Additional Assets" means any:

(1)      property, plant or equipment used in a Related
Business;

(2)      the Capital Stock of a Person that becomes a
Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or another
Restricted Subsidiary; or

(3)      Capital Stock constituting a minority interest in any
Person that at such time is a Restricted Subsidiary;

provided, however, that any such Restricted Subsidiary described in clause (2)
or (3) above is primarily engaged in a Related Business.

"Additional Euro Notes" means, subject to the Company's
compliance with Section 4.03, 12-1/4% Senior Subordinated Securities Due 2010
issued from time to time after the Issue Date under the terms of the Euro Notes
Indenture (other than pursuant to Section 2.06, 2.07, 2.09 or 3.06 of the Euro
Notes Indenture and other than Euro Notes Exchange Securities or Euro Notes
Private Exchange Securities (in each case as defined in the Euro Notes

1

9

Indenture) issued pursuant to an exchange offer for other Euro Notes outstanding
under the Euro Notes Indenture).

"Additional Securities" means, subject to the Company's
compliance with Section 4.03, 12-1/4% Senior Subordinated Securities Due 2010
issued from time to time after the Issue Date under the terms of this Indenture
(other than pursuant to Section 2.06, 2.07, 2.09 or 3.06 of this Indenture and
other than Exchange Securities or Private Exchange Securities issued pursuant to
an exchange offer for other Securities outstanding under this Indenture).

"Affiliate" of any specified Person means: (1) any other
Person, directly or indirectly, controlling or controlled by; or (2) under
direct or indirect common control with such specified Person. For the purposes
of this definition, "control" when used with respect to any Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. For purposes of Sections 4.04, 4.06 and 4.07 only,
"Affiliate" shall also mean any beneficial owner of Capital Stock representing
5% or more of the total voting power of the Voting Stock (on a fully diluted
basis) of the Company or of rights or warrants to purchase such Capital Stock
(whether or not currently exercisable) and any Person who would be an Affiliate
of any such beneficial owner pursuant to the first sentence hereof.

"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of:

(1) any shares of Capital Stock of a Restricted Subsidiary
(other than directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Company or a
Restricted Subsidiary);

(2) all or substantially all the assets of any division or
line of business of the Company or any Restricted Subsidiary; or

(3) any other assets of the Company or any Restricted
Subsidiary outside of the ordinary course of business of the Company or
such Restricted Subsidiary

2

10

(other than, in the case of clauses (1), (2) and (3), (A) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary (or to a Restricted Subsidiary so long
as the aggregate fair market value of all assets transferred to Restricted
Subsidiaries pursuant to this clause (A) does not exceed $50.0 million); (B) for
purposes of Section 4.06 only, a disposition that constitutes a Restricted
Payment permitted by Section 4.04 or a Permitted Investment; (C) sales or other
dispositions of obsolete, worn-out or otherwise unsuitable assets or excess
equipment in the ordinary course of business; and (D) a disposition of assets
with a fair market value of less than $1,000,000).

Notwithstanding anything to the contrary set forth above, (x)
unless, at the time of such disposition, the Company has Investment Grade
Status, a disposition of Receivables and Related Assets shall be deemed to
constitute an Asset Disposition and (y) a disposition of all or substantially
all the assets of the Company and its Restricted Subsidiaries taken as a whole
will be governed by the provisions of Sections 4.09 and/or 5.01 and not by the
provisions of Section 4.06.

"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).

"Average Life" means, as of the date of determination, with
respect to any Indebtedness, the quotient obtained by dividing (1) the sum of
the products of numbers of years from the date of determination to the dates of
each successive scheduled principal payment of or redemption or similar payment
with respect to such Indebtedness multiplied by the amount of such payment by
(2) the sum of all such payments.

"Bank Indebtedness" means all Obligations pursuant to the
Credit Agreement.

"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such Board.

"Business Day" means each day other than a Saturday, Sunday or
a day on which commercial banking institutions are authorized or required by law
to close in New York City.

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"Capital Lease Obligation" means an obligation that is
required to be classified and accounted for as a capital lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty.

"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.

"Change of Control" means the occurrence of any of the
following events:

(1) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
for purposes of this clause (1) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right
to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of a majority of the
total voting power of the Voting Stock of the Company (for the purposes
of this clause (1), such other person shall be deemed to beneficially
own any Voting Stock of a Person (the "specified person") held by an
other Person (the "parent entity"), if such other person is the
beneficial owner (as defined in this clause (1)), directly or
indirectly, of a majority of the voting power of the Voting Stock of
such parent entity);

(2) individuals who on the Issue Date constituted the Board of
Directors (together with any new directors whose election by such Board
of Directors or whose nomination for election by the shareholders of
the Company was approved by a vote of 66-2/3% of the directors of the
Company then still in office who were either directors on the Issue
Date or whose election or nomination for election was previously so
approved) 

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cease for any reason to constitute a majority of the Board of Directors
then in office; or

(3) the merger or consolidation of the Company with or into
another Person or the merger of another Person with or into the
Company, or the sale of all or substantially all the assets of the
Company (determined on a consolidated basis) to another Person, other
than a transaction following which in the case of a merger or
consolidation transaction, securities that represented 100% of the
Voting Stock of the Company immediately prior to such transaction (or
other securities into which such securities are converted as part of
such merger or consolidation transaction) constitute at least a
majority of the voting power of the Voting Stock of the surviving
Person in such merger or consolidation transaction.

"Code" means the Internal Revenue Code of 1986, as amended.

"Commodity Agreement" means, in respect of a Person, any
forward contract, commodity swap agreement, commodity option agreement or other
similar agreement or arrangement designed to protect such Person against
fluctuations in commodity prices.

"Company" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor and, for
purposes of any provision contained herein and required by the TIA, each other
obligor on the Securities.

"Consent Decree" means the consent decree entered on July 28,
2000 in the U.S. District Court for the District of Columbia in the matter of
United States of America v. Flowserve Corporation, Ingersoll-Dresser Pump
Company and Ingersoll-Rand Company relating to the purchase of Ingersoll-Dresser
Pump Company by the Company.

"Consent Decree Assets" means the assets identified in the
Consent Decree that the Company, Ingersoll-Dresser Pump Company and
Ingersoll-Rand Company have been ordered and directed to divest in connection
with the Acquisition.

"Consolidated Coverage Ratio" as of any date of determination
means the ratio of

(x) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters for 

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13

which internal financial statements are available ending on or prior to
the date of such determination to

(y) Consolidated Interest Expense for such four fiscal
quarters;

provided, however, that:

(1) if the Company or any Restricted Subsidiary has Incurred
any Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or
both, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day
of such period;

(2) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since
the beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on
the date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense
for such period shall be calculated on a pro forma basis as if such
discharge had occurred on the first day of such period and as if the
Company or such Restricted Subsidiary has not earned the interest
income actually earned during such period in respect of cash or
Temporary Cash Investments used to repay, repurchase, defease or
otherwise discharge such Indebtedness;

(3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, EBITDA for
such period shall be reduced by an amount equal to EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to EBITDA
(if negative), directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable
to any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with 

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14

respect to the Company and its continuing Restricted Subsidiaries in
connection with such Asset Disposition for such period (or, if the
Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company
and its continuing Restricted Subsidiaries are no longer liable for
such Indebtedness after such sale);

(4) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction
requiring a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the
first day of such period; and

(5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into
the Company or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition, any Investment or
acquisition of assets that would have required an adjustment pursuant
to clause (3) or (4) above if made by the Company or a Restricted
Subsidiary during such period, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period.

For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting officer (and shall
include any applicable Pro Forma Cost Savings). If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest of
such Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire 

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15

period (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of
12 months).

"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated Restricted
Subsidiaries, plus, to the extent not included in such total interest expense,
and to the extent incurred by the Company or its Restricted Subsidiaries,
without duplication:

(1) interest expense attributable to capital leases and the
interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction;

(2) amortization of debt discount and debt issuance cost;

(3) capitalized interest;

(4) non-cash interest expenses;

(5) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing;

(6) net payments pursuant to Hedging Obligations;

(7) Preferred Stock dividends in respect of all Preferred
Stock held by Persons other than the Company or a Wholly Owned
Subsidiary (other than dividends payable solely in Capital Stock (other
than Disqualified Stock) of the issuer of such Preferred Stock);

(8) interest incurred in connection with Investments in
discontinued operations;

(9) interest accruing on any Indebtedness of any other Person
to the extent such Indebtedness is Guaranteed by (or secured by the
assets of) the Company or any Restricted Subsidiary and there shall
have occurred and continues an event of default under such Indebtedness
or any payment is actually made in respect of such Guarantee;

(10) the cash contributions to any employee stock ownership
plan or similar trust to the extent such contributions are used by such
plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or
trust; and

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16

(11) any premiums, fees, discounts, expenses and losses on the
sale of Receivables and Related Assets (and any amortization thereof)
payable in connection with a Receivables Program, as determined on a
consolidated basis in conformity with GAAP.

"Consolidated Net Income" means, for any period, the net
income of the Company and its consolidated Subsidiaries; provided, however, that
there shall not be included in such Consolidated Net Income:

(1) any net income of any Person (other than the Company) if
such Person is not a Restricted Subsidiary, except that:

(A) subject to the exclusion contained in clause (4)
below, the Company's equity in the net income of any such
Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company
or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid
to a Restricted Subsidiary, to the limitations contained in
clause (3) below); and

(B) the Company's equity in a net loss of any such
Person for such period shall be included in determining such
Consolidated Net Income;

(2) any net income (or loss) of any Person acquired by the
Company or a Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition;

(3) any net income of any Restricted Subsidiary that is not a
Subsidiary Guarantor if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or
the making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Company, except that:

(A) subject to the exclusion contained in clause (4)
below, the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of
cash actually 

9

17

distributed by such Restricted Subsidiary during such period
to the Company or another Restricted Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or
other distribution paid to another Restricted Subsidiary, to
the limitation contained in this clause); and

(B) the Company's equity in a net loss of any such
Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income;

(4) any gain (but not loss) realized upon the sale or other
disposition of any assets (other than any Consent Decree Assets) of the
Company, its consolidated Subsidiaries or any other Person (including
pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain
(but not loss) realized upon the sale or other disposition of any
Capital Stock of any Person;

(5) extraordinary gains or losses; and

(6) the cumulative effect of a change in accounting
principles.

Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any repurchases, repayments or
redemptions of Investments, proceeds realized on the sale of the Investments or
return of capital to the Company or a Restricted Subsidiary to the extent such
repurchases, repayments, redemptions, proceeds or returns increase the amount of
Restricted Payments permitted under Section 4.04 (a)(3)(C).

"Consolidated Net Worth" means the total of the amounts shown
on the balance sheet of the Company and its consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company ending at least 45 days prior to the
taking of any action for the purpose of which the determination is being made,
as the sum of:

(1)      the par or stated value of all outstanding Capital
Stock of the Company plus

(2)      paid-in capital or capital surplus relating to such
Capital Stock plus

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18

(3)      any retained earnings or earned surplus

less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock. In determining "Consolidated Net Worth," the Company shall
exclude the impact of any write-off of deferred financing fees occurring in
connection with any transaction subject to Section 5.01 of this Indenture for
the purpose of which the determination is being made.

"Corporate Trust Office" means the principal office of the
Trustee at which at any time its corporate trust business shall be administered,
which office at the dated hereof is located at 101 Barclay Street, Floor 21
West, New York, New York 10286. Attention: Corporate Trust Administration, or
such other address as the Trustee may designate from time to time by notice to
the Holders and the Company, or the principal corporate trust office of any
successor Trustee (or such other address as a successor Trustee may designate
from time to time by notice to the Holders and the Company).

"Credit Agreement" means the Credit Agreement to be entered
into by and among the Company, certain of its Subsidiaries, the lenders referred
to therein, Credit Suisse First Boston, New York branch, as Syndication Agent,
Bank of America, N.A., as Administrative Agent, Collateral Agent and Swingline
Lender, and ABN-AMRO Bank N.V., Bank One and Salomon Smith Barney, Inc., as
Co-Documentation Agents, together with the related documents thereto (including
the term loans and revolving loans thereunder, any guarantees and security
documents), as amended, extended, renewed, restated, refinanced, supplemented or
otherwise modified (in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions) from time to time, and any
agreement (and related document) governing Indebtedness incurred to Refinance,
in whole or in part, the borrowings and commitments then outstanding or
permitted to be outstanding under such Credit Agreement or a successor Credit
Agreement, whether by the same or any other lender or group of lenders.

"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement designed
to protect such Person against fluctuations in currency values.

"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.

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19

"Designated Senior Indebtedness" with respect to a Person
means (1) the Bank Indebtedness; and (2) any other Senior Indebtedness of such
Person which, at the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $25.0 million and is specifically
designated by such Person in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture.

"Disqualified Stock" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable at the option of the holder) or
upon the happening of any event:

(1) matures or is mandatorily redeemable pursuant to a sinking
fund obligation or otherwise;

(2) is convertible or exchangeable at the option of the holder
for Indebtedness or Disqualified Stock; or

(3) is mandatorily redeemable or must be purchased upon the
occurrence of certain events or otherwise, in whole or in part;

in each case on or prior to the first anniversary of the Stated Maturity of the
Securities; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Securities shall not constitute
Disqualified Stock if (1) the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the terms applicable to the Securities in Sections 4.06 and
4.09; and (2) any such requirement only becomes operative after compliance with
such terms applicable to the Securities, including the purchase of any
Securities tendered pursuant thereto.

"EBITDA" for any period means the sum of Consolidated Net
Income, plus the following to the extent deducted in calculating such
Consolidated Net Income:

(1) all income tax expense of the Company and its consolidated
Restricted Subsidiaries;

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20

(2) Consolidated Interest Expense;

(3) depreciation and amortization expense of the Company and
its consolidated Restricted Subsidiaries (excluding amortization
expense attributable to a prepaid operating activity item that was paid
in cash in a prior period);

(4) all other non-cash charges of the Company and its
consolidated Restricted Subsidiaries (excluding any such non-cash
charge to the extent that it represents an accrual of or reserve for
cash expenditures in any future period); and

(5) cash integration and restructuring charges in connection
with the Acquisition and taken with respect to periods ended on or
prior to December 31, 2001, in an aggregate amount not to exceed $65.0
million;

in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated
Net Income to compute EBITDA only to the extent (and in the same proportion)
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.

"Eligible Indebtedness" means any indebtedness other than:

(1) Indebtedness in the form of, or represented by, bonds or
other securities or any guarantee thereof (other than a guarantee of
Indebtedness of the Company in the form of, or represented by, bonds or
other securities); and

(2) Indebtedness that is, or may be, quoted, listed or
purchased and sold on any stock exchange, automated trading system or
over-the-counter or other securities market (including, without
prejudice to the generality of the foregoing, the market for securities
eligible for resale pursuant to Rule 144A under the Securities Act).

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21

"Euro Equivalent" means with respect to any monetary amount in
a currency other than Euros, at any time of determination thereof, the amount of
Euros obtained by converting such foreign currency involved in such computation
into Euros at the spot rate for the purchase of Euros with the applicable
foreign currency as published in The Wall Street Journal in the "Exchange Rates"
column under the heading "Currency Trading" on the date two Business Days prior
to such determination.

"Euro Notes" means the 12-1/4% Senior Subordinated Notes due
2010 (other than any additional Euro Notes issued thereunder) as defined in the
Euro Notes Indenture.

"Euro Notes Indenture" means the Indenture dated August 8,
2000 among Flowserve Finance B.V., The Bank of New York, Flowserve Corporation
and the guarantors named therein.

"Euro Notes Holder" means the person in whose name a Euro Note
is registered on the Registrar's (as defined in the Euro Notes Indenture) books.

"European Government Obligations" means direct non-callable
obligations of, or non-callable obligations permitted by, any member nation of
the European Union, the payment or guarantee of which is secured by the full
faith and credit of the respective nation, provided that such nation has a
credit rating at least equal to that of the highest rated member nation of the
European Economic Area.

"Excess Cash Flow", with respect to the Company, has the
meaning specified in the Credit Agreement as in effect on the Issue Date.

"Exchange Act" means the Securities Exchange Act of 1934, as
amended.

"Exchange Securities" means the debt securities of the Company
issued pursuant to this Indenture in exchange for, and in an aggregate principal
amount equal to, the Initial Securities, in compliance with the terms of the
Registration Rights Agreement.

"Facilities" means the Term Loan Facilities and the Revolving
Credit Facilities.

"FFBV" means Flowserve Finance B.V., a Netherlands besloten
vennootschap, and indirect wholly owned subsidiary of the Company.

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"Foreign Restricted Subsidiary" means a Restricted Subsidiary
that is incorporated in a jurisdiction other than the United States or a State
thereof or the District of Columbia and with respect to which more than 80% of
any of its sales, earnings or assets (determined on a consolidated basis in
accordance with GAAP) are located in, generated from or derived from operations
located in territories outside of the United States of America and jurisdictions
outside the United States of America.

"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Issue Date, including those set
forth in:

(1) the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants;

(2) statements and pronouncements of the Financial Accounting
Standards Board;

(3) such other statements by such other entity as approved by
a significant segment of the accounting profession; and

(4) the rules and regulations of the SEC governing the
inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to
Section 13 of the Exchange Act, including opinions and pronouncements
in staff accounting bulletins and similar written statements from the
accounting staff of the SEC.

All ratios and computations based on GAAP contained in this Indenture shall be
computed in conformity with GAAP.

"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any Person
and any obligation, direct or indirect, contingent or otherwise, of such Person:

(1) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness of such Person (whether
arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay or to maintain financial statement conditions or
otherwise); or

(2) entered into for the purpose of assuring in any other
manner the obligee of such Indebtedness of

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23

the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part);

provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.

"Guaranty Agreement" means a supplemental indenture, in a form
satisfactory to the Trustee, pursuant to which a Subsidiary Guarantor guarantees
the Company's obligations with respect to the Securities on the terms provided
for in this Indenture.

"Hedging Obligations" of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement or Currency Agreement.

"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.

"Incur" means issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Person at the time it becomes a Restricted Subsidiary. The
term "Incurrence" when used as a noun shall have a correlative meaning. The
accretion of principal of a non-interest bearing or other discount security
shall not be deemed the Incurrence of Indebtedness.

"Indebtedness" means, with respect to any Person on any date
of determination (without duplication):

(1) the principal in respect of (A) indebtedness of such
Person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable, including, in each case, any
premium on such indebtedness to the extent such premium has become due
and payable;

(2) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered
into by such Person;

(3) all obligations of such Person issued or assumed as the
deferred purchase price of property, all 

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24

conditional sale obligations of such Person and all obligations of such
Person under any title retention agreement (but excluding trade
accounts payable arising in the ordinary course of business);

(4) all obligations of such Person for the reimbursement of
any obligor on any letter of credit, banker's acceptance, bank guaranty
or similar credit transaction (other than obligations with respect
thereto securing obligations (other than obligations described in
clauses (1) through (3) above) entered into in the ordinary course of
business of such Person to the extent such letters of credit, banker's
acceptances, bank guaranties or similar credit transactions are not
drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the tenth Business Day following payment
thereon);

(5) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified
Stock of such Person or, with respect to any Preferred Stock of any
Subsidiary of such Person, the principal amount of such Preferred Stock
to be determined in accordance with this Indenture (but excluding, in
each case, any accrued dividends);

(6) all obligations of the type referred to in clauses (1)
through (5) of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise, including
by means of any Guarantee;

(7) all obligations of the type referred to in clauses (1)
through (6) of other Persons secured by any Lien on any property or
asset of such Person (whether or not such obligation is assumed by such
Person), the amount of such obligation being deemed to be the lesser of
the value of such property or assets and the amount of the obligation
so secured; and

(8) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.

The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.

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"Indenture" means this Indenture as amended or supplemented
from time to time.

"Interest Rate Agreement" means in respect of a Person any
interest rate swap agreement, interest rate cap agreement or other financial
agreement or arrangement designed to protect such Person against fluctuations in
interest rates.

"Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet of the
lender) or other extensions of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of others), or any purchase or acquisition of Capital Stock, Indebtedness
or other similar instruments issued by such Person. For purposes of the
definition of "Unrestricted Subsidiary", the definition of "Restricted Payment"
and Section 4.04:

(1) "Investment" shall include the portion (proportionate to
the Company's equity interest in such Subsidiary) of the fair market
value of the net assets of any Subsidiary of the Company at the time
that such Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have
a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (A) the Company's "Investment" in such
Subsidiary at the time of such redesignation less (B) the portion
(proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time
of such redesignation; and

(2) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of
Directors.

"Investment Grade Status" means that the credit rating of the
Company's senior unsecured, non-credit-enhanced long-term debt is (a) "BBB-" or
higher according to Standard & Poor's Rating Group or (b) "Baa3" or higher
according to Moody's Investors Service, Inc.

"Issue Date" means August 8, 2000.

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"Lenders" has the meaning specified in the Credit Agreement.

"Leverage Ratio" has the meaning specified in the Credit
Agreement as in effect on the Issue Date.

"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof).

"Net Available Cash" from an Asset Disposition means cash
payments received therefrom (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise and proceeds from the sale or other disposition of any securities
received as consideration, but only as and when received, but excluding any
other consideration received in the form of assumption by the acquiring Person
of Indebtedness or other obligations relating to such properties or assets or
received in any other noncash form), in each case net of:

(1) all legal, title and recording tax expenses, commissions
and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes required to be accrued as a
liability under GAAP, as a consequence of such Asset Disposition;

(2) all payments made on any Indebtedness which is secured by
any assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon or other security agreement of any kind with
respect to such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition, or by applicable
law, be repaid out of the proceeds from such Asset Disposition;

(3) all distributions and other payments required to be made
to minority interest holders in Restricted Subsidiaries as a result of
such Asset Disposition; and

(4) the deduction of appropriate amounts provided by the
seller as a reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such Asset
Disposition and retained by the Company or any Restricted Subsidiary
after such Asset Disposition.

"Net Cash Proceeds", with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such 

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27

issuance or sale net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.

"Obligations" means with respect to any Indebtedness all
obligations for principal, premium, interest, penalties, fees, indemnifications,
reimbursements, and other amounts payable pursuant to the documentation
governing such Indebtedness.

"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company.

"Officers' Certificate" means a certificate signed by two
Officers.

"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.

"Permitted Employee Stock Purchase Loans" means loans, in an
aggregate amount outstanding at any time not to exceed $30.0 million, made by
third parties (other than any Affiliate of the Company) to employees of the
Company and its Subsidiaries who are participants in the Company's stock
purchase program to enable such employees to purchase common stock of the
Company.

"Permitted Investment" means an Investment by the Company or
any Restricted Subsidiary in:

(1) the Company, a Restricted Subsidiary or a Person that
will, upon the making of such Investment, become a Restricted
Subsidiary; provided, however, that the primary business of such
Restricted Subsidiary is a Related Business;

(2) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or
conveys all or substantially all its assets to, the Company or a
Restricted Subsidiary; provided, however, that such Person's primary
business is a Related Business;

(3) cash and Temporary Cash Investments;

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(4) receivables owing to the Company or any Restricted
Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include such concessionary
trade terms as the Company or any such Restricted Subsidiary deems
reasonable under the circumstances;

(5) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary
course of business;

(6) loans or advances to employees made in the ordinary course
of business consistent with past practices of the Company or such
Restricted Subsidiary, but in any event not to exceed $5.0 million in
the aggregate outstanding at any one time;

(7) guaranties of Permitted Employee Stock Purchase Loans;

(8) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments;

(9) any Person to the extent such Investment represents the
non-cash portion of the consideration received for an Asset Disposition
as permitted pursuant to the covenant described under Section 4.06;

(10) so long as no Default shall have occurred and be
continuing (or result therefrom), in Unrestricted Subsidiaries in an
aggregate amount which, when taken together with the amount of all
other Investments made pursuant to this clause (10) which at such time
have not been repaid, does not exceed $25.0 million;

(11) so long as no Default shall have occurred and be
continuing (or result therefrom), in any Person in an aggregate amount
which, when taken together with the amount of all other Investments
made pursuant to this clause (11) which at such time have not been
repaid, does not exceed $25.0 million; and

(12) a trust, limited liability company, special purpose
entity or other similar entity in connection with a Receivables
Program; provided, however, that (A) 

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such Investment is made by a Receivables Subsidiary and (B) the only
assets transferred to such trust, limited liability company, special
purpose entity or other similar entity consist of Receivables and
Related Assets of such Receivables Subsidiary.

"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.

"Preferred Stock", as applied to the Capital Stock of any
Person, means Capital Stock of any class or classes (however designated) which
is preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of
such Person.

"principal" of a Security means the principal of the Security
plus the premium, if any, payable on the Security which is due or overdue or is
to become due at the relevant time.

"Pro Forma Cost Savings" means, with respect to any period,
the reduction in costs that were (1) directly attributable to an asset
acquisition and calculated on a basis that is consistent with Regulation S-X
under the Securities Act in effect and applied as of the Issue Date; or (2)
implemented by the business that was the subject of any such asset acquisition
within 6 months of the date of such asset acquisition and that are supportable
and quantifiable by the underlying accounting records of such business, in the
case of each of (1) and (2), as if such reduction in costs had been effected as
of the beginning of such period.

"Public Equity Offering" means an underwritten primary public
offering of common stock of the Company pursuant to an effective registration
statement under the Securities Act.

"Receivables and Related Assets" means accounts receivable,
instruments, chattel paper, obligations, general intangibles and other similar
assets, including interest in merchandise or goods, the sale or lease of which
give rise to the foregoing, related contractual rights, guarantees, insurance
proceeds, collections, other related assets and proceeds of all the foregoing.

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"Receivables Program" means with respect to any Person, any
accounts receivable securitization program pursuant to which such Person
pledges, sells or otherwise transfers or encumbers its accounts receivable,
including a trust, limited liability company, special purpose entity or other
similar entity.

"Receivables Subsidiary" means a Wholly Owned Subsidiary (i)
created for the purpose of financing receivables created in the ordinary course
of business of the Company and its Subsidiaries and (ii) the sole assets of
which consist of Receivables and Related Assets of the Company and its
Subsidiaries and related Permitted Investments.

"Refinance" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.

"Refinancing Indebtedness" means Indebtedness that Refinances
any Indebtedness of the Company, FFBV or any Restricted Subsidiary existing on
the Issue Date or Incurred in compliance with this Indenture, including
Indebtedness that Refinances Refinancing Indebtedness; provided, however, that:

(1) such Refinancing Indebtedness has a Stated Maturity no
earlier than the Stated Maturity of the Indebtedness being Refinanced;

(2) such Refinancing Indebtedness has an Average Life at the
time such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being Refinanced; and

(3) such Refinancing Indebtedness has an aggregate principal
amount (or if Incurred with original issue discount, an aggregate issue
price) that is equal to or less than the aggregate principal amount (or
if Incurred with original issue discount, the aggregate accreted value)
then outstanding or committed (plus fees and expenses, including any
premium and defeasance costs) under the Indebtedness being Refinanced;

provided further, however, that Refinancing Indebtedness shall not include (A)
Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (B)
Indebtedness 

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of the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.

"Registration Rights Agreement" means the Registration Rights
Agreement dated August 3, 2000 among the Company, the Guarantors, Credit Suisse
First Boston Corporation, Banc of America Securities LLC, ABN AMRO Incorporated
and Banc One Capital Markets, Inc.

"Related Business" means any business in which the Company was
engaged on the Issue Date and any business related, ancillary or complementary
to any business of the Company in which the Company was engaged on the Issue
Date or any industrial manufacturing or related services business.

"Representative" means with respect to a Person any trustee,
agent or representative (if any) for an issue of Senior Indebtedness of such
Person.

"Restricted Payment" with respect to any Person means:

(1) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock (including
any payment in connection with any merger or consolidation involving
such Person) or similar payment to the direct or indirect holders of
its Capital Stock (other than dividends or distributions payable solely
in its Capital Stock (other than Disqualified Stock) and dividends or
distributions payable solely to the Company or a Restricted Subsidiary,
and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a
Subsidiary that is an entity other than a corporation));

(2) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company held by any
Person or of any Capital Stock of a Restricted Subsidiary held by any
Affiliate of the Company (other than a Restricted Subsidiary),
including the exercise of any option to exchange any Capital Stock
(other than into Capital Stock of the Company that is not Disqualified
Stock);

(3) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment 

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or scheduled sinking fund payment of any Subordinated Obligations of
such Person (other than the purchase, repurchase or other acquisition
of Subordinated Obligations purchased in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in
each case due within one year of the date of such purchase, repurchase
or other acquisition); or

(4) the making of any Investment (other than a Permitted
Investment) in any Person.

In determining the amount of any Restricted Payment made in
property other than cash, such amount shall be the fair market value of such
property at the time of such Restricted Payment, as determined in good faith by
the Board of Directors.

"Restricted Subsidiary" means any Subsidiary of the Company
that is not an Unrestricted Subsidiary.

"Revolving Credit Facility" means the revolving credit
facility contained in the Credit Agreement and any other facility or financing
arrangement that Refinances, in whole or in part, any such revolving credit
facility.

"Sale/Leaseback Transaction" means an arrangement relating to
property owned by the Company or a Restricted Subsidiary on the Issue Date or
thereafter acquired by the Company or a Restricted Subsidiary whereby the
Company or a Restricted Subsidiary transfers such property to a Person and the
Company or a Restricted Subsidiary leases it from such Person.

"SEC" means the Securities and Exchange Commission.

"Secured Indebtedness" means with respect to any Person any
Indebtedness of such Person secured by a Lien.

"Senior Indebtedness" means with respect to any Person:

(1) Bank Indebtedness of or guaranteed by such Person, whether
outstanding on the Issue Date or thereafter Incurred;

(2) Indebtedness of such Person, whether outstanding on the
Issue Date or thereafter Incurred; and

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33

(3) accrued and unpaid interest (including interest accruing
on or after the filing of any petition in bankruptcy or for
reorganization relating to such Person whether or not a claim for
post-filing interest is allowed or allowable in such proceeding) in
respect of (A) such Bank Indebtedness; (B) indebtedness of such Person
for money borrowed and (C) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such Person
is responsible or liable

unless, in the case of clauses (1) and (2), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the Securities;
provided, however, that Senior Indebtedness shall not include:

(1) any obligation of such Person to any Subsidiary;

(2) any liability for Federal, state, local or other taxes
owed or owing by such Person;

(3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities);

(4) any Indebtedness of such Person (and any accrued and
unpaid interest in respect thereof) which is subordinate or junior in
any respect to any other Indebtedness or other obligation of such
Person; or

(5) that portion of any Indebtedness which at the time of
Incurrence is Incurred in violation of the Indenture.

"Senior Subordinated Indebtedness" means, with respect to a
Person, the Securities (in the case of the Company), a Subsidiary Guaranty (in
the case of a Subsidiary Guarantor) and any other Indebtedness of such Person
that specifically provides that such Indebtedness is to rank pari passu with the
Securities or such Subsidiary Guaranty, as the case may be, in right of payment
and is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of such Person which is not Senior Indebtedness of such Person.

"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC.

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"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).

"Subordinated Obligation" means, with respect to a Person, any
Indebtedness of such Person (whether outstanding on the Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to the Securities,
the Euro Notes, the Company's Guaranty of the Euro Notes or a Subsidiary
Guaranty of such Person, as the case may be, pursuant to a written agreement to
that effect.

"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, association, partnership or other
business entity of which more than 50% of the total voting power of shares of
Voting Stock is at the time owned or controlled, directly or indirectly, by: (1)
such Person; (2) such Person and one or more Subsidiaries of such Person; or (3)
one or more Subsidiaries of such Person.

"Subsidiary Guarantor" means FFBV, Flowserve International
Limited, each direct or indirect Subsidiary of the Company that is a guarantor
of Senior Indebtedness under the Credit Agreement and each direct or indirect
domestic Restricted Subsidiary that is a guarantor of any other Indebtedness of
the Company.

"Subsidiary Guaranty" means a Guarantee by a Subsidiary
Guarantor of the Company's obligations with respect to the Securities.

"Temporary Cash Investments" means any of the following:

(1) any investment in direct obligations of the United States
of America, European Government Obligations or direct obligations of
any other European Union member state in which the Company or any of
its Restricted Subsidiaries has operations, or any agency thereof or
obligations guaranteed by the United States of America or any other
European Union member state in 

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35

which the Company or any of its Restricted Subsidiaries has operations,
or any agency thereof;

(2) investments in time deposit accounts, certificates of
deposit and money market deposits maturing within 180 days of the date
of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any state
thereof or any foreign country recognized by the United States, and
which bank or trust company has capital, surplus and undivided profits
aggregating in excess of $50,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or
such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436
under the Securities Act) or any money-market fund sponsored by a
registered broker-dealer or mutual fund distributor;

(3) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (1)
above entered into with a bank meeting the qualifications described in
clause (2) above;

(4) investments in commercial paper, maturing not more than 90
days after the date of acquisition, issued by a corporation (other than
an Affiliate of the Company) organized and in existence under the laws
of the United States of America or any foreign country recognized by
the United States of America with a rating at the time as of which any
investment therein is made of "P-2" (or higher) according to Moody's
Investors Service, Inc. or "A-2" (or higher) according to Standard and
Poor's Ratings Group; and

(5) investments in securities with maturities of six months or
less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America, or by
any political subdivision or taxing authority thereof, and rated at
least "A" by Standard & Poor's Ratings Group or "A" by Moody's
Investors Service, Inc.

"Term Loan Facility" means the term loan facility contained in
the Credit Agreement and any other facility or financing arrangement that
Refinances in whole or in part any such term loan facility.

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"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of this Indenture.

"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.

"Trust Officer" means, when used with respect to the Trustee,
any officer within the corporate trust department of the Trustee, including any
vice president, assistant vice president, assistant secretary, assistant
treasurer, trust officer or any other officer of the Trustee who customarily
performs functions similar to those performed by the Persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of such person's knowledge of and familiarity with the
particular subject and who shall have direct responsibility for the
administration of this Indenture.

"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.

"Unrestricted Subsidiary" means:

(1) any Subsidiary of the Company that at the time of
determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below; and

(2) any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors may designate any Subsidiary of the Company (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under Section
4.04.

The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (A) the Company could Incur $1.00 of
additional Indebtedness under Section 4.03(a) and (B) no Default shall have
occurred and be continuing. Any such 

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37

designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.

"U.S. Dollar Equivalent" means with respect to any monetary
amount in a currency other than U.S. dollars, at any time for determination
thereof, the amount of U.S. dollars obtained by converting such foreign currency
involved in such computation into U.S. dollars at the spot rate for the purchase
of U.S. dollars with the applicable foreign currency as published in The Wall
Street Journal in the "Exchange Rates" column under the heading "Currency
Trading" on the date two Business Days prior to such determination.

Except as described under Section 4.03, whenever it is
necessary to determine whether the Company has complied with any covenant in the
Indenture or a Default has occurred and an amount is expressed in a currency
other than U.S. dollars, such amount will be treated as the U.S. Dollar
Equivalent determined as of the date such amount is initially incurred in such
currency.

"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.

"Voting Stock" of a Person means all classes of Capital Stock
or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.

"Wholly Owned Subsidiary" means a Restricted Subsidiary all
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or one or more Wholly Owned Subsidiaries.

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SECTION 1.02. Other Definitions.

Defined in
Term                                                                                Section
----                                                                               ----------

"Affiliate Transaction" ..........................................................   4.07
"Appendix"........................................................................   2.01
"Bankruptcy Law"..................................................................   6.01
"Blockage Notice" ................................................................   10.03
"Change of Control Offer".........................................................   4.09(b)
"covenant defeasance option" .....................................................   8.01(b)
"Custodian".......................................................................   6.01
"Event of Default"................................................................   6.01
"Excess Cash Flow Offer"..........................................................   4.10
"Excess Cash Flow Offer Amount"...................................................   4.10
"Excess Cash Flow Offer Period"...................................................   4.10
"Excess Cash Flow Purchase Date"..................................................   4.10
"Foreign Jurisdiction Merger......................................................   5.01
"legal defeasance option".........................................................   8.01(b)
"Legal Holiday"...................................................................   13.08
"Obligations".....................................................................   11.01
"Offer" ..........................................................................   4.06(b)
"Offer Amount" ...................................................................   4.06(c)(2)
"Offer Period" ...................................................................   4.06(c)(2)
"pay its Subsidiary Guaranty".....................................................   12.03
"pay the Securities" .............................................................   10.03
"Paying Agent" ...................................................................   2.03
"Payment Blockage Period".........................................................   10.03
"Payment Default..................................................................   10.03
"Purchase Date"...................................................................   4.06(c)(1)
"Registrar" ......................................................................   2.03
"Successor Company" ..............................................................   5.01

SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:

"Commission" means the SEC;

"indenture securities" means the Securities;

"indenture security holder" means a Securityholder;

"indenture to be qualified" means this Indenture;

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39

"indenture trustee" or "institutional trustee" means the
Trustee; and

"obligor" on the indenture securities means the Company and
any other obligor on the indenture securities.

All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.

SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;

(3) "or" is not exclusive;

(4) "including" means including without limitation;

(5) words in the singular include the plural and words in the
plural include the singular;

(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness;

(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP;

(8) the principal amount of any Preferred Stock shall be (i)
the maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with respect
to such Preferred Stock, whichever is greater; and

(9) all references to the date the Securities were originally
issued shall refer to the Issue Date.

SECTION 1.05. Acts of Holders. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such 

32

40

Holders in person or by agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.

The ownership of Securities shall be proved by the Register.

Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.

If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Company may, at its option, by or pursuant to a Board Resolution, fix in advance
a record date for the determination of Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Company shall have no obligation to do so. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or other Act
may be given before or after such record date, but only the Holders of record at
the close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
Outstanding Securities have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the Outstanding Securities shall be computed as of such record
date; provided, however, that no such authorization, agreement or consent by the
Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than six months
after the record date.

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ARTICLE 2

The Securities

SECTION 2.01. Form and Dating. Provisions relating to the
Initial Securities, the Private Exchange Securities and the Exchange Securities
are set forth in the Rule 144A/Regulation S Appendix attached hereto (the
"Appendix") which is hereby incorporated in and expressly made part of this
Indenture. The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit 1 to the Appendix
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Securities, the Private Exchange Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A,
which is hereby incorporated in and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). Each Security shall be dated the date of its authentication.
The terms of the Securities set forth in the Appendix and Exhibit A are part of
the terms of this Indenture.

SECTION 2.02. Execution and Authentication. Two Officers shall
sign the Securities for the Company by manual or facsimile signature. The
Company's seal may be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.

If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.

A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.

The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the 

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same rights as any Registrar, Paying Agent or agent for service of notices and
demands.

SECTION 2.03. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.

The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any Wholly Owned Subsidiary incorporated or organized within The
United States of America may act as Paying Agent, Registrar, co-registrar or
transfer agent.

The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.

SECTION 2.04. Paying Agent To Hold Money in Trust. On each due
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent a sum sufficient to pay such principal and interest when
so becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment. If the Company
or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as
Paying Agent and hold it as a separate trust fund. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee and to account
for any funds disbursed by the Paying Agent. Upon complying with this Section
2.04 the Paying Agent shall have no further liability for the money delivered to
the Trustee.

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SECTION 2.05. Securityholder Lists. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.

SECTION 2.06. Transfer and Exchange. The Securities shall be
issued in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of this Indenture
and Section 8-401(a) of the Uniform Commercial Code are met. When Securities are
presented to the Registrar or a co-registrar with a request to exchange them for
an equal principal amount of Securities of other denominations, the Registrar
shall make the exchange as requested if the same requirements are met.

Notwithstanding the foregoing, the Company is not required to
register the transfer of any certificated Notes:

(1) for a period of 15 calendar days prior to any date fixed
for the redemption of the Securities;

(2) for a period of 15 calendar days immediately prior to the
date fixed for selection of Securities to be redeemed in part;

(3) for a period of 15 calendar days prior to the record date
with respect to any interest payment date; or

(4) which the Holder has tendered (and not withdrawn) for
repurchase in connection with an offer made pursuant to Section 4.06 or
4.09.

Any such transfer will be made without charge to the Holder,
other than any taxes, duties and governmental charges payable in connection with
such transfer.

SECTION 2.07. Replacement Securities. If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and 

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the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security.

Every replacement Security is an additional obligation of the
Company.

SECTION 2.08. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section 2.08 as not outstanding. A Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security.

If a Security is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.

If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest payable on that date with respect
to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue; provided, however, that in
determining whether the holders of the requisite principal amount of outstanding
Securities are present at a meeting of holders of Securities for quorum purposes
or have consented to or voted in favor of any request, demand, authorization,
direction, notice, consent, waiver, amendment or modification hereunder,
Securities held for the account of the Company, any of its subsidiaries or any
of its affiliates shall be disregarded and deemed not to be outstanding, except
that in determining whether the Trustee shall be protected in making such a
determination or relying upon any such quorum, consent or vote, only Securities
which a Trust Officer actually knows to be so owned shall be so disregarded.

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SECTION 2.09. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive Securities
and deliver them in exchange for temporary Securities.

SECTION 2.10. Cancellation. The Company at any time may
deliver Securities to the Trustee for cancellation. The Registrar and the Paying
Agent shall forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else shall
cancel and dispose of (subject to the record retention requirements of the
Exchange Act) all Securities surrendered for registration of transfer, exchange,
payment or cancellation in accordance with the Trustee's customary practices to
the Company unless the Company directs the Trustee to deliver canceled
Securities to the Company. The Company may not issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancellation.

SECTION 2.11. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.

SECTION 2.12. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.

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SECTION 2.13. Issuance of Additional Securities. The Company
shall be entitled, subject to its compliance with Section 4.03, to issue
Additional Securities under this Indenture which shall have identical terms as
the Initial Securities issued on the Issue Date, other than with respect to the
date of issuance and issue price. The Initial Securities issued on the Issue
Date, any Additional Securities and all Exchange Securities or Private Exchange
Securities issued in exchange therefor shall be treated as a single class for
all purposes under this Indenture.

With respect to any Additional Securities, the Company shall
set forth in a resolution of the Board of Directors and an Officers'
Certificate, a copy of each which shall be delivered to the Trustee, the
following information:

(1) the aggregate principal amount of such Additional
Securities to be authenticated and delivered pursuant to this
Indenture;

(2) the issue price, the issue date and the CUSIP number of
such Additional Securities; provided, however, that no Additional
Securities may be issued at a price that would cause such Additional
Securities to have "original issue discount" within the meaning of
Section 1273 of the Code; and

(3) whether such Additional Securities shall be Transfer
Restricted Securities and issued in the form of Initial Securities as
set forth in the Appendix to this Indenture or shall be issued in the
form of Exchange Securities as set forth in Exhibit A.

ARTICLE 3

Redemption

SECTION 3.01. Notices to Trustee. If the Company elects to
redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.

The Company shall give each notice to the Trustee provided for
in this Section 3.01 at least 60 days before the redemption date unless the
Trustee consents to a shorter period. Such notice shall be accompanied by an
Officers' Certificate and an Opinion of Counsel from the Company to the effect
that such redemption will comply with the conditions herein.

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SECTION 3.02. Selection of Securities To Be Redeemed. If fewer
than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee in its sole discretion shall deem to be fair and appropriate and in
accordance with methods generally used at the time of selection by fiduciaries
in similar circumstances. The Trustee shall make the selection from outstanding
Securities not previously called for redemption. The Trustee may select for
redemption portions of the principal of Securities that have denominations
larger than $1,000. Securities and portions of them the Trustee selects shall be
in principal amounts of $1,000 or a whole multiple of $1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption. The Trustee shall notify the Company
promptly of the Securities or portions of Securities to be redeemed.

SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a date for redemption of Securities, the Company shall
mail a notice of redemption by first-class mail to each Holder of Securities to
be redeemed at such Holder's registered address.

The notice shall identify the Securities to be redeemed and
shall state:

(1) the redemption date;

(2) the redemption price;

(3) the name and address of the Paying Agent;

(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;

(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;

(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on Securities
(or portion 

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thereof) called for redemption ceases to accrue on and after the
redemption date;

(7) The CUSIP numbers; and

(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Securities.

At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section 3.03.

SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date). Failure to give
notice or any defect in the notice to any Holder shall not affect the validity
of the notice to any other Holder.

SECTION 3.05. Deposit of Redemption Price. Prior to the
redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Company to the
Trustee for Cancellation.

SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.

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ARTICLE 4

Covenants

SECTION 4.01. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on the dates and in
the manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee or
the Paying Agent holds in accordance with this Indenture money sufficient to pay
all principal and interest then due and the Trustee or the Paying Agent, as the
case may be, is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture.

The Company shall pay interest on overdue principal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.

SECTION 4.02. SEC Reports. Notwithstanding that the Company
may not be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the SEC and provide the Trustee and
Securityholders with such annual reports and such information, documents and
other reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such Sections.
In addition, the Company shall furnish to the Holder of the Securities and to
prospective investors, upon the requests of such Holders, any information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so
long as any Securities are not freely transferable under the Securities Act. The
Company also shall comply with the other provisions of TIA Section 314(a).

SECTION 4.03. Limitation on Indebtedness. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness; provided, however, that the Company shall be
entitled to Incur Indebtedness, and its Restricted Subsidiaries shall be
entitled to Incur Eligible Indebtedness, in each case if, on the date of such
Incurrence and after giving effect thereto no Default has occurred and is
continuing and, the Consolidated Coverage Ratio exceeds 2.0 to 1 if such
Indebtedness is Incurred 

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prior to September 1, 2003 or 2.25 to 1 if such Indebtedness is Incurred
thereafter.

(b) Notwithstanding Section 4.03(a), the Company and the
Restricted Subsidiaries will be entitled to Incur any or all of the following
Indebtedness:

(1) Indebtedness Incurred by the Company pursuant to any
Revolving Credit Facility; provided, however, that, immediately after
giving effect to any such Incurrence, the aggregate principal amount of
all Indebtedness Incurred under this clause (1) and then outstanding
does not exceed the greater of (A) $300.0 million and (B) the sum of
(x) 50% of the book value of the inventory of the Company and its
Restricted Subsidiaries and (y) 50% of the book value of the accounts
receivable of the Company and its Restricted Subsidiaries (other than
any accounts receivable constituting Receivables and Related Assets
pledged, sold or otherwise transferred or encumbered in connection with
a Receivables Program), less the sum of all principal payments made
with respect to such Indebtedness pursuant to Section 4.06(a)(3)(A);

(2) Indebtedness Incurred by the Company pursuant to any Term
Loan Facility; provided, however, that, after giving effect to any such
Incurrence, the aggregate principal amount of all Indebtedness Incurred
under this clause (2) and then outstanding does not exceed $750.0
million less the aggregate sum of all principal payments actually made
from time to time after the Issue Date with respect to such
Indebtedness (other than principal payments made from any permitted
Refinancings thereof);

(3) Indebtedness Incurred by a Receivables Subsidiary pursuant
to a Receivables Program; provided, however, that, after giving effect
to any such Incurrence, the aggregate principal amount of all
Indebtedness Incurred under this clause (3) and then outstanding does
not exceed $400.0 million;

(4) Indebtedness owed to and held by the Company or a Wholly
Owned Subsidiary; provided, however, that (A) any subsequent issuance
or transfer of any Capital Stock which results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent
transfer of such Indebtedness (other than to the Company or a Wholly
Owned Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the obligor thereon and (B) if the

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Company or FFBV is the obligor on such Indebtedness, such Indebtedness
is expressly subordinated to the prior payment in full in cash of all
obligations with respect to the Securities and the Euro Notes,
respectively;

(5) the Securities and the Euro Notes (other than any
Additional Securities and Additional Euro Notes);

(6) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), (3), (4) or (5) of this
Section 4.03(b));

(7) Indebtedness of a Person Incurred and outstanding on or
prior to the date on which such Person becomes a Restricted Subsidiary
(including upon merger or consolidation with the Company or any
Restricted Subsidiary) or assumed in connection with the purchase of
assets from another Person (other than Indebtedness Incurred in
connection with, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Person became a Restricted
Subsidiary or such Person or such assets were acquired by the Company);
provided, however, that (A) with respect to any such Indebtedness
Incurred prior to the first anniversary of the Issue Date, such
Indebtedness is in an aggregate principal amount which, when taken
together with all other Indebtedness Incurred pursuant to this clause
(7), does not exceed $50.0 million or (B) on the date of such
acquisition and after giving pro forma effect thereto, the Company
would have been able to Incur at least $1.00 of additional Indebtedness
pursuant to Section 4.03(a);

(8) Indebtedness of the Company or any of its Restricted
Subsidiaries attributable to Capital Lease Obligations, or Incurred to
finance the acquisition, construction or improvement of any fixed or
capital assets, including any Indebtedness assumed in connection with
the acquisition of any such assets, in an aggregate principal amount
which, when taken together with all other Indebtedness of the Company
or any of its Restricted Subsidiaries Incurred pursuant to this clause
(8) and then outstanding, does not exceed $25.0 million (including any
Refinancing Indebtedness with respect thereto);

(9) Indebtedness under industrial revenue bonds in an
aggregate principal amount which, when taken 

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together with all other Indebtedness of the Company or any of its
Restricted Subsidiaries Incurred pursuant to this clause (9) and then
outstanding, does not exceed $20.0 million;

(10) Indebtedness Incurred by Foreign Restricted Subsidiaries
in an aggregate principal amount which, when taken together with all
other Indebtedness of Foreign Restricted Subsidiaries Incurred pursuant
to this clause (10) and then outstanding, does not exceed $25.0
million;

(11) Indebtedness of the Company, whether secured or
unsecured, consisting of Guarantees of Permitted Employee Stock
Purchase Loans;

(12) Indebtedness or other obligations solely in respect of
worker's compensation claims, self-insurance obligations and surety,
appeal and performance bonds entered into in the ordinary course of
business of the Company and its Restricted Subsidiaries;

(13) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to Section 4.03(a) or pursuant to clause (5), (6) or
(7) of this Section 4.03(b) or this clause (13); provided, however,
that to the extent such Refinancing Indebtedness directly or indirectly
Refinances Indebtedness of a Subsidiary Incurred pursuant to clause
(7), such Refinancing Indebtedness shall be Incurred only by such
Subsidiary;

(14) Hedging Obligations under or with respect to Interest
Rate Agreements, Currency Agreements or Commodity Agreements entered
into in the ordinary course of business and not for the purpose of
speculation;

(15) Indebtedness consisting of the Subsidiary Guaranty of a
Subsidiary Guarantor;

(16) Indebtedness of the Company or any Restricted Subsidiary
arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary
course of business, provided that the Indebtedness is satisfied within
five business days of Incurrence;

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(17) Indebtedness of the Company or any Restricted Subsidiary
consisting of indemnification, adjustment of purchase price or similar
obligations, in each case incurred in connection with the disposition
of any assets of the Company or any Restricted Subsidiary;

(18) Indebtedness consisting of the Guarantee by (i) the
Company of any Indebtedness of a Restricted Subsidiary that was
permitted to be Incurred by another provision of this Section 4.03 and
(ii) any Restricted Subsidiary of the Company of Indebtedness of the
Company that was permitted to be Incurred by another provision of this
Section 4.03; and

(19) Indebtedness of the Company in an aggregate principal
amount which, when taken together with all other Indebtedness of the
Company outstanding on the date of such Incurrence (other than
Indebtedness permitted by clauses (1) through (18) of this Section
4.03(b) or Section 4.03(a) does not exceed $25.0 million.

(c) Notwithstanding the foregoing, neither the Company nor any
Subsidiary Guarantor will Incur any Indebtedness pursuant to Section 4.03(b) if
the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations of the Company or any Subsidiary Guarantor unless such
Indebtedness shall be subordinated to the Securities or the applicable
Subsidiary Guaranty to at least the same extent as such Subordinated
Obligations.

(d) For purposes of determining compliance with this Section
4.03, (1) in the event that an item of Indebtedness meets the criteria of more
than one of the types of Indebtedness described above, the Company, in its sole
discretion, will classify such item of Indebtedness at the time of Incurrence
and only be required to include the amount and type of such Indebtedness in one
of the above clauses and (2) the Company will be entitled to divide and classify
an item of Indebtedness in more than one of the types of Indebtedness described
above.

(e) Notwithstanding Section 4.03(a) or 4.03(b), neither the
Company nor any Subsidiary Guarantor will Incur (1) any Indebtedness if such
Indebtedness is subordinate or junior in ranking in any respect to any Senior
Indebtedness of such Person, unless such Indebtedness is Senior Subordinated
Indebtedness or is expressly subordinated in right of payment to Senior
Subordinated Indebtedness of such Person or (2) any Secured Indebtedness that is
not Senior Indebtedness of such Person unless contemporaneously 

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therewith such Person makes effective provision to secure the Securities equally
and ratably with such Secured Indebtedness for so long as such Secured
Indebtedness is secured by a Lien.

(f) For purposes of determining compliance with any U.S.
dollar or Euro denominated restriction on the Incurrence of Indebtedness where
the Indebtedness Incurred is denominated in a different currency, the amount of
such Indebtedness will be the U.S. Dollar or Euro Equivalent, as the case may
be, determined on the date of the Incurrence of such Indebtedness; provided,
however, that if any such Indebtedness denominated in a different currency is
subject to a Currency Agreement with respect to U.S. dollars or Euros, as the
case may be, covering all principal, premium, if any, and interest payable on
such Indebtedness, the amount of such Indebtedness expressed in U.S. dollars or
Euros will be as provided in such Currency Agreement. The principal amount of
any Refinancing Indebtedness Incurred in the same currency as the Indebtedness
being Refinanced will be the Euro Equivalent or U.S. Dollar Equivalent, as
appropriate, of the Indebtedness Refinanced, except to the extent that (i) such
U.S. Dollar Equivalent or Euro Equivalent was determined based on a Currency
Agreement, in which case the Refinancing Indebtedness will be determined in
accordance with the preceding sentence, and (ii) the principal amount of the
Refinancing Indebtedness exceeds the principal amount of the Indebtedness being
Refinanced, in which case the U.S. Dollar Equivalent or Euro Equivalent of such
excess, as appropriate, will be determined on the date such Refinancing
Indebtedness is Incurred.

SECTION 4.04. Limitation on Restricted Payments. (a) The
Company shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:

(1) a Default shall have occurred and be continuing (or would
result therefrom);

(2) the Company is not entitled to Incur an additional $1.00
of Indebtedness under Section 4.03(a); or

(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Issue Date would exceed the sum of
(without duplication):

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(A) 50% of the Consolidated Net Income accrued during
the period (treated as one accounting period) from the
beginning of the fiscal quarter during which the Issue Date
occurs to the end of the most recent fiscal quarter for which
internal financial statements are available on or prior to the
date of such Restricted Payment (or, in case such Consolidated
Net Income shall be a deficit, minus 100% of such deficit);
plus

(B) 100% of the aggregate Net Cash Proceeds received
by the Company from the issuance or sale of, or cash capital
contribution in respect of, its Capital Stock (other than
Disqualified Stock) subsequent to the Issue Date (other than
an issuance or sale to a Subsidiary of the Company and other
than an issuance or sale to an employee stock ownership plan
or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees) and 100% of
the fair market value (as determined in good faith by
resolution of the Board of Directors) of property (other than
cash) that would constitute Temporary Cash Investments or used
in a Related Business and received by the Company or a
Restricted Subsidiary subsequent to the Issue Date in exchange
for or as a contribution in respect of its Capital Stock
(other than Disqualified Stock) subsequent to the Issue Date
(other than (i) an issuance to or a capital contribution by a
Subsidiary of the Company or (ii) an issuance to or a capital
contribution by an employee stock ownership plan or to a trust
established by the Company or any of its subsidiaries for the
benefit of their employees or (iii) property that was financed
with loans from the Company or any Restricted Subsidiary);
plus

(C) an amount equal to the sum of (x) the net
reduction in the Investments (other than Permitted
Investments) made by the Company or any Restricted Subsidiary
in any Person resulting from repurchases, repayments or
redemptions of such Investments by such Person, proceeds
realized on the sale of such Investments, and proceeds
representing the return of capital (to the extent not included
in Consolidated Net Income), in each case received by the
Company or any Restricted Subsidiary, and (y) to the extent
such Person is an Unrestricted Subsidiary, the portion
(proportionate to the Company's equity interest in 

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such Subsidiary) of the fair market value of the net assets of
such Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided,
however, that the foregoing sum shall not exceed, in the case
of any such Person or Unrestricted Subsidiary, the amount of
Investments (excluding Permitted Investments) previously made
(and treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Person or Unrestricted
Subsidiary.

(b) The provisions of Section 4.04(a) shall not prohibit:

(1) any Restricted Payment made out of the Net Cash Proceeds
of the substantially concurrent sale of, or made by exchange for,
Capital Stock of the Company (other than Disqualified Stock and other
than Capital Stock issued or sold to a Subsidiary of the Company or an
employee stock ownership plan or to a trust established by the Company
or any of its Subsidiaries for the benefit of their employees) or a
substantially concurrent cash capital contribution received by the
Company in respect of its Capital Stock (other than Disqualified
Stock); provided, however, that (A) such Restricted Payment shall be
excluded in the calculation of the amount of Restricted Payments and
(B) the Net Cash Proceeds from such sale or such cash capital
contribution (to the extent so used for such Restricted Payment) shall
be excluded from the calculation of amounts under Section 4.04(a)(3)(B)
and under clause (4) below;

(2) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent
sale of, Indebtedness which is permitted to be Incurred pursuant to
Section 4.03; provided, however, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value
shall be excluded in the calculation of the amount of Restricted
Payments;

(3) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with this Section 4.04; provided, however, that at the
time of payment of such dividend, no other Default shall have occurred
and be continuing (or result therefrom); 

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provided further, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments;

(4) so long as no Default has occurred and is continuing, the
repurchase or other acquisition of shares of Capital Stock of the
Company or any of its Subsidiaries (A) from employees, former
employees, directors or former directors of the Company or any of its
Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), (B) in the open market to
the extent such shares are acquired to satisfy a current obligation to
deliver shares in connection with the exercise of stock options or
similar rights, in each case pursuant to the terms of the agreements
(including employment agreements) or plans (or amendments thereto)
approved by the Board of Directors under which such individuals
purchase or sell or are granted the option to purchase or sell, shares
of such Capital Stock; provided, however, that the aggregate amount of
such repurchases and other acquisitions shall not exceed in any
calendar year the sum of (x) $5.0 million plus (y) the Net Cash
Proceeds from the sale of Capital Stock to employees or directors of
the Company (including pursuant to the exercise of stock options) that
occur during such calendar year (to the extent such Net Cash Proceeds
are not applied to the payment of a Restricted Payment pursuant to
clause (1) above); provided further, however, that (i) such repurchases
and other acquisitions shall be excluded in the calculation of the
amount of Restricted Payments and (ii) the Net Cash Proceeds from such
sales described in clause (y) shall be excluded from the calculation of
amounts under Section 4.04(a)(3)(B); or

(5) Restricted Payments not exceeding $15.0 million in the
aggregate; provided, however, that (A) at the time of such Restricted
Payments, no Default shall have occurred and be continuing (or result
therefrom) and (B) such Restricted Payments shall be included in the
calculation of Restricted Payments.

SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness 

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owed to the Company, (b) make any loans or advances to the Company or (c)
transfer any of its property or assets to the Company, except:

(1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date, including this Indenture,
the Euro Notes Indenture and the Credit Agreement as in effect on the
Issue Date;

(2) any encumbrance or restriction with respect to a
Receivables Subsidiary pursuant to a Receivables Program of such
Receivables Subsidiary;

(3) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary on or prior to the
date on which such Restricted Subsidiary was acquired by the Company
(other than Indebtedness Incurred as consideration in, or to provide
all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant
to which such Restricted Subsidiary became a Restricted Subsidiary or
was acquired by the Company) and outstanding on such date;

(4) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in Section 4.05 (1), (2), (3) or this clause (4)
or contained in any amendment to an agreement referred to in Section
4.05 (1), (2), (3) or this clause (4); provided, however, that the
encumbrances and restrictions with respect to such Restricted
Subsidiary contained in any such refinancing agreement or amendment
are, in the good faith judgment of the Board of Directors, no less
favorable, taken as a whole, to the Securityholders than encumbrances
and restrictions with respect to such Restricted Subsidiary contained
in such predecessor agreements;

(5) any such encumbrance or restriction consisting of
customary nonassignment provisions in leases governing leasehold
interests to the extent such provisions restrict the transfer of the
lease or the property leased thereunder;

(6) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness, or under
letters of credit or bank 

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guarantees, of a Restricted Subsidiary to the extent such restrictions
restrict the transfer of, or the grant of security over, the property
subject to such security agreements, mortgages, letters of credit or
bank guarantees;

(7) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or
disposition;

(8) purchase money obligations (including Capital Lease
Obligations) for property acquired in the ordinary course of business
that impose restrictions on the property so acquired of the nature
described in clause (c) above;

(9) provisions with respect to the disposition or distribution
of assets or property in joint venture agreements and other similar
agreements in the ordinary course of business; and

(10) any such encumbrance or restriction with respect to a
Foreign Restricted Subsidiary pursuant to an agreement governing
Indebtedness Incurred by such Foreign Restricted Subsidiary.

SECTION 4.06. Limitation on Sales of Assets and Subsidiary
Stock. (a) The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, consummate any Asset Disposition unless: (1) the
Company or such Restricted Subsidiary receives consideration at the time of such
Asset Disposition at least equal to the fair market value (including as to the
value of all non-cash consideration), as determined in good faith by the Board
of Directors, of the shares and assets subject to such Asset Disposition; (2) at
least 75% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash or cash equivalents; and (3) an
amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by the Company (or such Restricted Subsidiary, as the case may be) (A)
first, to the extent the Company elects (or is required by the terms of any
Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness of the
Company or Indebtedness (other than any Disqualified Stock) of a Restricted
Subsidiary (in each case other than Indebtedness owed to the Company or an
Affiliate of the Company) within one year from the later of the date of such
Asset Disposition or the receipt of such Net 

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Available Cash; (B) second, to the extent of the balance of such Net Available
Cash after application in accordance with clause (A), to the extent the Company
elects, to acquire Additional Assets within one year (or enter into a binding
commitment therefor within such period and acquire such Additional Assets within
18 months) from the later of the date of such Asset Disposition or the receipt
of such Net Available Cash; and (C) third, to the extent of the balance of such
Net Available Cash after application in accordance with clauses (A) and (B), to
make an offer to the holders of the Securities and the Euro Notes (and to
holders of other Senior Subordinated Indebtedness of the Company or FFBV
designated by the Company) to purchase, on a pro rata basis, Securities and Euro
Notes (and such other Senior Subordinated Indebtedness of the Company or FFBV)
pursuant to the conditions of Section 4.06(b); provided, however, that in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (A) or (C) above, the Company or such Restricted Subsidiary shall
permanently retire such Indebtedness and shall cause the related loan commitment
(if any) to be permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this
Section 4.06, (i) the Company and the Restricted Subsidiaries shall not be
required to apply any Net Available Cash in accordance with this Section 4.06
except to the extent that the aggregate Net Available Cash from all Asset
Dispositions which are not applied in accordance with this Section 4.06 exceeds
$10.0 million , and (ii) to the extent any Asset Disposition constitutes the
disposition of Consent Decree Assets, the Company shall be required to apply the
Net Available Cash from such Asset Disposition pursuant to Section 4.06
(a)(3)(A) and the Company shall not be required to comply with Section 4.06
(a)(1). Pending application of Net Available Cash pursuant to this Section 4.06,
such Net Available Cash shall be invested in Temporary Cash Investments or
applied to temporarily reduce revolving credit indebtedness.

For the purposes of this Section 4.06, the following are
deemed to be cash or cash equivalents: (1) the assumption of Indebtedness of the
Company or any Restricted Subsidiary and the release of the Company or such
Restricted Subsidiary from all liability on such Indebtedness in connection with
such Asset Disposition; and (2) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash.

In addition, the Company may elect to deem Additional Assets
(determined based on the fair market value 

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of such assets) as cash and cash equivalents for purposes of this Section 4.06;
provided, however, that such Additional Assets were acquired for fair market
value as part of the transaction constituting an Asset Disposition; and provided
further, however, that such Additional Assets will be deemed to have been
acquired in accordance with Section 4.06(a)(3)(B).

(b) In the event of an Asset Disposition that requires the
purchase of the Securities and Euro Notes (and other Senior Subordinated
Indebtedness of the Company or FFBV) pursuant to Section 4.06(a)(3)(C) above,
the Company will purchase, on a pro rata basis, Securities and Euro Notes
tendered pursuant to an offer (the "Offer") by the Company for the Securities
(and such other Senior Subordinated Indebtedness of the Company and FFBV, as
applicable) at a purchase price of 100% of their respective principal amount
(or, in the event such other Senior Subordinated Indebtedness of the Company and
FFBV, as applicable, was issued with significant original issue discount, 100%
of the accreted value thereof), without premium, plus accrued but unpaid
interest (or, in respect of such other Senior Subordinated Indebtedness of the
Company or FFBV, such lesser price, if any, as may be provided for by the terms
of such Senior Subordinated Indebtedness) in accordance with the procedures
(including prorating in the event of oversubscription) set forth in Section
4.06(c). If the aggregate purchase price of the Securities and Euro Notes (and
other Senior Subordinated Indebtedness of the Company or FFBV, as applicable)
tendered exceeds the Net Available Cash allotted to their purchase, the Company
will select the Securities and Euro Notes (and other Senior Subordinated
Indebtedness of the Company or FFBV, as applicable) to be purchased on a pro
rata basis but in round denominations, which in the case of the Securities will
be denominations of $1,000 principal amount or multiples thereof and in the case
of the Euro Notes will be (E)1,000 principal amount or multiples thereof. The
Company shall not be required to make such an offer to purchase Securities and
Euro Notes (and other Senior Subordinated Indebtedness of the Company and FFBV,
as applicable) pursuant to this Section 4.06 if the Net Available Cash available
therefor is less than $10.0 million (which lesser amount shall be carried
forward for purposes of determining whether such an offer is required with
respect to the Net Available Cash from any subsequent Asset Disposition).

(c)(1) Promptly, and in any event within 10 days after the
Company becomes obligated to make an Offer, the Company shall deliver to the
Trustee and send, by first-class mail to each Holder and Euro Notes Holder, a
written 

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62
notice stating that the Holder and Euro Notes Holder may elect to have his
Securities and Euro Notes purchased by the Company either in whole or in part
(subject to prorating as described in Section 4.06(b) in the event the Offer is
oversubscribed) in integral multiples of $1,000 of principal amount and E1,000
principal amount, respectively, at the applicable purchase price. The notice
shall specify a purchase date not less than 30 days nor more than 60 days after
the date of such notice (the "Purchase Date") and shall contain such information
concerning the business of the Company which the Company in good faith believes
will enable such Holders and Euro Notes Holders to make an informed decision
(which at a minimum will include (A) the most recently filed Annual Report on
Form 10-K (including audited consolidated financial statements) of the Company,
the most recent subsequently filed Quarterly Report on Form 10-Q and any Current
Report on Form 8-K of the Company filed subsequent to such Quarterly Report
which may be incorporated by reference, other than Current Reports describing
Asset Dispositions otherwise described in the offering materials (or
corresponding successor reports), (B) a description of material developments in
the Company's business subsequent to the date of the latest of such Reports, and
(C) if material, appropriate pro forma financial information) and all
instructions and materials necessary to tender Securities and the Euro Notes
pursuant to the Offer, together with the information contained in clause (3).

(2) Not later than the date upon which written notice of an
Offer is delivered to the Trustee as provided below, the Company shall deliver
to the Trustee an Officers' Certificate as to (A) the amount of the Offer (the
"Offer Amount"), including information as to any other Senior Subordinated
Indebtedness of the Company or FFBV included in the Offer, (B) the allocation of
the Net Available Cash from the Asset Dispositions pursuant to which such Offer
is being made and (C) the compliance of such allocation with the provisions of
Section 4.06(a) and (b). On such date, the Company shall also irrevocably
deposit with the Trustee or with a Paying Agent (or, if the Company is acting as
its own Paying Agent, segregate and hold in trust) in Temporary Cash
Investments, maturing on the last day prior to the Purchase Date or on the
Purchase Date if funds are immediately available by open of business, an amount
equal to the Offer Amount to be held for payment in accordance with the
provisions of this Section 4.06. If the Offer includes other Senior Subordinated
Indebtedness, the deposit described in the preceding sentence may be made with
any other paying agent pursuant to arrangements satisfactory to the Trustee.
Upon the expiration of the period for which the Offer 

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remains open (the "Offer Period"), the Company shall deliver to the Trustee for
cancellation the Securities or portions thereof which have been properly
tendered to and are to be accepted by the Company. The Trustee shall, on the
Purchase Date, mail or deliver payment (or cause the delivery of payment) to
each tendering Holder in the amount of the purchase price. In the event that the
aggregate purchase price of the Securities and Euro Notes delivered by the
Company to the Trustee is less than the Offer Amount applicable to the
Securities and Euro Notes, the Trustee shall deliver the excess to the Company
immediately after the expiration of the Offer Period for application by the
Company in any manner permitted by this Indenture.

(3) Holders and Euro Notes Holders electing to have either a
Security or a Euro Note purchased shall be required to surrender the Security or
Euro Note, with an appropriate form duly completed, to the Company at the
address specified in the notice at least three Business Days prior to the
Purchase Date. Holders and Euro Notes Holders shall be entitled to withdraw
their election if the Trustee or the Company receives not later than one
Business Day prior to the Purchase Date, a telex, facsimile transmission or
letter setting forth the name of the Holder or Euro Notes Holder, the principal
amount of the Security on Euro Note which was delivered for purchase by the
Holder or Euro Notes Holder and a statement that such Holder or Euro Notes
Holder is withdrawing his election to have such Security or Euro Notes
purchased. Holders or Euro Notes Holders whose Securities or Euro Notes are
purchased only in part shall be issued new Securities or Euro Notes equal in
principal amount to the unpurchased portion of the Securities or Euro Notes
surrendered.

(4) At the time the Company delivers Securities or Euro Notes
to the Trustee which are to be accepted for purchase, the Company shall also
deliver an Officers' Certificate stating that such Securities or Euro Notes are
to be accepted by the Company pursuant to and in accordance with the terms of
this Section 4.06. A Security shall be deemed to have been accepted for purchase
at the time the Trustee, directly or through an agent, mails or delivers payment
therefor to the surrendering Holder or Euro Notes Holder.

(d) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities or Euro
Notes pursuant to this Section 4.06. To the extent that the provisions of any
securities laws or regulations conflict 

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with provisions of this Section 4.06, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.06 by virtue of its compliance
with such securities laws or regulations.

SECTION 4.07. Limitation on Affiliate Transactions. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, enter into
or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property, employee compensation arrangements or the rendering of
any service) with, or for the benefit of, any Affiliate of the Company (an
"Affiliate Transaction") unless: (1) the terms of the Affiliate Transaction are
no less favorable to the Company or such Restricted Subsidiary than those that
could be obtained at the time of the Affiliate Transaction in arm's-length
dealings with a Person who is not an Affiliate; (2) if such Affiliate
Transaction involves an amount in excess of $10.0 million, the terms of the
Affiliate Transaction are set forth in writing and a majority of the
non-employee directors of the Company disinterested with respect to such
Affiliate Transactions have determined in good faith that the criteria set forth
in clause (1) are satisfied and have approved the relevant Affiliate Transaction
as evidenced by a resolution of the Board of Directors; and (3) if such
Affiliate Transaction involves an amount in excess of $20.0 million, the Board
of Directors shall also have received a written opinion from (A) an investment
banking firm of national prominence or (B) an accounting or appraisal firm
nationally recognized in making such determinations, in each case that is not an
Affiliate of the Company to the effect that such Affiliate Transaction is fair,
from a financial standpoint, to the Company and its Restricted Subsidiaries.

(b) The provisions of Section 4.07(a) shall not prohibit: (1)
any Investment (other than a Permitted Investment) or other Restricted Payment,
in each case permitted to be made pursuant to Section 4.04; (2) any issuance of
securities, or other payments, awards or grants in cash, securities or otherwise
pursuant to, or the funding of, employment arrangements, stock options, stock
ownership plans or other similar incentive arrangements approved by the Board of
Directors; (3) loans or advances to employees in the ordinary course of business
in accordance with the past practices of the Company or its Restricted
Subsidiaries, but in any event not to exceed $5.0 million in the aggregate
outstanding at any one time; (4) guarantees of Permitted Employee Stock Purchase
Loans; (5) the payment of reasonable fees to directors of the Company and its

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Restricted Subsidiaries who are not employees of the Company or its Restricted
Subsidiaries; (6) any transaction with a Restricted Subsidiary or joint venture
or similar entity which would constitute an Affiliate Transaction solely because
the Company or a Restricted Subsidiary owns an equity interest in or otherwise
controls such Restricted Subsidiary, joint venture or similar entity; (7) the
issuance or sale of any Capital Stock (other than Disqualified Stock) of the
Company; (8) any Receivables Program of the Company or a Restricted Subsidiary;
(9) customary directors' and officers' indemnification arrangements; and (10)
any agreement with the Company or any Restricted Subsidiary as in effect as of
the Issue Date and any amendment or replacement thereto or any transaction
contemplated thereby so long as such amendment or replacement agreement is not
more disadvantageous to the Company and its Restricted Subsidiaries than the
original agreement as in effect on the Issue Date.

SECTION 4.08. Limitation on the Sale or Issuance of Capital
Stock of Restricted Subsidiaries. The Company (1) shall not, and shall not
permit any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose
of (but excluding any pledge of such Capital Stock otherwise permitted by this
Indenture) any Capital Stock of any Restricted Subsidiary to any Person (other
than the Company or a Wholly Owned Subsidiary), and (2) shall not permit any
Restricted Subsidiary to issue any of its Capital Stock (other than, if
necessary, shares of its Capital Stock constituting directors' or other legally
required qualifying shares) to any Person (other than to the Company or a Wholly
Owned Subsidiary), unless (A) immediately after giving effect to such issuance,
sale or other disposition, neither the Company nor any of its Subsidiaries own
any Capital Stock of such Restricted Subsidiary; (B) immediately after giving
effect to such issuance, sale or other disposition, such Restricted Subsidiary
would no longer constitute a Restricted Subsidiary and any Investment in such
Person remaining after giving effect thereto would have been permitted to be
made under Section 4.04 if made on the date of such issuance, sale or other
disposition; or (C) the Company concurrently acquires sufficient shares of
Capital Stock of such Restricted Subsidiary to at least maintain the same
percentage ownership interest it had prior to the transaction.

Notwithstanding the foregoing, the issuance or sale of shares
of Capital Stock of any Restricted Subsidiary of the Company will not violate
the provisions of the 

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immediately preceding sentence if such shares are issued or sold in connection
with:

(i) the formation or capitalization of a Restricted
Subsidiary, or

(ii) a single transaction or a series of substantially
contemporaneous transactions whereby such Restricted Subsidiary becomes
a Restricted Subsidiary of the Company by reason of the acquisition of
securities or assets from another Person.

SECTION 4.09. Change of Control. (a) Upon the occurrence of a
Change of Control, each Holder shall have the right to require that the Company
purchase such Holder's Securities at a purchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of holders of record on the relevant
record date to receive interest on the relevant interest payment date), in
accordance with the terms contemplated in Section 4.09(b). In the event that at
the time of such Change of Control the terms of the Senior Indebtedness of the
Company restrict or prohibit the repurchase of Securities pursuant to this
Section 4.09, then prior to the mailing of the notice to Holders provided for in
Section 4.09(b) below but in any event within 30 days following any Change of
Control, the Company shall (1) repay in full all such Senior Indebtedness or
(ii) obtain the requisite consent under the agreements governing such Senior
Indebtedness to permit the repurchase of the Securities as provided for in
Section 4.09(b).

(b) Within 30 days following any Change of Control, the
Company shall mail a notice to each Holder with a copy to the Trustee (the
"Change of Control Offer") stating:

(1) that a Change of Control has occurred and that such Holder
has the right to require the Company to purchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of Holders of record on the relevant
record date to receive interest on the relevant interest payment date);

(2) the circumstances and relevant facts regarding such Change
of Control (including information with respect to pro forma historical
income, cash flow and capitalization, each after giving effect to such
Change of Control);

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(3) the purchase date (which shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed); and

(4) the instructions determined by the Company, consistent
with this Section 4.09, that a Holder must follow in order to have its
Securities purchased.

(c) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders will be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the purchase date, a facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.

(d) On the purchase date, all Securities purchased by the
Company under this Section 4.09 shall be delivered by the Company to the Trustee
for Cancellation, and the Company shall pay the purchase price plus accrued and
unpaid interest, if any, to the Holders entitled thereto.

(e) Notwithstanding the foregoing provisions of this Section
4.09, the Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 4.09 applicable to a Change of Control Offer made by the Company
and purchases all Securities validly tendered and not withdrawn under such
Change of Control Offer.

(f) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section 4.09. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.09, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.09 by virtue of its
compliance with such securities laws or regulations.

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SECTION 4.10. Excess Cash Flow Repurchase Offer. (a) If the
Company has Excess Cash Flow for any fiscal year (commencing with the fiscal
year ending December 31, 2001), no later than the 120th day following the end of
such fiscal year, the Company shall apply an amount equal to 50% of the Excess
Cash Flow for such fiscal year: (1) first, to the extent the Company elects (or
is required by the terms of any Indebtedness), to prepay, repay, redeem or
purchase (and permanently reduce the commitments thereunder) Senior Indebtedness
of the Company with such percentage of Excess Cash Flow; (2) second, to the
extent of the balance of such percentage of Excess Cash Flow after application
in accordance with clause (1), to make an offer to the holders of the Securities
and Euro Notes (and to holders of other Senior Subordinated Indebtedness of the
Company or FFBV designated by the Company) to purchase, on a pro rata basis,
Securities and Euro Notes (and such other Senior Subordinated Indebtedness of
the Company or FFBV) pursuant to and subject to the conditions contained in this
Section 4.10 and in Section 4.10 of the Euro Notes Indenture (an "Excess Cash
Flow Offer"); and (3) third, to the extent of the balance of such percentage of
Excess Cash Flow after application in accordance with clause (1) or (2) above,
to any other application or use not prohibited by the Indenture; provided,
however, that in connection with any prepayment, repayment or purchase of
Indebtedness pursuant to clause (1) above, the Company shall permanently retire
such Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased; and provided, further, that no Excess Cash Flow Offer shall
be required to be made if the Company's Leverage Ratio is less than 3.0 to 1.0
on the last day of such fiscal year.

(b) In the event of an Excess Cash Flow Offer, the Company
will be required to purchase, on a pro rata basis, Securities and Euro Notes
tendered pursuant to an offer by the Company for the Securities and Euro Notes
(and other Senior Subordinated Indebtedness of the Company and FFBV, as
applicable) at a purchase price of 100% of their respective principal amount
(or, in the event such other Senior Subordinated Indebtedness was issued with
significant original issue discount, 100% of the accreted value thereof),
without premium, plus accrued but unpaid interest (or, in respect of such Senior
Subordinated Indebtedness, such lesser price, if any, as may be provided for by
the terms of such Senior Subordinated Indebtedness) in accordance with the
procedures (including prorating in the event of oversubscription) set forth in
Section 4.10(c). If the aggregate purchase price of the Securities and Dollar

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Notes (and other Senior Subordinated Indebtedness of the Company or FFBV)
tendered pursuant to such offer is less than the Excess Cash Flow allotted to
their purchase, the Company will be entitled to apply the remaining Excess Cash
Flow in accordance with clause (a)(3) above. The Company shall not be required
to make an Excess Cash Flow Offer to purchase Securities and Euro Notes (and
other Senior Subordinated Indebtedness) pursuant to Section 4.10(a) if the
Excess Cash Flow available therefor is less than $5.0 million (which lesser
amount shall be carried forward for purposes of determining whether such an
offer is required with respect to the Excess Cash Flow in any subsequent fiscal
year).

(c)(1) Promptly, and in any event within 10 days after the
Company becomes obligated to make an Excess Cash Flow Offer, the Company shall
deliver to the Trustee and send, by first-class mail to each Holder and Euro
Notes Holder, a written notice stating that the Holder and Euro Notes Holder may
elect to have his Securities and Euro Notes purchased by the Company either in
whole or in part (subject to prorating as described in Section 4.10(b) in the
event the Excess Cash Flow Offer is oversubscribed) in integral multiples of
$1,000 of principal amount and E1,000 principal amount, respectively, at the
applicable purchase price. The notice shall specify a purchase date not less
than 30 days nor more than 60 days after the date of such notice (the "Excess
Cash Flow Purchase Date") and shall contain such information concerning the
business of the Company which the Company in good faith believes will enable
such Holders and Euro Notes Holders to make an informed decision (which at a
minimum will include (A) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the Company, the most
recent subsequently filed Quarterly Report on Form 10-Q and any Current Report
on Form 8-K of the Company filed subsequent to such Quarterly Report which may
be incorporated by reference (or corresponding successor reports), and (B) a
description of material developments in the Company's business subsequent to the
date of the latest of such Reports) and all instructions and materials necessary
to tender Securities and Euro Notes pursuant to the Excess Cash Flow Offer,
together with the information contained in clause (3).

(2) Not later than the date upon which written notice of an
Excess Cash Flow Offer is delivered to the Trustee as provided below, the
Company shall deliver to the Trustee an Officers' Certificate as to (A) the
amount of the Excess Cash Flow Offer (the "Excess Cash Flow Offer Amount"),
including information as to any other Senior 

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Subordinated Indebtedness of the Company or FFBV included in the Excess Cash
Flow Offer, (B) the percentage of the Excess Cash Flow remaining after
application in accordance with Section 4.10(a)(1) with respect to which such
Excess Cash Flow Offer is being made and (C) the compliance of such allocation
with the provisions of Section 4.10(a) and (b). On such date, the Company shall
also irrevocably deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust) in
Temporary Cash Investments, maturing on the last day prior to the Excess Cash
Flow Purchase Date or on the Excess Cash Flow Purchase Date if funds are
immediately available by open of business, an amount equal to the Excess Cash
Flow Offer Amount to be held for payment in accordance with the provisions of
this Section 4.10. If the Excess Cash Flow Offer includes other Senior
Subordinated Indebtedness, the deposit described in the preceding sentence may
be made with any other paying agent pursuant to arrangements satisfactory to the
Trustee. Upon the expiration of the period for which the Excess Cash Flow Offer
remains open (the "Excess Cash Flow Offer Period"), the Company shall deliver to
the Trustee for cancellation the Securities and Euro Notes or portions thereof
which have been properly tendered to and are to be accepted by the Company. The
Trustee shall, on the Purchase Date, mail or deliver payment (or cause the
delivery of payment) to each tendering Holder and the Euro Notes Holder in the
amount of the purchase price. In the event that the aggregate purchase price of
the Securities and Euro Notes delivered by the Company to the Trustee is less
than the Excess Cash Flow Offer Amount applicable to the Securities and Euro
Notes, the Trustee shall deliver the excess to the Company immediately after the
expiration of the Excess Cash Flow Offer Period for application by the Company
in any manner permitted by this Indenture.

(3) Holders and Euro Notes Holders electing to have either a
Security or a Euro Note purchased shall be required to surrender the Security or
Euro Note, with an appropriate form duly completed, to the Company at the
address specified in the notice at least three Business Days prior to the Excess
Cash Flow Purchase Date. Holders and Euro Notes Holders shall be entitled to
withdraw their election if the Trustee or the Company receives not later than
one Business Day prior to the Excess Cash Flow Purchase Date, a telex, facsimile
transmission or letter setting forth the name of the Holder or Euro Notes
Holder, the principal amount of the Security or Euro Note which was delivered
for purchase by the Holder or Euro Notes Holder and a statement that such Holder
or Euro Notes Holder is withdrawing his election to have such Security or Euro
Notes 

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purchased. Holders or Euro Notes Holders whose Securities or Euro Notes are
purchased only in part shall be issued new Securities or Euro Notes equal in
principal amount to the unpurchased portion of the Securities or Euro Notes
surrendered.

(4) At the time the Company delivers Securities or Euro Notes
to the Trustee which are to be accepted for purchase, the Company shall also
deliver an Officers' Certificate stating that such Securities or Euro Notes are
to be accepted by the Company pursuant to and in accordance with the terms of
this Section 4.10. A Security or Euro Note shall be deemed to have been accepted
for purchase at the time the Trustee, directly or through an agent, mails or
delivers payment therefor to the surrendering Holder or Euro Notes Holder.

(d) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities or Euro
Notes pursuant to this Section 4.10. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.10,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Section 4.10 by
virtue of its compliance with such securities laws or regulations.

SECTION 4.11. Future Guarantors. The Company shall cause each
domestic Restricted Subsidiary that Guarantees any Indebtedness of the Company
or any other Subsidiary Guarantor to, at the same time, execute and deliver to
the Trustee a Guaranty Agreement pursuant to which such Restricted Subsidiary
will Guarantee payment of the Securities on the same terms and conditions as
those set forth in Article 11 of this Indenture.

SECTION 4.12. Compliance Certificate. The Company shall
deliver to the Trustee within 120 days after the end of each fiscal year of the
Company an Officers' Certificate stating that in the course of the performance
by the signers of their duties as Officers of the Company they would normally
have knowledge of any Default and whether or not the signers know of any Default
that occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with TIA Section 314(a)(4).

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SECTION 4.13. Further Instruments and Acts. The Company and
the Subsidiary Guarantors will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper or as the Trustee
may request to carry out more effectively the purpose of this Indenture.

ARTICLE 5

Successor Company

SECTION 5.01. When Company May Merge or Transfer Assets. The
Company shall not consolidate with or merge with or into, or convey, transfer or
lease, in one transaction or a series of transactions, directly or indirectly,
all or substantially all its assets to, any Person, unless:

(1) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the
laws of the United States of America, any State thereof or the District
of Columbia or under the laws of Bermuda, the British Virgin Islands,
the Bahamas or Canada and the Successor Company (if not the Company)
shall expressly assume, by an indenture supplemental hereto, executed
and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Securities and this Indenture;

(2) immediately after giving pro forma effect to such
transaction (and treating any Indebtedness which becomes an obligation
of the Successor Company or any Subsidiary as a result of such
transaction as having been Incurred by such Successor Company or such
Subsidiary at the time of such transaction), no Default shall have
occurred and be continuing;

(3) immediately after giving pro forma effect to such
transaction, the Successor Company would be able to Incur an additional
$1.00 of Indebtedness pursuant to Section 4.03(a);

(4) immediately after giving pro forma effect to such
transaction, the Successor Company shall have Consolidated Net Worth in
an amount that is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction;

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(5) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture;

(6) in the event that the Successor Company in any merger is
organized and existing under the laws of Bermuda, the British Virgin
Islands, the Bahamas or Canada (any such merger, a "Foreign
Jurisdiction Merger"), the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that the Holders will not recognize
income, gain or loss for U.S. Federal income tax purposes as a result
of such transaction and will be subject to U.S. Federal income tax on
the same amounts and at the same times as would have been the case if
such transaction had not occurred; and

(7) in the event of a Foreign Jurisdiction Merger, the Company
shall have delivered to the Trustee an Opinion of Counsel in the
jurisdiction of the Successor Company to the effect that (A) any
payment of interest or principal under or with respect to the
Securities or the Guaranties will, after giving effect to such
transaction, be exempt from any withholding or deduction for or on
account of any present or future tax, duty, levy, impost, assessment or
other governmental charge of whatever nature imposed or levied by or on
behalf of any jurisdiction from or through which payment is made or in
which the payor is organized, resident or engaged in business for tax
purposes and (B) no other taxes or income (including capital gains)
will be payable by a Holder of Securities under the laws of any
jurisdiction where the Successor Company is or becomes organized,
resident or engaged in business for tax purposes in respect of the
acquisition, ownership or disposition of the Securities, including the
receipt of interest or principal thereon, provided that such Holder
does not use or hold, and is not deemed to use or hold the Securities
in carrying on a business in the jurisdiction where the Successor
Company is or becomes organized, resident or engaged in business for
tax purposes;

provided, however, that clause (3) and (4) will not be applicable to (A) a
Restricted Subsidiary consolidating with, merging into or transferring all or
part of its properties and assets to the Company or (B) the Company merging with
an Affiliate of the Company solely for the 

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purpose and with the sole effect of reincorporating the Company in another
jurisdiction.

The Successor Company shall be the successor to the Company
and shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture, and the predecessor Company, except
in the case of a lease, shall be released from the obligation to pay the
principal of and interest on the Securities.

The Company shall not permit any Subsidiary Guarantor to
consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or a series of transactions, all or substantially all of its assets
to any Person unless: (1) except in the case of a Subsidiary Guarantor that has
been disposed of in its entirety to another Person (other than to the Company or
an Affiliate of the Company), whether through a merger, consolidation or sale of
Capital Stock or assets, the resulting, surviving or transferee Person (if not
such Subsidiary) shall be a Person organized and existing under the laws of the
jurisdiction under which such Subsidiary was organized or under the laws of the
United States of America, or any State thereof or the District of Columbia, and
such Person shall expressly assume, by a Guaranty Agreement, in a form
satisfactory to the Trustee, all the obligations of such Subsidiary, if any,
under its Subsidiary Guaranty of the Securities; (2) immediately after giving
effect to such transaction or transactions on a pro forma basis (and treating
any Indebtedness which becomes an obligation of the resulting, surviving or
transferee Person as a result of such transaction as having been issued by such
Person at the time of such transaction), no Default shall have occurred and be
continuing; and (3) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
transfer and such Guaranty Agreement, if any, complies with this Indenture.

ARTICLE 6

Defaults and Remedies

SECTION 6.01. Events of Default. An "Event of Default" occurs
if:

(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article 10, and such default continues
for a period of 30 days;

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(2) the Company (i) defaults in the payment of the principal
of any Security when the same becomes due and payable at its Stated
Maturity, upon optional redemption, upon declaration or otherwise,
whether or not such payment shall be prohibited by Article 10, or (ii)
fails to redeem or purchase Securities when required pursuant to this
Indenture or the Securities, whether or not such redemption or purchase
shall be prohibited by Article 10;

(3) the Company fails to comply with Section 5.01;

(4) the Company fails to comply with Section 4.02, 4.03, 4.04,
4.05, 4.06, 4.07, 4.08, 4.09 or 4.11 (other than a failure to purchase
Securities when required under Section 4.06 or 4.09) and such failure
continues for 30 days after the notice specified below;

(5) the Company or any Subsidiary Guarantor fails to comply
with any of its agreements in the Securities or this Indenture (other
than those referred to in clause (1), (2), (3) or (4) above) and such
failure continues for 60 days after the notice specified below;

(6) Indebtedness of any Subsidiary Guarantor, the Company or
any Significant Subsidiary is not paid within any applicable grace
period after final maturity or is accelerated by the holders thereof
because of a default and the total amount of such Indebtedness unpaid
or accelerated exceeds $10.0 million, or its foreign currency
equivalent at the time;

(7) any Subsidiary Guarantor, the Company or any Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

(A) commences a voluntary case;

(B) consents to the entry of an order for relief
against it in an involuntary case;

(C) consents to the appointment of a Custodian of it
or for any substantial part of its property; or

(D) makes a general assignment for the benefit of its
creditors;

or takes any comparable action under any foreign laws relating to
insolvency;

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(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:

(A) is for relief against any Subsidiary Guarantor,
the Company or any Significant Subsidiary in an involuntary
case;

(B) appoints a Custodian of any Subsidiary Guarantor,
the Company or any Significant Subsidiary or for any
substantial part of its property; or

(C) orders the winding up or liquidation of any
Subsidiary Guarantor, the Company or any Significant
Subsidiary;

or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days;

(9) any judgment or decree for the payment of money in excess
of $10.0 million or its foreign currency equivalent at the time is
entered against any Subsidiary Guarantor, the Company or any
Significant Subsidiary, remains outstanding for a period of 60 days
following the entry of such judgment or decree and is not discharged,
waived or the execution thereof stayed within 10 days after the notice
specified below; or

(10) a Subsidiary Guaranty ceases to be in full force and
effect (other than in accordance with the terms of this Indenture) or a
Subsidiary Guarantor denies or disaffirms its obligations under its
Subsidiary Guaranty.

The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.

The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.

A Default under clauses (4), (5) or (9) is not an Event of
Default until the Trustee or the holders of at least 25% in principal amount of
the outstanding Securities 

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notify the Company of the Default and the Company does not cure such Default
within the time specified after receipt of such notice. Such notice must specify
the Default, demand that it be remedied and state that such notice is a "Notice
of Default".

The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default under clause (6) or (10) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9), its status and what action the Company is taking or
proposes to take with respect thereto.

SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in Section 6.01(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the Securities by notice to the
Company and the Trustee, may declare the principal of and accrued but unpaid
interest on all the Securities to be due and payable. Upon such a declaration,
such principal and interest shall be due and payable immediately. If an Event of
Default specified in Section 6.01(7) or (8) with respect to the Company occurs,
the principal of and interest on all the Securities shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Securityholders. The Holders of a majority in principal
amount of the Securities by notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.

SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.

The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
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in the Event of Default. No remedy is exclusive of any other remedy. All
available remedies are cumulative.

SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of or interest on a Security, (ii) a Default arising
from the failure to redeem or purchase any Security when required pursuant to
this Indenture or (iii) a Default in respect of a provision that under Section
9.02 cannot be amended without the consent of each Securityholder affected. When
a Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.

SECTION 6.05. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification or
security satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.

SECTION 6.06. Limitation on Suits. Except to enforce the right
to receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:

(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;

(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;

(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;

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(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and

(5) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.

A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.

SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.

SECTION 6.08. Collection Suit by Trustee. If an Event of
Default specified in Section 6.01(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount then due and owing (together with
interest on any unpaid interest to the extent lawful) and the amounts provided
for in Section 7.07.

SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.07.

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SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:

FIRST: to the Trustee for amounts due under Section 7.07;

SECOND: to holders of Senior Indebtedness of the Company and,
if such money or property has been collected from a Subsidiary
Guarantor, to holders of Senior Indebtedness of such Subsidiary
Guarantor, in each case to the extent required by Article 10 and 12;

THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and

FOURTH: to the Company.

The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section 6.10. At least 15 days
before such record date, the Company shall mail to each Securityholder and the
Trustee a notice that states the record date, the payment date and amount to be
paid.

SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit
by Holders of more than 10% in principal amount of the Securities.

SECTION 6.12. Waiver of Stay or Extension Laws. The Company
(to the extent it may lawfully do so) shall not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and shall not hinder, delay or 

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impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law had
been enacted.

ARTICLE 7

Trustee

SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.

(b) Except during the continuance of an Event of Default:

(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and

(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).

(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:

(1) this paragraph does not limit the effect of paragraph (b)
of this Section 7.01;

(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and

(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.

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(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.

(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.

(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.

(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.

(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01 and to the provisions of the TIA.

SECTION 7.02. Rights of Trustee. (a) The Trustee may
conclusively rely on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.

(c) The Trustee may act through agents or attorneys and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.

(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.

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(e) The Trustee may consult with counsel of its choice, and
the advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.

(f) Any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;

(g) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee security or indemnity satisfactory to the
Trustee against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction;

(h) The Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Trust Officer has actual knowledge thereof
or unless written notice of any event which is in fact such a default is
received by the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Securities and this Indenture;

(i) The rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and to each agent, custodian and other Person
employed to act hereunder; and

(j) The Trustee may request that the Company deliver an
Officers' Certificate setting forth the names of individuals and/or titles of
officers authorized at such time to take specified actions pursuant to this
Indenture, which Officers' Certificate may be signed by any person authorized to
sign an Officers' Certificate, including any person specified as so authorized
in any such certificate previously delivered and not superseded.

SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it 

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would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or
co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.

SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in the Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.

SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.

SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of May 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA Section
313(b).

A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange (if any) on
which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.

SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee from time to time reasonable compensation for its services.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the 

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Trustee's agents, counsel, accountants and experts. The Company shall indemnify
each of the Trustee and any predecessor Trustee and their agents against any and
all loss, damage, claims, liability or expense (including attorneys' fees and
taxes (other than taxes based upon, measured by, or determined by the income of
the Trustee)) incurred by it in connection with the administration of this trust
and the performance of its duties hereunder including the costs and expenses of
defending itself against any claim (whether asserted by the Company or any
Holder or any other Person). The Trustee shall notify the Company promptly of
any claim for which it may seek indemnity. Failure by the Trustee to so notify
the Company shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim and the Trustee may have separate counsel and the
Company shall pay the fees and expenses of such counsel. The Company need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own wilful misconduct, negligence
or bad faith.

To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee other than money or property held in
trust to pay principal of and interest on particular Securities.

The Company's payment obligations pursuant to this Section
7.07 shall survive the discharge of this Indenture and the resignation or
removal of the Trustee. When the Trustee incurs expenses after the occurrence of
a Default specified in Section 6.01(7) or (8) with respect to the Company, the
expenses are intended to constitute expenses of administration under the
Bankruptcy Law.

SECTION 7.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Company. The Holders of a majority in principal
amount of the Securities may remove the Trustee by so notifying the Trustee and
may appoint a successor Trustee. The Company shall remove the Trustee if:

(1) the Trustee fails to comply with Section 7.10;

(2) the Trustee is adjudged bankrupt or insolvent;

(3) a receiver or other public officer takes charge of the
Trustee or its property; or

(4) the Trustee otherwise becomes incapable of acting.

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If the Trustee resigns, is removed by the Company or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.

A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.

If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in principal amount of the Securities may petition any court of
competent jurisdiction at the expense of the Company for the appointment of a
successor Trustee.

If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.

Notwithstanding the replacement of the Trustee pursuant to
this Section 7.08, the Company's obligations under Section 7.07 shall continue
for the benefit of the retiring Trustee.

SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.

In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
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successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.

SECTION 7.10. Eligibility; Disqualification. The Trustee shall
at all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.

SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.

ARTICLE 8

Discharge of Indenture; Defeasance

SECTION 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (1) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.07) for
cancellation or (2) all outstanding Securities have become due and payable,
whether at maturity or on a redemption date as a result of the mailing of a
notice of redemption pursuant to Article 3 hereof and the Company irrevocably
deposits with the Trustee funds sufficient to pay at maturity or upon redemption
all outstanding Securities, including interest thereon to maturity or such
redemption date (other than Securities replaced pursuant to Section 2.07), and
if in either case the Company pays all other sums payable hereunder by the
Company, then this Indenture shall, subject to Section 8.01(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Company accompanied by an Officers' Certificate and
an Opinion of Counsel and at the cost and expense of the Company.

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(b) Subject to Sections 8.01(c) and 8.02, the Company at any
time may terminate (1) all its obligations under the Securities and this
Indenture ("legal defeasance option") or (2) its obligations under Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10 and 4.11 and the operation
of Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of
Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) and the
limitations contained in Sections 5.01(3) and 5.01(4) ("covenant defeasance
option"). The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option.

If the Company exercises its legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default with
respect thereto. If the Company exercises its covenant defeasance option,
payment of the Securities may not be accelerated because of an Event of Default
specified in Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in
the case of Sections 6.01(7) and (8), with respect only to Significant
Subsidiaries) or because of the failure of the Company to comply with Sections
5.01(3) and 5.01(4). If the Company exercises its legal defeasance option or its
covenant defeasance option, each Subsidiary Guarantor, if any, shall be released
from all its obligations with respect to its Subsidiary Guaranty.

Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.

(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.

SECTION 8.02. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:

(1) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of principal of
and interest on the Securities to maturity or redemption, as the case
may be;

(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments 

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of principal and interest when due and without reinvestment on the
deposited U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will
be sufficient to pay principal and interest when due on all the
Securities to maturity or redemption, as the case may be;

(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Sections 6.01(7) or (8) with
respect to the Company occurs which is continuing at the end of the
period;

(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;

(5) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under
the Investment Company Act of 1940;

(6) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (B) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Securityholders will not recognize
income, gain or loss for Federal income tax purposes as a result of
such defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such defeasance had not occurred;

(7) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
covenant defeasance had not occurred;

(8) the Company delivers to the Trustee an Opinion of Counsel
in the jurisdiction or organization of the Company (if other than the
United States) to the effect 

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that (A) Holders will not recognize income, gain or loss income tax
purposes of such jurisdiction a result of such deposit and defeasance,
and will be subject to income tax of such jurisdiction on the same
amounts, and in the same manner and at the same times as would have
been the case if such deposit and defeasance, had not occurred; and

(9) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities as
contemplated by this Article 8 have been complied with.

Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.

SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant to
this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article 10.

SECTION 8.04. Repayment to Company. The Trustee and the Paying
Agent shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.

Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors.

SECTION 8.05. Indemnity for Government Obligations. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.

SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining 

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or otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, if the
Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.

ARTICLE 9

Amendments

SECTION 9.01. Without Consent of Holders. The Company, the
Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities
without notice to or consent of any Securityholder:

(1) to cure any ambiguity, omission, defect or inconsistency;

(2) to comply with Article 5;

(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;

(4) to make any change in Article 10 that would limit or
terminate the benefits available to any holder of Senior Indebtedness
of the Company or of a Subsidiary Guarantor (or Representatives
therefor) under Article 10 or 12;

(5) to add guarantees with respect to the Securities,
including any Subsidiary Guaranties, or to secure the Securities;

(6) to add to the covenants of the Company or a Subsidiary
Guarantor for the benefit of the Holders or to surrender any right or
power herein conferred upon the Company or a Subsidiary Guarantor;

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(7) to comply with any requirements of the SEC in connection
with qualifying, or maintaining the qualification of, this Indenture
under the TIA; or

(8) to make any change that does not adversely affect the
rights of any Securityholder.

An amendment under this Section 9.01 may not make any change
that adversely affects the rights under Article 10 or 12 of any holder of Senior
Indebtedness of the Company or of a Subsidiary Guarantor then outstanding unless
the holders of such Senior Indebtedness (or any group or Representative thereof
authorized to give a consent) consent to such change.

After an amendment under this Section 9.01 becomes effective,
the Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section 9.01.

SECTION 9.02. With Consent of Holders. The Company, the
Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities
without notice to any Securityholder but with the written consent of the Holders
of at least a majority in principal amount of the Securities then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Securities). However, without the consent of each Securityholder affected
thereby, an amendment may not:

(1) reduce the amount of Securities whose Holders must consent
to an amendment;

(2) reduce the rate of or extend the time for payment of
interest on any Security;

(3) reduce the principal amount of or extend the Stated
Maturity of any Security;

(4) reduce the amount payable upon the redemption of any
Security or change the time at which any Security may be redeemed in
accordance with Article 3;

(5) make any Security payable in money other than that stated
in the Security;

(6) make any changes in the ranking or priority of any
Security that would adversely affect the Securityholders;

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(7) make any change in Section 6.04 or 6.07 or the second
sentence of this Section 9.02; or

(8) make any change in any Subsidiary Guaranty that would
adversely affect the Securityholders.

It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent approves the substance thereof.

An amendment under this Section 9.02 may not make any change
that adversely affects the rights under Article 10 or 12 of any holder of Senior
Indebtedness of the Company or of a Subsidiary Guarantor then outstanding unless
the holders of such Senior Indebtedness (or any group or Representative thereof
authorized to give a consent) consent to such change.

After an amendment under this Section 9.02 becomes effective,
the Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section 9.02.

SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.

SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder. An
amendment or waiver becomes effective upon the execution of such amendment or
waiver by the Trustee.

The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding 

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paragraph, those Persons who were Securityholders at such record date (or their
duly designated proxies), and only those Persons, shall be entitled to give such
consent or to revoke any consent previously given or to take any such action,
whether or not such Persons continue to be Holders after such record date. No
such consent shall be valid or effective for more than 120 days after such
record date.

SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.

SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article 9 if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.

SECTION 9.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.

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ARTICLE 10

Subordination

SECTION 10.01. Agreement To Subordinate. The Company agrees,
and each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment of all
Senior Indebtedness of the Company and that the subordination is for the benefit
of and enforceable by the holders of such Senior Indebtedness. The Securities
shall in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company and only Indebtedness of the Company which is Senior
Indebtedness of the Company shall rank senior to the Securities in accordance
with the provisions set forth herein. All provisions of this Article 10 shall be
subject to Section 10.12.

SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:

(1) holders of Senior Indebtedness of the Company shall be
entitled to receive payment in full in cash of such Senior Indebtedness
before Securityholders shall be entitled to receive any payment of
principal of or interest on the Securities; and

(2) until such Senior Indebtedness is paid in full in cash,
any payment or distribution to which Securityholders would be entitled
but for this Article 10 shall be made to holders of such Senior
Indebtedness as their interests may appear, except that Securityholders
may receive shares of Capital Stock and any debt securities that are
subordinated to such Senior Indebtedness to at least the same extent as
the Securities.

SECTION 10.03. Default on Senior Indebtedness of the Company.
The Company shall not pay the principal of or interest on the Securities or make
any deposit pursuant to Section 8.01 and may not purchase, redeem or otherwise
retire any Securities (collectively, "pay the Securities") if either of the
following (a "Payment Default") occurs (1) any Designated Senior Indebtedness of
the Company is not paid in cash when due; or (2) any other default on 

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Designated Senior Indebtedness of the Company occurs and the maturity of such
Designated Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, the Payment Default has been cured or waived and any
such acceleration has been rescinded or such Designated Senior Indebtedness has
been paid in full in cash; provided, however, that the Company shall be entitled
to pay the Securities without regard to the foregoing if the Company and the
Trustee receive written notice approving such payment from the Representative of
all Designated Senior Indebtedness with respect to which a Payment Default has
occurred and is continuing. During the continuance of any default (other than a
Payment Default) with respect to any Designated Senior Indebtedness of the
Company pursuant to which the maturity thereof may be accelerated immediately
without further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, the Company
shall not pay the Securities for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee of (with a copy to the Company)
written notice (a "Blockage Notice") of such default from the Representative of
such Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter. The Payment Blockage Period
shall end earlier if such Payment Blockage Period is terminated (1) by written
notice to the Trustee and the Company from the Person or Persons who gave such
Blockage Notice; (2) because the default giving rise to such Blockage Notice is
cured, waived or otherwise no longer continuing; or (3) because such Designated
Senior Indebtedness has been discharged or repaid in full in cash.
Notwithstanding the provisions described in the immediately preceding two
sentences (but subject to the provisions contained in the first sentence of this
Section 10.03), unless the holders of such Designated Senior Indebtedness or the
Representative of such Designated Senior Indebtedness shall have accelerated the
maturity of such Designated Senior Indebtedness, the Company shall be entitled
to resume payments on the Securities after termination of such Payment Blockage
Period. The Securities shall not be subject to more than one Payment Blockage
Period in any consecutive 360-day period, irrespective of the number of defaults
with respect to Designated Senior Indebtedness of the Company during such
period; provided, however, that if any Blockage Notice within such 360-day
period is given by or on behalf of any holders of Designated Senior Indebtedness
of the Company (other than the Bank Indebtedness), the Representative of the
Bank Indebtedness shall be entitled to give another Blockage Notice within such
period; provided further, however, that in no event shall the total number of
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in effect exceed 179 days in the aggregate during any 360-consecutive-day
period, and there must be 181 days during any 360-consecutive-day period during
which no Payment Blockage Period is in effect. For purposes of this Section
10.03, no default or event of default which existed or was continuing on the
date of the commencement of any Payment Blockage Period with respect to the
Designated Senior Indebtedness of the Company initiating such Payment Blockage
Period shall be, or be made, the basis of the commencement of a subsequent
Payment Blockage Period by the Representative of such Designated Senior
Indebtedness, whether or not within a period of 360 consecutive days, unless
such default or event of default shall have been cured or waived for a period of
not less than 90 consecutive days.

SECTION 10.04. Acceleration of Payment of Securities. If
payment of the Securities is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness of the Company (or their Representatives) of the
acceleration. If any Designated Senior Indebtedness of the Company is
outstanding, neither the Company nor any subsidiary Guarantor including FFBV
shall pay the Securities until five Business Days after the Representatives of
all the issues of Designated Senior Indebtedness of the Company receive notice
of such acceleration and, thereafter, shall be entitled to pay the Securities
only if this Article 10 otherwise permits payment at that time.

SECTION 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 10 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness of the Company and pay
it over to them as their interests may appear.

SECTION 10.06. Subrogation. After all Senior Indebtedness of
the Company is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to such Senior Indebtedness. A
distribution made under this Article 10 to holders of such Senior Indebtedness
which otherwise would have been made to Securityholders is not, as between the
Company and Securityholders, a payment by the Company on such Senior
Indebtedness.

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SECTION 10.07. Relative Rights. This Article 10 defines the
relative rights of Securityholders and holders of Senior Indebtedness of the
Company. Nothing in this Indenture shall:

(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or

(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default, subject to the rights of holders
of Senior Indebtedness of the Company to receive distributions
otherwise payable to Securityholders.

SECTION 10.08. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Indebtedness of the Company to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Company or by its failure to comply with
this Indenture.

SECTION 10.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 10.03, the Trustee or Paying Agent shall continue to
make payments on the Securities and shall not be charged with knowledge of the
existence of facts that under this Article 10 would prohibit the making of any
such payments unless, not less than two Business Days prior to the date of such
payment, a Trust Officer of the Trustee receives notice satisfactory to it that
such payments are prohibited by this Article 10. The Company, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness of the Company shall be entitled to give the notice; provided,
however, that, if an issue of Senior Indebtedness of the Company has a
Representative, only the Representative shall be entitled to give the notice.

The Trustee in its individual or any other capacity shall be
entitled to hold Senior Indebtedness of the Company with the same rights it
would have if it were not Trustee. The Registrar and co-registrar and the Paying
Agent shall be entitled to do the same with like rights. The Trustee shall be
entitled to all the rights set forth in this Article 10 with respect to any
Senior Indebtedness of the Company which may at any time be held by it, to the
same extent as any other holder of such Senior Indebtedness; and nothing in
Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing
in this Article 10 shall apply to claims of, or payments to, the Trustee under
or pursuant to Section 7.07.

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SECTION 10.10. Distribution or Notice to Representative.
Whenever any Person is to make a distribution or give a notice to holders of
Senior Indebtedness of the Company, such Person shall be entitled to make such
distribution or give such notice to their Representative (if any).

SECTION 10.11. Article 10 Not To Prevent Events of Default or
Limit Right To Accelerate. The failure to make a payment pursuant to the
Securities by reason of any provision in this Article 10 shall not be construed
as preventing the occurrence of a Default. Nothing in this Article 10 shall have
any effect on the right of the Securityholders or the Trustee to accelerate the
maturity of the Securities.

SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 8 by the Trustee for
the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness of the Company or
subject to the restrictions set forth in this Article 10, and none of the
Securityholders shall be obligated to pay over any such amount to the Company or
any holder of Senior Indebtedness of the Company or any other creditor of the
Company.

SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (1) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (2) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the
Securityholders or (3) upon the Representatives of Senior Indebtedness of the
Company for the purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of such Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 10. In the event that the Trustee determines, in good faith,
that evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness of the Company to participate in any payment or distribution
pursuant to this Article 10, the Trustee shall be entitled 

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to request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of such Senior Indebtedness held by such Person, the
extent to which such Person is entitled to participate in such payment or
distribution and other facts pertinent to the rights of such Person under this
Article 10, and, if such evidence is not furnished, the Trustee shall be
entitled to defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment. The provisions of Sections
7.01 and 7.02 shall be applicable to all actions or omissions of actions by the
Trustee pursuant to this Article 10.

SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Company as provided in this Article 10 and appoints
the Trustee as attorney-in-fact for any and all such purposes.

SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness of the Company. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of the Company and shall
not be liable to any such holders if it shall mistakenly pay over or distribute
to Securityholders or the Company or any other Person, money or assets to which
any holders of Senior Indebtedness of the Company shall be entitled by virtue of
this Article 10 or otherwise. With respect to the holders of Senior
Indebtedness, the Trustee undertakes to perform or to observe only such of its
covenants or obligations as are specifically set forth in this Indenture and no
implied covenants or obligations with respect to holders of Senior Indebtedness
shall be read into this Indenture against the Trustee.

SECTION 10.16. Reliance by Holders of Senior Indebtedness of
the Company on Subordination Provisions. Each Securityholder by accepting a
Security acknowledges and agrees that the foregoing subordination provisions
are, and are intended to be, an inducement and a consideration to each holder of
any Senior Indebtedness of the Company, whether such Senior Indebtedness was
created or acquired before or after the issuance of the Securities, to acquire
and continue to hold, or to continue to hold, such Senior Indebtedness and such
holder of such Senior Indebtedness shall be deemed conclusively to have relied
on such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.

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ARTICLE 11

Subsidiary Guaranties

SECTION 11.01. Guaranties. Each Subsidiary Guarantor hereby
unconditionally and irrevocably guarantees, jointly and severally, to each
Holder and to the Trustee and its successors and assigns (a) the full and
punctual payment of principal of and interest on the Securities when due,
whether at maturity, by acceleration, by redemption or otherwise, and all other
monetary obligations of the Company under this Indenture and the Securities and
(b) the full and punctual performance within applicable grace periods of all
other obligations of the Company under this Indenture and the Securities (all
the foregoing being hereinafter collectively called the "Obligations"). Each
Subsidiary Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from such
Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under
this Article 11 notwithstanding any extension or renewal of any Obligation.

Each Subsidiary Guarantor waives presentation to, demand of,
payment from and protest to the Company of any of the Obligations and also
waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice
of any default under the Securities or the Obligations. The obligations of each
Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Company or any other Person under this Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Indenture, the Securities or any other agreement;
(d) the release of any security held by any Holder or the Trustee for the
Obligations or any of them; (e) the failure of any Holder or the Trustee to
exercise any right or remedy against any other guarantor of the Obligations; or
(f) except as set forth in Section 11.06, any change in the ownership of such
Subsidiary Guarantor.

Each Subsidiary Guarantor further agrees that its Subsidiary
Guaranty herein constitutes a guarantee of payment, performance and compliance
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by any Holder or the Trustee to any security held for
payment of the Obligations.

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Each Subsidiary Guaranty is, to the extent and in the manner
set forth in Article 12, subordinated and subject in right of payment to the
prior payment in full of the principal of and premium, if any, and interest on
all Senior Indebtedness of the Subsidiary Guarantor giving such Subsidiary
Guaranty and each Subsidiary Guaranty is made subject to such provisions of this
Indenture.

Except as expressly set forth in Sections 8.01(b), 11.02 and
11.06, the obligations of each Subsidiary Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Subsidiary Guarantor herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Securities or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the obligations, or by any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of such Subsidiary Guarantor or would
otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law
or equity.

Each Subsidiary Guarantor further agrees that its Guarantee
herein shall continue to be effective or be reinstated, as the case may be, if
at any time payment, or any part thereof, of principal of or interest on any
Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Company or otherwise.

In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against any
Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay
the principal of or interest on any Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Obligation, each Subsidiary Guarantor hereby
promises to and shall, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (1) the unpaid amount of such Obligations, (2) accrued and 

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unpaid interest on such Obligations (but only to the extent not prohibited by
law) and (3) all other monetary Obligations of the Company to the Holders and
the Trustee.

Each Subsidiary Guarantor agrees that it shall not be entitled
to any right of subrogation in respect of any Obligations guaranteed hereby
until payment in full of all Obligations and all obligations to which the
Obligations are subordinated as provided in Article 12. Each Subsidiary
Guarantor further agrees that, as between it, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the Obligations
Guaranteed hereby may be accelerated as provided in Article 6 for the purposes
of such Subsidiary Guarantor's Subsidiary Guaranty herein, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article 6, such Obligations
(whether or not due and payable) shall forthwith become due and payable by such
Subsidiary Guarantor for the purposes of this Section 11.01.

Each Subsidiary Guarantor also agrees to pay any and all costs
and expenses (including reasonable attorneys' fees) incurred by the Trustee or
any Holder in enforcing any rights under this Section.

SECTION 11.02. Limitation on Liability. Any term or provision
of this Indenture to the contrary notwithstanding, the maximum aggregate amount
of the Obligations guaranteed hereunder by any Subsidiary Guarantor shall not
exceed the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.

Each Subsidiary Guarantor that makes a payment under its
Guaranty will be entitled to a contribution from each other Subsidiary Guarantor
in an amount equal to such other Subsidiary Guarantor's pro rata portion of such
payment based on the respective net assets of all the Subsidiary Guarantors at
the time of such payment determined in accordance with GAAP.

SECTION 11.03. Successors and Assigns. This Article 11 shall
be binding upon each Subsidiary Guarantor and its successors and assigns and
shall enure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and 

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privileges conferred upon that party in this Indenture and in the Securities
shall automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.

SECTION 11.04. No Waiver. Neither a failure nor a delay on the
part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article 11 shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Trustee and
the Holders herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Article 11
at law, in equity, by statute or otherwise.

SECTION 11.05. Modification. No modification, amendment or
waiver of any provision of this Article 11, nor the consent to any departure by
any Subsidiary Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Trustee, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on any Subsidiary Guarantor in any case
shall entitle such Subsidiary Guarantor to any other or further notice or demand
in the same, similar or other circumstances.

SECTION 11.06. Release of Subsidiary Guarantor. Except in the
case of FFBV's Guaranty of the Securities, upon the sale (including any sale
pursuant to any exercise of remedies by a holder of Senior Indebtedness of the
Company or of such Subsidiary Guarantor) or other disposition (including by way
of consolidation or merger) of a Subsidiary Guarantor or the sale or disposition
of all or substantially all the assets of such Subsidiary Guarantor (in each
case other than a sale or disposition to the Company or an Affiliate of the
Company) or at such time as such Subsidiary Guarantor no longer Guarantees any
other Indebtedness of the Company, such Subsidiary Guarantor shall be deemed
released from all obligations under this Article 11 without any further action
required on the part of the Trustee or any Holder. At the request of the
Company, the Trustee shall execute and deliver an appropriate instrument
evidencing such release.

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ARTICLE 12

Subordination of Subsidiary Guaranties

SECTION 12.01. Agreement To Subordinate. Each Subsidiary
Guarantor agrees, and each Securityholder by accepting a Security agrees, that
the Indebtedness evidenced by such Subsidiary Guarantor's Subsidiary Guaranty is
subordinated in right of payment, to the extent and in the manner provided in
this Article 12, to the prior payment of all Senior Indebtedness of such
Subsidiary Guarantor and that the subordination is for the benefit of and
enforceable by the holders of such Senior Indebtedness. The Obligations of a
Subsidiary Guarantor shall in all respects rank pari passu with all other Senior
Subordinated Indebtedness of such Subsidiary Guarantor and only Senior
Indebtedness of such Subsidiary Guarantor (including such Subsidiary]
Guarantor's Guaranty of Senior Indebtedness of the Company) shall rank senior to
the Obligations of such Subsidiary Guarantor in accordance with the provisions
set forth herein.

SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of any Subsidiary Guarantor to creditors
upon a total or partial liquidation or a total or partial dissolution of such
Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Subsidiary Guarantor or its
property:

(1) holders of Senior Indebtedness of such Subsidiary
Guarantor shall be entitled to receive payment in full in cash of such
Senior Indebtedness before Securityholders shall be entitled to receive
any payment pursuant to the Subsidiary Guaranty of such Subsidiary
Guarantor; and

(2) until the Senior Indebtedness of any Subsidiary Guarantor
is paid in full in cash, any payment or distribution to which
Securityholders would be entitled but for this Article 12 shall be made
to holders of such Senior Indebtedness as their interests may appear,
except that Securityholders may receive shares of Capital Stock and any
debt securities of such Subsidiary Guarantor that are subordinated to
such Senior Indebtedness to at least the same extent as Subsidiary
Guaranty.

SECTION 12.03. Default on Senior Indebtedness of Subsidiary
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its Subsidiary Guaranty or purchase, redeem or otherwise retire or defease any
Securities or other Obligations (collectively, "pay its Subsidiary Guaranty") if
either of the following (a "Payment Default") occurs (1) any Designated Senior
Indebtedness of such Subsidiary Guarantor is not paid in cash when due; or (2)
any other default on Designated Senior Indebtedness of such Subsidiary Guarantor
occurs and the maturity of such Designated Senior Indebtedness is accelerated in
accordance with its terms; unless, in either case, the Payment Default has been
cured or waived and any such acceleration has been rescinded or such Designated
Senior Indebtedness has been paid in full in cash; provided, however, that any
Subsidiary Guarantor shall be entitled to pay its Subsidiary Guaranty without
regard to the foregoing if such Subsidiary Guarantor and the Trustee receive
written notice approving such payment from the Representative of all Designated
Senior Indebtedness with respect to which a Payment Default has occurred and is
continuing. During the continuance of any default (other than a Payment Default)
with respect to any Designated Senior Indebtedness of such Subsidiary Guarantor
pursuant to which the maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, such Subsidiary
Guarantor shall not pay its Subsidiary Guaranty for a period (a "Payment
Blockage Period") commencing upon the receipt by the Trustee of (with a copy to
such Subsidiary Guarantor) written notice (a "Blockage Notice") of such default
from the Representative of such Designated Senior Indebtedness specifying an
election to effect a Payment Blockage Period and ending 179 days thereafter. The
Payment Blockage Period shall end earlier if such Payment Blockage Period is
terminated (1) by written notice to the Trustee and such Subsidiary Guarantor
from the Person or Persons who gave such Blockage Notice; (2) because the
default giving rise to such Blockage Notice is cured, waived or otherwise no
longer continuing; or (3) because such Designated Senior Indebtedness has been
discharged or repaid in full in cash. Notwithstanding the provisions described
in the immediately preceding two sentences (but subject to the provisions
contained in the first sentence of this Section 12.03), unless the holders of
such Designated Senior Indebtedness giving such Payment Notice or the
Representative of such Designated Senior Indebtedness shall have accelerated the
maturity of such Designated Senior Indebtedness, any Subsidiary Guarantor shall
be entitled to resume payments pursuant to its Subsidiary Guaranty after
termination of such Payment Blockage Period. No Subsidiary Guarantor shall be
subject to more than one Blockage Period in any 360-consecutive day period,
irrespective of the number of 

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defaults with respect to Designated Senior Indebtedness of such Subsidiary
Guarantor during such period; provided, however, that if any Blockage Notice
within such 360-day period is given by or on behalf of any holders of Designated
Senior Indebtedness of such Subsidiary Guarantor (other than the Bank
Indebtedness), the Representative of the Bank Indebtedness shall be entitled to
give another Blockage Notice within such period; provided further, however, that
in no event shall the total number of days during which any Payment Blockage
Period or Periods is in effect exceed 179 days in the aggregate during any
360-consecutive-day period, and there must be 181 days during any
360-consecutive-day period during which no Payment Blockage Period is in effect.
For purposes of this Section 12.03, no default or event of default which existed
or was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness of such Subsidiary Guarantor
initiating such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such default or event of default shall have been cured
or waived for a period of not less than 90 consecutive days.

SECTION 12.04. Demand for Payment. If a demand for payment is
made on a Subsidiary Guarantor pursuant to Article 11, the Trustee shall
promptly notify the holders of the Designated Senior Indebtedness of such
Subsidiary Guarantor (or their Representatives) of such demand.

SECTION 12.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 12 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness of the applicable
Subsidiary Guarantor and pay it over to them or their Representatives as their
interests may appear.

SECTION 12.06. Subrogation. After all Senior Indebtedness of a
Subsidiary Guarantor is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to Senior Indebtedness of such
Subsidiary Guarantor. A distribution made under this Article 12 to holders of
such Senior Indebtedness which otherwise would have been made to Securityholders
is not, as between the relevant Subsidiary Guarantor and Securityholders, a
payment by such Subsidiary Guarantor on such Senior Indebtedness.

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SECTION 12.07. Relative Rights. This Article 12 defines the
relative rights of Securityholders and holders of Senior Indebtedness of a
Subsidiary Guarantor. Nothing in this Indenture shall:

(1) impair, as between a Subsidiary Guarantor and
Securityholders, the obligation of such Subsidiary Guarantor, which is
absolute and unconditional, to pay its Subsidiary Guaranty to the
extent set forth in Article 11; or

(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a default by such Subsidiary Guarantor
under its Subsidiary Guaranty, subject to the rights of holders of
Senior Indebtedness of such Subsidiary Guarantor to receive
distributions otherwise payable to Securityholders.

SECTION 12.08. Subordination May Not Be Impaired by Company or
any Subsidiary Guarantor. No right of any holder of Senior Indebtedness of any
Subsidiary Guarantor to enforce the subordination of the Subsidiary Guaranty of
such Subsidiary Guarantor shall be impaired by any act or failure to act by the
Company or such Subsidiary Guarantor or by their failure to comply with this
Indenture.

SECTION 12.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 12.03, the Trustee or Paying Agent shall continue to
make payments on any Subsidiary Guaranty and shall not be charged with knowledge
of the existence of facts that would prohibit the making of any such payments
unless, not less than two Business Days prior to the date of such payment, a
Trust Officer of the Trustee receives written notice satisfactory to it that
such payments are prohibited by this Article 12. The Company, the relevant
Subsidiary Guarantor, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness of such Subsidiary Guarantor
shall be entitled to give the notice; provided, however, that, if an issue of
Senior Indebtedness of any Subsidiary Guarantor has a Representative, only the
Representative shall be entitled to give the notice.

The Trustee in its individual or any other capacity shall be
entitled to hold Senior Indebtedness of any Subsidiary Guarantor with the same
rights it would have if it were not the Trustee. The Registrar and co-registrar
and the Paying Agent may do the same with like rights. The Trustee shall be
entitled to all the rights set forth in this Article 12 with respect to any
Senior Indebtedness of any Subsidiary Guarantor which may at any time be held by

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it, to the same extent as any other holder of such Senior Indebtedness; and
nothing in Article 7 shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article 12 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.07.

SECTION 12.10. Distribution or Notice to Representative.
Whenever any Person is to make a distribution or give a notice to holders of
Senior Indebtedness of any Subsidiary Guarantor, such Person shall be entitled
to make such distribution or give such notice to their Representative (if any).

SECTION 12.11. Article 12 Not To Prevent Events of Default or
Limit Right To Demand Payment. The failure to make a payment pursuant to a
Subsidiary Guaranty by reason of any provision in this Article 12 shall not be
construed as preventing the occurrence of a Default. Nothing in this Article 12
shall have any effect on the right of the Securityholders or the Trustee to make
a demand for payment on any Subsidiary Guarantor pursuant to its Subsidiary
Guaranty.

SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 12, the Trustee and the Securityholders
shall be entitled to rely (1) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (2) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the
Securityholders or (3) upon the Representatives for the holders of Senior
Indebtedness of any Subsidiary Guarantor for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
such Senior Indebtedness and other indebtedness of such Subsidiary Guarantor,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 12. In the
event that the Trustee determines, in good faith, that evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness of any
Subsidiary Guarantor to participate in any payment or distribution pursuant to
this Article 12, the Trustee shall be entitled to request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness of such Subsidiary Guarantor held by such Person, the extent
to which such Person is entitled to participate in such payment or distribution
and other facts pertinent to the rights of such Person under this Article 12,
and, if such evidence is not furnished, the Trustee shall be entitled to defer
any 

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payment to such Person pending judicial determination as to the right of such
Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall
be applicable to all actions or omissions of actions by the Trustee pursuant to
this Article 12.

SECTION 12.13. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of any Subsidiary Guarantor as provided in this Article 12
and appoints the Trustee as attorney-in-fact for any and all such purposes.

SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of Subsidiary Guarantor. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of any Subsidiary Guarantor
and shall not be liable to any such holders if it shall mistakenly pay over or
distribute to Securityholders or the Company or any other Person, money or
assets to which any holders of such Senior Indebtedness shall be entitled by
virtue of this Article 12 or otherwise.

SECTION 12.15. Reliance by Holders of Senior Indebtedness of
Subsidiary Guarantors on Subordination Provisions. Each Securityholder by
accepting a Security acknowledges and agrees that the foregoing subordination
provisions are, and are intended to be, an inducement and a consideration to
each holder of any Senior Indebtedness of any Subsidiary Guarantor, whether such
Senior Indebtedness was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively
to have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Indebtedness.

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ARTICLE 13

Miscellaneous

SECTION 13.01. Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.

SECTION 13.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:

if to the Company or any Subsidiary Guarantor:

Flowserve Corporation
222 West Las Colinas Blvd.
Suite 1500
Irving, TX 75039

Attention of Renee Hornbaker

if to the Trustee:

The Bank of New York
101 Barclay Street, Floor 21W
New York, NY 10286

Attention of Corporate Trust
Administration-Global Finance Unit

The Company, any Subsidiary Guarantor or the Trustee by notice
to the other may designate additional or different addresses for subsequent
notices or communications.

Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.

Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it. Notices
delivered to the Trustee shall be effective when received.

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112

SECTION 13.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, any Subsidiary Guarantor, the Trustee, the Registrar
and anyone else shall have the protection of TIA Section 312(c).

SECTION 13.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:

(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and

(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.

SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:

(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;

(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;

(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and

(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.

SECTION 13.06. When Securities Disregarded. In determining
whether the Holders of the required principal 

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amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company shall be disregarded and deemed not to be outstanding, except that, for
the purpose of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Securities which the Trustee knows
are so owned shall be so disregarded. Also, subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.

SECTION 13.07. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.

SECTION 13.08. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not required to be
open in the State of New York. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period. If a regular record date is a
Legal Holiday, the record date shall not be affected.

SECTION 13.09. Governing Law. This Indenture and the
Securities shall be governed by, and construed in accordance with, the laws of
the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.

SECTION 13.10. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company or any Subsidiary
Guarantor shall not have any liability for any obligations of the Company under
the Securities or this Indenture or of such Subsidiary Guarantor under its
Subsidiary Guaranty or this Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. By accepting a Security,
each Securityholder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Securities.

SECTION 13.11. Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.

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114

SECTION 13.12. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.

SECTION 13.13. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.

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115

IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.

FLOWSERVE CORPORATION,

by /s/ RENEE J. HORNBAKER
----------------------------
Name: Renee J. Hornbaker
Title: Vice President and 
Chief Financial 
Officer

FLOWSERVE FINANCE B.V.,

by /s/ JOHN M. NANOS
----------------------------
Name: John M. Nanos
Title: Managing Director

by /s/ M. KATHLEEN MCVAY
----------------------------
Name: M. Kathleen McVay
Title: Managing Director

FLOWSERVE RED CORPORATION,
FLOWSERVE FSD CORPORATION,
FLOWSERVE FCD CORPORATION,
FLOWSERVE INTERNATIONAL, INC.,
FLOWSERVE MANAGEMENT COMPANY (DE 
BUSINESS TRUST),
BW/IP-NEW MEXICO, INC.,
FLOWSERVE INTERNATIONAL, LLC,
DURAMETALLIC AUSTRALIA HOLDING 
COMPANY,
FLOWSERVE INTERNATIONAL LIMITED,
INNOVATIVE VALVE TECHNOLOGIES, INC.,
PLANT MAINTENANCE, INC.,
VARCO VALVE, INC.,
COLONIAL EQUIPMENT & SERVICE CO., 
INC.,
CECORP, INC.,
DIVT ACQUISITION-DELAWARE, LLC,
DIVT SUBSIDIARY, LLC,
SOUTHERN VALVE SERVICE, INC.,
L.T. KOPPL INDUSTRIES, INC.,
KOPPL COMPANY,

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116

KOPPL INDUSTRIAL SYSTEMS, INC.,    
HARLEY INDUSTRIES, INC.,           
KOPPL COMPANY OF ARIZONA,          
SEELEY & JONES, INCORPORATED,      
GSV, INC.,                         
IPSCO-FLORIDA, INC.,               
INTERNATIONAL PIPING SERVICES 
COMPANY,  
CYPRESS INDUSTRIES, INC.,          
DALCO, LLC,                        
PLANT SPECIALTIES, INC.,           
ENERGY MAINTENANCE, INC.,          
PREVENTIVE MAINTENANCE, INC.,      
PRODUCTION MACHINE INCORPORATED,   
ICE LIQUIDATING, INC.,             
VALVE REPAIR OF SOUTH CAROLINA, 
INC.,   
THE SAFE SEAL COMPANY, INC.,       
FLICKINGER-BENICIA INC.,           
PUGET INVESTMENTS, INC.,           
STEAM SUPPLY & RUBBER CO., INC.,   
FLICKINGER COMPANY,                
BOYDEN, INC.,                      
VALVE ACTUATION & REPAIR CO.,      
INGERSOLL-DRESSER PUMP COMPANY,    
IDP ALTERNATE ENERGY COMPANY,      
ENERGY HYDRO, INC.                 
PUMP INVESTMENTS, INC.             
FLOWSERVE HOLDINGS, INC.           
IPSCO HOLDING, INC.                

by /s/ JOHN M. NANOS
----------------------------
Name: John M. Nanos
Title:

THE BANK OF NEW YORK,

by /s/ LUIS PEREZ
----------------------------
Name: Luis Perez
Title: Assistant V.P.

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[Draft-08/06/00]
RULE 144A/REGULATION S APPENDIX

PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES

1. Definitions

1.1  Definitions

For the purposes of this Appendix the following terms shall have the
meanings indicated below:

"Depository" means The Depository Trust Company, its nominees
and their respective successors.

"Exchange Securities" means (1) the 12-1/4% Senior
Subordinated Securities Due 2010 issued pursuant to the Indenture in connection
with a Registered Exchange Offer pursuant to a Registration Rights Agreement and
(2) Additional Securities, if any, issued pursuant to a registration statement
filed with the SEC under the Securities Act.

"Initial Purchasers" means (1) with respect to the Initial
Securities issued on the Issue Date, Credit Suisse First Boston Corporation,
Banc of America Securities LLC, ABN AMRO Incorporated and Banc One Capital
Markets, Inc., and (2) with respect to each issuance of Additional Securities,
the Persons purchasing such Additional Securities under the related Purchase
Agreement.

"Initial Securities" means (1) $290,000,000 aggregate
principal amount of 12-1/4% Senior Subordinated Securities Due 2010 issued on
the Issue Date and (2) Additional Securities, if any, issued in a transaction
exempt from the registration requirements of the Securities Act.

"Private Exchange" means the offer by the Company, pursuant to
a Registration Rights Agreement, to the Initial Purchasers to issue and deliver
to each Initial Purchaser, in exchange for the Initial Securities held by the
Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.

"Private Exchange Securities" means any 12-1/4% Senior
Securities Subordinated Due 2010 issued in connection with a Private Exchange.

"Purchase Agreement" means (1) with respect to the Initial
Securities issued on the Issue Date, the Purchase Agreement dated August 3,
among the Company and the Initial 

118

Purchasers, and (2) with respect to each issuance of Additional Securities, the
purchase agreement or underwriting agreement among the Company and the Persons
purchasing such Additional Securities.

"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.

"Registered Exchange Offer" means the offer by the Company,
pursuant to a Registration Rights Agreement, to certain Holders of Initial
Securities, to issue and deliver to such Holders, in exchange for the Initial
Securities, a like aggregate principal amount at maturity of Exchange Securities
registered under the Securities Act.

"Registration Rights Agreement" means (1) with respect to the
Initial Securities issued on the Issue Date, the Registration Rights Agreement
dated August 3, among the Company and the Initial Purchasers, and (2) with
respect to each issuance of Additional Securities issued in a transaction exempt
from the registration requirements of the Securities Act, the registration
rights agreement, if any, among the Company and the Persons purchasing such
Additional Securities under the related Purchase Agreement.

"Securities" means the Initial Securities, the Exchange
Securities and the Private Exchange Securities, treated as a single class.

"Securities Act" means the Securities Act of 1933.

"Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depository), or any successor Person
thereto and shall initially be the Trustee.

"Shelf Registration Statement" means the registration
statement issued by the Company in connection with the offer and sale of Initial
Securities or Private Exchange Securities pursuant to a Registration Rights
Agreement.

"Transfer Restricted Securities" means Securities that bear or
are required to bear the legend set forth in Section 2.3(b)hereto.

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1.2 Other Definitions

Defined in
Term                                                                                 Section:
----                                                                                ----------

"Agent Members".........................................................................................2.1(b)
"Global Security".......................................................................................2.1(a)
"Regulation S"..........................................................................................2.1(a)
"Restricted Global Security"............................................................................2.1(a)
"Rule 144A".............................................................................................2.1(a)

2. The Securities.

2.1 (a) Form and Dating. Initial Securities offered and sold to a QIB
in reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance
on Regulation S under the Securities Act ("Regulation S"), in each case as
provided in a Purchase Agreement, and Private Exchange Securities, as provided
in a Registration Rights Agreement, shall be issued initially in the form of one
or more permanent global Securities in definitive, fully registered form without
interest coupons with the global securities legend and restricted securities
legend set forth in Exhibit 1 hereto (each, a "Restricted Global Security"),
which shall be deposited on behalf of the purchasers of the Initial Securities
represented thereby with the Trustee, at its principal Corporate Trust Office,
as custodian for the Depository (or with such other custodian as the Depository
may direct), and registered in the name of the Depository or a nominee of the
Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Global Securities
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depository or its nominee as hereinafter
provided. Exchange Securities shall be issued in global form (with the global
securities legend set forth in Exhibit 1 hereto) or in certificated form at the
option of the Holders thereof from time to time. Exchange Securities issued in
global form and Restricted Global Securities are sometimes referred to in this
Appendix as "Global Securities."

(b) Book-Entry Provisions. This Section 2.1(b) shall apply
only to a Global Security deposited with or on behalf of the Depository.

The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and (b)
shall be delivered by the Trustee to such 

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Depository or pursuant to such Depository's instructions or held by the Trustee
as custodian for the Depository.

Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depository or by the Trustee as the
custodian of the Depository or under such Global Security, and the Company, the
Trustee and any agent of the Company or the Trustee shall be entitled to treat
the Depository as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depository or impair, as between the Depository and its Agent Members, the
operation of customary practices of such Depository governing the exercise of
the rights of a holder of a beneficial interest in any Global Security.

(c) Certificated Securities. Except as provided in this
Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in Restricted
Global Securities shall not be entitled to receive physical delivery of
certificated Securities.

2.2 Authentication. The Trustee shall authenticate and deliver: (1) on
the Issue Date, an aggregate principal amount of $290,000,000 million 12-1/4%
Senior Subordinated Securities Due 2010, (2) any Additional Securities for an
original issue in an aggregate principal amount specified in the written order
of the Company pursuant to Section 2.02 of the Indenture and (3) Exchange
Securities or Private Exchange Securities for issue only in a Registered
Exchange Offer or a Private Exchange, respectively, pursuant to a Registration
Rights Agreement, for a like principal amount of Initial Securities, in each
case upon a written order of the Company signed by two Officers or by an Officer
and either an Assistant Treasurer or an Assistant Secretary of the Company. Such
order shall specify the amount of the Securities to be authenticated and the
date on which the original issue of Securities is to be authenticated and, in
the case of any issuance of Additional Securities pursuant to Section 2.13 of
the Indenture, shall certify that such issuance is in compliance with Section
4.03 of the Indenture.

2.3 Transfer and Exchange.

(a) Transfer and Exchange of Global Securities. (i) The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the 

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Depository, in accordance with this Indenture (including applicable restrictions
on transfer set forth herein, if any) and the procedures of the Depository
therefor. A transferor of a beneficial interest in a Global Security shall
deliver to the Registrar a written order given in accordance with the
Depositary's procedures containing information regarding the participant account
of the Depositary to be credited with a beneficial interest in the Global
Security. The Registrar shall, in accordance with such instructions instruct the
Depositary to credit to the account of the Person specified in such instructions
a beneficial interest in the Global Security and to debit the account of the
Person making the transfer the beneficial interest in the Global Security being
transferred.

(ii) Notwithstanding any other provisions of this Appendix
(other than the provisions set forth in Section 2.4), a Global Security may not
be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.

(iii) In the event that a Restricted Global Security is
exchanged for Securities in certificated registered form pursuant to Section 2.4
of this Appendix, prior to the consummation of a Registered Exchange Offer or
the effectiveness of a Shelf Registration Statement with respect to such
Securities, such Securities may be exchanged only in accordance with such
procedures as are substantially consistent with the provisions of this Section
2.3 (including the certification requirements set forth on the reverse of the
Initial Securities intended to ensure that such transfers comply with Rule 144A
or Regulation S, as the case may be) and such other procedures as may from time
to time be adopted by the Company.

(b) Legend.

(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Security certificate evidencing the Restricted
Global Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the
following form:

THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE
OFFERED, SOLD OR 

5

122

OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS
SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION
5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED, ONLY (I) TO THE COMPANY, (II) IN THE
UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED STATES IN
AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (IV) PURSUANT TO EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I)
THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.

(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a
Restricted Global Security) pursuant to Rule 144 under the Securities
Act, the Registrar shall permit the transferee thereof to exchange such
Transfer Restricted Security for a certificated Security that does not
bear the legend set forth above and rescind any restriction on the
transfer of such Transfer Restricted Security, if the transferor
thereof certifies in writing to the Registrar that such sale or
transfer was made in reliance on Rule 144 (such certification to be in
the form set forth on the reverse of the Security).

(iii) After a transfer of any Initial Securities or Private
Exchange Securities pursuant to and during the period of the
effectiveness of a Shelf Registration Statement with respect to such
Initial Securities or Private Exchange Securities, as the case may be,
all requirements pertaining to legends on such Initial Security or such
Private Exchange Security will cease to apply, the requirements
requiring any such Initial Security or such Private Exchange Security
issued to 

6

123

certain Holders be issued in global form will cease to apply, and a
certificated Initial Security or Private Exchange Security or an
Initial Security or Private Exchange Security in global form, in each
case without restrictive transfer legends, will be available to the
transferee of the Holder of such Initial Securities or Private Exchange
Securities upon exchange of such transferring Holder's certificated
Initial Security or Private Exchange Security or directions to transfer
such Holder's interest in the Global Security, as applicable.

(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities, all requirements pertaining to such
Initial Securities that Initial Securities issued to certain Holders be
issued in global form will still apply with respect to Holders of such
Initial Securities that do not exchange their Initial Securities, and
Exchange Securities in certificated or global form will be available to
Holders that exchange such Initial Securities in such Registered
Exchange Offer.

(v) Upon the consummation of a Private Exchange with respect
to the Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued
in global form will still apply with respect to Holders of such Initial
Securities that do not exchange their Initial Securities, and Private
Exchange Securities in global form with the global securities legend
and the Restricted Securities Legend set forth in Exhibit 1 hereto will
be available to Holders that exchange such Initial Securities in such
Private Exchange.

(c) Cancellation or Adjustment of Global Security. At such
time as all beneficial interests in a Global Security have either been exchanged
for certificated Securities, redeemed, purchased or canceled, such Global
Security shall be returned to the Depository for cancellation or retained and
canceled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Security is exchanged for certificated
Securities, redeemed, purchased or canceled, the principal amount of Securities
represented by such Global Security shall be reduced and an adjustment shall be
made on the books and records of the Trustee (if it is then the Securities
Custodian for such Global Security) with respect to such Global Security, by the
Trustee or the Securities Custodian, to reflect such reduction.

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(d) Obligations with Respect to Transfers and Exchanges of
Securities.

(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate certificated
Securities and Global Securities at the Registrar's or co-registrar's
request.

(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any
such transfer taxes, assessments or similar governmental charge payable
upon exchange or transfer pursuant to Sections 3.06, 4.09 and 9.05 of
the Indenture).

(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of any Security for a period
beginning 15 Business Days before the mailing of a notice of an offer
to repurchase or redeem Securities or 15 Business Days before an
interest payment date.

(iv) Prior to the due presentation for registration of
transfer of any Security, the Company, the Trustee, the Paying Agent,
the Registrar or any co-registrar may deem and treat the person in
whose name a Security is registered as the absolute owner of such
Security for the purpose of receiving payment of principal of and
interest on such Security and for all other purposes whatsoever,
whether or not such Security is overdue, and none of the Company, the
Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.

(v) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.

(e) No Obligation of the Trustee.

(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of a Global Security, a member of, or a
participant in the Depository or other Person with respect to the
accuracy of the records of the Depository or its nominee or of any
participant or member thereof, with respect to any ownership interest
in the Securities or with respect to the delivery to any 

8

125

participant, member, beneficial owner or other Person (other than the
Depository) of any notice (including any notice of redemption) or the
payment of any amount, under or with respect to such Securities. All
notices and communications to be given to the Holders and all payments
to be made to Holders under the Securities shall be given or made only
to or upon the order of the registered Holders (which shall be the
Depository or its nominee in the case of a Global Security). The rights
of beneficial owners in any Global Security shall be exercised only
through the Depository subject to the applicable rules and procedures
of the Depository. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Depository with respect to
its members, participants and any beneficial owners.

(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to
any transfer of any interest in any Security (including any transfers
between or among Depository participants, members or beneficial owners
in any Global Security) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by, the terms
of this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.

2.4 Certificated Securities.

(a) A Restricted Global Security deposited with the Depository
or with the Trustee as custodian for the Depository pursuant to Section 2.1
shall be transferred to the beneficial owners thereof in the form of
certificated Securities in an aggregate principal amount equal to the principal
amount of such Global Security, in exchange for such Global Security, only if
such transfer complies with Section 2.3 and (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository for such
Restricted Global Security or if at any time such Depository ceases to be a
"clearing agency" registered under the Exchange Act and a successor depositary
is not appointed by the Company within 90 days of such notice, or (ii) an Event
of Default has occurred and is continuing or (iii) the Company, in its sole
discretion, notifies the Trustee in writing that it elects to cause the issuance
of certificated Securities under this Indenture.

(b) Any Restricted Global Security that is transferable to the
beneficial owners thereof pursuant to this 

9

126

Section 2.4 shall be surrendered by the Depository to the Trustee located at its
principal corporate trust office in the Borough of Manhattan, The City of New
York, to be so transferred, in whole or from time to time in part, without
charge, and the Trustee shall authenticate and deliver, upon such transfer of
each portion of such Restricted Global Security, an equal aggregate principal
amount of certificated Initial Securities of authorized denominations. Any
portion of a Restricted Global Security transferred pursuant to this Section 2.4
shall be executed, authenticated and delivered only in denominations of $1,000
principal amount and any integral multiple thereof and registered in such names
as the Depository shall direct. Any certificated Initial Security or Private
Exchange Security delivered in exchange for an interest in the Restricted Global
Security shall, except as otherwise provided by Section 2.3(b), bear the
restricted securities legend set forth in Exhibit 1 hereto.

(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Security shall be entitled to grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.

(d) In the event of the occurrence of either of the events
specified in Section 2.4(a), the Company shall promptly make available to the
Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.

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EXHIBIT 1
to
RULE 144A/REGULATION S APPENDIX

[FORM OF FACE OF INITIAL SECURITY]

[Global Securities Legend]

UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

[Restricted Securities Legend]

THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF
THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (I) TO THE COMPANY, (II) IN THE UNITED STATES TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

128

No.:                                                 CUSIP No.:
ISIN No.:

12-1/4% Senior Subordinated Notes Due 2010

Flowserve Corporation, a New York corporation, promises to pay
to Cede & Co, or registered assigns, the principal amount set forth on Schedule
A hereto on August 15, 2010.

Interest Payment Dates: February 15 and August 15.

Record Dates: February 1 and August 1.

Additional provisions of this Security are set forth on the
other side of this Security.

Dated: August 8, 2000

129

FLOWSERVE CORPORATION,

by
----------------------------
Name: Renee J. Hornbaker
Title: Vice President and 
Chief Financial 
Officer

FLOWSERVE FINANCE B.V.,

by
----------------------------
Name: John M. Nanos
Title: Managing Director

by
----------------------------
Name: M. Kathleen McVay
Title: Managing Director

FLOWSERVE RED CORPORATION,
FLOWSERVE FSD CORPORATION,
FLOWSERVE FCD CORPORATION,
FLOWSERVE INTERNATIONAL, INC.,
FLOWSERVE MANAGEMENT COMPANY (DE 
BUSINESS TRUST),
BW/IP-NEW MEXICO, INC.,
FLOWSERVE INTERNATIONAL, LLC,
DURAMETALLIC AUSTRALIA HOLDING 
COMPANY,
FLOWSERVE INTERNATIONAL LIMITED,
INNOVATIVE VALVE TECHNOLOGIES, INC.,
PLANT MAINTENANCE, INC.,
VARCO VALVE, INC.,
COLONIAL EQUIPMENT & SERVICE CO., 
INC.,
CECORP, INC.,
DIVT ACQUISITION-DELAWARE, LLC,
DIVT SUBSIDIARY, LLC,
SOUTHERN VALVE SERVICE, INC.,
L.T. KOPPL INDUSTRIES, INC.,
KOPPL COMPANY,
KOPPL INDUSTRIAL SYSTEMS, INC.,
HARLEY INDUSTRIES, INC.,
KOPPL COMPANY OF ARIZONA,
SEELEY & JONES, INCORPORATED,
GSV, INC.,
IPSCO-FLORIDA, INC.,

130

INTERNATIONAL PIPING SERVICES 
COMPANY,
CYPRESS INDUSTRIES, INC.,
DALCO, LLC,
PLANT SPECIALTIES, INC.,
ENERGY MAINTENANCE, INC.,
PREVENTIVE MAINTENANCE, INC.,
PRODUCTION MACHINE INCORPORATED,
ICE LIQUIDATING, INC.,
VALVE REPAIR OF SOUTH CAROLINA, 
INC.,
THE SAFE SEAL COMPANY, INC.,
FLICKINGER-BENICIA INC.,
PUGET INVESTMENTS, INC.,
STEAM SUPPLY & RUBBER CO., INC.,
FLICKINGER COMPANY,
BOYDEN, INC.,
VALVE ACTUATION & REPAIR CO.,
INGERSOLL-DRESSER PUMP COMPANY,
IDP ALTERNATE ENERGY COMPANY,
ENERGY HYDRO, INC.
PUMP INVESTMENTS, INC.
FLOWSERVE HOLDINGS, INC.
IPSCO HOLDING, INC.

by
----------------------------
Name: John M. Nanos
Title:

131

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION

THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.

by
------------------------------
Authorized Signatory

132

[FORM OF REVERSE SIDE OF INITIAL SECURITY]

12-1/4% Senior Subordinated Notes Due 2010

1. Interest

Flowserve Corporation, a New York corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above; provided,
however, that if a Registration Default (as defined in the Registration Rights
Agreement) occurs, additional interest will accrue on this Security at a rate of
0.50% per annum (increasing by an additional 0.50% per annum after each
consecutive 90-day period that occurs after the date on which such Registration
Default occurs up to a maximum additional interest rate of 2.00%) from and
including the date on which any such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured. The
Company will pay interest semiannually on February 15 and August 15 of each
year, commencing February 15, 2001. Interest on the Securities will accrue from
the most recent date to which interest has been paid or, if no interest has been
paid, from August 8, 2000. Interest will be computed on the basis of a 360-day
year of twelve 30-day months. The Company will pay interest on overdue principal
at 1% per annum in excess of the above rate and will pay interest on overdue
installments of interest at such higher rate to the extent lawful.

2. Method of Payment

The Company will pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on the February 1 or August 1 next preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a Paying
Agent to collect principal payments. The Company will pay principal and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all payments in
respect of a certificated Security (including 

133

principal, premium and interest) by mailing a check to the registered address of
each Holder thereof; provided, however, that payments on a certificated Security
will be made by wire transfer to a U.S. dollar account maintained by the payee
with a bank in the United States if such Holder elects payment by wire transfer
by giving written notice to the Trustee or the Paying Agent to such effect
designating such account no later than 30 days immediately preceding the
relevant due date for payment (or such other date as the Trustee may accept in
its discretion).

3. Paying Agent and Registrar

Initially, The Bank of New York, a New York banking
corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4. Indenture

The Company issued the Securities under an Indenture dated as
of August 8, 2000 ("Indenture"), among the Company, the Subsidiary Guarantors
and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date
of the Indenture (the "Act"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the Act for a statement of those terms.

The Securities are general unsecured obligations of the
Company. The Company shall be entitled, subject to its compliance with Section
4.03 of the Indenture, to issue Additional Securities pursuant to Section 2.13
of the Indenture. The Initial Securities issued on the Issue Date, any
Additional Securities and all Exchange Securities or Private Exchange Securities
issued in exchange therefor will be treated as a single class for all purposes
under the Indenture. The Indenture contains covenants that limit the ability of
the Company and its subsidiaries to incur additional indebtedness; pay dividends
or distributions on, or redeem or repurchase capital stock; make investments;
issue or sell capital stock of subsidiaries; engage in transactions with
affiliates; transfer or sell assets; guarantee 

2

134

indebtedness; restrict dividends or other payments of subsidiaries; consolidate,
merge or transfer all or substantially all of its assets and the assets of its
subsidiaries. These covenants are subject to important exceptions and
qualifications.

5. Optional Redemption

Except as set forth below, the Company shall not be entitled
to redeem the Securities at its option prior to August 15, 2005.

On and after August 15, 2005, the Company shall be entitled at
its option to redeem all or a portion of the Securities upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed in
percentages of principal amount on the redemption date), plus accrued interest
to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the 12-month period commencing on August 15 of the
years set forth below:

Redemption
Period                               Price
------                             ----------

2005                               106.125%
2006                               104.083
2007                               102.042
2008 and thereafter                100.000%

In addition, prior to August 15, 2003, the Company shall be
entitled at its option on one or more occasions to redeem Securities (which
includes Additional Securities, if any) in an aggregate principal amount not to
exceed 35% of the aggregate principal amount of the Securities (which includes
Additional Securities, if any) originally issued at a redemption price
(expressed as a percentage of principal amount) of 112.25%, plus accrued and
unpaid interest to the redemption date, with the net cash proceeds from one or
more Public Equity Offerings; provided, however, that (1) at least 65% of such
aggregate principal amount of Securities (which includes Additional Securities,
if any) remains outstanding immediately after the occurrence of each such
redemption (other than Securities held, directly or indirectly, by the Company
or its Affiliates); and (2) each such redemption occurs within 60 days after the
closing date of the related Public Equity Offering.

3

135

6. Notice of Redemption

Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
$1,000 principal amount may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued interest
on all Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.

7. Put Provisions

Upon a Change of Control, any Holder of Securities will have
the right to cause the Company to repurchase all or any part of the Securities
of such Holder at a repurchase price equal to 101% of the principal amount of
the Securities to be repurchased plus accrued interest to the date of repurchase
(subject to the right of holders of record on the relevant record date to
receive interest due on the related interest payment date) as provided in, and
subject to the terms of, the Indenture.

8. Subordination

The Securities are subordinated to Senior Indebtedness of the
Company, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Company must be paid before the Securities may be
paid. The Company agrees, and each Securityholder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.

9. Subsidiary Guaranties

The payment by the Company of the principal of, and premium
and interest on, the Securities is fully and unconditionally guaranteed on a
joint and several senior subordinated basis by each of the Subsidiary
Guarantors.

4

136

10. Denominations; Transfer; Exchange

The Securities are in registered form without coupons in
denominations of $1,000 principal amount and whole multiples of $1,000. A Holder
may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.

11. Persons Deemed Owners

The registered Holder of this Security may be treated as the
owner of it for all purposes.

12. Unclaimed Money

If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.

13. Discharge and Defeasance

Subject to certain conditions, the Company at any time shall
be entitled to terminate some or all of its obligations under the Securities and
the Indenture if the Company deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.

14. Amendment, Waiver

Subject to certain exceptions set forth in the Indenture, (i)
the Indenture and the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal 

5

137

amount outstanding of the Securities. Subject to certain exceptions set forth in
the Indenture, without the consent of any Securityholder, the Company, the
Subsidiary Guarantors and the Trustee shall be entitled to amend the Indenture
or the Securities to cure any ambiguity, omission, defect or inconsistency, or
to comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add
guarantees with respect to the Securities, including Subsidiary Guaranties, or
to secure the Securities, or to add additional covenants or surrender rights and
powers conferred on the Company or the Subsidiary Guarantors, or to comply with
any request of the SEC in connection with qualifying the Indenture under the
Act, or to make certain changes in the subordination provisions, or to make any
change that does not adversely affect the rights of any Securityholder.

15. Defaults and Remedies

Under the Indenture, Events of Default include (i) default for
30 days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon acceleration or otherwise, or failure by the Company to
redeem or purchase Securities when required; (iii) failure by the Company to
comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (iv) certain accelerations (including
failure to pay within any grace period after final maturity) of other
Indebtedness of the Company, the Significant Subsidiaries or the Subsidiary
Guarantors if the amount accelerated (or so unpaid) exceeds $10 million; (v)
certain events of bankruptcy or insolvency with respect to the Company, the
Subsidiary Guarantors or the Significant Subsidiaries; (vi) certain judgments or
decrees for the payment of money in excess of $10 million and (vii) certain
defaults with respect to Subsidiary Guaranties. If an Event of Default occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the Securities may declare all the Securities to be due and payable
immediately. Certain events of bankruptcy or insolvency are Events of Default
which will result in the Securities being due and payable immediately upon the
occurrence of such Events of Default.

Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives indemnity or security
satisfactory to it. Subject to certain limitations, Holders of a majority in
principal 

6

138

amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in the interest of the Holders.

16. Trustee Dealings with the Company

Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.

17. No Recourse Against Others

A director, officer, employee or stockholder, as such, of the
Company, any Subsidiary Guarantor or the Trustee shall not have any liability
for any obligations of the Company or any Subsidiary Guarantor under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.

18. Authentication

This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.

19. Abbreviations

Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).

7

139

20. CUSIP Numbers

Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.

21. Holders' Compliance with Registration Rights Agreement.

Each Holder of a Security, by acceptance hereof, acknowledges
and agrees to the provisions of the Registration Rights Agreement, including the
obligations of the Holders with respect to a registration and the
indemnification of the Company to the extent provided therein.

22. GOVERNING LAW.

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE SECURITY HOLDER A COPY OF THE INDENTURE WHICH
HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:

FLOWSERVE CORPORATION
222 WEST LAS COLINAS BLVD.
SUITE 1500
IRVING, TX 75039
ATTENTION: RENEE HORNBAKER

8

140

--------------------------------------------------------------------------------
ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Print or type assignee's name, address and zip code)

(Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint                           agent to transfer this 
Security on the books of the Company. The agent may substitute another to act 
for him.

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

Date:                  Your Signature:
----------------                 -----------------------------------------

--------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.

In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)     [ ]      to the Company; or

(2)     [ ]      pursuant to an effective registration statement under 
the Securities Act of 1933; or

(3)     [ ]      inside the United States to a "qualified institutional 
buyer" (as defined in Rule 144A under the Securities 
Act of 1933) that purchases for its own account or for 
the account of a qualified institutional buyer to whom 
notice is given that such transfer is being made in 
reliance on Rule 144A, in each case pursuant to 

9

141

and in compliance with Rule 144A under the Securities
Act of 1933; or

(4)     [ ]      outside the United States in an offshore transaction
within the meaning of Regulation S under the Securities
Act in compliance with Rule 904 under the Securities
Act of 1933; or

(5)     [ ]      pursuant to the exemption from registration provided by
Rule 144 under the Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however, that
if box (4) or (5) is checked, the Trustee shall be entitled to require,
prior to registering any such transfer of the Securities, such legal
opinions, certifications and other information as the Company has
reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the
exemption provided by Rule 144 under such Act.

------------------------
Signature

Signature Guarantee:

----------------------------                           -------------------------
Signature must be guaranteed                           Signature

Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

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

10

142

TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.

Dated:
----------------                            -----------------------------
NOTICE: To be executed by
an executive officer

11

143

[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The original principal amount of this Global Security is
_____________. The following increases or decreases in this Global Security have
been made:

Amount of decrease     Amount of increase     Principal amount of    Signature of
in Principal  amount   in Principal amount    this Global Security   authorized officer
Date of                  of this Global         of this Global         following such         of Trustee or
Exchange                 Security               Security               decrease or increase)  Securities Custodian

12

144

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06, 4.09 or 4.10 of the Indenture, check the box:

[ ]

If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06, 4.09 or 4.10 of the
Indenture, state the amount in principal amount: $o

Date:                             Your Signature:
---------------                             ------------------------------
(Sign exactly as your name
appears on the other side of
this Security.)

Signature Guarantee:
---------------------------------------
(Signature must be guaranteed)

Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

13

145

EXHIBIT A

[FORM OF FACE OF EXCHANGE SECURITY
OR PRIVATE EXCHANGE SECURITY]

*/**/

----------
*/If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "TO BE ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".]

**/If the Security is a Private Exchange Security issued in a Private Exchange
to an Initial Purchaser holding an unsold portion of its initial allotment, add
the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the
Assignment Form included in this Exhibit A with the Assignment Form included in
such Exhibit 1.]

146

No.:                                                 CUSIP No.:
ISIN No.:

12-1/4% Senior Subordinated Notes Due 2010

Flowserve Corporation, a New York corporation, promises to pay
to Cede & Co, or registered assigns, the principal amount set forth on Schedule
A hereto on August 15, 2010.

Interest Payment Dates: February 15 and August 15.

Record Dates: February 1 and August 1.

Additional provisions of this Security are set forth on the
other side of this Security.

Dated: August 8, 2000

2

147

FLOWSERVE CORPORATION,

by /s/ RENEE J. HORNBAKER
----------------------------
Name: Renee J. Hornbaker
Title: Vice President and 
Chief Financial 
Officer

FLOWSERVE FINANCE B.V.,

by /s/ JOHN M. NANOS
----------------------------
Name: John M. Nanos
Title: Managing Director

by /s/ M. KATHLEEN MCVAY
----------------------------
Name: M. Kathleen McVay
Title: Managing Director

FLOWSERVE RED CORPORATION,
FLOWSERVE FSD CORPORATION,
FLOWSERVE FCD CORPORATION,
FLOWSERVE INTERNATIONAL, INC.,
FLOWSERVE MANAGEMENT COMPANY (DE 
BUSINESS TRUST),
BW/IP-NEW MEXICO, INC.,
FLOWSERVE INTERNATIONAL, LLC,
DURAMETALLIC AUSTRALIA HOLDING 
COMPANY,
FLOWSERVE INTERNATIONAL LIMITED,
INNOVATIVE VALVE TECHNOLOGIES, INC.,
PLANT MAINTENANCE, INC.,
VARCO VALVE, INC.,
COLONIAL EQUIPMENT & SERVICE CO., 
INC.,
CECORP, INC.,
DIVT ACQUISITION-DELAWARE, LLC,
DIVT SUBSIDIARY, LLC,
SOUTHERN VALVE SERVICE, INC.,
L.T. KOPPL INDUSTRIES, INC.,
KOPPL COMPANY,
KOPPL INDUSTRIAL SYSTEMS, INC.,
HARLEY INDUSTRIES, INC.,
KOPPL COMPANY OF ARIZONA,
SEELEY & JONES, INCORPORATED,
GSV, INC.,
IPSCO-FLORIDA, INC.,

3

148

INTERNATIONAL PIPING SERVICES 
COMPANY,
CYPRESS INDUSTRIES, INC.,
DALCO, LLC,
PLANT SPECIALTIES, INC.,
ENERGY MAINTENANCE, INC.,
PREVENTIVE MAINTENANCE, INC.,
PRODUCTION MACHINE INCORPORATED,
ICE LIQUIDATING, INC.,
VALVE REPAIR OF SOUTH CAROLINA, 
INC.,
THE SAFE SEAL COMPANY, INC.,
FLICKINGER-BENICIA INC.,
PUGET INVESTMENTS, INC.,
STEAM SUPPLY & RUBBER CO., INC.,
FLICKINGER COMPANY,
BOYDEN, INC.,
VALVE ACTUATION & REPAIR CO.,
INGERSOLL-DRESSER PUMP COMPANY,
IDP ALTERNATE ENERGY COMPANY,
ENERGY HYDRO, INC.
PUMP INVESTMENTS, INC.
FLOWSERVE HOLDINGS, INC.
IPSCO HOLDING, INC.

by
----------------------------
Name: John M. Nanos
Title:

4

149

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION

THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.

by
------------------------------
Authorized Signatory

5

150

[FORM OF REVERSE SIDE OF [EXCHANGE SECURITY
OR PRIVATE EXCHANGE] SECURITY]

12-1/4% Senior Subordinated Notes Due 2010

1. Interest

Flowserve Corporation, a New York corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above; provided,
however, that if a Registration Default (as defined in the Registration Rights
Agreement) occurs, additional interest will accrue on this Security at a rate of
0.50% per annum (increasing by an additional 0.50% per annum after each
consecutive 90-day period that occurs after the date on which such Registration
Default occurs up to a maximum additional interest rate of 2.00%) from and
including the date on which any such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured. The
Company will pay interest semiannually on February 15 and August 15 of each
year, commencing February 15, 2001. Interest on the Securities will accrue from
the most recent date to which interest has been paid or, if no interest has been
paid, from August 8, 2000. Interest will be computed on the basis of a 360-day
year of twelve 30-day months. The Company will pay interest on overdue principal
at 1% per annum in excess of the above rate and will pay interest on overdue
installments of interest at such higher rate to the extent lawful.

2. Method of Payment

The Company will pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on the February 1 or August 1 next preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a Paying
Agent to collect principal payments. The Company will pay principal and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all 

151

payments in respect of a certificated Security (including principal, premium and
interest) by mailing a check to the registered address of each Holder thereof;
provided, however, that payments on a certificated Security will be made by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 30 days immediately preceding the relevant due date for
payment (or such other date as the Trustee may accept in its discretion).

3. Paying Agent and Registrar

Initially, The Bank of New York, a New York banking
corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4. Indenture

The Company issued the Securities under an Indenture dated as
of August 8, 2000 ("Indenture"), among the Company, the Subsidiary Guarantors
and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date
of the Indenture (the "Act"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the Act for a statement of those terms.

The Securities are general unsecured obligations of the
Company. The Company shall be entitled, subject to its compliance with Section
4.03 of the Indenture, to issue Additional Securities pursuant to Section 2.13
of the Indenture. The Initial Securities issued on the Issue Date, any
Additional Securities and all Exchange Securities or Private Exchange Securities
issued in exchange therefor will be treated as a single class for all purposes
under the Indenture. The Indenture contains covenants that limit the ability of
the Company and its subsidiaries to incur additional indebtedness; pay dividends
or distributions on, or redeem or repurchase capital stock; make investments;
issue or sell capital stock of subsidiaries; engage in transactions 

2

152

with affiliates; transfer or sell assets; guarantee indebtedness; restrict
dividends or other payments of subsidiaries; consolidate, merge or transfer all
or substantially all of its assets and the assets of its subsidiaries. These
covenants are subject to important exceptions and qualifications.

5. Optional Redemption

Except as set forth below, the Company shall not be entitled
to redeem the Securities at its option prior to August 15, 2005.

On and after August 15, 2005, the Company shall be entitled at
its option to redeem all or a portion of the Securities upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed in
percentages of principal amount on the redemption date), plus accrued interest
to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the 12-month period commencing on August 15 of the
years set forth below:

Redemption
Period                                Price
------                             ----------

2005                               106.125%
2006                               104.083
2007                               102.042
2008 and thereafter                100.000%

In addition, prior to August 15, 2003, the Company shall be
entitled at its option on one or more occasions to redeem Securities (which
includes Additional Securities, if any) in an aggregate principal amount not to
exceed 35% of the aggregate principal amount of the Securities (which includes
Additional Securities, if any) originally issued at a redemption price
(expressed as a percentage of principal amount) of 112.25%, plus accrued and
unpaid interest to the redemption date, with the net cash proceeds from one or
more Public Equity Offerings; provided, however, that (1) at least 65% of such
aggregate principal amount of Securities (which includes Additional Securities,
if any) remains outstanding immediately after the occurrence of each such
redemption (other than Securities held, directly or indirectly, by the Company
or its Affiliates); and (2) each such redemption occurs within 60 days after the
closing date of the related Public Equity Offering.

3

153

6. Notice of Redemption

Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
$1,000 principal amount may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued interest
on all Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.

7. Put Provisions

Upon a Change of Control, any Holder of Securities will have
the right to cause the Company to repurchase all or any part of the Securities
of such Holder at a repurchase price equal to 101% of the principal amount of
the Securities to be repurchased plus accrued interest to the date of repurchase
(subject to the right of holders of record on the relevant record date to
receive interest due on the related interest payment date) as provided in, and
subject to the terms of, the Indenture.

8. Subordination

The Securities are subordinated to Senior Indebtedness of the
Company, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Company must be paid before the Securities may be
paid. The Company agrees, and each Securityholder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.

9. Subsidiary Guaranties

The payment by the Company of the principal of, and premium
and interest on, the Securities is fully and unconditionally guaranteed on a
joint and several senior subordinated basis by each of the Subsidiary
Guarantors.

4

154

10. Denominations; Transfer; Exchange

The Securities are in registered form without coupons in
denominations of $1,000 principal amount and whole multiples of $1,000. A Holder
may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.

11. Persons Deemed Owners

The registered Holder of this Security may be treated as the
owner of it for all purposes.

12. Unclaimed Money

If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.

13. Discharge and Defeasance

Subject to certain conditions, the Company at any time shall
be entitled to terminate some or all of its obligations under the Securities and
the Indenture if the Company deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.

14. Amendment, Waiver

Subject to certain exceptions set forth in the Indenture, (i)
the Indenture and the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal 

5

155

amount outstanding of the Securities. Subject to certain exceptions set forth in
the Indenture, without the consent of any Securityholder, the Company, the
Subsidiary Guarantors and the Trustee shall be entitled to amend the Indenture
or the Securities to cure any ambiguity, omission, defect or inconsistency, or
to comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add
guarantees with respect to the Securities, including Subsidiary Guaranties, or
to secure the Securities, or to add additional covenants or surrender rights and
powers conferred on the Company or the Subsidiary Guarantors, or to comply with
any request of the SEC in connection with qualifying the Indenture under the
Act, or to make certain changes in the subordination provisions, or to make any
change that does not adversely affect the rights of any Securityholder.

15. Defaults and Remedies

Under the Indenture, Events of Default include (i) default for
30 days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon acceleration or otherwise, or failure by the Company to
redeem or purchase Securities when required; (iii) failure by the Company to
comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (iv) certain accelerations (including
failure to pay within any grace period after final maturity) of other
Indebtedness of the Company, the Significant Subsidiaries or the Subsidiary
Guarantors if the amount accelerated (or so unpaid) exceeds $10 million; (v)
certain events of bankruptcy or insolvency with respect to the Company, the
Subsidiary Guarantors or the Significant Subsidiaries; (vi) certain judgments or
decrees for the payment of money in excess of $10 million and (vii) certain
defaults with respect to Subsidiary Guaranties. If an Event of Default occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the Securities may declare all the Securities to be due and payable
immediately. Certain events of bankruptcy or insolvency are Events of Default
which will result in the Securities being due and payable immediately upon the
occurrence of such Events of Default.

Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives indemnity or security
satisfactory to it. Subject to certain limitations, Holders of a majority in
principal 

6

156

amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in the interest of the Holders.

16. Trustee Dealings with the Company

Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.

17. No Recourse Against Others

A director, officer, employee or stockholder, as such, of the
Company, and Subsidiary Guarantor or the Trustee shall not have any liability
for any obligations of the Company or any Subsidiary Guarantor under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.

18. Authentication

This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.

19. Abbreviations

Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).

7

157

20. CUSIP Numbers

Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.

21. Holders' Compliance with Registration Rights Agreement.

Each Holder of a Security, by acceptance hereof, acknowledges
and agrees to the provisions of the Registration Rights Agreement, including the
obligations of the Holders with respect to a registration and the
indemnification of the Company to the extent provided therein.

22. GOVERNING LAW.

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE SECURITY HOLDER A COPY OF THE INDENTURE WHICH
HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:

FLOWSERVE CORPORATION
222 WEST LAS COLINAS BLVD.
SUITE 1500
IRVING, TX 75039
ATTENTION: RENEE HORNBAKER

8

158

--------------------------------------------------------------------------------
ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Print or type assignee's name, address and zip code)

(Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint                           agent to transfer this 
Security on the books of the Company. The agent may substitute another to act 
for him.

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

Date:                  Your Signature:
----------------                 -----------------------------------------

--------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.

In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)     [ ]      to the Company; or

(2)     [ ]      pursuant to an effective registration statement under 
the Securities Act of 1933; or

(3)     [ ]      inside the United States to a "qualified institutional 
buyer" (as defined in Rule 144A under the Securities 
Act of 1933) that purchases for its own account or for 
the account of a qualified institutional buyer to whom 
notice is given that such transfer is being made in 
reliance on Rule 144A, in each case pursuant to 

9

159

and in compliance with Rule 144A under the Securities
Act of 1933; or

(4)     [ ]      outside the United States in an offshore transaction
within the meaning of Regulation S under the Securities
Act in compliance with Rule 904 under the Securities
Act of 1933; or

(5)     [ ]      pursuant to the exemption from registration provided by
Rule 144 under the Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however, that
if box (4) or (5) is checked, the Trustee shall be entitled to require,
prior to registering any such transfer of the Securities, such legal
opinions, certifications and other information as the Company has
reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the
exemption provided by Rule 144 under such Act.

------------------------
Signature

Signature Guarantee:

----------------------------                           -------------------------
Signature must be guaranteed                                   Signature

Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

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

10

160

TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.

Dated:
----------------                            -----------------------------
NOTICE: To be executed by
an executive officer

11

161

[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The original principal amount of this Global Security is
_____________. The following increases or decreases in this Global Security have
been made:

Date of                  Amount of decrease     Amount of increase     Principal amount of    Signature of
Exchange                 in Principal amount    in Principal amount    this Global Security   authorized officer
of this Global         of this Global         following such         of Trustee or
Security               Security               decrease or increase   Securities Custodian

12

162

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06, 4.09 or 4.10 of the Indenture, check the box:

[ ]

If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06, 4.09 or 4.10 of the
Indenture, state the amount in principal amount: $o

Date:                         Your Signature:
---------------                          ---------------------------------
(Sign exactly as your name 
appears on the other side of 
this Security.)

Signature Guarantee:
---------------------------------------
(Signature must be guaranteed)

Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

13

1
EXECUTION COPY

EXHIBIT 4.8

================================================================================

Flowserve Finance B.V.
Issuer

The Guarantors named herein

12-1/4% Senior Subordinated Securities Due 2010

----------

INDENTURE

Dated as of August 8, 2000

----------

The Bank of New York
Trustee

================================================================================

2

CROSS-REFERENCE TABLE

TIA                                                           Indenture
Section                                                         Section
-------                                                         ---------

310(a)(1)       .........................................     7.10
(a)(2)       .........................................     7.10
(a)(3)       .........................................     N.A.
(a)(4)       .........................................     N.A.
(b)          .........................................     7.08; 7.10
(c)          .........................................     N.A.
311(a)          .........................................     7.11
(b)          .........................................     7.11
(c)          .........................................     N.A.
312(a)          .........................................     2.05
(b)          .........................................     13.03
(c)          .........................................     13.03
313(a)          .........................................     7.06
(b)(1)       .........................................     N.A.
(b)(2)       .........................................     7.06
(c)          .........................................     11.02
(d)          .........................................     7.06
314(a)          .........................................     4.02; 4.11; 13.02
(b)          .........................................     N.A.
(c)(1)       .........................................     13.04
(c)(2)       .........................................     13.04
(c)(3)       .........................................     N.A.
(d)          .........................................     N.A.
(e)          .........................................     13.05
(f)          .........................................     4.10
315(a)          .........................................     7.01
(b)          .........................................     7.05; 13.02
(c)          .........................................     7.01
(d)          .........................................     7.01
(e)          .........................................     6.11
316(a)(last sentence)....................................     13.06
(a)(1)(A)    .........................................     6.05
(a)(1)(B)    .........................................     6.04
(a)(2)       .........................................     N.A.
(b)          .........................................     6.07
317(a)(1)       .........................................     6.08
(a)(2)       .........................................     6.09
(b)          .........................................     2.04
318(a)          .........................................     13.01

N.A. means Not Applicable.

Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.

3

TABLE OF CONTENTS

Page
----

ARTICLE 1

Definitions and Incorporation by Reference

SECTION 1.01.  Definitions.....................................................1
SECTION 1.02.  Other Definitions  ............................................31
SECTION 1.03.  Incorporation by Reference of Trust Indenture Act..............31
SECTION 1.04.  Rules of Construction..........................................32
SECTION 1.05.  Acts of Holders    ............................................32

ARTICLE 2

The Securities

SECTION 2.01.  Form and Dating................................................33
SECTION 2.02.  Execution and Authentication...................................34
SECTION 2.03.  Registrar and Paying Agent.....................................34
SECTION 2.04.  Paying Agent To Hold Money in Trust............................35
SECTION 2.05.  Securityholder Lists...........................................36
SECTION

2.06.  Transfer and Exchange..........................................36
SECTION 2.07.  Replacement Securities.........................................36
SECTION 2.08.  Outstanding Securities.........................................37
SECTION 2.09.  Temporary Securities...........................................38
SECTION 2.10.  Cancellation       ............................................38
SECTION 2.11.  Defaulted Interest ............................................38
SECTION 2.12.  CUSIP, ISIN and Common Code Numbers............................38
SECTION 2.13.  Issuance of Additional Securities..............................38

ARTICLE 3

Redemption

SECTION 3.01.  Notices to Trustee ............................................39
SECTION 3.02.  Selection of Securities To Be Redeemed.........................40
SECTION 3.03.  Notice of Redemption...........................................40
SECTION 3.04.  Effect of Notice of Redemption.................................41
SECTION 3.05.  Deposit of Redemption Price....................................41
SECTION 3.06.  Securities Redeemed in Part....................................41

4

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----

ARTICLE 4

Covenants

SECTION 4.01.  Payment of Securities..........................................41
SECTION 4.02.  SEC Reports....................................................42
SECTION 4.03.  Limitation on Indebtedness.....................................42
SECTION 4.04.  Limitation on Restricted Payments..............................47
SECTION 4.05.  Limitation on Restrictions on Distributions from Restricted
Subsidiaries...............................................50
SECTION 4.06.  Limitation on Sales of Assets and Subsidiary Stock.............52
SECTION 4.07.  Limitation on Affiliate Transactions...........................56
SECTION 4.08.  Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries....................................57
SECTION 4.09.  Change of Control  ............................................58
SECTION 4.10.  Excess Cash Flow Repurchase Offer..............................60
SECTION 4.11.  Future Guarantors  ............................................63
SECTION 4.12.  Additional Amounts ............................................64
SECTION 4.13.  Compliance Certificate.........................................65
SECTION 4.14.  Further Instruments and Acts...................................66
SECTION 4.15.  Ownership of the Issuer........................................66
SECTION 4.16.  Limitation on Business Activities of the Issuer................66
SECTION 4.17.  Limitation on Use of Proceeds..................................66

ARTICLE 5

Successor Company

SECTION 5.01.  When the Company or Issuer May Merge or Transfer Assets........66

ARTICLE 6

Defaults and Remedies

SECTION 6.01.  Events of Default..............................................69
SECTION 6.02.  Acceleration...................................................72
SECTION 6.03.  Other Remedies.................................................72
SECTION 6.04.  Waiver of Past Defaults........................................72
SECTION 6.05.  Control by Majority............................................73
SECTION 6.06.  Limitation on Suits............................................73
SECTION 6.07.  Rights of Holders To Receive Payment...........................73
SECTION 6.08.  Collection Suit by Trustee.....................................74
SECTION 6.09.  Trustee May File Proofs of Claim...............................74
SECTION 6.10.  Priorities.....................................................74
SECTION 6.11.  Undertaking for Costs..........................................75
SECTION 6.12.  Waiver of Stay or Extension Laws...............................75

2

5

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ARTICLE 7

Trustee

SECTION 7.01.  Duties of Trustee..............................................75
SECTION 7.02.  Rights of Trustee..............................................77
SECTION 7.03.  Individual Rights of Trustee...................................78
SECTION 7.04.  Trustee's Disclaimer...........................................78
SECTION 7.05.  Notice of Defaults.............................................78
SECTION 7.06.  Reports by Trustee to Holders..................................78
SECTION 7.07.  Compensation and Indemnity.....................................79
SECTION 7.08.  Replacement of Trustee.........................................80
SECTION 7.09.  Successor Trustee by Merger....................................81
SECTION 7.10.  Eligibility; Disqualification..................................81
SECTION 7.11.  Preferential Collection of Claims Against Issuer...............81

ARTICLE 8

Discharge of Indenture; Defeasance

SECTION 8.01.  Discharge of Liability on Securities; Defeasance...............81
SECTION 8.02.  Conditions to Defeasance.......................................83
SECTION 8.03.  Application of Trust Money.....................................85
SECTION 8.04.  Repayment to Issuer............................................85
SECTION 8.05.  Indemnity for Government Obligations...........................85
SECTION 8.06.  Reinstatement..................................................85

ARTICLE 9

Amendments

SECTION 9.01.  Without Consent of Holders.....................................86
SECTION 9.02.  With Consent of Holders........................................87
SECTION 9.03.  Compliance with Trust Indenture Act............................88
SECTION 9.04.  Revocation and Effect of Consents and Waivers..................88
SECTION 9.05.  Notation on or Exchange of Securities..........................89
SECTION 9.06.  Trustee To Sign Amendments.....................................89
SECTION 9.07.  Payment for Consent............................................89

ARTICLE 10

Subordination

SECTION 10.01.  Agreement To Subordinate......................................89
SECTION 10.02.  Liquidation, Dissolution, Bankruptcy..........................90
SECTION 10.03.  Default on Senior Indebtedness of the Issuer..................90
SECTION 10.04.  Acceleration of Payment of Securities.........................91
SECTION 10.05.  When Distribution Must Be Paid Over...........................92

3

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Page
----

SECTION 10.06.  Subrogation...................................................92
SECTION 10.07.  Relative Rights...............................................92
SECTION 10.08.  Subordination May Not Be Impaired by Issuer...................92
SECTION 10.09.  Rights of Trustee and Paying Agent............................93
SECTION 10.10.  Distribution or Notice to Representative......................93
SECTION 10.11.  Article 10 Not To Prevent Events of Default or Limit
Right To Accelerate.......................................93
SECTION 10.12.  Trust Moneys Not Subordinated.................................93
SECTION 10.13.  Trustee Entitled To Rely......................................94
SECTION 10.14.  Trustee To Effectuate Subordination. Each Securityholder
by accepting a Security authorizes........................94
SECTION 10.15.  Trustee Not Fiduciary for Holders of Senior Indebtedness
of the Issuer.............................................94
SECTION 10.16.  Reliance by Holders of Senior Indebtedness of the Issuer
on Subordination Provisions...............................95

ARTICLE 11

The Company Guaranty

SECTION 11.01.  The Company Guaranty..........................................95
SECTION 11.02.  Successors and Assigns........................................97
SECTION 11.03.  No Waiver.....................................................97
SECTION 11.04.  Modification..................................................98

ARTICLE 12

Subordination of the Company Guaranty

SECTION 12.01.  Agreement To Subordinate......................................98
SECTION 12.02.  Liquidation, Dissolution, Bankruptcy..........................98
SECTION 12.03.  Default on Senior Indebtedness of  the Company................99
SECTION 12.04.  Demand for Payment...........................................100
SECTION 12.05.  When Distribution Must Be Paid Over..........................100
SECTION 12.06.  Subrogation..................................................100
SECTION 12.07.  Relative Rights..............................................101
SECTION 12.08.  Subordination May Not Be Impaired by Company.................101
SECTION 12.09.  Rights of Trustee and Paying Agent...........................101
SECTION 12.10.  Distribution or Notice to Representative.....................102
SECTION 12.11.  Article 12 Not To Prevent Events of Default or Limit
Right To Demand Payment..................................102
SECTION 12.12.  Trustee Entitled To Rely.....................................102
SECTION 12.13.  Trustee To Effectuate Subordination..........................102

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Page
----

SECTION 12.14.  Trustee Not Fiduciary for Holders  of Senior Indebtedness
of the Company...........................................103
SECTION 12.15.  Reliance by Holders of Senior Indebtedness of the
Company on Subordination Provisions......................103

ARTICLE 13

Subsidiary Guaranties

SECTION 13.01.  Guaranties...................................................103
SECTION 13.02.  Limitation on Liability......................................106
SECTION 13.03.  Successors and Assigns.......................................106
SECTION 13.04.  No Waiver....................................................106
SECTION 13.05.  Modification.................................................106
SECTION 13.06.  Release of Subsidiary Guarantor..............................107

ARTICLE 14

Subordination of Subsidiary Guaranties

SECTION 14.01.  Agreement To Subordinate.....................................107
SECTION 14.02.  Liquidation, Dissolution, Bankruptcy.........................107
SECTION 14.03.  Default on Senior Indebtedness of Subsidiary Guarantor.......108
SECTION 14.04.  Demand for Payment...........................................109
SECTION 14.05.  When Distribution Must Be Paid Over..........................109
SECTION 14.06.  Subrogation..................................................110
SECTION 14.07.  Relative Rights..............................................110
SECTION 14.08.  Subordination May Not Be Impaired by Issuer or any
Subsidiary Guarantor.....................................110
SECTION 14.09.  Rights of Trustee and Paying Agent...........................110
SECTION 14.10.  Distribution or Notice to Representative.....................111
SECTION 14.11.  Article 14 Not To Prevent Events of Default or Limit Right
To Demand Payment........................................111
SECTION 14.12.  Trustee Entitled To Rely.....................................111
SECTION 14.13.  Trustee To Effectuate Subordination..........................112
SECTION 14.14.  Trustee Not Fiduciary for Holders of Senior Indebtedness
of Subsidiary Guarantor..................................112
SECTION 14.15.  Reliance by Holders of Senior Indebtedness of Subsidiary
Guarantors on Subordination Provisions...................112

ARTICLE 15

Miscellaneous

SECTION 15.01.  Trust Indenture Act Controls.................................113

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Page
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SECTION 15.02.  Notices......................................................113
SECTION 15.03.  Consent to Jurisdiction and Service..........................114
SECTION 15.04.  Communication by Holders with Other Holders..................114
SECTION 15.05.  Certificate and Opinion as to Conditions Precedent...........114
SECTION 15.06.  Statements Required in Certificate or Opinion................115
SECTION 15.07.  When Securities Disregarded..................................115
SECTION 15.08.  Rules by Trustee, Paying Agent and Registrar.................115
SECTION 15.09.  Legal Holidays...............................................115
SECTION 15.10.  Governing Law................................................116
SECTION 15.11.  No Recourse Against Others...................................116
SECTION 15.12.  Successors...................................................116
SECTION 15.13.  Multiple Originals...........................................116
SECTION 15.14.  Table of Contents; Headings..................................116

Rule 144A/Regulation S Appendix

Exhibit 1      -    Form of Initial Security

Exhibit A      -    Form of Face of Exchange Security or Private
Exchange Security

Exhibit B-1    -    Form of Certification to be Given by Holder
of Beneficial Interest in a Temporary
Regulation S Global Security

Exhibit B-2    -    Form of Euroclear and Clearstream Certificate

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INDENTURE dated as of August 8, 2000, among
Flowserve Finance B.V., a Netherlands besloten
vennootschap with corporate seat in Amsterdam (the
"Issuer"), the GUARANTORS named herein and The Bank
of New York, a New York banking corporation(the
"Trustee").

Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Issuer's
Initial Securities, Exchange Securities and Private Exchange Securities
(collectively, the "Securities"):

ARTICLE 1

Definitions and Incorporation by Reference

SECTION 1.01. Definitions.

"Acquisition" means the acquisition by the Company, directly
or indirectly, of 100% of the partnership interests of Ingersoll-Dresser Pump
Company.

"Additional Assets" means any:

(1)      property, plant or equipment used in a Related
Business;

(2)      the Capital Stock of a Person that becomes a
Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or another
Restricted Subsidiary; or

(3)      Capital Stock constituting a minority interest in any
Person that at such time is a Restricted Subsidiary;

provided, however, that any such Restricted Subsidiary described in clause (2)
or (3) above is primarily engaged in a Related Business.

"Additional Dollar Notes" means, subject to the Company's
compliance with Section 4.03, 12-1/4% Senior Subordinated Securities Due 2010
issued from time to time after the Issue Date under the terms of the Dollar
Notes Indenture (other than pursuant to Section 2.06, 2.07, 2.09 or 3.06 of the
Dollar Notes Indenture and other than Dollar Notes Exchange Securities or Dollar
Notes Private Exchange Securities (in each case as defined in the Dollar Notes

10

Indenture) issued pursuant to an exchange offer for other Dollar Notes
outstanding under the Dollar Notes Indenture).

"Additional Securities" means, subject to the Company's
compliance with Section 4.03, 12-1/4% Senior Subordinated Securities Due 2010
issued from time to time after the Issue Date under the terms of this Indenture
(other than pursuant to Section 2.06, 2.07, 2.09 or 3.06 of this Indenture and
other than Exchange Securities or Private Exchange Securities issued pursuant to
an exchange offer for other Securities outstanding under this Indenture).

"Affiliate" of any specified Person means: (1) any other
Person, directly or indirectly, controlling or controlled by; or (2) under
direct or indirect common control with such specified Person. For the purposes
of this definition, "control" when used with respect to any Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. For purposes of Sections 4.04, 4.06 and 4.07 only,
"Affiliate" shall also mean any beneficial owner of Capital Stock representing
5% or more of the total voting power of the Voting Stock (on a fully diluted
basis) of the Company or of rights or warrants to purchase such Capital Stock
(whether or not currently exercisable) and any Person who would be an Affiliate
of any such beneficial owner pursuant to the first sentence hereof.

"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of:

(1) any shares of Capital Stock of a Restricted Subsidiary
(other than directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Company or a
Restricted Subsidiary);

(2) all or substantially all the assets of any division or
line of business of the Company or any Restricted Subsidiary; or

(3) any other assets of the Company or any Restricted
Subsidiary outside of the ordinary course of business of the Company or
such Restricted Subsidiary

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11

(other than, in the case of clauses (1), (2) and (3), (A) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary (or to a Restricted Subsidiary so long
as the aggregate fair market value of all assets transferred to Restricted
Subsidiaries pursuant to this clause (A) does not exceed $50.0 million); (B) for
purposes of Section 4.06 only, a disposition that constitutes a Restricted
Payment permitted by Section 4.04 or a Permitted Investment; (C) sales or other
dispositions of obsolete, worn-out or otherwise unsuitable assets or excess
equipment in the ordinary course of business; and (D) a disposition of assets
with a fair market value of less than $1,000,000).

Notwithstanding anything to the contrary set forth above, (x)
unless, at the time of such disposition, the Company has Investment Grade
Status, a disposition of Receivables and Related Assets shall be deemed to
constitute an Asset Disposition and (y) a disposition of all or substantially
all the assets of the Company and its Restricted Subsidiaries taken as a whole
will be governed by the provisions of Sections 4.09 and/or 5.01 and not by the
provisions of Section 4.06.

"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).

"Average Life" means, as of the date of determination, with
respect to any Indebtedness, the quotient obtained by dividing (1) the sum of
the products of numbers of years from the date of determination to the dates of
each successive scheduled principal payment of or redemption or similar payment
with respect to such Indebtedness multiplied by the amount of such payment by
(2) the sum of all such payments.

"Bank Indebtedness" means all Obligations pursuant to the
Credit Agreement.

"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such Board
and (in the case of the Issuer) the management board of the Issuer.

"Business Day" means each day other than a Saturday, Sunday or
a day on which commercial banking

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institutions are authorized or required by law to close in New York City,
Amsterdam, London or Luxembourg.

"Capital Lease Obligation" means an obligation that is
required to be classified and accounted for as a capital lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty.

"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.

"Change of Control" means the occurrence of any of the
following events:

(1) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
for purposes of this clause (1) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right
to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of a majority of the
total voting power of the Voting Stock of the Company (for the purposes
of this clause (1), such other person shall be deemed to beneficially
own any Voting Stock of a Person (the "specified person") held by an
other Person (the "parent entity"), if such other person is the
beneficial owner (as defined in this clause (1)), directly or
indirectly, of a majority of the voting power of the Voting Stock of
such parent entity);

(2) individuals who on the Issue Date constituted the Board of
Directors (together with any new directors whose election by such Board
of Directors or whose nomination for election by the shareholders of
the Company was approved by a vote of 66-2/3% of the directors of the
Company then still in office who were either directors on the Issue
Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office; or

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(3) the merger or consolidation of the Company with or into
another Person or the merger of another Person with or into the
Company, or the sale of all or substantially all the assets of the
Company (determined on a consolidated basis) to another Person, other
than a transaction following which in the case of a merger or
consolidation transaction, securities that represented 100% of the
Voting Stock of the Company immediately prior to such transaction (or
other securities into which such securities are converted as part of
such merger or consolidation transaction) constitute at least a
majority of the voting power of the Voting Stock of the surviving
Person in such merger or consolidation transaction.

"Code" means the Internal Revenue Code of 1986, as amended.

"Commodity Agreement" means, in respect of a Person, any
forward contract, commodity swap agreement, commodity option agreement or other
similar agreement or arrangement designed to protect such Person against
fluctuations in commodity prices.

"Company" means the party named as such in the Dollar Notes
Indenture until a successor replaces it, and thereafter, means the successor
and, for the purposes of any provision contained therein and required by the
TIA, each other obligor on the Dollar Notes.

"Company Guaranty" means the Guarantee by the Company of the
Issuer's obligations with respect to the Securities.

"Consent Decree" means the consent decree entered on July 28,
2000 in the U.S. District Court for the District of Columbia in the matter of
United States of America v. Flowserve Corporation, Ingersoll-Dresser Pump
Company and Ingersoll-Rand Company relating to the purchase of Ingersoll-Dresser
Pump Company by the Company.

"Consent Decree Assets" means the assets identified in the
Consent Decree that the Company, Ingersoll-Dresser Pump Company and
Ingersoll-Rand Company have been ordered and directed to divest in connection
with the Acquisition.

"Consolidated Coverage Ratio" as of any date of determination
means the ratio of

(x) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters for

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which internal financial statements are available ending on or prior to
the date of such determination to

(y) Consolidated Interest Expense for such four fiscal
quarters;

provided, however, that:

(1) if the Company or any Restricted Subsidiary has Incurred
any Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or
both, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day
of such period;

(2) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since
the beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on
the date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense
for such period shall be calculated on a pro forma basis as if such
discharge had occurred on the first day of such period and as if the
Company or such Restricted Subsidiary has not earned the interest
income actually earned during such period in respect of cash or
Temporary Cash Investments used to repay, repurchase, defease or
otherwise discharge such Indebtedness;

(3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, EBITDA for
such period shall be reduced by an amount equal to EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to EBITDA
(if negative), directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable
to any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Restricted Subsidiaries in connection with
such Asset Disposition

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15

for such period (or, if the Capital Stock of any Restricted Subsidiary
is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the
extent the Company and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale);

(4) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction
requiring a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the
first day of such period; and

(5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into
the Company or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition, any Investment or
acquisition of assets that would have required an adjustment pursuant
to clause (3) or (4) above if made by the Company or a Restricted
Subsidiary during such period, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period.

For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting officer (and shall
include any applicable Pro Forma Cost Savings). If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest of
such Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months).

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"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated Restricted
Subsidiaries, plus, to the extent not included in such total interest expense,
and to the extent incurred by the Company or its Restricted Subsidiaries,
without duplication:

(1) interest expense attributable to capital leases and the
interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction;

(2) amortization of debt discount and debt issuance cost;

(3) capitalized interest;

(4) non-cash interest expenses;

(5) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing;

(6) net payments pursuant to Hedging Obligations;

(7) Preferred Stock dividends in respect of all Preferred
Stock held by Persons other than the Company or a Wholly Owned
Subsidiary (other than dividends payable solely in Capital Stock (other
than Disqualified Stock) of the issuer of such Preferred Stock);

(8) interest incurred in connection with Investments in
discontinued operations;

(9) interest accruing on any Indebtedness of any other Person
to the extent such Indebtedness is Guaranteed by (or secured by the
assets of) the Company or any Restricted Subsidiary and there shall
have occurred and continues an event of default under such Indebtedness
or any payment is actually made in respect of such Guarantee;

(10) the cash contributions to any employee stock ownership
plan or similar trust to the extent such contributions are used by such
plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or
trust; and

(11) any premiums, fees, discounts, expenses and losses on the
sale of Receivables and Related Assets (and any amortization thereof)
payable in connection

8

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with a Receivables Program, as determined on a consolidated basis in
conformity with GAAP.

"Consolidated Net Income" means, for any period, the net
income of the Company and its consolidated Subsidiaries; provided, however, that
there shall not be included in such Consolidated Net Income:

(1) any net income of any Person (other than the Company) if
such Person is not a Restricted Subsidiary, except that:

(A) subject to the exclusion contained in clause (4)
below, the Company's equity in the net income of any such
Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company
or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid
to a Restricted Subsidiary, to the limitations contained in
clause (3) below); and

(B) the Company's equity in a net loss of any such
Person for such period shall be included in determining such
Consolidated Net Income;

(2) any net income (or loss) of any Person acquired by the
Company or a Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition;

(3) any net income of any Restricted Subsidiary that is not a
Subsidiary Guarantor if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or
the making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Company, except that:

(A) subject to the exclusion contained in clause (4)
below, the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such Restricted Subsidiary during
such period to the Company or another Restricted Subsidiary as
a dividend or other distribution (subject, in the case of a
dividend or other distribution paid to another Restricted
Subsidiary, to the limitation contained in this clause); and

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(B) the Company's equity in a net loss of any such
Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income;

(4) any gain (but not loss) realized upon the sale or other
disposition of any assets (other than any Consent Decree Assets) of the
Company, its consolidated Subsidiaries or any other Person (including
pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain
(but not loss) realized upon the sale or other disposition of any
Capital Stock of any Person;

(5) extraordinary gains or losses; and

(6) the cumulative effect of a change in accounting
principles.

Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any repurchases, repayments or
redemptions of Investments, proceeds realized on the sale of the Investments or
return of capital to the Company or a Restricted Subsidiary to the extent such
repurchases, repayments, redemptions, proceeds or returns increase the amount of
Restricted Payments permitted under Section 4.04(a)(3)(C).

"Consolidated Net Worth" means the total of the amounts shown
on the balance sheet of the Company and its consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company ending at least 45 days prior to the
taking of any action for the purpose of which the determination is being made,
as the sum of:

(1)      the par or stated value of all outstanding Capital
Stock of the Company plus

(2)      paid-in capital or capital surplus relating to such
Capital Stock plus

(3)      any retained earnings or earned surplus

less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock. In determining "Consolidated Net Worth," the Company shall
exclude the impact of any write-off of deferred financing fees occurring in
connection with any transaction subject to Section 5.01 of this Indenture for
the purpose of which the determination is being made.

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"Corporate Trust Office" means the principal office of the
Trustee at which at any time its corporate trust business shall be administered,
which office at the dated hereof is located at 101 Barclay Street, Floor 21
West, New York, New York 10286. Attention: Corporate Trust Administration, or
such other address as the Trustee may designate from time to time by notice to
the Holders and the Company, or the principal corporate trust office of any
successor Trustee (or such other address as a successor Trustee may designate
from time to time by notice to the Holders and the Issuer).

"Credit Agreement" means the Credit Agreement to be entered
into by and among the Company, certain of its Subsidiaries, the lenders referred
to therein, Credit Suisse First Boston, New York branch, as Syndication Agent,
Bank of America, N.A., as Administrative Agent, Collateral Agent and Swingline
Lender, and ABN-AMRO Bank N.V., Bank One, and Salomon Smith Barney, Inc., as
Co-Documentation Agents, together with the related documents thereto (including
the term loans and revolving loans thereunder, any guarantees and security
documents), as amended, extended, renewed, restated, refinanced, supplemented or
otherwise modified (in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions) from time to time, and any
agreement (and related document) governing Indebtedness incurred to Refinance,
in whole or in part, the borrowings and commitments then outstanding or
permitted to be outstanding under such Credit Agreement or a successor Credit
Agreement, whether by the same or any other lender or group of lenders.

"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement designed
to protect such Person against fluctuations in currency values.

"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.

"Designated Senior Indebtedness" with respect to a Person
means (1) the Bank Indebtedness; and (2) any other Senior Indebtedness of such
Person which, at the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $25.0 million and is specifically
designated by such Person in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture.

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"Disqualified Stock" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable at the option of the holder) or
upon the happening of any event:

(1) matures or is mandatorily redeemable pursuant to a sinking
fund obligation or otherwise;

(2) is convertible or exchangeable at the option of the holder
for Indebtedness or Disqualified Stock; or

(3) is mandatorily redeemable or must be purchased upon the
occurrence of certain events or otherwise, in whole or in part;

in each case on or prior to the first anniversary of the Stated Maturity of the
Securities; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Securities shall not constitute
Disqualified Stock if (1) the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the terms applicable to the Securities in Sections 4.06 and
4.09; and (2) any such requirement only becomes operative after compliance with
such terms applicable to the Securities, including the purchase of any
Securities tendered pursuant thereto.

"Dollar Notes" means the 12-1/4% Senior Subordinated Notes due
2010 (as defined therein) issued pursuant to the Dollar Notes Indenture.

"Dollar Notes Indenture" means the Indenture dated August 8,
2000 among the Company, the Bank of New York, and the guarantors named therein.

"Dollar Notes Holder" means the person in whose name a Dollar
Note is registered on the Registrar's (as defined in the Dollar Notes Indenture)
books.

"EBITDA" for any period means the sum of Consolidated Net
Income, plus the following to the extent deducted in calculating such
Consolidated Net Income:

(1) all income tax expense of the Company and its consolidated
Restricted Subsidiaries;

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(2) Consolidated Interest Expense;

(3) depreciation and amortization expense of the Company and
its consolidated Restricted Subsidiaries (excluding amortization
expense attributable to a prepaid operating activity item that was paid
in cash in a prior period);

(4) all other non-cash charges of the Company and its
consolidated Restricted Subsidiaries (excluding any such non-cash
charge to the extent that it represents an accrual of or reserve for
cash expenditures in any future period); and

(5) cash integration and restructuring charges in connection
with the Acquisition and taken with respect to periods ended on or
prior to December 31, 2001, in an aggregate amount not to exceed $65.0
million;

in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and non- cash charges of, a Restricted Subsidiary shall be added to Consolidated
Net Income to compute EBITDA only to the extent (and in the same proportion)
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.

"Eligible Indebtedness" means any indebtedness other than:

(1) Indebtedness in the form of, or represented by, bonds or
other securities or any guarantee thereof (other than a guarantee of
Indebtedness of the Company in the form of, or represented by, bonds or
other securities); and

(2) Indebtedness that is, or may be, quoted, listed or
purchased and sold on any stock exchange, automated trading system or
over-the-counter or other securities market (including, without
prejudice to the generality of the foregoing, the market for securities
eligible for resale pursuant to Rule 144A under the Securities Act).

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"European Economic Area" means the member nations of the
European Economic Area pursuant to the Oporto Agreement on the European Economic
Area dated May 2, 1992, as amended.

"Euro Equivalent" means with respect to any monetary amount in
a currency other than Euros, at any time of determination thereof, the amount of
Euros obtained by converting such foreign currency involved in such computation
into Euros at the spot rate for the purchase of Euros with the applicable
foreign currency as published in The Wall Street Journal in the "Exchange Rates"
column under the heading "Currency Trading" on the date two Business Days prior
to such determination.

"European Government Obligations" means direct non-callable
obligations of, or non-callable obligations permitted by, any member nation of
the European Union, the payment or guarantee of which is secured by the full
faith and credit of the respective nation, provided that such nation has a
credit rating at least equal to that of the highest rated member nation of the
European Economic Area.

"European Union" means the member nations to the third stage
of economic and monetary union pursuant to the Treaty of Rome establishing the
European Community, as amended by the Treaty on European Union, signed at
Maastricht on February 7, 1992.

"Excess Cash Flow", with respect to the Company, has the
meaning specified in the Credit Agreement as in effect on the Issue Date.

"Exchange Act" means the Securities Exchange Act of 1934, as
amended.

"Exchange Securities" means the debt securities of the Issuer
issued pursuant to this Indenture in exchange for, and in an aggregate principal
amount equal to, the Initial Securities, in compliance with the terms of the
Registration Rights Agreement.

"Facilities" means the Term Loan Facilities and the Revolving
Credit Facilities.

"Foreign Restricted Subsidiary" means a Restricted Subsidiary
that is incorporated in a jurisdiction other than the United States or a State
thereof or the District of Columbia and with respect to which more than 80% of
any of its sales, earnings or assets (determined on a consolidated basis in
accordance with GAAP) are located in, generated from or derived from operations
located in territories

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outside of the United States of America and jurisdictions outside the United
States of America.

"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Issue Date, including those set
forth in:

(1) the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants;

(2) statements and pronouncements of the Financial Accounting
Standards Board;

(3) such other statements by such other entity as approved by
a significant segment of the accounting profession; and

(4) the rules and regulations of the SEC governing the
inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to
Section 13 of the Exchange Act, including opinions and pronouncements
in staff accounting bulletins and similar written statements from the
accounting staff of the SEC.

All ratios and computations based on GAAP contained in this Indenture shall be
computed in conformity with GAAP.

"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any Person
and any obligation, direct or indirect, contingent or otherwise, of such Person:

(1) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness of such Person (whether
arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay or to maintain financial statement conditions or
otherwise); or

(2) entered into for the purpose of assuring in any other
manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in
part);

provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.

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"Guaranty Agreement" means a supplemental indenture, in a form
satisfactory to the Trustee, pursuant to which a Subsidiary Guarantor guarantees
the Issuer's obligations with respect to the Securities on the terms provided
for in this Indenture.

"Hedging Obligations" of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement or Currency Agreement.

"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.

"Incur" means issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Person at the time it becomes a Restricted Subsidiary. The
term "Incurrence" when used as a noun shall have a correlative meaning. The
accretion of principal of a non-interest bearing or other discount security
shall not be deemed the Incurrence of Indebtedness.

"Indebtedness" means, with respect to any Person on any date
of determination (without duplication):

(1) the principal in respect of (A) indebtedness of such
Person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable, including, in each case, any
premium on such indebtedness to the extent such premium has become due
and payable;

(2) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered
into by such Person;

(3) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations
of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable arising in
the ordinary course of business);

(4) all obligations of such Person for the reimbursement of
any obligor on any letter of credit, banker's acceptance, bank guaranty
or similar credit transaction (other than obligations with respect
thereto securing obligations (other than obligations described in
clauses (1) through (3) above) entered

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25

into in the ordinary course of business of such Person to the extent
such letters of credit, banker's acceptances, bank guaranties or
similar credit transactions are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the tenth Business
Day following payment thereon);

(5) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified
Stock of such Person or, with respect to any Preferred Stock of any
Subsidiary of such Person, the principal amount of such Preferred Stock
to be determined in accordance with this Indenture (but excluding, in
each case, any accrued dividends);

(6) all obligations of the type referred to in clauses (1)
through (5) of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise, including
by means of any Guarantee;

(7) all obligations of the type referred to in clauses (1)
through (6) of other Persons secured by any Lien on any property or
asset of such Person (whether or not such obligation is assumed by such
Person), the amount of such obligation being deemed to be the lesser of
the value of such property or assets and the amount of the obligation
so secured; and

(8) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.

The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.

"Indenture" means this Indenture as amended or supplemented
from time to time.

"Intercompany Loans" means the loans by the Issuer to the
Company or any of the Company's Wholly Owned Subsidiaries.

"Interest Rate Agreement" means in respect of a Person any
interest rate swap agreement, interest rate cap agreement or other financial
agreement or arrangement designed to protect such Person against fluctuations in
interest rates.

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"Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet of the
lender) or other extensions of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of others), or any purchase or acquisition of Capital Stock, Indebtedness
or other similar instruments issued by such Person. For purposes of the
definition of "Unrestricted Subsidiary", the definition of "Restricted Payment"
and Section 4.04:

(1) "Investment" shall include the portion (proportionate to
the Company's equity interest in such Subsidiary) of the fair market
value of the net assets of any Subsidiary of the Company at the time
that such Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have
a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (A) the Company's "Investment" in such
Subsidiary at the time of such redesignation less (B) the portion
(proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time
of such redesignation; and

(2) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of
Directors.

"Investment Grade Status" means that the credit rating of the
Company's senior unsecured, non-credit- enhanced long-term debt is (a) "BBB-" or
higher according to Standard & Poor's Rating Group or (b) "Baa3" or higher
according to Moody's Investors Service, Inc.

"Issuer" means the party named as such in this Indenture until
a successor replaces it and, thereafter, means the successor and, for purposes
of any provision contained herein and required by the TIA, each other obligor on
the indenture securities.

"Issue Date" means August 8, 2000.

"Lenders" has the meaning specified in the Credit Agreement.

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"Leverage Ratio" has the meaning specified in the Credit
Agreement as in effect on the Issue Date.

"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof).

"Net Available Cash" from an Asset Disposition means cash
payments received therefrom (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise and proceeds from the sale or other disposition of any securities
received as consideration, but only as and when received, but excluding any
other consideration received in the form of assumption by the acquiring Person
of Indebtedness or other obligations relating to such properties or assets or
received in any other noncash form), in each case net of:

(1) all legal, title and recording tax expenses, commissions
and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes required to be accrued as a
liability under GAAP, as a consequence of such Asset Disposition;

(2) all payments made on any Indebtedness which is secured by
any assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon or other security agreement of any kind with
respect to such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition, or by applicable
law, be repaid out of the proceeds from such Asset Disposition;

(3) all distributions and other payments required to be made
to minority interest holders in Restricted Subsidiaries as a result of
such Asset Disposition; and

(4) the deduction of appropriate amounts provided by the
seller as a reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such Asset
Disposition and retained by the Company or any Restricted Subsidiary
after such Asset Disposition.

"Net Cash Proceeds", with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.

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"Obligations" means with respect to any Indebtedness all
obligations for principal, premium, interest, penalties, fees, indemnifications,
reimbursements, and other amounts payable pursuant to the documentation
governing such Indebtedness.

"OECD" means the Organization for Economic Cooperation and
Development.

"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company or (in the case of
the Issuer) any managing director of the Issuer.

"Officers' Certificate" means a certificate signed by two
Officers.

"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company, the Issuer or the Trustee.

"Permitted Employee Stock Purchase Loans" means loans, in an
aggregate amount outstanding at any time not to exceed $30.0 million, made by
third parties (other than any Affiliate of the Company) to employees of the
Company and its Subsidiaries who are participants in the Company's stock
purchase program to enable such employees to purchase common stock of the
Company.

"Permitted Investment" means an Investment by the Company or
any Restricted Subsidiary in:

(1) the Company, a Restricted Subsidiary or a Person that
will, upon the making of such Investment, become a Restricted
Subsidiary; provided, however, that the primary business of such
Restricted Subsidiary is a Related Business;

(2) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or
conveys all or substantially all its assets to, the Company or a
Restricted Subsidiary; provided, however, that such Person's primary
business is a Related Business;

(3) cash and Temporary Cash Investments;

(4) receivables owing to the Company or any Restricted
Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include

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29

such concessionary trade terms as the Company or any such Restricted
Subsidiary deems reasonable under the circumstances;

(5) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary
course of business;

(6) loans or advances to employees made in the ordinary course
of business consistent with past practices of the Company or such
Restricted Subsidiary, but in any event not to exceed $5.0 million in
the aggregate outstanding at any one time;

(7) guaranties of Permitted Employee Stock Purchase Loans;

(8) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments;

(9) any Person to the extent such Investment represents the
non-cash portion of the consideration received for an Asset Disposition
as permitted pursuant to the covenant described under Section 4.06;

(10) so long as no Default shall have occurred and be
continuing (or result therefrom), in Unrestricted Subsidiaries in an
aggregate amount which, when taken together with the amount of all
other Investments made pursuant to this clause (10) which at such time
have not been repaid, does not exceed $25.0 million;

(11) so long as no Default shall have occurred and be
continuing (or result therefrom), in any Person in an aggregate amount
which, when taken together with the amount of all other Investments
made pursuant to this clause (11) which at such time have not been
repaid, does not exceed $25.0 million; and

(12) a trust, limited liability company, special purpose
entity or other similar entity in connection with a Receivables
Program; provided, however, that (A) such Investment is made by a
Receivables Subsidiary and (B) the only assets transferred to such
trust, limited liability company, special purpose entity or other
similar entity consist of Receivables and Related Assets of such
Receivables Subsidiary.

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"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.

"Preferred Stock", as applied to the Capital Stock of any
Person, means Capital Stock of any class or classes (however designated) which
is preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of
such Person.

"principal" of a Security means the principal of the Security
plus the premium, if any, payable on the Security which is due or overdue or is
to become due at the relevant time.

"Pro Forma Cost Savings" means, with respect to any period,
the reduction in costs that were (1) directly attributable to an asset
acquisition and calculated on a basis that is consistent with Regulation S-X
under the Securities Act in effect and applied as of the Issue Date; or (2)
implemented by the business that was the subject of any such asset acquisition
within 6 months of the date of such asset acquisition and that are supportable
and quantifiable by the underlying accounting records of such business, in the
case of each of (1) and (2), as if such reduction in costs had been effected as
of the beginning of such period.

"Public Equity Offering" means an underwritten primary public
offering of common stock of the Company pursuant to an effective registration
statement under the Securities Act.

"Receivables and Related Assets" means accounts receivable,
instruments, chattel paper, obligations, general intangibles and other similar
assets, including interest in merchandise or goods, the sale or lease of which
give rise to the foregoing, related contractual rights, guarantees, insurance
proceeds, collections, other related assets and proceeds of all the foregoing.

"Receivables Program" means with respect to any Person, any
accounts receivable securitization program pursuant to which such Person
pledges, sells or otherwise transfers or encumbers its accounts receivable,
including a trust, limited liability company, special purpose entity or other
similar entity.

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"Receivables Subsidiary" means a Wholly Owned Subsidiary (i)
created for the purpose of financing receivables created in the ordinary course
of business of the Company and its Subsidiaries and (ii) the sole assets of
which consist of Receivables and Related Assets of the Company and its
Subsidiaries and related Permitted Investments.

"Refinance" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.

"Refinancing Indebtedness" means Indebtedness that Refinances
any Indebtedness of the Company, the Issuer or any Restricted Subsidiary
existing on the Issue Date or Incurred in compliance with this Indenture,
including Indebtedness that Refinances Refinancing Indebtedness; provided,
however, that:

(1) such Refinancing Indebtedness has a Stated Maturity no
earlier than the Stated Maturity of the Indebtedness being Refinanced;

(2) such Refinancing Indebtedness has an Average Life at the
time such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being Refinanced; and

(3) such Refinancing Indebtedness has an aggregate principal
amount (or if Incurred with original issue discount, an aggregate issue
price) that is equal to or less than the aggregate principal amount (or
if Incurred with original issue discount, the aggregate accreted value)
then outstanding or committed (plus fees and expenses, including any
premium and defeasance costs) under the Indebtedness being Refinanced;

provided further, however, that Refinancing Indebtedness shall not include (A)
Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (B)
Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.

"Registration Rights Agreement" means the Registration Rights
Agreement dated August 3, 2000 among the Company, the Issuer, the Subsidiary
Guarantors, Credit Suisse First Boston (Europe) Limited, Bank of America
International Limited, ABN AMRO Bank N.V. and First Chicago Limited.

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"Related Business" means any business in which the Company was
engaged on the Issue Date and any business related, ancillary or complementary
to any business of the Company in which the Company was engaged on the Issue
Date or any industrial manufacturing or related services business.

"Representative" means with respect to a Person any trustee,
agent or representative (if any) for an issue of Senior Indebtedness of such
Person.

"Restricted Payment" with respect to any Person means:

(1) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock (including
any payment in connection with any merger or consolidation involving
such Person) or similar payment to the direct or indirect holders of
its Capital Stock (other than dividends or distributions payable solely
in its Capital Stock (other than Disqualified Stock) and dividends or
distributions payable solely to the Company or a Restricted Subsidiary,
and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a
Subsidiary that is an entity other than a corporation));

(2) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company held by any
Person or of any Capital Stock of a Restricted Subsidiary held by any
Affiliate of the Company (other than a Restricted Subsidiary),
including the exercise of any option to exchange any Capital Stock
(other than into Capital Stock of the Company that is not Disqualified
Stock);

(3) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations of such Person (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased
in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the
date of such purchase, repurchase or other acquisition); or

(4) the making of any Investment (other than a Permitted
Investment) in any Person.

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In determining the amount of any Restricted Payment made in
property other than cash, such amount shall be the fair market value of such
property at the time of such Restricted Payment, as determined in good faith by
the Board of Directors of the Company.

"Restricted Subsidiary" means any Subsidiary of the Company
that is not an Unrestricted Subsidiary.

"Revolving Credit Facility" means the revolving credit
facility contained in the Credit Agreement and any other facility or financing
arrangement that Refinances, in whole or in part, any such revolving credit
facility.

"Sale/Leaseback Transaction" means an arrangement relating to
property owned by the Company or a Restricted Subsidiary on the Issue Date or
thereafter acquired by the Company or a Restricted Subsidiary whereby the
Company or a Restricted Subsidiary transfers such property to a Person and the
Company or a Restricted Subsidiary leases it from such Person.

"SEC" means the Securities and Exchange Commission.

"Secured Indebtedness" means with respect to any Person any
Indebtedness of such Person secured by a Lien.

"Senior Indebtedness" means with respect to any Person:

(1) Bank Indebtedness of or guaranteed by such Person, whether
outstanding on the Issue Date or thereafter Incurred;

(2) Indebtedness of such Person, whether outstanding on the
Issue Date or thereafter Incurred; and

(3) accrued and unpaid interest (including interest accruing
on or after the filing of any petition in bankruptcy or for
reorganization relating to such Person whether or not a claim for
post-filing interest is allowed or allowable in such proceeding) in
respect of (A) such Bank Indebtedness; (B) indebtedness of such Person
for money borrowed and (C) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such Person
is responsible or liable

unless, in the case of clauses (1) and (2), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such

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34

obligations are subordinate in right of payment to the Securities; provided,
however, that Senior Indebtedness shall not include:

(1) any obligation of such Person to any Subsidiary;

(2) any liability for Federal, state, local or other taxes
owed or owing by such Person;

(3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities);

(4) any Indebtedness of such Person (and any accrued and
unpaid interest in respect thereof) which is subordinate or junior in
any respect to any other Indebtedness or other obligation of such
Person; or

(5) that portion of any Indebtedness which at the time of
Incurrence is Incurred in violation of the Indenture.

"Senior Subordinated Indebtedness" means, with respect to a
Person, the Securities (in the case of the Issuer), the Issuer's Guaranty of the
Dollar Notes, the Dollar Notes, the Company Guaranty (in the case of the
Company), a Subsidiary Guaranty (in the case of a Subsidiary Guarantor) and any
other Indebtedness of such Person that specifically provides that such
Indebtedness is to rank pari passu with the Securities or such Subsidiary
Guaranty, as the case may be, in right of payment and is not subordinated by its
terms in right of payment to any Indebtedness or other obligation of such Person
which is not Senior Indebtedness of such Person.

"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC.

"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).

"Subordinated Obligation" means, with respect to a Person, any
Indebtedness of such Person (whether outstanding

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35

on the Issue Date or thereafter Incurred) which is subordinate or junior in
right of payment to the Securities, the Issuer's Guaranty of the Dollar Notes,
the Dollar Notes, the Company Guaranty or a Subsidiary Guaranty of such Person,
as the case may be, pursuant to a written agreement to that effect.

"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, association, partnership or other
business entity of which more than 50% of the total voting power of shares of
Voting Stock is at the time owned or controlled, directly or indirectly, by: (1)
such Person; (2) such Person and one or more Subsidiaries of such Person; or (3)
one or more Subsidiaries of such Person.

"Subsidiary Guarantor" means each direct or indirect
Subsidiary (other than the Issuer), including Flowserve International Limited,
of the Company that is a guarantor of Senior Indebtedness under the Credit
Agreement and each direct or indirect domestic Restricted Subsidiary that is a
guarantor of any other Indebtedness of the Company.

"Subsidiary Guaranty" means a Guarantee by a Subsidiary
Guarantor of the Issuer's obligations with respect to the Securities.

"Temporary Cash Investments" means any of the following:

(1) any investment in direct obligations of the United States
of America, European Government Obligations or direct obligations of
any other European Union member state in which the Company or any of
its Restricted Subsidiaries has operations, or any agency thereof or
obligations guaranteed by the United States of America or any other
European Union member state in which the Company or any of its
Restricted Subsidiaries has operations, or any agency thereof;

(2) investments in time deposit accounts, certificates of
deposit and money market deposits maturing within 180 days of the date
of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any state
thereof or any foreign country recognized by the United States, and
which bank or trust company has capital, surplus and undivided profits
aggregating in excess of $50,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or
such similar equivalent rating) or higher by at least one nationally

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36

recognized statistical rating organization (as defined in Rule 436
under the Securities Act) or any money-market fund sponsored by a
registered broker-dealer or mutual fund distributor;

(3) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (1)
above entered into with a bank meeting the qualifications described in
clause (2) above;

(4) investments in commercial paper, maturing not more than 90
days after the date of acquisition, issued by a corporation (other than
an Affiliate of the Company) organized and in existence under the laws
of the United States of America or any foreign country recognized by
the United States of America with a rating at the time as of which any
investment therein is made of "P-2" (or higher) according to Moody's
Investors Service, Inc. or "A-2" (or higher) according to Standard and
Poor's Ratings Group; and

(5) investments in securities with maturities of six months or
less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America, or by
any political subdivision or taxing authority thereof, and rated at
least "A" by Standard & Poor's Ratings Group or "A" by Moody's
Investors Service, Inc.

"Term Loan Facility" means the term loan facility contained in
the Credit Agreement and any other facility or financing arrangement that
Refinances in whole or in part any such term loan facility.

"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
Section 77aaa-77bbbb) as in effect on the date of this Indenture.

"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.

"Trust Officer" means when used with respect to the Trustee,
any officer within the corporate trust department of the Trustee, including any
vice president, assistant vice president, assistant secretary, assistant
treasurer, trust officer or any other officer of the Trustee who customarily
performs functions similar to those performed by the Persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of such person's knowledge of and familiarity with the
particular subject and who shall have direct responsibility for the
administration of this Indenture.

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"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.

"Unrestricted Subsidiary" means:

(1) any Subsidiary of the Company that at the time of
determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below; and

(2) any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors of the Company may designate any Subsidiary of the
Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under Section 4.04.

The Board of Directors of the Company may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (A) the Company could Incur
$1.00 of additional Indebtedness under Section 4.03(a) and (B) no Default shall
have occurred and be continuing. Any such designation by the Board of Directors
of the Company shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.

"U.S. Dollar Equivalent" means with respect to any monetary
amount in a currency other than U.S. dollars, at any time for determination
thereof, the amount of U.S. dollars obtained by converting such foreign currency
involved in such computation into U.S. dollars at the spot rate for the purchase
of U.S. dollars with the applicable foreign currency as published in The Wall
Street Journal in the "Exchange Rates" column under the heading "Currency
Trading" on the date two Business Days prior to such determination.

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Except as described under Section 4.03, whenever it is
necessary to determine whether the Issuer has complied with any covenant in the
Indenture or a Default has occurred and an amount is expressed in a currency
other than U.S. dollars, such amount will be treated as the U.S. Dollar
Equivalent determined as of the date such amount is initially incurred in such
currency.

"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.

"Voting Stock" of a Person means all classes of Capital Stock
or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.

"Wholly Owned Subsidiary" means a Restricted Subsidiary all
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or one or more Wholly Owned Subsidiaries.

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SECTION 1.02. Other Definitions.

Defined in
Term                                                                                    Section
----                                                                                  ----------

"Affiliate Transaction" ............................................................ 4.07
"Appendix........................................................................... 2.01
"Bankruptcy Law".................................................................... 6.01
"Blockage Notice" .................................................................. 10.03
"Change of Control Offer"........................................................... 4.09(b)
"covenant defeasance option" ....................................................... 8.01(b)
"Custodian"......................................................................... 6.01
"Event of Default".................................................................. 6.01
"Excess Cash Flow Offer"............................................................ 4.10
"Excess Cash Flow Offer Amount"..................................................... 4.10
"Excess Cash Flow Offer Period"..................................................... 4.10
"Excess Cash Flow Purchase Date".................................................... 4.10
"Foreign Jurisdiction Merger........................................................ 5.01
"legal defeasance option"........................................................... 8.01(b)
"Legal Holiday"..................................................................... 13.08
"Obligations"....................................................................... 11.01
"Offer" ............................................................................ 4.06(b)
"Offer Amount" ..................................................................... 4.06(c)(2)
"Offer Period" ..................................................................... 4.06(c)(2)
"pay its Subsidiary Guaranty"....................................................... 14.03
"pay the Securities" ............................................................... 10.03
"Paying Agent" ..................................................................... 2.03
"Payment Blockage Period"........................................................... 10.03
"Payment Default.................................................................... 10.03
"Purchase Date"..................................................................... 4.06(c)(1)
"Registrar" ........................................................................ 2.03
"Successor Company" ................................................................ 5.01

SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:

"Commission" means the SEC;

"indenture securities" means the Securities;

"indenture security holder" means a Securityholder;

"indenture to be qualified" means this Indenture;

"indenture trustee" or "institutional trustee" means the
Trustee; and

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"obligor" on the indenture securities means the Issuer and any
other obligor on the indenture securities.

All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.

SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;

(3) "or" is not exclusive;

(4) "including" means including without limitation;

(5) words in the singular include the plural and words in the
plural include the singular;

(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness;

(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP;

(8) the principal amount of any Preferred Stock shall be (i)
the maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with respect
to such Preferred Stock, whichever is greater; and

(9) all references to the date the Securities were originally
issued shall refer to the Issue Date.

SECTION 1.05. Acts of Holders. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Issuer. Such instrument

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or instruments (and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "Act" of Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and conclusive in favor of the Trustee and the Issuer, if made in the manner
provided in this Section.

The ownership of Securities shall be proved by the Register.

Any request, demand, authorization, direction, notice,
consent, waiver or other Act of Holder of any Security shall bind every future
Holder of the same Security and the holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Issuer in reliance thereon, whether or not notation of such action is made upon
such Security.

If the Issuer shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Issuer may, at its option, by or pursuant to a Board resolution, fix in advance
a record date for the determination of Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Issuer shall have no obligation to do so. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or other Act
may be given before or after such record date, but only the Holders of record at
the close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
Outstanding Securities have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the Outstanding Securities shall be computed as of such record
date; provided, however, that no such authorization, agreement or consent by the
Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than six months
after the record date.

ARTICLE 2

The Securities

SECTION 2.01. Form and Dating. Provisions relating to the
Initial Securities, the Private Exchange Securities and the Exchange Securities
are set forth in the

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Rule 144A/Regulation S Appendix attached hereto (the "Appendix") which is hereby
incorporated in and expressly made part of this Indenture. The Initial
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit 1 to the Appendix which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities, the Private Exchange Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Issuer is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Issuer).
Each Security shall be dated the date of its authentication. The terms of the
Securities set forth in the Appendix and Exhibit A are part of the terms of this
Indenture.

SECTION 2.02. Execution and Authentication. Two Officers shall
sign the Securities for the Issuer by manual or facsimile signature.

If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.

A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.

The Trustee may appoint an authenticating agent reasonably
acceptable to the Issuer to authenticate the Securities. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.

SECTION 2.03. Registrar and Paying Agent. The Issuer shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Issuer may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.

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The Issuer shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Issuer shall notify
the Trustee of the name and address of any such agent. If the Issuer fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Issuer or any Wholly Owned Subsidiary incorporated or organized within The
United States of America may act as Paying Agent, Registrar, co-registrar or
transfer agent.

The Issuer initially appoints The Bank of New York as
Registrar and Paying Agent and Banque Internationale a Luxembourg as Luxembourg
Paying Agent in connection with the Securities. The Issuer will appoint the
Banque Internationale a Luxembourg as transfer agent in the event the Euro Notes
are issued in definitive registered form.

So long as the Securities are listed on the Luxembourg Stock
Exchange and the rules of such Exchange so require, the Issuer will maintain a
paying agent and transfer agent in Luxembourg. If the Securities are listed on
any other securities exchange, the Issuer will satisfy any requirement at such
securities exchange as to paying agents. So long as the Securities are listed on
the Luxembourg Stock Exchange, any change in the paying agent or transfer agent
shall be notified to holders of Securities by publication of notices to the
holders of the Securities in accordance with the provisions of Section 15.02 of
this Indenture.

SECTION 2.04. Paying Agent To Hold Money in Trust. On each due
date of the principal and interest on any Security, the Issuer shall deposit
with the Paying Agent a sum sufficient to pay such principal and interest when
so becoming due. The Issuer shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Issuer in making any such payment. If the Issuer
or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as
Paying Agent and hold it as a separate trust fund. The Issuer at any time may
require a Paying Agent to pay all money held by it to the Trustee and to account
for any funds disbursed by the Paying Agent. Upon complying with this

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Section 2.04 the Paying Agent shall have no further liability for the money
delivered to the Trustee.

SECTION 2.05. Securityholder Lists. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Issuer shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.

SECTION 2.06. Transfer and Exchange. The Securities shall be
issued in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of this Indenture
and Section 8-401(a) of the Uniform Commercial Code are met. When Securities are
presented to the Registrar or a co-registrar with a request to exchange them for
an equal principal amount of Securities of other denominations, the Registrar
shall make the exchange as requested if the same requirements are met.

Notwithstanding the foregoing, the Issuer is not required to
register the transfer of any certificated Notes:

(1) for a period of 15 calendar days prior to any date fixed
for the redemption of the Securities;

(2) for a period of 15 calendar days immediately prior to the
date fixed for selection of Securities to be redeemed in part;

(3) for a period of 15 calendar days prior to the record date
with respect to any interest payment date; or

(4) which the Holder has tendered (and not withdrawn) for
repurchase in connection with an offer made pursuant to Section 4.06 or
4.09.

Any such transfer will be made without charge to the Holder,
other than any taxes, duties and governmental charges payable in connection with
such transfer.

SECTION 2.07. Replacement Securities. If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost,

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destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall
authenticate a replacement Security if the requirements of Section 8-405 of the
Uniform Commercial Code are met and the Holder satisfies any other reasonable
requirements of the Trustee. If required by the Trustee or the Issuer, such
Holder shall furnish an indemnity bond sufficient in the judgment of the Issuer
and the Trustee to protect the Issuer, the Trustee, the Paying Agent, the
Registrar and any co-registrar from any loss which any of them may suffer if a
Security is replaced. The Issuer and the Trustee may charge the Holder for their
expenses in replacing a Security.

Every replacement Security is an additional obligation of the
Issuer.

SECTION 2.08. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section 2.08 as not outstanding. A Security does not cease to be
outstanding because the Issuer or an Affiliate of the Issuer holds the Security.

If a Security is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the Trustee and the Issuer receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.

If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest payable on that date with respect
to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue; provided, however, that in
determining whether the holders of the requisite principal amount of outstanding
Securities are present at a meeting of holders of Securities for quorum purposes
or have consented to or voted in favor of any request, demand, authorization,
direction, notice, consent, waiver, amendment or modification hereunder,
Securities held for the account of the Issuer, any of its subsidiaries or any of
its affiliates shall be disregarded and deemed not to be outstanding, except
that in determining whether the Trustee shall be protected in making such a
determination or relying upon any such quorum, consent or vote, only Securities
which a Trust Officer actually knows to be so owned shall be so disregarded.

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SECTION 2.09. Temporary Securities. Until definitive
Securities are ready for delivery, the Issuer may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Issuer
considers appropriate for temporary Securities. Without unreasonable delay, the
Issuer shall prepare and the Trustee shall authenticate definitive Securities
and deliver them in exchange for temporary Securities.

SECTION 2.10. Cancellation. The Issuer at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
dispose of (subject to the record retention requirements of the Exchange Act)
all Securities surrendered for registration of transfer, exchange, payment or
cancellation in accordance with the Trustee's customary practices unless the
Issuer directs the Trustee to deliver canceled Securities to the Issuer. The
Issuer may not issue new Securities to replace Securities it has redeemed, paid
or delivered to the Trustee for cancellation.

SECTION 2.11. Defaulted Interest. If the Issuer defaults in a
payment of interest on the Securities, the Issuer shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Issuer may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Issuer shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.

SECTION 2.12. CUSIP, ISIN and Common Code Numbers. The Issuer
in issuing the Securities may use "CUSIP", "ISIN and Common Code numbers (if
then generally in use) and, if so, the Trustee shall use "CUSIP", "ISIN" and
Common Code numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.

SECTION 2.13. Issuance of Additional Securities. The Issuer
shall be entitled, subject to compliance with

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Section 4.03, to issue Additional Securities under this Indenture which shall
have identical terms as the Initial Securities issued on the Issue Date, other
than with respect to the date of issuance and issue price. The Initial
Securities issued on the Issue Date, any Additional Securities and all Exchange
Securities or Private Exchange Securities issued in exchange therefor shall be
treated as a single class for all purposes under this Indenture.

With respect to any Additional Securities, the Issuer shall
set forth in a resolution of the Board of Directors and an Officers'
Certificate, a copy of each of which shall be delivered to the Trustee, the
following information:

(1) the aggregate principal amount of such Additional
Securities to be authenticated and delivered pursuant to this
Indenture;

(2) the issue price, the issue date and the CUSIP number of
such Additional Securities; provided, however, that no Additional
Securities may be issued at a price that would cause such Additional
Securities to have "original issue discount" within the meaning of
Section 1273 of the Code; and

(3) whether such Additional Securities shall be Transfer
Restricted Securities and issued in the form of Initial Securities as
set forth in the Appendix to this Indenture or shall be issued in the
form of Exchange Securities as set forth in Exhibit A.

ARTICLE 3

Redemption

SECTION 3.01. Notices to Trustee. If the Issuer elects to
redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.

The Issuer shall give each notice to the Trustee provided for
in this Section 3.01 at least 60 days before the redemption date unless the
Trustee consents to a shorter period. Such notice shall be accompanied by an
Officers' Certificate and an Opinion of Counsel from the Issuer to the effect
that such redemption will comply with the conditions herein.

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SECTION 3.02. Selection of Securities To Be Redeemed. If fewer
than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee in its sole discretion shall deem to be fair and appropriate and in
accordance with methods generally used at the time of selection by fiduciaries
in similar circumstances. The Trustee shall make the selection from outstanding
Securities not previously called for redemption. The Trustee may select for
redemption portions of the principal of Securities that have denominations
larger than E.1,000. Securities and portions of them the Trustee selects shall
be in principal amounts of E.1,000 or a whole multiple of E.1,000. Provisions of
this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption. The Trustee shall notify the
Issuer promptly of the Securities or portions of Securities to be redeemed.

SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a date for redemption of Securities, the Issuer shall
mail a notice of redemption by first-class mail to each Holder of Securities to
be redeemed at such Holder's registered address.

The notice shall identify the Securities to be redeemed and
shall state:

(1) the redemption date;

(2) the redemption price;

(3) the name and address of the Paying Agent;

(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;

(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;

(6) that, unless the Issuer defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Securities (or
portion thereof) called for redemption ceases to accrue on and after
the redemption date;

(7) the ISIN and Common Code numbers; and

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(8) that no representation is made as to the correctness or
accuracy of the CUSIP, ISIN or Common Code number, if any, listed in
such notice or printed on the Securities.

At the Issuer's request, the Trustee shall give the notice of
redemption in the Issuer's name and at the Issuer's expense. In such event, the
Issuer shall provide the Trustee with the information required by this Section
3.03.

SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date). Failure to give
notice or any defect in the notice to any Holder shall not affect the validity
of the notice to any other Holder.

SECTION 3.05. Deposit of Redemption Price. Prior to the
redemption date, the Issuer shall deposit with the Paying Agent (or, if the
Issuer or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Issuer to the
Trustee for Cancellation.

SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Issuer shall execute and the Trustee
shall authenticate for the Holder (at the Issuer's expense) a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.

ARTICLE 4

Covenants

SECTION 4.01. Payment of Securities. The Issuer shall promptly
pay the principal of and interest on the Securities on the dates and in the
manner provided in the Securities and in this Indenture. Principal and interest
shall be considered paid on the date due if on such date the Trustee or the
Paying Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest

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then due and the Trustee or the Paying Agent, as the case may be, is not
prohibited from paying such money to the Securityholders on that date pursuant
to the terms of this Indenture.

The Issuer shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.

SECTION 4.02. SEC Reports. Notwithstanding that the Issuer may
not be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Issuer shall file with the SEC and provide the Trustee and
Securityholders with such annual reports and such information, documents and
other reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such Sections
provided, however, that so long as the Company Guaranty is in effect and the
rules and regulations of the SEC would permit the Issuer (if subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act) to satisfy
such reporting requirements with the reports, information and other documents
required to be filed by the Company, the provision of such reports, information
and other documents by the Company hereunder shall be deemed to satisfy the
obligations of the Issuer hereunder. In addition, the Issuer shall furnish to
the Holder of the Securities and to prospective investors, upon the requests of
such Holders, any information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act so long as any Securities are not freely
transferable under the Securities Act. The Issuer also shall comply with the
other provisions of TIA Section 314(a).

SECTION 4.03. Limitation on Indebtedness. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness; provided, however, that the Company shall be
entitled to Incur Indebtedness, and its Restricted Subsidiaries shall be
entitled to Incur Eligible Indebtedness, in each case if, on the date of such
Incurrence and after giving effect thereto no Default has occurred and is
continuing and, the Consolidated Coverage Ratio exceeds 2.0 to 1 if such
Indebtedness is Incurred prior to September 1, 2003 or 2.25 to 1 if such
Indebtedness is Incurred thereafter.

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(b) Notwithstanding Section 4.03(a), the Company and the
Restricted Subsidiaries will be entitled to Incur any or all of the following
Indebtedness:

(1) Indebtedness Incurred by the Company pursuant to any
Revolving Credit Facility; provided, however, that, immediately after
giving effect to any such Incurrence, the aggregate principal amount of
all Indebtedness Incurred under this clause (1) and then outstanding
does not exceed the greater of (A) $300.0 million and (B) the sum of
(x) 50% of the book value of the inventory of the Company and its
Restricted Subsidiaries and (y) 50% of the book value of the accounts
receivable of the Company and its Restricted Subsidiaries (other than
any accounts receivable constituting Receivables and Related Assets
pledged, sold or otherwise transferred or encumbered in connection with
a Receivables Program), less the sum of all principal payments made
with respect to such Indebtedness pursuant to Section 4.06(a)(3)(A);

(2) Indebtedness Incurred by the Company pursuant to any Term
Loan Facility; provided, however, that, after giving effect to any such
Incurrence, the aggregate principal amount of all Indebtedness Incurred
under this clause (2) and then outstanding does not exceed $750.0
million less the aggregate sum of all principal payments actually made
from time to time after the Issue Date with respect to such
Indebtedness (other than principal payments made from any permitted
Refinancings thereof);

(3) Indebtedness Incurred by a Receivables Subsidiary pursuant
to a Receivables Program; provided, however, that, after giving effect
to any such Incurrence, the aggregate principal amount of all
Indebtedness Incurred under this clause (3) and then outstanding does
not exceed $400.0 million;

(4) Indebtedness owed to and held by the Company or a Wholly
Owned Subsidiary; provided, however, that (A) any subsequent issuance
or transfer of any Capital Stock which results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent
transfer of such Indebtedness (other than to the Company or a Wholly
Owned Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the obligor thereon and (B) if the
Company or the Issuer is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in
cash of all obligations with respect to the Securities and Dollar
Notes, respectively;

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(5) the Securities and the Dollar Notes (other than any
Additional Securities and Additional Dollar Notes);

(6) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), (3), (4) or (5) of this
Section 4.03(b));

(7) Indebtedness of a Person Incurred and outstanding on or
prior to the date on which such Person becomes a Restricted Subsidiary
(including upon merger or consolidation with the Company or any
Restricted Subsidiary) or assumed in connection with the purchase of
assets from another Person (other than Indebtedness Incurred in
connection with, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Person became a Restricted
Subsidiary or such Person or such assets were acquired by the Company);
provided, however, that (A) with respect to any such Indebtedness
Incurred prior to the first anniversary of the Issue Date, such
Indebtedness is in an aggregate principal amount which, when taken
together with all other Indebtedness Incurred pursuant to this clause
(7), does not exceed $50.0 million or (B) on the date of such
acquisition and after giving pro forma effect thereto, the Company
would have been able to Incur at least $1.00 of additional Indebtedness
pursuant to Section 4.03(a);

(8) Indebtedness of the Company or any of its Restricted
Subsidiaries attributable to Capital Lease Obligations, or Incurred to
finance the acquisition, construction or improvement of any fixed or
capital assets, including any Indebtedness assumed in connection with
the acquisition of any such assets, in an aggregate principal amount
which, when taken together with all other Indebtedness of the Company
or any of its Restricted Subsidiaries Incurred pursuant to this clause
(8) and then outstanding, does not exceed $25.0 million (including any
Refinancing Indebtedness with respect thereto);

(9) Indebtedness under industrial revenue bonds in an
aggregate principal amount which, when taken together with all other
Indebtedness of the Company or any of its Restricted Subsidiaries
Incurred pursuant to this clause (9) and then outstanding, does not
exceed $20.0 million;

(10) Indebtedness Incurred by Foreign Restricted
Subsidiaries in an aggregate principal amount which,

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when taken together with all other Indebtedness of Foreign Restricted
Subsidiaries Incurred pursuant to this clause (10) and then
outstanding, does not exceed $25.0 million;

(11) Indebtedness of the Company, whether secured
or unsecured, consisting of Guarantees of Permitted
Employee Stock Purchase Loans;

(12) Indebtedness or other obligations solely in respect of
worker's compensation claims, self-insurance obligations and surety,
appeal and performance bonds entered into in the ordinary course of
business of the Company and its Restricted Subsidiaries;

(13) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to Section 4.03(a) or pursuant to clause (5), (6) or
(7) of this Section 4.03(b) or this clause (13); provided, however,
that to the extent such Refinancing Indebtedness directly or indirectly
Refinances Indebtedness of a Subsidiary Incurred pursuant to clause
(7), such Refinancing Indebtedness shall be Incurred only by such
Subsidiary;

(14) Hedging Obligations under or with respect to Interest
Rate Agreements, Currency Agreements or Commodity Agreements entered
into in the ordinary course of business and not for the purpose of
speculation;

(15) Indebtedness consisting of the Company Guaranty, the
Issuer's Guaranty of the Dollar Notes and each Subsidiary Guaranty of a
Subsidiary Guarantor;

(16) Indebtedness of the Company or any Restricted Subsidiary
arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary
course of business, provided that the Indebtedness is satisfied within
five business days of Incurrence;

(17) Indebtedness of the Company or any Restricted Subsidiary
consisting of indemnification, adjustment of purchase price or similar
obligations, in each case incurred in connection with the disposition
of any assets of the Company or any Restricted Subsidiary;

(18) Indebtedness consisting of the Guarantee by (i) the
Company of any Indebtedness of a Restricted Subsidiary that was
permitted to be Incurred by another

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provision of this Section 4.03 and (ii) any Restricted Subsidiary of
the Company of Indebtedness of the Company that was permitted to be
Incurred by another provision of this Section 4.03; and

(19) Indebtedness of the Company in an aggregate principal
amount which, when taken together with all other Indebtedness of the
Company outstanding on the date of such Incurrence (other than
Indebtedness permitted by clauses (1) through (18) of this Section
4.03(b) or Section 4.03(a) does not exceed $25.0 million.

(c) Notwithstanding the foregoing, none of the Company, the
Issuer nor any Subsidiary Guarantor will Incur any Indebtedness pursuant to
Section 4.03(b) if the proceeds thereof are used, directly or indirectly, to
Refinance any Subordinated Obligations of the Company, the Issuer or any
Subsidiary Guarantor unless such Indebtedness shall be subordinated to the
Company Guaranty, the Securities or the applicable Subsidiary Guaranty to at
least the same extent as such Subordinated Obligations.

(d) For purposes of determining compliance with this Section
4.03, (1) in the event that an item of Indebtedness meets the criteria of more
than one of the types of Indebtedness described above, the Issuer, in its sole
discretion, will classify such item of Indebtedness at the time of Incurrence
and only be required to include the amount and type of such Indebtedness in one
of the above clauses and (2) the Issuer will be entitled to divide and classify
an item of Indebtedness in more than one of the types of Indebtedness described
above.

(e) Notwithstanding Section 4.03(a) or 4.03(b), none of the
Company, the Issuer nor any Subsidiary Guarantor will Incur (1) any Indebtedness
if such Indebtedness is subordinate or junior in ranking in any respect to any
Senior Indebtedness of such Person, unless such Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness of such Person or (2) any Secured Indebtedness
that is not Senior Indebtedness of such Person unless contemporaneously
therewith such Person makes effective provision to secure the Securities equally
and ratably with such Secured Indebtedness for so long as such Secured
Indebtedness is secured by a Lien.

(f) For purposes of determining compliance with any U.S.
dollar or Euro denominated restriction on the Incurrence of Indebtedness where
the Indebtedness Incurred is denominated in a different currency, the amount of
such Indebtedness will be the U.S. Dollar Equivalent or Euro

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Equivalent, as the case may be, determined on the date of the Incurrence of such
Indebtedness; provided, however, that if such Indebtedness denominated in a
different currency is subject to a Currency Agreement with respect to U.S.
dollars or Euros, as the case may be, covering all principal, premium, if any,
and interest payable on such Indebtedness, the amount of such Indebtedness
expressed in U.S. dollars or Euros will be as provided in such Currency
Agreement. The principal amount of any Refinancing Indebtedness Incurred in the
same currency as the Indebtedness being Refinanced will be the Euro Equivalent
or U.S. Dollar Equivalent, as appropriate, of the Indebtedness Refinanced,
except to the extent that (i) such U.S. Dollar Equivalent or Euro Equivalent was
determined based on a Currency Agreement, in which case the Refinancing
Indebtedness will be determined in accordance with the preceding sentence, and
(ii) the principal amount of the Refinancing Indebtedness exceeds the principal
amount of the Indebtedness being Refinanced, in which case the U.S. Dollar
Equivalent or Euro Equivalent of such excess, as appropriate, will be determined
on the date such Refinancing Indebtedness is Incurred.

SECTION 4.04. Limitation on Restricted Payments. (a) The
Company shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:

(1) a Default shall have occurred and be continuing (or would
result therefrom);

(2) the Company is not entitled to Incur an additional $1.00
of Indebtedness under Section 4.03(a); or

(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Issue Date would exceed the sum of
(without duplication):

(A) 50% of the Consolidated Net Income accrued during
the period (treated as one accounting period) from the
beginning of the fiscal quarter during which the Issue Date
occurs to the end of the most recent fiscal quarter for which
internal financial statements are available on or prior to the
date of such Restricted Payment (or, in case such Consolidated
Net Income shall be a deficit, minus 100% of such deficit);
plus

(B) 100% of the aggregate Net Cash Proceeds received
by the Company from the issuance or sale of, or cash capital
contribution in respect of,

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its Capital Stock (other than Disqualified Stock) subsequent
to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company and other than an issuance or sale
to an employee stock ownership plan or to a trust established
by the Company or any of its Subsidiaries for the benefit of
their employees) and 100% of the fair market value (as
determined in good faith by resolution of the Board of
Directors) of property (other than cash) that would constitute
Temporary Cash Investments or used in a Related Business and
received by the Company or a Restricted Subsidiary subsequent
to the Issue Date in exchange for or as a contribution in
respect of its Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than (i) an issuance to or
a capital contribution by a Subsidiary of the Company or (ii)
an issuance to or a capital contribution by an employee stock
ownership plan or to a trust established by the Company or any
of its subsidiaries for the benefit of their employees or
(iii) property that was financed with loans from the Company
or any Restricted Subsidiary); plus

(C) an amount equal to the sum of (x) the net
reduction in the Investments (other than Permitted
Investments) made by the Company or any Restricted Subsidiary
in any Person resulting from repurchases, repayments or
redemptions of such Investments by such Person, proceeds
realized on the sale of such Investments, and proceeds
representing the return of capital (to the extent not included
in Consolidated Net Income), in each case received by the
Company or any Restricted Subsidiary, and (y) to the extent
such Person is an Unrestricted Subsidiary, the portion
(proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of such
Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided,
however, that the foregoing sum shall not exceed, in the case
of any such Person or Unrestricted Subsidiary, the amount of
Investments (excluding Permitted Investments) previously made
(and treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Person or Unrestricted
Subsidiary.

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(b) The provisions of Section 4.04(a) shall not prohibit:

(1) any Restricted Payment made out of the Net Cash Proceeds
of the substantially concurrent sale of, or made by exchange for,
Capital Stock of the Company (other than Disqualified Stock and other
than Capital Stock issued or sold to a Subsidiary of the Company or an
employee stock ownership plan or to a trust established by the Company
or any of its Subsidiaries for the benefit of their employees) or a
substantially concurrent cash capital contribution received by the
Company in respect of its Capital Stock (other than Disqualified
Stock); provided, however, that (A) such Restricted Payment shall be
excluded in the calculation of the amount of Restricted Payments and
(B) the Net Cash Proceeds from such sale or such cash capital
contribution (to the extent so used for such Restricted Payment) shall
be excluded from the calculation of amounts under Section 4.04(a)(3)(B)
and under clause (4) below;

(2) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent
sale of, Indebtedness which is permitted to be Incurred pursuant to
Section 4.03; provided, however, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value
shall be excluded in the calculation of the amount of Restricted
Payments;

(3) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with this Section 4.04; provided, however, that at the
time of payment of such dividend, no other Default shall have occurred
and be continuing (or result therefrom); provided further, however,
that such dividend shall be included in the calculation of the amount
of Restricted Payments;

(4) so long as no Default has occurred and is continuing, the
repurchase or other acquisition of shares of Capital Stock of the
Company or any of its Subsidiaries (A) from employees, former
employees, directors or former directors of the Company or any of its
Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), (B) in the open market to
the extent such shares are acquired to satisfy a current obligation to
deliver shares in connection with the exercise of stock

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options or similar rights, in each case pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase or
sell, shares of such Capital Stock; provided, however, that the
aggregate amount of such repurchases and other acquisitions shall not
exceed in any calendar year the sum of (x) $5.0 million plus (y) the
Net Cash Proceeds from the sale of Capital Stock to employees or
directors of the Company (including pursuant to the exercise of stock
options) that occur during such calendar year (to the extent such Net
Cash Proceeds are not applied to the payment of a Restricted Payment
pursuant to clause (1) above); provided further, however, that (i) such
repurchases and other acquisitions shall be excluded in the calculation
of the amount of Restricted Payments and (ii) the Net Cash Proceeds
from such sales described in clause (y) shall be excluded from the
calculation of amounts under Section 4.04(a)(3)(B); or

(5) Restricted Payments not exceeding $15.0 million in the
aggregate; provided, however, that (A) at the time of such Restricted
Payments, no Default shall have occurred and be continuing (or result
therefrom) and (B) such Restricted Payments shall be included in the
calculation of Restricted Payments.

SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) make any loans or advances to the Company
or (c) transfer any of its property or assets to the Company, except:

(1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date, including this Indenture,
the Dollar Notes Indenture and the Credit Agreement as in effect on the
Issue Date;

(2) any encumbrance or restriction with respect to a
Receivables Subsidiary pursuant to a Receivables Program of such
Receivables Subsidiary;

(3) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement

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relating to any Indebtedness Incurred by such Restricted Subsidiary on
or prior to the date on which such Restricted Subsidiary was acquired
by the Company (other than Indebtedness Incurred as consideration in,
or to provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding
on such date;

(4) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in Section 4.05 (1), (2), (3) or this clause (4)
or contained in any amendment to an agreement referred to in Section
4.05 (1), (2), (3) or this clause (4); provided, however, that the
encumbrances and restrictions with respect to such Restricted
Subsidiary contained in any such refinancing agreement or amendment
are, in the good faith judgment of the Board of Directors of the
Company, no less favorable, taken as a whole, to the Securityholders
than encumbrances and restrictions with respect to such Restricted
Subsidiary contained in such predecessor agreements;

(5) any such encumbrance or restriction consisting of
customary nonassignment provisions in leases governing leasehold
interests to the extent such provisions restrict the transfer of the
lease or the property leased thereunder;

(6) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness, or under
letters of credit or bank guarantees, of a Restricted Subsidiary to the
extent such restrictions restrict the transfer of, or the grant of
security over, the property subject to such security agreements,
mortgages, letters of credit or bank guarantees;

(7) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or
disposition;

(8) purchase money obligations (including Capital Lease
Obligations) for property acquired in the ordinary course of business
that impose restrictions on the property so acquired of the nature
described in clause (c) above;

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(9) provisions with respect to the disposition or distribution
of assets or property in joint venture agreements and other similar
agreements in the ordinary course of business; and

(10) any such encumbrance or restriction with respect to a
Foreign Restricted Subsidiary pursuant to an agreement governing
Indebtedness Incurred by such Foreign Restricted Subsidiary.

SECTION 4.06. Limitation on Sales of Assets and Subsidiary
Stock. (a) The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, consummate any Asset Disposition unless: (1) the
Company or such Restricted Subsidiary receives consideration at the time of such
Asset Disposition at least equal to the fair market value (including as to the
value of all non-cash consideration), as determined in good faith by the Board
of Directors, of the shares and assets subject to such Asset Disposition; (2) at
least 75% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash or cash equivalents; and (3) an
amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by the Company (or such Restricted Subsidiary, as the case may be) (A)
first, to the extent the Company elects (or is required by the terms of any
Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness of the
Company or Indebtedness (other than any Disqualified Stock) of a Restricted
Subsidiary (in each case other than Indebtedness owed to the Company or an
Affiliate of the Company) within one year from the later of the date of such
Asset Disposition or the receipt of such Net Available Cash; (B) second, to the
extent of the balance of such Net Available Cash after application in accordance
with clause (A), to the extent the Company elects, to acquire Additional Assets
within one year (or enter into a binding commitment therefor within such period
and acquire such Additional Assets within 18 months) from the later of the date
of such Asset Disposition or the receipt of such Net Available Cash; and (C)
third, to the extent of the balance of such Net Available Cash after application
in accordance with clauses (A) and (B), to make an offer to the holders of the
Dollar Notes and the Securities (and to holders of other Senior Subordinated
Indebtedness of the Company or the Issuer designated by the Company) to
purchase, on a pro rata basis, Dollar Notes and Securities (and such other
Senior Subordinated Indebtedness of the Company or the Issuer) pursuant to the
conditions of Section 4.06(b); provided, however, that in connection with any
prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or (C)
above, the Company or such Restricted Subsidiary shall permanently retire such
Indebtedness and shall cause the

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related loan commitment (if any) to be permanently reduced in an amount equal to
the principal amount so prepaid, repaid or purchased. Notwithstanding the
foregoing provisions of this Section 4.06, (i) the Company and the Restricted
Subsidiaries shall not be required to apply any Net Available Cash in accordance
with this Section 4.06 except to the extent that the aggregate Net Available
Cash from all Asset Dispositions which are not applied in accordance with this
Section 4.06 exceeds $10.0 million , and (ii) to the extent any Asset
Disposition constitutes the disposition of Consent Decree Assets, the Company
shall be required to apply the Net Available Cash from such Asset Disposition
pursuant to Section 4.06 (a)(3)(A) and the Company shall not be required to
comply with Section 4.06 (a)(1). Pending application of Net Available Cash
pursuant to this Section 4.06, such Net Available Cash shall be invested in
Temporary Cash Investments or applied to temporarily reduce revolving credit
indebtedness.

For the purposes of this Section 4.06, the following are
deemed to be cash or cash equivalents: (1) the assumption of Indebtedness of the
Company or any Restricted Subsidiary and the release of the Company or such
Restricted Subsidiary from all liability on such Indebtedness in connection with
such Asset Disposition; and (2) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash.

In addition, the Company may elect to deem Additional Assets
(determined based on the fair market value of such assets) as cash and cash
equivalents for purposes of this Section 4.06; provided, however, that such
Additional Assets were acquired for fair market value as part of the transaction
constituting an Asset Disposition; and provided further, however, that such
Additional Assets will be deemed to have been acquired in accordance with
Section 4.06(a)(3)(B).

(b) In the event of an Asset Disposition that requires the
purchase of the Securities and Dollar Notes (and other Senior Subordinated
Indebtedness of the Company or the Issuer) pursuant to Section 4.06(a)(3)(C)
above, the Company will purchase, on a pro rata basis, Securities and Dollar
Notes tendered pursuant to an offer (the "Offer") by the Company for the
Securities (and such other Senior Subordinated Indebtedness of the Company and
the Issuer, as applicable) at a purchase price of 100% of their respective
principal amount (or, in the event such other Senior Subordinated Indebtedness
of the Company or the Issuer, as applicable, was issued with significant
original issue discount, 100% of the accreted value thereof), without premium,
plus accrued but unpaid interest (or, in respect of

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such other Senior Subordinated Indebtedness of the Company or the Issuer, such
lesser price, if any, as may be provided for by the terms of such Senior
Subordinated Indebtedness) in accordance with the procedures (including
prorating in the event of oversubscription) set forth in Section 4.06(c). If the
aggregate purchase price of the Securities and Dollar Notes (and other Senior
Subordinated Indebtedness of the Company or the Issuer) tendered exceeds the Net
Available Cash allotted to their purchase, the Company will select the
Securities and Dollar Notes(and other Senior Subordinated Indebtedness of the
Company or the Issuer) to be purchased on a pro rata basis but in round
denominations, which in the case of the Securities will be denominations of
E.1,000 principal amount or multiples thereof and in the case of the Dollar
Notes will be $1,000 principal amount or multiples thereof. The Company shall
not be required to make such an offer to purchase Securities and Dollar Notes
(and other Senior Subordinated Indebtedness of the Company and the Issuer)
pursuant to this Section 4.06 if the Net Available Cash available therefor is
less than $10.0 million (which lesser amount shall be carried forward for
purposes of determining whether such an offer is required with respect to the
Net Available Cash from any subsequent Asset Disposition).

(c)(1) Promptly, and in any event within 10 days after the
Company becomes obligated to make an Offer, the Company shall deliver to the
Trustee and send, by first-class mail to each Holder and Dollar Notes Holder,
and, so long as the Securities are listed on the Luxembourg Stock Exchange,
publish in a Luxembourg newspaper of general circulation, a written notice
stating that the Holder and Dollar Notes Holder may elect to have his Securities
and Dollar Notes purchased by the Company either in whole or in part (subject to
prorating as described in Section 4.06(b) in the event the Offer is
oversubscribed) in integral multiples of E.1,000 of principal amount and $1,000
principal amount, respectively, at the applicable purchase price. The notice
shall specify a purchase date not less than 30 days nor more than 60 days after
the date of such notice (the "Purchase Date") and shall contain such information
concerning the business of the Company which the Company in good faith believes
will enable such Holders and Dollar Notes Holders to make an informed decision
(which at a minimum will include (A) the most recently filed Annual Report on
Form 10-K (including audited consolidated financial statements) of the Company,
the most recent subsequently filed Quarterly Report on Form 10-Q and any Current
Report on Form 8-K of the Company filed subsequent to such Quarterly Report
which may be incorporated by reference, other than Current Reports describing
Asset Dispositions otherwise described in the offering materials (or
corresponding successor reports), (B) a description of

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material developments in the Company's business subsequent to the date of the
latest of such Reports, and (C) if material, appropriate pro forma financial
information) and all instructions and materials necessary to tender Securities
and Dollar Notes pursuant to the Offer, together with the information contained
in clause (3).

(2) Not later than the date upon which written notice of an
Offer is delivered to the Trustee as provided below, the Company shall deliver
to the Trustee an Officers' Certificate as to (A) the amount of the Offer (the
"Offer Amount"), including information as to any other Senior Subordinated
Indebtedness of the Company or the Issuer included in the Offer, (B) the
allocation of the Net Available Cash from the Asset Dispositions pursuant to
which such Offer is being made and (C) the compliance of such allocation with
the provisions of Section 4.06(a) and (b). On such date, the Company shall also
irrevocably deposit with the Trustee or with a Paying Agent (or, if the Company
is acting as its own Paying Agent, segregate and hold in trust) in Temporary
Cash Investments, maturing on the last day prior to the Purchase Date or on the
Purchase Date if funds are immediately available by open of business, an amount
equal to the Offer Amount to be held for payment in accordance with the
provisions of this Section 4.06. If the Offer includes other Senior Subordinated
Indebtedness, the deposit described in the preceding sentence may be made with
any other paying agent pursuant to arrangements satisfactory to the Trustee.
Upon the expiration of the period for which the Offer remains open (the "Offer
Period"), the Company shall deliver to the Trustee for cancellation the
Securities and Dollar Notes or portions thereof which have been properly
tendered to and are to be accepted by the Company. The Trustee shall, on the
Purchase Date, mail or deliver payment (or cause the delivery of payment) to
each tendering Holder and the Dollar Notes Holder in the amount of the purchase
price. In the event that the aggregate purchase price of the Securities and
Dollar Notes delivered by the Company to the Trustee is less than the Offer
Amount applicable to the Securities and Dollar Notes, the Trustee shall deliver
the excess to the Company immediately after the expiration of the Offer Period
for application by the Company in any manner permitted by this Indenture.

(3) Holders and Dollar Notes Holders electing to have either a
Security or a Dollar Note purchased shall be required to surrender the Security
or a Dollar Note, with an appropriate form duly completed, to the Company at the
address specified in the notice at least three Business Days prior to the
Purchase Date. Holders and Dollar Notes Holders shall be entitled to withdraw
their election if the Trustee or the Company receives not later than one
Business Day prior to the Purchase Date, a telex, facsimile

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transmission or letter setting forth the name of the Holder or Dollar Notes
Holder, the principal amount of the Security or Dollar Note which was delivered
for purchase by the Holder or Dollar Notes Holder and a statement that such
Holder or Dollar Notes Holder is withdrawing his election to have such Security
or Dollar Notes purchased. Holders or Dollar Notes Holders whose Securities or
Dollar Notes are purchased only in part shall be issued new Securities or Dollar
Notes equal in principal amount to the unpurchased portion of the Securities or
Dollar Notes surrendered.

(4) At the time the Company delivers Securities or Dollar
Notes to the Trustee which are to be accepted for purchase, the Company shall
also deliver an Officers' Certificate stating that such Securities or Dollar
Notes are to be accepted by the Company pursuant to and in accordance with the
terms of this Section 4.06. A Security or Dollar Note shall be deemed to have
been accepted for purchase at the time the Trustee, directly or through an
agent, mails or delivers payment therefor to the surrendering Holder or Dollar
Notes Holder.

(d) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities or Dollar
Notes pursuant to this Section 4.06. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.06,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Section 4.06 by
virtue of its compliance with such securities laws or regulations.

SECTION 4.07. Limitation on Affiliate Transactions. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, enter into
or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property, employee compensation arrangements or the rendering of
any service) with, or for the benefit of, any Affiliate of the Company (an
"Affiliate Transaction") unless: (1) the terms of the Affiliate Transaction are
no less favorable to the Company or such Restricted Subsidiary than those that
could be obtained at the time of the Affiliate Transaction in arm's-length
dealings with a Person who is not an Affiliate; (2) if such Affiliate
Transaction involves an amount in excess of $10.0 million, the terms of the
Affiliate Transaction are set forth in writing and a majority of the
non-employee directors of the Company disinterested with respect to such
Affiliate Transactions have determined in good faith that the criteria set forth
in clause (1) are satisfied and have approved the relevant Affiliate Transaction
as evidenced by

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a resolution of the Board of Directors of the Company; and (3) if such Affiliate
Transaction involves an amount in excess of $20.0 million, the Board of
Directors of the Company shall also have received a written opinion from (A) an
investment banking firm of national prominence or (B) an accounting or appraisal
firm nationally recognized in making such determinations, in each case that is
not an Affiliate of the Company to the effect that such Affiliate Transaction is
fair, from a financial standpoint, to the Company and its Restricted
Subsidiaries.

(b) The provisions of Section 4.07(a) shall not prohibit: (1)
any Investment (other than a Permitted Investment) or other Restricted Payment,
in each case permitted to be made pursuant to Section 4.04; (2) any issuance of
securities, or other payments, awards or grants in cash, securities or otherwise
pursuant to, or the funding of, employment arrangements, stock options, stock
ownership plans or other similar incentive arrangements approved by the Board of
Directors of the Company; (3) loans or advances to employees in the ordinary
course of business in accordance with the past practices of the Company or its
Restricted Subsidiaries, but in any event not to exceed $5.0 million in the
aggregate outstanding at any one time; (4) guarantees of Permitted Employee
Stock Purchase Loans; (5) the payment of reasonable fees to directors of the
Company and its Restricted Subsidiaries who are not employees of the Company or
its Restricted Subsidiaries; (6) any transaction with a Restricted Subsidiary or
joint venture or similar entity which would constitute an Affiliate Transaction
solely because the Company or a Restricted Subsidiary owns an equity interest in
or otherwise controls such Restricted Subsidiary, joint venture or similar
entity; (7) the issuance or sale of any Capital Stock (other than Disqualified
Stock) of the Company; (8) any Receivables Program of the Company or a
Restricted Subsidiary; (9) customary directors' and officers' indemnification
arrangements; and (10) any agreement with the Company or any Restricted
Subsidiary as in effect as of the Issue Date and any amendment or replacement
thereto or any transaction contemplated thereby so long as such amendment or
replacement agreement is not more disadvantageous to the Company and its
Restricted Subsidiaries than the original agreement as in effect on the Issue
Date.

SECTION 4.08. Limitation on the Sale or Issuance of Capital
Stock of Restricted Subsidiaries. The Company (1) shall not, and shall not
permit any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose
of (but excluding any pledge of such Capital Stock otherwise permitted by this
Indenture) any Capital Stock of any Restricted Subsidiary to any Person (other
than the Company

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or a Wholly Owned Subsidiary), and (2) shall not permit any Restricted
Subsidiary to issue any of its Capital Stock (other than, if necessary, shares
of its Capital Stock constituting directors' or other legally required
qualifying shares) to any Person (other than to the Company or a Wholly Owned
Subsidiary), unless (A) immediately after giving effect to such issuance, sale
or other disposition, neither the Company nor any of its Subsidiaries own any
Capital Stock of such Restricted Subsidiary; (B) immediately after giving effect
to such issuance, sale or other disposition, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect thereto would have been permitted to be made under
Section 4.04 if made on the date of such issuance, sale or other disposition; or
(C) the Company concurrently acquires sufficient shares of Capital Stock of such
Restricted Subsidiary to at least maintain the same percentage ownership
interest it had prior to the transaction.

Notwithstanding the foregoing, the issuance or sale of shares
of Capital Stock of any Restricted Subsidiary of the Company will not violate
the provisions of the immediately preceding sentence if such shares are issued
or sold in connection with:

(i) the formation or capitalization of a Restricted
Subsidiary, or

(ii) a single transaction or a series of substantially
contemporaneous transactions whereby such Restricted Subsidiary becomes
a Restricted Subsidiary of the Company by reason of the acquisition of
securities or assets from another Person.

SECTION 4.09. Change of Control. (a) Upon the occurrence of a
Change of Control, each Holder shall have the right to require that the Issuer
purchase such Holder's Securities at a purchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of holders of record on the relevant
record date to receive interest on the relevant interest payment date), in
accordance with the terms contemplated in Section 4.09(b). In the event that at
the time of such Change of Control the terms of the Senior Indebtedness of the
Company restrict or prohibit the repurchase of Securities pursuant to this
Section 4.09, then prior to the mailing of the notice to Holders provided for in
Section 4.09(b) below but in any event within 30 days following any Change of
Control, the Company shall (1) repay in full all such Senior Indebtedness or
(ii) obtain the requisite consent under the agreements

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governing such Senior Indebtedness to permit the repurchase of the Securities as
provided for in Section 4.09(b).

(b) Within 30 days following any Change of Control, the Issuer
shall mail a notice to each Holder with a copy to the Trustee (the "Change of
Control Offer") and, so long as the Securities are listed on the Luxembourg
Stock Exchange, publish in a Luxembourg newspaper of general circulation,
stating:

(1) that a Change of Control has occurred and that such Holder
has the right to require the Issuer to purchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of Holders of record on the relevant
record date to receive interest on the relevant interest payment date);

(2) the circumstances and relevant facts regarding such Change
of Control (including information with respect to pro forma historical
income, cash flow and capitalization, each after giving effect to such
Change of Control);

(3) the purchase date (which shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed); and

(4) the instructions determined by the Issuer, consistent with
this Section 4.09, that a Holder must follow in order to have its
Securities purchased.

(c) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form duly completed, to
the Issuer at the address specified in the notice at least three Business Days
prior to the purchase date. Holders will be entitled to withdraw their election
if the Trustee or the Issuer receives not later than one Business Day prior to
the purchase date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security which was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Security purchased.

(d) On the purchase date, all Securities purchased by the
Issuer under this Section 4.09 shall be delivered by the Issuer to the Trustee
for cancellation, and the Issuer shall pay the purchase price plus accrued and
unpaid interest, if any, to the Holders entitled thereto.

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(e) Notwithstanding the foregoing provisions of this Section
4.09, the Issuer shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 4.09 applicable to a Change of Control Offer made by the Issuer
and purchases all Securities validly tendered and not withdrawn under such
Change of Control Offer.

(f) The Issuer shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section 4.09. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.09, the Issuer shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.09 by virtue of
its compliance with such securities laws or regulations.

SECTION 4.10. Excess Cash Flow Repurchase Offer. (a) If the
Company has Excess Cash Flow for any fiscal year (commencing with the fiscal
year ending December 31, 2001), no later than the 120th day following the end of
such fiscal year, the Company shall apply an amount equal to 50% of the Excess
Cash Flow for such fiscal year: (1) first, to the extent the Company elects (or
is required by the terms of any Indebtedness), to prepay, repay, redeem or
purchase (and permanently reduce the commitments thereunder) Senior Indebtedness
of the Company with such percentage of Excess Cash Flow; (2) second, to the
extent of the balance of such percentage of Excess Cash Flow after application
in accordance with clause (1), to make an offer to the holders of the Securities
and Dollar Notes (and to holders of other Senior Subordinated Indebtedness of
the Company or the Issuer designated by the Company) to purchase, on a pro rata
basis, Securities and Dollar Notes (and such other Senior Subordinated
Indebtedness of the Company or the Issuer) pursuant to and subject to the
conditions contained in this Section 4.10 and in Section 4.10 of the Dollar
Notes Indenture (an "Excess Cash Flow Offer"); and (3) third, to the extent of
the balance of such percentage of Excess Cash Flow after application in
accordance with clause (1) or (2) above, to any other application or use not
prohibited by this Indenture; provided, however, that in connection with any
prepayment, repayment or purchase of Indebtedness pursuant to clause (1) above,
the Company shall permanently retire such Indebtedness and shall cause the
related loan commitment (if any) to be permanently reduced in an amount equal to
the principal amount so prepaid, repaid or purchased; and provided, further,
that no Excess Cash Flow

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Offer shall be required to be made if the Company's Leverage Ratio is less than
3.0 to 1.0 on the last day of such fiscal year.

(b) In the event of an Excess Cash Flow Offer, the Company
will be required to purchase, on a pro rata basis, Securities and Dollar Notes
tendered pursuant to an offer by the Company for the Securities and Dollar notes
(and other Senior Subordinated Indebtedness of the Company and the Issuer, as
applicable) at a purchase price of 100% of their respective principal amount
(or, in the event such other Senior Subordinated Indebtedness was issued with
significant original issue discount, 100% of the accreted value thereof),
without premium, plus accrued but unpaid interest (or, in respect of such Senior
Subordinated Indebtedness, such lesser price, if any, as may be provided for by
the terms of such Senior Subordinated Indebtedness) in accordance with the
procedures (including prorating in the event of oversubscription) set forth in
Section 4.10(c). If the aggregate purchase price of the Securities and Euro
Notes (and other Senior Subordinated Indebtedness of the Company or the Issuer)
tendered pursuant to such offer is less than the Excess Cash Flow allotted to
their purchase, the Company will be entitled to apply the remaining Excess Cash
Flow in accordance with clause (a)(3) above. The Company shall not be required
to make an Excess Cash Flow Offer to purchase Securities and Dollar Notes (and
other Senior Subordinated Indebtedness) pursuant to Section 4.10(a) if the
Excess Cash Flow available therefor is less than $5.0 million (which lesser
amount shall be carried forward for purposes of determining whether such an
offer is required with respect to the Excess Cash Flow in any subsequent fiscal
year).

(c)(1) Promptly, and in any event within 10 days after the
Company becomes obligated to make an Excess Cash Flow Offer, the Company shall
deliver to the Trustee and send, by first-class mail to each Holder and Dollar
Notes Holder, and, so long as the Securities are listed on the Luxembourg Stock
Exchange, publish in a Luxembourg newspaper of general circulation, a written
notice stating that the Holder and Dollar Notes Holder may elect to have his
Securities and Dollar Notes purchased by the Company either in whole or in part
(subject to prorating as described in Section 4.10(b) in the event the Excess
Cash Flow Offer is oversubscribed) in integral multiples of E.1,000 of
principal amount and $1,000 principal amount, respectively, at the applicable
purchase price. The notice shall specify a purchase date not less than 30 days
nor more than 60 days after the date of such notice (the "Excess Cash Flow
Purchase Date") and shall contain such information concerning the business of
the Company which the Company in good faith believes will enable such Holders
and Dollar

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Notes Holders to make an informed decision (which at a minimum will include (A)
the most recently filed Annual Report on Form 10-K (including audited
consolidated financial statements) of the Company, the most recent subsequently
filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the
Company filed subsequent to such Quarterly Report which may be incorporated by
reference (or corresponding successor reports), and (B) a description of
material developments in the Company's business subsequent to the date of the
latest of such Reports) and all instructions and materials necessary to tender
Securities and Dollar Notes pursuant to the Excess Cash Flow Offer, together
with the information contained in clause (3).

(2) Not later than the date upon which written notice of an
Excess Cash Flow Offer is delivered to the Trustee as provided below, the
Company shall deliver to the Trustee an Officers' Certificate as to (A) the
amount of the Excess Cash Flow Offer (the "Excess Cash Flow Offer Amount"),
including information as to any other Senior Subordinated Indebtedness of the
Company or the Issuer included in the Excess Cash Flow Offer, (B) the percentage
of the Excess Cash Flow remaining after application in accordance with Section
4.10(a)(1) with respect to which such Excess Cash Flow Offer is being made and
(C) the compliance of such allocation with the provisions of Section 4.10(a) and
(b). On such date, the Company shall also irrevocably deposit with the Trustee
or with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust) in Temporary Cash Investments, maturing on the last
day prior to the Excess Cash Flow Purchase Date or on the Excess Cash Flow
Purchase Date if funds are immediately available by open of business, an amount
equal to the Excess Cash Flow Offer Amount to be held for payment in accordance
with the provisions of this Section 4.10. If the Excess Cash Flow Offer includes
other Senior Subordinated Indebtedness, the deposit described in the preceding
sentence may be made with any other paying agent pursuant to arrangements
satisfactory to the Trustee. Upon the expiration of the period for which the
Excess Cash Flow Offer remains open (the "Excess Cash Flow Offer Period"), the
Company shall deliver to the Trustee for cancellation the Securities and Dollar
Notes or portions thereof which have been properly tendered to and are to be
accepted by the Company. The Trustee shall, on the Purchase Date, mail or
deliver payment (or cause the delivery of payment) to each tendering Holder and
the Dollar Notes Holder in the amount of the purchase price. In the event that
the aggregate purchase price of the Securities and Dollar Notes delivered by the
Company to the Trustee is less than the Excess Cash Flow Offer Amount applicable
to the Securities and Dollar Notes, the Trustee shall deliver the excess to the
Company immediately after the expiration of

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the Excess Cash Flow Offer Period for application by the Company in any manner
permitted by this Indenture.

(3) Holders and Dollar Note Holders electing to have either a
Security or Dollar Note purchased shall be required to surrender the Security or
Dollar Note, with an appropriate form duly completed, to the Company at the
address specified in the notice at least three Business Days prior to the Excess
Cash Flow Purchase Date. Holders and Dollar Notes Holders shall be entitled to
withdraw their election if the Trustee or the Company receives not later than
one Business Day prior to the Excess Cash Flow Purchase Date, a telex, facsimile
transmission or letter setting forth the name of the Holder or Dollar Notes
Holder, the principal amount of the Security or Dollar Note which was delivered
for purchase by the Holder or Dollar Notes Holder and a statement that such
Holder or Dollar Notes Holder is withdrawing his election to have such Security
or Dollar Notes purchased. Holders or Dollar Notes Holders whose Securities or
Dollar Notes are purchased only in part shall be issued new Securities or Dollar
Notes equal in principal amount to the unpurchased portion of the Securities or
Dollar Notes surrendered.

(4) At the time the Company delivers Securities or Dollar
Notes to the Trustee which are to be accepted for purchase, the Company shall
also deliver an Officers' Certificate stating that such Securities or Dollar
Notes are to be accepted by the Company pursuant to and in accordance with the
terms of this Section 4.10. A Security or Dollar Note shall be deemed to have
been accepted for purchase at the time the Trustee, directly or through an
agent, mails or delivers payment therefor to the surrendering Holder or Dollar
Notes Holder.

(d) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities or Euro
Notes pursuant to this Section 4.10. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.10,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Section 4.10 by
virtue of its compliance with such securities laws or regulations.

SECTION 4.11. Future Guarantors. The Issuer and the Company
shall cause each domestic Restricted Subsidiary that Guarantees any Indebtedness
of the Company, the Issuer or any other Subsidiary Guarantor to, at the same
time, execute and deliver to the Trustee a Guaranty Agreement pursuant to which
such Restricted Subsidiary will Guarantee

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payment of the Securities on the same terms and conditions as those set forth in
Article 11 of this Indenture.

SECTION 4.12. Additional Amounts. All payments made under or
with respect to the Securities shall be made free and clear of and without
withholding or deduction for or on account of any present or future tax, duty,
levy, impost, assessment or other governmental charge (including penalties,
interest and other liabilities related thereto) (hereinafter "Taxes") imposed or
levied by or on behalf of the government of The Netherlands or any political
subdivision or any authority or agency therein or thereof having power to tax,
or within any other jurisdiction in which the Issuer is organized or is
otherwise resident for tax purposes or any jurisdiction from or through which
payment is made (each a "Relevant Taxing Jurisdiction"), unless it is required
to withhold or deduct Taxes by law or by the interpretation or administration
thereof.

If the Issuer is so required to withhold or deduct any amount
for or on account of Taxes imposed by a Relevant Taxing Jurisdiction from any
payment made under or with respect to the Securities, the Issuer shall pay such
additional amounts ("Additional Amounts") as may be necessary so that the net
amount received by the Holders (including Additional Amounts) after such
withholding or deduction will not be less than the amount the Holders would have
received if such Taxes had not been withheld or deducted; provided, however,
that the foregoing obligation to pay Additional Amounts does not apply to (1)
any Taxes that would not have been so imposed but for the existence of any
present or former connection between the relevant Holder (or between a
fiduciary, settlor, beneficiary, member or shareholder of, or possessor of power
over the relevant Holder, if the relevant Holder is an estate, nominee, trust or
corporation) and the Relevant Taxing Jurisdiction (other than the mere receipt
of such payment or the ownership or holding outside of The Netherlands of such
Security); or (2) any estate, inheritance, gift, sales, excise, transfer,
personal property tax or similar tax, assessment or governmental charge; nor
shall the Issuer be required to pay Additional Amounts (a) if the payment could
have been made without such deduction or withholding if the beneficiary of the
payment had presented the Security for payment within 30 days after the date on
which such payment or such Security became due and payable or the date on which
payment thereof is duly provided for, whichever is later (except to the extent
that the Holder would have been entitled to Additional Amounts had the Security
been presented on the last day of such 30 day period), (b) with respect to any
payment of principal of (or premium, if any, on) or interest on such Security to
any Holder who is a fiduciary or partnership or any person other than the sole
beneficial

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owner of such payment, to the extent that a beneficiary or settlor with respect
to such fiduciary, a member of such a partnership or the beneficial owner of
such payment would not have been entitled to the Additional Amounts had such
beneficiary, settlor, member or beneficial owner been the actual Holder of such
Security, (c) if the Securities are presented for payment in The Netherlands;
provided, however, that at such time the Issuer has at least one paying agent in
the European Union (other than in The Netherlands), or (d) if the Securities are
presented for payment by, on behalf of, a Holder who would be able to avoid
withholding or deduction by presenting any form or certificate and/or making a
declaration of non-residence or similar claim for exemption but fails to do so.

Upon request, the Issuer shall provide the Trustee with
official receipts or other documentation satisfactory to the Trustee evidencing
the payment of the Taxes with respect to which Additional Amounts are paid.

Whenever in this Indenture there is mentioned, in any context:
(1) the payment of principal; (2) purchase prices in connection with a purchase
of Securities; (3) interest; or (4) any other amount payable on or with respect
to any of the Securities, such reference shall be deemed to include payment of
Additional Amounts provided for in this Section to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.

The Issuer shall pay any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise in any jurisdiction from the execution, delivery, enforcement
or registration of the Securities, this Indenture or any other document or
instrument in relation thereof, or the receipt of any payments with respect to
the Securities, excluding such taxes, charges or similar levies imposed by any
jurisdiction outside of The Netherlands, the jurisdiction of incorporation of
any successor of the Issuer or any jurisdiction in which a paying agent is
located, and the Issuer will indemnify the Holders for any such taxes paid by
such Holders.

The obligations described under this Section shall survive any
termination, defeasance or discharge of this Indenture and shall apply mutatis
mutandis to any jurisdiction in which any successor Person to the Issuer is
organized or any political subdivision or taxing authority or agency thereof or
therein.

SECTION 4.13. Compliance Certificate. The Company or the
Issuer shall deliver to the Trustee within

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120 days after the end of each fiscal year of the Company an Officers'
Certificate stating that in the course of the performance by the signers of
their duties as Officers of the Company or the Issuer they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company or the Issuer is taking or
proposes to take with respect thereto. The Issuer also shall comply with TIA
Section 314(a)(4).

SECTION 4.14. Further Instruments and Acts. The Company and
the Subsidiary Guarantors will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper or as the Trustee
may request to carry out more effectively the purpose of this Indenture.

SECTION 4.15. Ownership of the Issuer. The Issuer shall at all
times be a Wholly Owned Subsidiary of the Company.

SECTION 4.16. Limitation on Business Activities of the Issuer.
The Issuer will not, and the Company will not permit the Issuer to (a) incur any
Indebtedness other than (1) the Securities, (2) the Issuer's Guaranty of the
Dollar Notes, (3) the Issuer's guaranty of obligations in respect of the Credit
Agreement and, (4) Indebtedness incurred in compliance with Section 4.03(b)(4)
of this Indenture and, in the case of (1) and (2), any refinancings or
replacements thereof permitted by the Section 4.03 or (b) engage in any business
activities other than (1) the issuance of the Securities and the guaranties
described in the preceding clause (a), (2) the making of Intercompany Loans and
(3) activities incidental to the activities described in clauses (1) or (2) of
this clause (b).

SECTION 4.17. Limitation on Use of Proceeds. The Issuer will
use all the net proceeds of the issuance of the Securities to make Intercompany
Loans and pay fees and expenses of the offering of the Securities, including
customary organizational expenses of the Issuer.

ARTICLE 5

Successor Company

SECTION 5.01. When the Company or Issuer May Merge or Transfer
Assets. Neither the Company nor the Issuer shall consolidate with or merge with
or into, or convey, transfer or lease, in one transaction or a series of

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transactions, directly or indirectly, all or substantially
all its assets to, any Person, unless, in the case of the
Company:

(1) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the
laws of the United States of America, any State thereof or the District
of Columbia or under the laws of Bermuda, the British Virgin Islands,
the Bahamas or Canada and the Successor Company (if not the Company)
shall expressly assume, by an indenture supplemental hereto, executed
and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Company's Guaranty of the
Securities and this Indenture;

(2) immediately after giving pro forma effect to such
transaction (and treating any Indebtedness which becomes an obligation
of the Successor Company or any Subsidiary as a result of such
transaction as having been Incurred by such Successor Company or such
Subsidiary at the time of such transaction), no Default shall have
occurred and be continuing;

(3) immediately after giving pro forma effect to such
transaction, the Successor Company would be able to Incur an additional
$1.00 of Indebtedness pursuant to Section 4.03(a);

(4) immediately after giving pro forma effect to such
transaction, the Successor Company shall have Consolidated Net Worth in
an amount that is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction;

(5) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture;

(6) in the event that the Successor Company in any merger is
organized and existing under the laws of Bermuda, the British Virgin
Islands, the Bahamas or Canada (any such merger, a "Foreign
Jurisdiction Merger"), the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that the Holders will not recognize
income, gain or loss for Netherlands tax purposes as a result of such
transaction and will be subject to Netherlands tax on the same amounts
and at the same times as would have been the case if such transaction
had not occurred; and

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(7) in the event of a Foreign Jurisdiction Merger, the Company
shall have delivered to the Trustee an Opinion of Counsel in the
jurisdiction of the Successor Company to the effect that (A) any
payment of interest or principal under or with respect to the
Securities or the Guaranties will, after giving effect to such
transaction, be exempt from any withholding or deduction for or on
account of any present or future tax, duty, levy, impost, assessment or
other governmental charge of whatever nature imposed or levied by or on
behalf of any jurisdiction from or through which payment is made or in
which the payor is organized, resident or engaged in business for tax
purposes and (B) no other taxes or income (including capital gains)
will be payable by a Holder of Securities under the laws of any
jurisdiction where the Successor Company is or becomes organized,
resident or engaged in business for tax purposes in respect of the
acquisition, ownership or disposition of the Securities, including the
receipt of interest or principal thereon, provided that such Holder
does not use or hold, and is not deemed to use or hold the Securities
in carrying on a business in the jurisdiction where the Successor
Company is or becomes organized, resident or engaged in business for
tax purposes;

provided, however, that clause (3) and (4) will not be applicable to (A) a
Restricted Subsidiary consolidating with, merging into or transferring all or
part of its properties and assets to the Company or (B) the Company merging with
an Affiliate of the Company solely for the purpose and with the sole effect of
reincorporating the Company in another jurisdiction.

The Successor Company shall be the successor to the Company
and shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture, and the predecessor Company, except
in the case of a lease, shall be released from the obligation to pay the
principal of and interest on the Securities.

The Company shall not permit any Subsidiary Guarantor to
consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or a series of transactions, all or substantially all of its assets
to any Person unless: (1) except in the case of a Subsidiary Guarantor that has
been disposed of in its entirety to another Person (other than to the Company or
an Affiliate of the Company), whether through a merger, consolidation or sale of
Capital Stock or assets, the resulting, surviving or transferee Person (if not
such Subsidiary) shall be a Person organized and existing under the laws of the
jurisdiction

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under which such Subsidiary was organized or under the laws of the United States
of America, or any State thereof or the District of Columbia, and such Person
shall expressly assume, by a Guaranty Agreement, in a form satisfactory to the
Trustee, all the obligations of such Subsidiary, if any, under its Subsidiary
Guaranty of the Securities and Dollar Notes; (2) immediately after giving effect
to such transaction or transactions on a pro forma basis (and treating any
Indebtedness which becomes an obligation of the resulting, surviving or
transferee Person as a result of such transaction as having been issued by such
Person at the time of such transaction), no Default shall have occurred and be
continuing; and (3) the Issuer delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
transfer and such Guaranty Agreement, if any, complies with this Indenture.

ARTICLE 6

Defaults and Remedies

SECTION 6.01. Events of Default. An "Event of Default" occurs
if:

(1) the Issuer defaults in any payment of interest or any
Additional Amounts on any Security when the same becomes due and
payable, whether or not such payment shall be prohibited by Article 10,
and such default continues for a period of 30 days;

(2) the Company or the Issuer (i) defaults in the payment of
the principal of any Security when the same becomes due and payable at
its Stated Maturity, upon optional redemption, upon declaration or
otherwise, whether or not such payment shall be prohibited by Article
10, or (ii) fails to redeem or purchase Securities when required
pursuant to this Indenture or the Securities, whether or not such
redemption or purchase shall be prohibited by Article 10;

(3) the Company or the Issuer fails to comply with
Section 5.01;

(4) the Company or the Issuer, as applicable, fails to comply
with Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.11,
4.15, 4.16 or 4.17 (other than a failure to purchase Securities when
required under Section 4.06 or 4.09) and such failure continues for 30
days after the notice specified below;

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(5) the Company, the Issuer or any Subsidiary Guarantor fails
to comply with any of its agreements in the Securities or this
Indenture (other than those referred to in clause (1), (2), (3) or (4)
above) and such failure continues for 60 days after the notice
specified below;

(6) Indebtedness of any Subsidiary Guarantor, the Company, the
Issuer or any Significant Subsidiary is not paid within any applicable
grace period after final maturity or is accelerated by the holders
thereof because of a default and the total amount of such Indebtedness
unpaid or accelerated exceeds $10.0 million, or its foreign currency
equivalent at the time;

(7) any Subsidiary Guarantor, the Company, the Issuer or any
Significant Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:

(A) commences a voluntary case;

(B) consents to the entry of an order for relief
against it in an involuntary case;

(C) consents to the appointment of a Custodian of it
or for any substantial part of its property; or

(D) makes a general assignment for the benefit of its
creditors;

or takes any comparable action under any foreign laws
relating to insolvency;

(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:

(A) is for relief against any Subsidiary Guarantor,
the Company, the Issuer or any Significant Subsidiary in an
involuntary case;

(B) appoints a Custodian of any Subsidiary Guarantor,
the Company, the Issuer or any Significant Subsidiary or for
any substantial part of its property; or

(C) orders the winding up or liquidation of any
Subsidiary Guarantor, the Company, the Issuer or any
Significant Subsidiary;

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or any similar relief is granted under any foreign laws
and the order or decree remains unstayed and in effect
for 60 days;

(9) any judgment or decree for the payment of money in excess
of $10.0 million or its foreign currency equivalent at the time is
entered against any Subsidiary Guarantor, the Company, the Issuer or
any Significant Subsidiary, remains outstanding for a period of 60 days
following the entry of such judgment or decree and is not discharged,
waived or the execution thereof stayed within 10 days after the notice
specified below; or

(10) the Company's Guaranty of the Securities or a Subsidiary
Guaranty ceases to be in full force and effect (other than in
accordance with the terms of this Indenture) or the Company or a
Subsidiary Guarantor denies or disaffirms its obligations under its
Guaranty.

The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.

The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors and (in the case
of the Issuer) means Netherlands bankruptcy law, including without limitation
the provisions thereof relating to surseance van betaling and faillissement. The
term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.

A Default under clauses (4), (5) or (9) is not an Event of
Default until the Trustee or the holders of at least 25% in principal amount of
the outstanding Securities notify the Issuer of the Default and the Issuer or
the Company does not cure such Default within the time specified after receipt
of such notice. Such notice must specify the Default, demand that it be remedied
and state that such notice is a "Notice of Default".

The Issuer shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default under clause (6) or (10) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9), its status and what action the Issuer is taking or
proposes to take with respect thereto.

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SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in Section 6.01(7) or (8) with respect to the
Company or the Issuer) occurs and is continuing, the Trustee by notice to the
Issuer, or the Holders of at least 25% in principal amount of the Securities by
notice to the Issuer and the Trustee, may declare the principal of and accrued
but unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.01(7) or (8) with respect to the
Company or the Issuer, occurs, the principal of and interest on all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Securityholders.
The Holders of a majority in principal amount of the Securities by notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.

SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.

The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.

SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of or interest on a Security, (ii) a Default arising
from the failure to redeem or purchase any Security when required pursuant to
this Indenture or (iii) a Default in respect of a provision that under Section
9.02 cannot be amended without the consent of each Securityholder affected. When
a Default is waived, it is deemed cured, but no such

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waiver shall extend to any subsequent or other Default or impair any consequent
right.

SECTION 6.05. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification or
security satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.

SECTION 6.06. Limitation on Suits. Except to enforce the right
to receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:

(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;

(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;

(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;

(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and

(5) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.

A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.

SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal

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of and interest on the Securities held by such Holder, on or after the
respective due dates expressed in the Securities, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.

SECTION 6.08. Collection Suit by Trustee. If an Event of
Default specified in Section 6.01(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount then due and owing (together with
interest on any unpaid interest to the extent lawful) and the amounts provided
for in Section 7.07.

SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Issuer, its creditors or its
property and, unless prohibited by law or applicable regulations, may vote on
behalf of the Holders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial proceeding
is hereby authorized by each Holder to make payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.

SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:

FIRST: to the Trustee for amounts due under Section 7.07;

SECOND: to holders of Senior Indebtedness of the Issuer and,
if such money or property has been collected from the Company or a
Subsidiary Guarantor, to holders of Senior Indebtedness of the Company
or of such Subsidiary Guarantor, in each case to the extent required by
Article 10, 12 and 14;

THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and

FOURTH: to the Issuer.

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The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section 6.10. At least 15 days
before such record date, the Issuer shall mail to each Securityholder and the
Trustee a notice that states the record date, the payment date and amount to be
paid.

SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any
party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant. This Section 6.11 does not
apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a
suit by Holders of more than 10% in principal amount of the Securities.

SECTION 6.12. Waiver of Stay or Extension Laws. The Issuer (to
the extent it may lawfully do so) shall not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture; and the Issuer
(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law, and shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.

ARTICLE 7

Trustee

SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.

(b) Except during the continuance of an Event of Default:

(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and

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(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).

(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:

(1) this paragraph does not limit the effect of paragraph (b)
of this Section 7.01;

(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and

(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.

(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.

(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuer.

(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.

(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.

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(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01 and to the provisions of the TIA.

SECTION 7.02. Rights of Trustee. (a) The Trustee may
conclusively rely on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document;

(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel;

(c) The Trustee may act through agents or attorneys and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care;

(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence;

(e) The Trustee may consult with counsel of its choice, and
the advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel;

(f) Any request or direction of the Issuer mentioned herein
shall be sufficiently evidenced by an Issuer request or Issuer order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
resolution;

(g) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee security or indemnity satisfactory to the
Trustee against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction;

(h) The Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Trust Officer has actual knowledge thereof
or unless written

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notice of any event which is in fact such a default is received by the Trustee
at the Corporate Trust Office of the Trustee, and such notice references the
Securities and this Indenture;

(i) The rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and to each agent, custodian and other Person
employed to act hereunder; and

(j) The Trustee may request that the Issuer deliver an
Officers' Certificate setting forth the names of individuals and/or titles of
officers authorized at such time to take specified actions pursuant to this
Indenture, which Officers' Certificate may be signed by any person authorized to
sign on Officers' Certificate, including any person specified as so authorized
in any such certificate previously delivered and not superseded.

SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or
co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.

SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Issuer's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Issuer in the Indenture or in any document issued in connection
with the sale of the Securities or in the Securities other than the Trustee's
certificate of authentication.

SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.

SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with

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the May 15 following the date of this Indenture, and in any event prior to July
15 in each year, the Trustee shall mail to each Securityholder a brief report
dated as of May 15 that complies with TIA Section 313(a). The Trustee also shall
comply with TIA Section 313(b).

A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange (if any) on
which the Securities are listed. The Issuer agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.

SECTION 7.07. Compensation and Indemnity. The Issuer shall pay
to the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall reimburse the Trustee upon request
for all reasonable out-of-pocket expenses incurred or made by it, including
costs of collection, in addition to the compensation for its services. Such
expenses shall include the reasonable compensation and expenses, disbursements
and advances of the Trustee's agents, counsel, accountants and experts. The
Issuer shall indemnify the Trustee and any predecessor Trustee and their agents
against any and all loss, liability or expense (including attorneys' fees and
taxes (other than taxes based upon, measured by or determined by the income of
the Trustee)) incurred by it in connection with the administration of this trust
and the performance of its duties hereunder, including the costs and expenses of
defending itself against any claim (whether asserted by the Issuer or any Holder
or any other Person). The Trustee shall notify the Issuer promptly of any claim
for which it may seek indemnity. Failure by the Trustee to so notify the Issuer
shall not relieve the Issuer of its obligations hereunder. The Issuer shall
defend the claim and the Trustee may have separate counsel and the Issuer shall
pay the fees and expenses of such counsel. The Issuer need not reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own wilful misconduct, negligence or bad faith.

To secure the Issuer's payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee other than money or property held in
trust to pay principal of and interest on particular Securities.

The Issuer's payment obligations pursuant to this Section 7.07
shall survive the discharge of this Indenture and the resignation or removal of
the Trustee. When the Trustee incurs expenses after the occurrence of a Default

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specified in Section 6.01(7) or (8) with respect to the Issuer, the expenses are
intended to constitute expenses of administration under the Bankruptcy Law.

SECTION 7.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Issuer. The Holders of a majority in principal
amount of the Securities may remove the Trustee by so notifying the Trustee and
may appoint a successor Trustee. The Issuer shall remove the Trustee if:

(1) the Trustee fails to comply with Section 7.10;

(2) the Trustee is adjudged bankrupt or insolvent;

(3) a receiver or other public officer takes charge of the
Trustee or its property; or

(4) the Trustee otherwise becomes incapable of acting.

If the Trustee resigns, is removed by the Issuer or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Issuer shall promptly appoint a
successor Trustee.

A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Securityholders. The retiring Trustee shall promptly transfer all property held
by it as Trustee to the successor Trustee, subject to the lien provided for in
Section 7.07.

If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in principal amount of the Securities may petition any court of
competent jurisdiction at the expense of the Issuer for the appointment of a
successor Trustee.

If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.

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Notwithstanding the replacement of the Trustee pursuant to
this Section 7.08, the Issuer's obligations under Section 7.07 shall continue
for the benefit of the retiring Trustee.

SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.

In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.

SECTION 7.10. Eligibility; Disqualification. The Trustee shall
at all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.

SECTION 7.11. Preferential Collection of Claims Against
Issuer. The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.

ARTICLE 8

Discharge of Indenture; Defeasance

SECTION 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (1) the Issuer delivers to the

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Trustee all outstanding Securities (other than Securities replaced pursuant to
Section 2.07) for cancellation or (2) all outstanding Securities have become due
and payable, whether at maturity or on a redemption date as a result of the
mailing of a notice of redemption pursuant to Article 3 hereof and the Issuer
irrevocably deposits with the Trustee funds sufficient to pay at maturity or
upon redemption all outstanding Securities, including interest thereon to
maturity or such redemption date (other than Securities replaced pursuant to
Section 2.07), and if in either case the Issuer pays all other sums payable
hereunder by the Issuer, then this Indenture shall, subject to Section 8.01(c),
cease to be of further effect. The Trustee shall acknowledge satisfaction and
discharge of this Indenture on demand of the Issuer accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the Issuer.

(b) Subject to Sections 8.01(c) and 8.02, the Issuer at any
time may terminate (1) all its and the Company's obligations under the
Securities and this Indenture ("legal defeasance option") or (2) the Company's
and the Issuer's obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07,
4.08, 4.09, 4.10, 4.11, 4.15, 4.16 and 4.17 and the operation of Sections
6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections
6.01(7) and (8), with respect only to Significant Subsidiaries) and the
limitations contained in Sections 5.01(3) and 5.01(4) ("covenant defeasance
option"). The Issuer may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option.

If the Issuer exercises its legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default with
respect thereto. If the Issuer exercises its covenant defeasance option, payment
of the Securities may not be accelerated because of an Event of Default
specified in Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in
the case of Sections 6.01(7) and (8), with respect only to Significant
Subsidiaries) or because of the failure of the Company to comply with Sections
5.01(3) and 5.01(4). If the Issuer exercises its legal defeasance option or its
covenant defeasance option, each Subsidiary Guarantor, if any, shall be released
from all its obligations with respect to its Subsidiary Guaranty and the Company
shall be released from all its obligations with respect to its Guaranty.

Upon satisfaction of the conditions set forth herein and upon
request of the Issuer, the Trustee shall acknowledge in writing the discharge of
those obligations that the Issuer terminates.

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(c) Notwithstanding clauses (a) and (b) above, the Issuer's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Issuer's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.

SECTION 8.02. Conditions to Defeasance. The Issuer may
exercise its legal defeasance option or its covenant defeasance option only if:

(1) the Issuer irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations or European Government Obligations
for the payment of principal of and interest on the Securities to
maturity or redemption, as the case may be;

(2) the Issuer delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations or
European Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will
be sufficient to pay principal and interest when due on all the
Securities to maturity or redemption, as the case may be;

(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Sections 6.01(7) or (8) with
respect to the Issuer occurs which is continuing at the end of the
period;

(4) the deposit does not constitute a default under any other
agreement binding on the Issuer and is not prohibited by Article 10;

(5) the Issuer delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under
the Investment Company Act of 1940;

(6) in the case of the legal defeasance option, the Issuer
shall have delivered to the Trustee an Opinion of Counsel stating that
(A) the Issuer has received from, or there has been published by, the
Internal Revenue Service a ruling, or (B) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Securityholders will not recognize
income, gain or loss for Federal income

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tax purposes as a result of such defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance had not
occurred;

(7) in the case of the covenant defeasance option, the Issuer
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
covenant defeasance had not occurred;

(8) the Issuer delivers to the Trustee an Opinion of Counsel
in The Netherlands to the effect that (A) Holders will not recognize
income, gain or loss for Dutch federal or provincial income tax
purposes as a result of such deposit and defeasance, and will be
subject to income tax of such jurisdiction on the same amounts, and in
the same manner and at the same times as would have been the case if
such deposit and defeasance, had not occurred, and (B) payments from
the defeasance trust will be free and exempt from any and all
withholding and other income taxes of whatever nature of The
Netherlands or any province thereof or any political subdivision
thereof or therein having the power to tax; and

(9) the Issuer delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities as
contemplated by this Article 8 have been complied with.

Before or after a deposit, the Issuer may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.

For purposes of this Section, money denominated in currency
other than Euro and U.S. Government Obligations deposited pursuant to this
section shall be subject in their entirety (including principal, interest and
premium, if any) to a customary Currency Agreement that is of a duration not
less than the defeasance period that fixes the exchange rate of such money or
U.S. Government Obligations into Euro for the benefit of the Trustee. The amount
of such money and U.S. Government Obligations expressed in Euro will be as
provided in such Currency Agreement. The counterparty to such Currency Agreement
shall be a commercial bank organized in the United States having capital and
surplus in excess of $500.0 million or a commercial bank organized under the
laws

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of any country that is a member of the OECD having total assets in excess of
$500.0 million (or its foreign currency equivalent at the time). Such
counterparty may obtain from the Issuer an Opinion of Counsel to the effect that
such currency agreement has been duly authorized and entered into by the Issuer.

SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money, European Government Obligations or U.S. Government
Obligations deposited with it pursuant to this Article 8. It shall apply the
deposited money and the money from European Government Obligations or U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article 10.

SECTION 8.04. Repayment to Issuer. The Trustee and the Paying
Agent shall promptly turn over to the Issuer upon request any excess money or
securities held by them at any time.

Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Issuer upon request any money held by them
for the payment of principal or interest that remains unclaimed for two years,
and, thereafter, Securityholders entitled to the money must look to the Issuer
for payment as general creditors.

SECTION 8.05. Indemnity for Government Obligations. The Issuer
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited European Government Obligations or U.S.
Government Obligations or the principal and interest received on such European
Government or U.S. Government Obligations.

SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money, European Government Obligations or U.S. Government
Obligations in accordance with this Article 8 by reason of any legal proceeding
or by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company's
and the Issuer's obligations under this Indenture and the Securities shall be
revived and reinstated as though no deposit had occurred pursuant to this
Article 8 until such time as the Trustee or Paying Agent is permitted to apply
all such money, European Government Obligations or U.S. Government Obligations
in accordance with this Article 8; provided, however, that, if the Issuer has
made any payment of interest on or principal of any Securities because of the
reinstatement of its obligations, the Issuer shall be

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subrogated to the rights of the Holders of such Securities to receive such
payment from the money, European Government Obligations or U.S. Government
Obligations held by the Trustee or Paying Agent.

ARTICLE 9

Amendments

SECTION 9.01. Without Consent of Holders. The Issuer, the
Company, the Subsidiary Guarantors and the Trustee may amend this Indenture or
the Securities without notice to or consent of any Securityholder:

(1) to cure any ambiguity, omission, defect or inconsistency;

(2) to comply with Article 5;

(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;

(4) to make any change in Article 10 that would limit or
terminate the benefits available to any holder of Senior Indebtedness
of the Company or the Issuer or of a Subsidiary Guarantor (or
Representatives therefor) under Article 10, 12 or 14;

(5) to add guarantees with respect to the Securities,
including any Subsidiary Guaranties, or to secure the Securities;

(6) to add to the covenants of the Issuer, the Company or a
Subsidiary Guarantor for the benefit of the Holders or to surrender any
right or power herein conferred upon the Issuer, the Company or a
Subsidiary Guarantor;

(7) to comply with any requirements of the SEC in connection
with qualifying, or maintaining the qualification of, this Indenture
under the TIA; or

(8) to make any change that does not adversely
affect the rights of any Securityholder.

An amendment under this Section 9.01 may not make any change
that adversely affects the rights under

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Article 10, 12 or 14 of any holder of Senior Indebtedness of the Issuer, the
Company or of a Subsidiary Guarantor then outstanding unless the holders of such
Senior Indebtedness (or any group or Representative thereof authorized to give a
consent) consent to such change.

After an amendment under this Section 9.01 becomes effective,
the Issuer shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section 9.01.

SECTION 9.02. With Consent of Holders. The Issuer, the Company
the Subsidiary Guarantors and the Trustee may amend this Indenture or the
Securities without notice to any Securityholder but with the written consent of
the Holders of at least a majority in principal amount of the Securities then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Securities). However, without the consent of each
Securityholder affected thereby, an amendment may not:

(1) reduce the amount of Securities whose Holders must consent
to an amendment;

(2) reduce the rate of or extend the time for payment of
interest on any Security;

(3) reduce the principal amount of or extend the Stated
Maturity of any Security;

(4) reduce the amount payable upon the redemption of any
Security or change the time at which any Security may be redeemed in
accordance with Article 3;

(5) make any Security payable in money other than that stated
in the Security;

(6) make any changes in the ranking or priority of any
Security that would adversely affect the Securityholders;

(7) make any change in Section 6.04 or 6.07 or the
second sentence of this Section 9.02;

(8) make any change in the Company Guaranty or any Subsidiary
Guaranty that would adversely affect the Securityholders; or

(9) make any change in Section 4.12 that adversely affects the
rights of any Securityholder or amend terms of the Securities or this
Indenture in a way that would

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result in the loss of an exemption from any of the Taxes described
thereunder.

It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent approves the substance thereof.

An amendment under this Section 9.02 may not make any change
that adversely affects the rights under Article 10, 12 or 14 of any holder of
Senior Indebtedness of the Issuer, the Company or of a Subsidiary Guarantor then
outstanding unless the holders of such Senior Indebtedness (or any group or
Representative thereof authorized to give a consent) consent to such change.

After an amendment under this Section 9.02 becomes effective,
the Issuer shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section 9.02.

SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.

SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder. An
amendment or waiver becomes effective upon the execution of such amendment or
waiver by the Trustee.

The Issuer may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders

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after such record date. No such consent shall be valid or effective for more
than 120 days after such record date.

SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Issuer or the Trustee so determines, the Issuer in
exchange for the Security shall issue and the Trustee shall authenticate a new
Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.

SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article 9 if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.

SECTION 9.07. Payment for Consent. Neither the Issuer nor any
Affiliate of the Issuer shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.

ARTICLE 10

Subordination

SECTION 10.01. Agreement To Subordinate. The Issuer agrees,
and each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment of all
Senior Indebtedness of the Issuer and that the subordination is for the benefit
of and enforceable by the holders of such Senior Indebtedness. The Securities
shall in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Issuer and only

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Indebtedness of the Issuer which is Senior Indebtedness of the Issuer shall rank
senior to the Securities in accordance with the provisions set forth herein. All
provisions of this Article 10 shall be subject to Section 10.12.

SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Issuer to creditors upon a total or
partial liquidation or a total or partial dissolution of the Issuer or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Issuer or its property:

(1) holders of Senior Indebtedness of the Issuer shall be
entitled to receive payment in full in cash of such Senior Indebtedness
before Securityholders shall be entitled to receive any payment of
principal of or interest on the Securities; and

(2) until such Senior Indebtedness is paid in full in cash,
any payment or distribution to which Securityholders would be entitled
but for this Article 10 shall be made to holders of such Senior
Indebtedness as their interests may appear, except that Securityholders
may receive shares of Capital Stock and any debt securities that are
subordinated to such Senior Indebtedness to at least the same extent as
the Securities.

SECTION 10.03. Default on Senior Indebtedness of the Issuer.
The Issuer shall not pay the principal of or interest on the Securities or make
any deposit pursuant to Section 8.01 and may not purchase, redeem or otherwise
retire any Securities (collectively, "pay the Securities") if either of the
following (a "Payment Default") occurs (1) any Designated Senior Indebtedness of
the Issuer is not paid in cash when due; or (2) any other default on Designated
Senior Indebtedness of the Issuer occurs and the maturity of such Designated
Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, the Payment Default has been cured or waived and any such
acceleration has been rescinded or such Designated Senior Indebtedness has been
paid in full in cash; provided, however, that the Issuer shall be entitled to
pay the Securities without regard to the foregoing if the Issuer and the Trustee
receive written notice approving such payment from the Representative of all
Designated Senior Indebtedness with respect to which a Payment Default has
occurred and is continuing. During the continuance of any default (other than a
Payment Default) with respect to any Designated Senior Indebtedness of the
Issuer pursuant to which the maturity thereof may be accelerated immediately
without further notice (except such notice as may be required to effect such
acceleration) or the expiration of

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any applicable grace periods, the Issuer shall not pay the Securities for a
period (a "Payment Blockage Period") commencing upon the receipt by the Trustee
of (with a copy to the Issuer) written notice (a "Blockage Notice") of such
default from the Representative of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter. The Payment Blockage Period shall end earlier if such Payment
Blockage Period is terminated (1) by written notice to the Trustee and the
Issuer from the Person or Persons who gave such Blockage Notice; (2) because the
default giving rise to such Blockage Notice is cured, waived or otherwise no
longer continuing; or (3) because such Designated Senior Indebtedness has been
discharged or repaid in full in cash. Notwithstanding the provisions described
in the immediately preceding two sentences (but subject to the provisions
contained in the first sentence of this Section 10.03), unless the holders of
such Designated Senior Indebtedness or the Representative of such Designated
Senior Indebtedness shall have accelerated the maturity of such Designated
Senior Indebtedness, the Issuer shall be entitled to resume payments on the
Securities after termination of such Payment Blockage Period. The Securities
shall not be subject to more than one Payment Blockage Period in any consecutive
360-day period, irrespective of the number of defaults with respect to
Designated Senior Indebtedness of the Issuer during such period; provided,
however, that if any Blockage Notice within such 360-day period is given by or
on behalf of any holders of Designated Senior Indebtedness of the Issuer (other
than the Bank Indebtedness), the Representative of the Bank Indebtedness shall
be entitled to give another Blockage Notice within such period; provided
further, however, that in no event shall the total number of days during which
any Payment Blockage Period or Periods is in effect exceed 179 days in the
aggregate during any 360-consecutive-day period, and there must be 181 days
during any 360-consecutive day period during which no Payment Blockage Period is
in effect. For purposes of this Section 10.03, no default or event of default
which existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness of the Issuer
initiating such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such default or event of default shall have been cured
or waived for a period of not less than 90 consecutive days.

SECTION 10.04. Acceleration of Payment of Securities. If
payment of the Securities is accelerated because of an Event of Default, the
Issuer or the Trustee

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shall promptly notify the holders of the Designated Senior Indebtedness of the
Issuer (or their Representatives) of the acceleration. If any Designated Senior
Indebtedness of the Issuer is outstanding, the Issuer shall not pay the
Securities until five Business Days after the Representatives of all the issues
of Designated Senior Indebtedness of the Issuer receive notice of such
acceleration and, thereafter, shall be entitled to pay the Securities only if
this Article 10 otherwise permits payment at that time.

SECTION 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 10 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness of the Issuer and pay
it over to them as their interests may appear.

SECTION 10.06. Subrogation. After all Senior Indebtedness of
the Issuer is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to such Senior Indebtedness. A
distribution made under this Article 10 to holders of such Senior Indebtedness
which otherwise would have been made to Securityholders is not, as between the
Issuer and Securityholders, a payment by the Issuer on such Senior Indebtedness.

SECTION 10.07. Relative Rights. This Article 10 defines the
relative rights of Securityholders and holders of Senior Indebtedness of the
Issuer. Nothing in this Indenture shall:

(1) impair, as between the Issuer and Securityholders, the
obligation of the Issuer, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or

(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default, subject to the rights of holders
of Senior Indebtedness of the Issuer to receive distributions otherwise
payable to Securityholders.

SECTION 10.08. Subordination May Not Be Impaired by Issuer. No
right of any holder of Senior Indebtedness of the Issuer to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Issuer or by its failure to comply with this
Indenture.

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SECTION 10.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 10.03, the Trustee or Paying Agent shall continue to
make payments on the Securities and shall not be charged with knowledge of the
existence of facts that under this Article 10 would prohibit the making of any
such payments unless, not less than two Business Days prior to the date of such
payment, a Trust Officer of the Trustee receives notice satisfactory to it that
such payments are prohibited by this Article 10. The Issuer, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness of the Issuer shall be entitled to give the notice; provided,
however, that, if an issue of Senior Indebtedness of the Issuer has a
Representative, only the Representative shall be entitled to give the notice.

The Trustee in its individual or any other capacity shall be
entitled to hold Senior Indebtedness of the Issuer with the same rights it would
have if it were not Trustee. The Registrar and co-registrar and the Paying Agent
shall be entitled to do the same with like rights. The Trustee shall be entitled
to all the rights set forth in this Article 10 with respect to any Senior
Indebtedness of the Issuer which may at any time be held by it, to the same
extent as any other holder of such Senior Indebtedness; and nothing in Article 7
shall deprive the Trustee of any of its rights as such holder. Nothing in this
Article 10 shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 7.07.

SECTION 10.10. Distribution or Notice to Representative.
Whenever any Person is to make a distribution or give a notice to holders of
Senior Indebtedness of the Issuer, such Person shall be entitled to make such
distribution or give such notice to their Representative (if any).

SECTION 10.11. Article 10 Not To Prevent Events of Default or
Limit Right To Accelerate. The failure to make a payment pursuant to the
Securities by reason of any provision in this Article 10 shall not be construed
as preventing the occurrence of a Default. Nothing in this Article 10 shall have
any effect on the right of the Securityholders or the Trustee to accelerate the
maturity of the Securities.

SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations or European Government Obligations held in trust
under Article 8 by the Trustee for the payment of principal of and interest on
the Securities shall not be subordinated to the prior payment of any Senior
Indebtedness of the

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Issuer or subject to the restrictions set forth in this Article 10, and none of
the Securityholders shall be obligated to pay over any such amount to the Issuer
or any holder of Senior Indebtedness of the Issuer or any other creditor of the
Issuer.

SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (1) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (2) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the
Securityholders or (3) upon the Representatives of Senior Indebtedness of the
Issuer for the purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of such Senior Indebtedness and other
Indebtedness of the Issuer, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article 10. In the event that the Trustee determines, in good faith, that
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness of the Issuer to participate in any payment or distribution
pursuant to this Article 10, the Trustee shall be entitled to request such
Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of such Senior Indebtedness held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article 10, and, if such
evidence is not furnished, the Trustee shall be entitled to defer any payment to
such Person pending judicial determination as to the right of such Person to
receive such payment. The provisions of Sections 7.01 and 7.02 shall be
applicable to all actions or omissions of actions by the Trustee pursuant to
this Article 10.

SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Issuer as provided in this Article 10 and appoints
the Trustee as attorney-in-fact for any and all such purposes.

SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness of the Issuer. The Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness of the Issuer and shall not be liable
to any such holders if it shall mistakenly pay over or distribute

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to Securityholders or the Issuer or any other Person, money or assets to which
any holders of Senior Indebtedness of the Issuer shall be entitled by virtue of
this Article 10 or otherwise.

SECTION 10.16. Reliance by Holders of Senior Indebtedness of
the Issuer on Subordination Provisions. Each Securityholder by accepting a
Security acknowledges and agrees that the foregoing subordination provisions
are, and are intended to be, an inducement and a consideration to each holder of
any Senior Indebtedness of the Issuer, whether such Senior Indebtedness was
created or acquired before or after the issuance of the Securities, to acquire
and continue to hold, or to continue to hold, such Senior Indebtedness and such
holder of such Senior Indebtedness shall be deemed conclusively to have relied
on such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.

ARTICLE 11

The Company Guaranty

SECTION 11.01. The Company Guaranty. The Company hereby
unconditionally and irrevocably guarantees to each Holder and to the Trustee and
its successors and assigns (a) the full and punctual payment of principal of and
interest on the Securities when due, whether at maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of the Issuer under
this Indenture and the Securities and (b) the full and punctual performance
within applicable grace periods of all other obligations of the Issuer under
this Indenture and the Securities (all the foregoing being for purposes of this
Article 11 collectively called the "Obligations"). The Company further agrees
that the Obligations may be extended or renewed, in whole or in part, without
notice or further assent from the Company and that the Company will remain bound
under this Article 11 notwithstanding any extension or renewal of any
Obligation.

The Company waives presentation to, demand of, payment from
and protest to the Issuer of any of the Obligations and also waives notice of
protest for nonpayment. The Company waives notice of any default under the
Securities or the Obligations. The obligations of the Company hereunder shall
not be affected by (a) the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any right or remedy against the Issuer or any
other Person under this Indenture, the Securities or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of this

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Indenture, the Securities or any other agreement; (d) the release of any
security held by any Holder or the Trustee for the Obligations or any of them;
or (e) the failure of any Holder or the Trustee to exercise any right or remedy
against any other guarantor of the Obligations.

The Company further agrees that its Guaranty herein
constitutes a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waives any right to require that any resort be
had by any Holder or the Trustee to any security held for payment of the
Obligations.

The Company Guaranty is, to the extent and in the manner set
forth in Article 12, subordinated and subject in right of payment to the prior
payment in full of the principal of and premium, if any, and interest on all
Senior Indebtedness of the Company and such Guaranty is made subject to such
provisions of this Indenture.

Except as expressly set forth in Sections 8.01(a) and (b) and
8.02, the obligations of the Company hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of the Company herein shall not be discharged or impaired or
otherwise affected by the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any remedy under this Indenture, the Securities or
any other agreement, by any waiver or modification of any thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
the Company or would otherwise operate as a discharge of the Company as a matter
of law or equity.

The Company further agrees that its Guarantee herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Obligation is
rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Issuer or otherwise.

In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against the
Company by

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virtue hereof, upon the failure of the Issuer to pay the principal of or
interest on any Obligation when and as the same shall become due, whether at
maturity, by acceleration, by redemption or otherwise, or to perform or comply
with any other Obligation, the Company hereby promises to and shall, upon
receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in
cash, to the Holders or the Trustee an amount equal to the sum of (1) the unpaid
amount of such Obligations, (2) accrued and unpaid interest on such Obligations
(but only to the extent not prohibited by law) and (3) all other monetary
Obligations of the Issuer to the Holders and the Trustee.

The Company agrees that it shall not be entitled to any right
of subrogation in respect of any Obligations guaranteed hereby until payment in
full of all Obligations and all obligations to which the Obligations are
subordinated as provided in Article 12. The Company further agrees that, as
between it, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the Obligations Guaranteed hereby may be accelerated as
provided in Article 6 for the purposes of the Company's Guaranty herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such Obligations as provided in
Article 6, such Obligations (whether or not due and payable) shall forthwith
become due and payable by the Company for the purposes of this Section.

The Company also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee or any Holder in
enforcing any rights under this Section.

SECTION 11.02. Successors and Assigns. This Article 11 shall
be binding upon the Company and its successors and assigns and shall enure to
the benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon that party in this Indenture and in the
Securities shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Indenture.

SECTION 11.03. No Waiver. Neither a failure nor a delay on the
part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article 11 shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Trustee and
the Holders

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herein expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which either may have under this Article 11 at law, in
equity, by statute or otherwise.

SECTION 11.04. Modification. No modification, amendment or
waiver of any provision of this Article 11, nor the consent to any departure by
the Company therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in the same, similar or other circumstances.

ARTICLE 12

Subordination of the Company Guaranty

SECTION 12.01. Agreement To Subordinate. The Company agrees,
and each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Company's Guaranty is subordinated in right of payment, to the
extent and in the manner provided in this Article 12, to the prior payment of
all Senior Indebtedness of the Company and that the subordination is for the
benefit of and enforceable by the holders of such Senior Indebtedness. The
Obligations of the Company shall in all respects rank pari passu with all other
Senior Subordinated Indebtedness of the Company and only Senior Indebtedness of
the Company (including the Company's Guaranty of Senior Indebtedness of the
Issuer) shall rank senior to the Obligations of the Company in accordance with
the provisions set forth herein.

SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:

(1) holders of Senior Indebtedness of the Company shall be
entitled to receive payment in full of such Senior Indebtedness before
Securityholders shall be entitled to receive any payment pursuant to
the Guaranty of the Company; and

(2) until the Senior Indebtedness of the Company is paid in
full in cash, any payment or distribution to which Securityholders
would be entitled but for this Article 12 shall be made to holders of
such Senior

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Indebtedness as their interests may appear, except that Securityholders
may receive shares of Capital Stock and any debt securities of the
Company that are subordinated to such Senior Indebtedness to at least
the same extent as Guaranty.

SECTION 12.03. Default on Senior Indebtedness of the Company.
The Company shall make its Guaranty or purchase, redeem or otherwise retire or
defease any Securities or other Obligations (collectively, "pay its Guaranty")
if either of the following (a "Payment Default") occurs (1) any Designated
Senior Indebtedness of the Company is not paid when due; or (2) any other
default on Designated Senior Indebtedness of the Company occurs and the maturity
of such Designated Senior Indebtedness is accelerated in accordance with its
terms; unless, in either case, the Payment Default has been cured or waived and
any such acceleration has been rescinded or such Designated Senior Indebtedness
has been paid in full; provided, however, that the Company shall be entitled to
pay its Guaranty without regard to the foregoing if the Company and the Trustee
receive written notice approving such payment from the Representative of any
Designated Senior Indebtedness with respect to which the Payment Default has
occurred and is continuing. During the continuance of any default (other than a
Payment Default) with respect to any Designated Senior Indebtedness of the
Company pursuant to which the maturity thereof may be accelerated immediately
without further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, the Company
shall not pay its Guaranty for a period (a "Payment Blockage Period") commencing
upon the receipt by the Trustee of (with a copy to the Company) written notice
(a "Blockage Notice") of such default from the Representative of such Designated
Senior Indebtedness specifying an election to effect a Payment Blockage Period
and ending 179 days thereafter. The Payment Blockage Period shall end earlier if
such Payment Blockage Period is terminated (1) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice; (2)
because the default giving rise to such Blockage Notice is cured, waived or
otherwise no longer continuing; or (3) because such Designated Senior
Indebtedness has been discharged or repaid in full. Notwithstanding the
provisions described in the immediately preceding two sentences (but subject to
the provisions contained in the first sentence of this Section), unless the
holders of such Designated Senior Indebtedness giving such Payment Notice or the
Representative of such Designated Senior Indebtedness shall have accelerated the
maturity of such Designated Senior Indebtedness, the Company shall be entitled
to resume payments pursuant to its Guaranty after termination of such Payment
Blockage Period. The Company shall not be subject

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to more than one Blockage Period in any consecutive 360-day period, irrespective
of the number of defaults with respect to Designated Senior Indebtedness of the
Company during such period; provided, however, that if any Blockage Notice
within such 360-day period is given by or on behalf of any holders of Designated
Senior Indebtedness of the Issuer (other than the Bank Indebtedness), the
Representative of the Bank Indebtedness shall be entitled to give another
Blockage Notice within such period; provided further, however, that in no event
shall the total number of days during which any Payment Blockage Period or
Periods is in effect exceed 179 days in the aggregate during any
360-consecutive-day period, and there must be 181 days during any
360-consecutive day period during which no Payment Blockage Period is in effect.
For purposes of this Section, no default or event of default which existed or
was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness of the Company initiating
such Payment Blockage Period shall be, or be made, the basis of the commencement
of a subsequent Payment Blockage Period by the Representative of such Designated
Senior Indebtedness, whether or not within a period of 360 consecutive days,
unless such default or event of default shall have been cured or waived for a
period of not less than 90 consecutive days.

SECTION 12.04. Demand for Payment. If a demand for payment is
made on the Company pursuant to Article 11, the Trustee shall promptly notify
the holders of the Designated Senior Indebtedness of the Company (or their
Representatives) of such demand.

SECTION 12.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 12 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness of the Company and pay
it over to it or its Representatives as their interests may appear.

SECTION 12.06. Subrogation. After all Senior Indebtedness of
the Company is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to Senior Indebtedness of the
Company. A distribution made under this Article 12 to holders of such Senior
Indebtedness which otherwise would have been made to Securityholders is not, as
between the Company and Securityholders, a payment by the Company on such Senior
Indebtedness.

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SECTION 12.07. Relative Rights. This Article 12 defines the
relative rights of Securityholders and holders of Senior Indebtedness of the
Company. Nothing in this Indenture shall:

(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
its Guaranty to the extent set forth in Article 11; or

(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a default by the Company under its
Guaranty, subject to the rights of holders of Senior Indebtedness of
the Company to receive distributions otherwise payable to
Securityholders.

SECTION 12.08. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Indebtedness of the Company to enforce the
subordination of the Guaranty of the Company shall be impaired by any act or
failure to act by the Company or by its failure to comply with this Indenture.

SECTION 12.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 12.03, the Trustee or Paying Agent shall continue to
make payments on any Guaranty and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives written notice satisfactory to it that such
payments are prohibited by this Article 12. The Issuer, the Company, the
Registrar or co-registrar, the Paying Agent, a Representative or a holder of
Senior Indebtedness of the Company shall be entitled to give the notice;
provided, however, that, if an issue of Senior Indebtedness of the Company has a
Representative, only the Representative shall be entitled to give the notice.

The Trustee in its individual or any other capacity shall be
entitled to hold Senior Indebtedness of the Company with the same rights it
would have if it were not the Trustee. The Registrar and co-registrar and the
Paying Agent may do the same with like rights. The Trustee shall be entitled to
all the rights set forth in this Article 12 with respect to any Senior
Indebtedness of the Company which may at any time be held by it, to the same
extent as any other holder of such Senior Indebtedness; and nothing in Article 7
shall deprive the Trustee of any of its rights as such holder. Nothing in this
Article 12 shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 7.07.

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SECTION 12.10. Distribution or Notice to Representative.
Whenever any Person is to make a distribution or give a notice to holders of
Senior Indebtedness of the Company, such Person shall be entitled to make such
distribution or give such notice to their Representative (if any).

SECTION 12.11. Article 12 Not To Prevent Events of Default or
Limit Right To Demand Payment. The failure to make a payment pursuant to a
Guaranty by reason of any provision in this Article 12 shall not be construed as
preventing the occurrence of a Default. Nothing in this Article 12 shall have
any effect on the right of the Securityholders or the Trustee to make a demand
for payment on the Company pursuant to its Guaranty.

SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 12, the Trustee and the Securityholders
shall be entitled to rely (1) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (2) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the
Securityholders or (3) upon the Representatives for the holders of Senior
Indebtedness of the Company for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of such Senior
Indebtedness and other indebtedness of the Company or the Issuer, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article 12. In the event that
the Trustee determines, in good faith, that evidence is required with respect to
the right of any Person as a holder of Senior Indebtedness of the Company to
participate in any payment or distribution pursuant to this Article 12, the
Trustee shall be entitled to request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
of the Company held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article 12, and, if such evidence is not
furnished, the Trustee shall be entitled to defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article 12.

SECTION 12.13. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take

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such action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Securityholders and the holders of Senior Indebtedness
of the Company as provided in this Article 12 and appoints the Trustee as
attorney-in-fact for any and all such purposes.

SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of the Company. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of the Company and shall
not be liable to any such holders if it shall mistakenly pay over or distribute
to Securityholders or the Issuer or any other Person, money or assets to which
any holders of such Senior Indebtedness shall be entitled by virtue of this
Article 12 or otherwise.

SECTION 12.15. Reliance by Holders of Senior Indebtedness of
the Company on Subordination Provisions. Each Securityholder by accepting a
Security acknowledges and agrees that the foregoing subordination provisions
are, and are intended to be, an inducement and a consideration to each holder of
any Senior Indebtedness of the Company, whether such Senior Indebtedness was
created or acquired before or after the issuance of the Securities, to acquire
and continue to hold, or to continue to hold, such Senior Indebtedness and such
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.

ARTICLE 13

Subsidiary Guaranties

SECTION 13.01. Guaranties. Each Subsidiary Guarantor hereby
unconditionally and irrevocably guarantees, jointly and severally, to each
Holder and to the Trustee and its successors and assigns (a) the full and
punctual payment of principal of and interest on the Securities when due,
whether at maturity, by acceleration, by redemption or otherwise, and all other
monetary obligations of the Issuer under this Indenture and the Securities and
(b) the full and punctual performance within applicable grace periods of all
other obligations of the Issuer under this Indenture and the Securities (all the
foregoing being for the purposes of this Article 13 collectively called the
"Obligations"). Each Subsidiary Guarantor further agrees that the Obligations
may be extended or renewed, in whole or in part, without notice or further
assent from such Subsidiary Guarantor and that such Subsidiary Guarantor will
remain bound under this Article 13 notwithstanding any extension or renewal of
any Obligation.

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Each Subsidiary Guarantor waives presentation to, demand of,
payment from and protest to the Issuer of any of the Obligations and also waives
notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of any
default under the Securities or the Obligations. The obligations of each
Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Issuer or any other Person under this Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Indenture, the Securities or any other agreement;
(d) the release of any security held by any Holder or the Trustee for the
Obligations or any of them; (e) the failure of any Holder or the Trustee to
exercise any right or remedy against any other guarantor of the Obligations; or
(f) except as set forth in Section 13.06, any change in the ownership of such
Subsidiary Guarantor.

Each Subsidiary Guarantor further agrees that its Subsidiary
Guaranty herein constitutes a guarantee of payment, performance and compliance
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by any Holder or the Trustee to any security held for
payment of the Obligations.

Each Subsidiary Guaranty is, to the extent and in the manner
set forth in Article 14, subordinated and subject in right of payment to the
prior payment in full of the principal of and premium, if any, and interest on
all Senior Indebtedness of the Subsidiary Guarantor giving such Subsidiary
Guaranty and each Subsidiary Guaranty is made subject to such provisions of this
Indenture.

Except as expressly set forth in Sections 8.01(b), 13.02 and
13.06, the obligations of each Subsidiary Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Subsidiary Guarantor herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Securities or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the obligations, or by any other act or thing

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or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of such Subsidiary Guarantor or would
otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law
or equity.

Each Subsidiary Guarantor further agrees that its Guarantee
herein shall continue to be effective or be reinstated, as the case may be, if
at any time payment, or any part thereof, of principal of or interest on any
Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Issuer or otherwise.

In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against any
Subsidiary Guarantor by virtue hereof, upon the failure of the Issuer to pay the
principal of or interest on any Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Obligation, each Subsidiary Guarantor hereby
promises to and shall, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (1) the unpaid amount of such Obligations, (2) accrued and unpaid
interest on such Obligations (but only to the extent not prohibited by law) and
(3) all other monetary Obligations of the Issuer to the Holders and the Trustee.

Each Subsidiary Guarantor agrees that it shall not be entitled
to any right of subrogation in respect of any Obligations guaranteed hereby
until payment in full of all Obligations and all obligations to which the
Obligations are subordinated as provided in Article 14. Each Subsidiary
Guarantor further agrees that, as between it, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the Obligations
Guaranteed hereby may be accelerated as provided in Article 6 for the purposes
of such Subsidiary Guarantor's Subsidiary Guaranty herein, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article 6, such Obligations
(whether or not due and payable) shall forthwith become due and payable by such
Subsidiary Guarantor for the purposes of this Section 13.01.

Each Subsidiary Guarantor also agrees to pay any and all costs
and expenses (including reasonable attorneys' fees) incurred by the Trustee or
any Holder in enforcing any rights under this Section.

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SECTION 13.02. Limitation on Liability. Any term or provision
of this Indenture to the contrary notwithstanding, the maximum aggregate amount
of the Obligations guaranteed hereunder by any Subsidiary Guarantor shall not
exceed the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.

Each Subsidiary Guarantor that makes a payment under its
Guaranty will be entitled to a contribution from each other Subsidiary Guarantor
in an amount equal to such other Subsidiary Guarantor's pro rata portion of such
payment based on the respective net assets of all the Subsidiary Guarantors at
the time of such payment determined in accordance with GAAP.

SECTION 13.03. Successors and Assigns. This Article 13 shall
be binding upon each Subsidiary Guarantor and its successors and assigns and
shall enure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.

SECTION 13.04. No Waiver. Neither a failure nor a delay on the
part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article 13 shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Trustee and
the Holders herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Article 13
at law, in equity, by statute or otherwise.

SECTION 13.05. Modification. No modification, amendment or
waiver of any provision of this Article 13, nor the consent to any departure by
any Subsidiary Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Trustee, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on any Subsidiary Guarantor in any case
shall entitle such Subsidiary Guarantor to any other or further notice or demand
in the same, similar or other circumstances.

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SECTION 13.06. Release of Subsidiary Guarantor. Upon the sale
(including any sale pursuant to any exercise of remedies by a holder of Senior
Indebtedness of the Issuer or of such Subsidiary Guarantor) or other disposition
(including by way of consolidation or merger) of a Subsidiary Guarantor or the
sale or disposition of all or substantially all the assets of such Subsidiary
Guarantor (in each case other than a sale or disposition to the Issuer or an
Affiliate of the Issuer) or at such time as such Subsidiary Guarantor no longer
Guarantees any other Indebtedness of the Company or the Issuer, such Subsidiary
Guarantor shall be deemed released from all obligations under this Article 13
without any further action required on the part of the Trustee or any Holder. At
the request of the Issuer, the Trustee shall execute and deliver an appropriate
instrument evidencing such release.

ARTICLE 14

Subordination of Subsidiary Guaranties

SECTION 14.01. Agreement To Subordinate. Each Subsidiary
Guarantor agrees, and each Securityholder by accepting a Security agrees, that
the Indebtedness evidenced by such Subsidiary Guarantor's Subsidiary Guaranty is
subordinated in right of payment, to the extent and in the manner provided in
this Article 14, to the prior payment of all Senior Indebtedness of such
Subsidiary Guarantor and that the subordination is for the benefit of and
enforceable by the holders of such Senior Indebtedness. The Obligations of a
Subsidiary Guarantor shall in all respects rank pari passu with all other Senior
Subordinated Indebtedness of such Subsidiary Guarantor and only Senior
Indebtedness of such Subsidiary Guarantor (including such Subsidiary)
Guarantor's Guaranty of Senior Indebtedness of the Issuer) shall rank senior to
the Obligations of such Subsidiary Guarantor in accordance with the provisions
set forth herein.

SECTION 14.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of any Subsidiary Guarantor to creditors
upon a total or partial liquidation or a total or partial dissolution of such
Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Subsidiary Guarantor or its
property:

(1) holders of Senior Indebtedness of such Subsidiary
Guarantor shall be entitled to receive payment in full in cash of such
Senior Indebtedness before Securityholders shall be entitled to receive
any

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payment pursuant to the Subsidiary Guaranty of such Subsidiary
Guarantor; and

(2) until the Senior Indebtedness of any Subsidiary Guarantor
is paid in full in cash, any payment or distribution to which
Securityholders would be entitled but for this Article 14 shall be made
to holders of such Senior Indebtedness as their interests may appear,
except that Securityholders may receive shares of Capital Stock and any
debt securities of such Subsidiary Guarantor that are subordinated to
such Senior Indebtedness to at least the same extent as Subsidiary
Guaranty.

SECTION 14.03. Default on Senior Indebtedness of Subsidiary
Guarantor. No Subsidiary Guarantor shall make its Subsidiary Guaranty or
purchase, redeem or otherwise retire or defease any Securities or other
Obligations (collectively, "pay its Subsidiary Guaranty") if either of the
following (a "Payment Default") occurs (1) any Designated Senior Indebtedness of
such Subsidiary Guarantor is not paid in cash when due; or (2) any other default
on Designated Senior Indebtedness of such Subsidiary Guarantor occurs and the
maturity of such Designated Senior Indebtedness is accelerated in accordance
with its terms; unless, in either case, the Payment Default has been cured or
waived and any such acceleration has been rescinded or such Designated Senior
Indebtedness has been paid in full in cash; provided, however, that any
Subsidiary Guarantor shall be entitled to pay its Subsidiary Guaranty without
regard to the foregoing if such Subsidiary Guarantor and the Trustee receive
written notice approving such payment from the Representative of all Designated
Senior Indebtedness with respect to which a Payment Default has occurred and is
continuing. During the continuance of any default (other than a Payment Default)
with respect to any Designated Senior Indebtedness of such Subsidiary Guarantor
pursuant to which the maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, such Subsidiary
Guarantor shall not pay its Subsidiary Guaranty for a period (a "Payment
Blockage Period") commencing upon the receipt by the Trustee of (with a copy to
such Subsidiary Guarantor) written notice (a "Blockage Notice") of such default
from the Representative of such Designated Senior Indebtedness specifying an
election to effect a Payment Blockage Period and ending 179 days thereafter. The
Payment Blockage Period shall end earlier if such Payment Blockage Period is
terminated (1) by written notice to the Trustee and such Subsidiary Guarantor
from the Person or Persons who gave such Blockage Notice; (2) because the
default giving rise to such Blockage Notice is cured, waived or otherwise no
longer

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continuing; or (3) because such Designated Senior Indebtedness has been
discharged or repaid in full in cash. Notwithstanding the provisions described
in the immediately preceding two sentences (but subject to the provisions
contained in the first sentence of this Section 14.03), unless the holders of
such Designated Senior Indebtedness giving such Payment Notice or the
Representative of such Designated Senior Indebtedness shall have accelerated the
maturity of such Designated Senior Indebtedness, any Subsidiary Guarantor shall
be entitled to resume payments pursuant to its Subsidiary Guaranty after
termination of such Payment Blockage Period. No Subsidiary Guarantor shall be
subject to more than one Blockage Period in any 360-consecutive day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness of such Subsidiary Guarantor during such period; provided, however,
that if any Blockage Notice within such 360-day period is given by or on behalf
of any holders of Designated Senior Indebtedness of the Issuer (other than the
Bank Indebtedness), the Representative of the Bank Indebtedness shall be
entitled to give another Blockage Notice within such period; provided further,
however, that in no event shall the total number of days during which any
Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate
during any 360-consecutive day period, and there must be 181 days during any
360-consecutive day period during which no Payment Blockage Period is in effect.
For purposes of this Section 14.03, no default or event of default which existed
or was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness of such Subsidiary Guarantor
initiating such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such default or event of default shall have been cured
or waived for a period of not less than 90 consecutive days.

SECTION 14.04. Demand for Payment. If a demand for payment is
made on a Subsidiary Guarantor pursuant to Article 13, the Trustee shall
promptly notify the holders of the Designated Senior Indebtedness of such
Subsidiary Guarantor (or their Representatives) of such demand.

SECTION 14.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 14 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness of the applicable
Subsidiary Guarantor and pay it over to them or their Representatives as their
interests may appear.

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SECTION 14.06. Subrogation. After all Senior Indebtedness of a
Subsidiary Guarantor is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to Senior Indebtedness of such
Subsidiary Guarantor. A distribution made under this Article 14 to holders of
such Senior Indebtedness which otherwise would have been made to Securityholders
is not, as between the relevant Subsidiary Guarantor and Securityholders, a
payment by such Subsidiary Guarantor on such Senior Indebtedness.

SECTION 14.07. Relative Rights. This Article 14 defines the
relative rights of Securityholders and holders of Senior Indebtedness of a
Subsidiary Guarantor. Nothing in this Indenture shall:

(1) impair, as between a Subsidiary Guarantor and
Securityholders, the obligation of such Subsidiary Guarantor, which is
absolute and unconditional, to pay its Subsidiary Guaranty to the
extent set forth in Article 13; or

(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a default by such Subsidiary Guarantor
under its Subsidiary Guaranty, subject to the rights of holders of
Senior Indebtedness of such Subsidiary Guarantor to receive
distributions otherwise payable to Securityholders.

SECTION 14.08. Subordination May Not Be Impaired by Issuer or
any Subsidiary Guarantor. No right of any holder of Senior Indebtedness of any
Subsidiary Guarantor to enforce the subordination of the Subsidiary Guaranty of
such Subsidiary Guarantor shall be impaired by any act or failure to act by the
Issuer or such Subsidiary Guarantor or by their failure to comply with this
Indenture.

SECTION 14.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 14.03, the Trustee or Paying Agent shall continue to
make payments on any Subsidiary Guaranty and shall not be charged with knowledge
of the existence of facts that would prohibit the making of any such payments
unless, not less than two Business Days prior to the date of such payment, a
Trust Officer of the Trustee receives written notice satisfactory to it that
such payments are prohibited by this Article 14. The Issuer, the relevant
Subsidiary Guarantor, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness of such Subsidiary Guarantor
shall be entitled to give the notice; provided, however, that, if an issue of
Senior Indebtedness of any Subsidiary Guarantor has a Representative, only the
Representative shall be entitled to give the notice.

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The Trustee in its individual or any other capacity shall be
entitled to hold Senior Indebtedness of any Subsidiary Guarantor with the same
rights it would have if it were not the Trustee. The Registrar and co-registrar
and the Paying Agent may do the same with like rights. The Trustee shall be
entitled to all the rights set forth in this Article 14 with respect to any
Senior Indebtedness of any Subsidiary Guarantor which may at any time be held by
it, to the same extent as any other holder of such Senior Indebtedness; and
nothing in Article 7 shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article 14 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.07.

SECTION 14.10. Distribution or Notice to Representative.
Whenever any Person is to make a distribution or give a notice to holders of
Senior Indebtedness of any Subsidiary Guarantor, such Person shall be entitled
to make such distribution or give such notice to their Representative (if any).

SECTION 14.11. Article 14 Not To Prevent Events of Default or
Limit Right To Demand Payment. The failure to make a payment pursuant to a
Subsidiary Guaranty by reason of any provision in this Article 14 shall not be
construed as preventing the occurrence of a Default. Nothing in this Article 14
shall have any effect on the right of the Securityholders or the Trustee to make
a demand for payment on any Subsidiary Guarantor pursuant to its Subsidiary
Guaranty.

SECTION 14.12. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 14, the Trustee and the Securityholders
shall be entitled to rely (1) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 14.02
are pending, (2) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the
Securityholders or (3) upon the Representatives for the holders of Senior
Indebtedness of any Subsidiary Guarantor for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
such Senior Indebtedness and other indebtedness of such Subsidiary Guarantor,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 14. In the
event that the Trustee determines, in good faith, that evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness of any
Subsidiary Guarantor to

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participate in any payment or distribution pursuant to this Article 14, the
Trustee shall be entitled to request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
of such Subsidiary Guarantor held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article 14, and, if such
evidence is not furnished, the Trustee shall be entitled to defer any payment to
such Person pending judicial determination as to the right of such Person to
receive such payment. The provisions of Sections 7.01 and 7.02 shall be
applicable to all actions or omissions of actions by the Trustee pursuant to
this Article 14.

SECTION 14.13. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of any Subsidiary Guarantor as provided in this Article 14
and appoints the Trustee as attorney-in-fact for any and all such purposes.

SECTION 14.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of Subsidiary Guarantor. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of any Subsidiary Guarantor
and shall not be liable to any such holders if it shall mistakenly pay over or
distribute to Securityholders or the Issuer or any other Person, money or assets
to which any holders of such Senior Indebtedness shall be entitled by virtue of
this Article 14 or otherwise.

SECTION 14.15. Reliance by Holders of Senior Indebtedness of
Subsidiary Guarantors on Subordination Provisions. Each Securityholder by
accepting a Security acknowledges and agrees that the foregoing subordination
provisions are, and are intended to be, an inducement and a consideration to
each holder of any Senior Indebtedness of any Subsidiary Guarantor, whether such
Senior Indebtedness was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively
to have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Indebtedness.

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ARTICLE 15

Miscellaneous

SECTION 15.01. Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.

SECTION 15.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:

if to the Issuer or any Subsidiary Guarantor:

Parallelweg 6,
Etten-Leur 4870AA
The Netherlands

Attention:  Managing Director

With a copy to:

Flowserve Corporation
222 West Las Colinas Blvd.
Suite 1500
Irving, TX 75039

Attention of Renee Hornbaker

if to the Trustee:

The Bank of New York
101 Barclay Street, Floor 21W
New York, NY 10286

Attention of Corporate Trust
Administration - Global Finance Unit

All notices shall be deemed to have been given upon (i) the
mailing by first class mail, postage prepaid, of such notices to Holders at
their registered addresses as recorded in the register, and (ii) so long as the
Securities are listed on the Luxembourg Stock Exchange and it is required by the
rules of the Luxembourg Stock Exchange, publication of such notice to the
Holders of the Securities in English in a leading newspaper having general
circulation in Luxembourg (which is expected to be the Luxemburger Wort) or, if
such publication is not practicable, in one other leading English language daily
newspaper with general circulation in Europe, such newspaper being published on

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each business day in morning editions, whether or not it shall be published in
Saturday, Sunday or holiday editions.

The Issuer, the Company, any Subsidiary Guarantor or the
Trustee by notice to the other may designate additional or different addresses
for subsequent notices or communications.

Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.

Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.

SECTION 15.03. Consent to Jurisdiction and Service. The Issuer
will appoint CT Corporation system, 111 8th Avenue, 13th floor, New York, New
York 10011 as its agent for actions brought under Federal or state securities
laws brought in any Federal or state court located in the Borough of Manhattan
in The City of New York and will submit to such jurisdiction.

SECTION 15.04. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Issuer, the Company, any Subsidiary Guarantor the Trustee, the
Registrar and anyone else shall have the protection of TIA Section 312(c).

SECTION 15.05. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Issuer to the Trustee to take
or refrain from taking any action under this Indenture, the Issuer shall furnish
to the Trustee:

(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and

(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.

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SECTION 15.06. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:

(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;

(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;

(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and

(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.

SECTION 15.07. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Issuer or
by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Issuer shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.

SECTION 15.08. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.

SECTION 15.09. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not required to be
open in the State of New York, a day on which the Trans-European Automated
Real-time Gross Settlement Express Transfer (TARGET) system is not open or, so
long as the Securities are listed on the Luxembourg Stock Exchange, the City of
Luxembourg. If a payment date is a Legal Holiday, payment shall be made on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period. If a regular record date is a Legal Holiday, the
record date shall not be affected.

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SECTION 15.10. Governing Law. This Indenture and the
Securities shall be governed by, and construed in accordance with, the laws of
the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.

SECTION 15.11. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Issuer, the Company or any
Subsidiary Guarantor shall not have any liability for any obligations of the
Issuer under the Securities or this Indenture, of the Company under its Guaranty
or this Indenture or of such Subsidiary Guarantor under its Subsidiary Guaranty
or this Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be part
of the consideration for the issue of the Securities.

SECTION 15.12. Successors. All agreements of the Issuer in
this Indenture and the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.

SECTION 15.13. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.

SECTION 15.14. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.

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IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.

FLOWSERVE FINANCE B.V.,

by /s/ JOHN M. NANOS
-------------------------------
Name:  John M. Nanos
Title: Managing Director

by /s/ M. KATHLEEN MCVAY
-------------------------------
Name:  M. Kathleen McVay
Title: Managing Director

FLOWSERVE CORPORATION,

by /s/ RENEE J. HORNBAKER
-------------------------------
Name:  Renee J. Hornbaker
Title: Vice President and
Chief Financial
Officer

FLOWSERVE RED CORPORATION,
FLOWSERVE FSD CORPORATION,
FLOWSERVE FCD CORPORATION,
FLOWSERVE INTERNATIONAL, INC.,
FLOWSERVE MANAGEMENT COMPANY (DE
BUSINESS TRUST),
BW/IP-NEW MEXICO, INC.,
FLOWSERVE INTERNATIONAL, LLC,
DURAMETALLIC AUSTRALIA HOLDING COMPANY,
FLOWSERVE INTERNATIONAL LIMITED,
INNOVATIVE VALVE TECHNOLOGIES, INC.,
PLANT MAINTENANCE, INC.,
VARCO VALVE, INC.,
COLONIAL EQUIPMENT & SERVICE CO., INC.,
CECORP, INC.,
DIVT ACQUISITION-DELAWARE, LLC,
DIVT SUBSIDIARY, LLC,
SOUTHERN VALVE SERVICE, INC.,
L.T. KOPPL INDUSTRIES, INC.,
KOPPL COMPANY,
KOPPL INDUSTRIAL SYSTEMS, INC.,

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HARLEY INDUSTRIES, INC.,
KOPPL COMPANY OF ARIZONA,
SEELEY & JONES, INCORPORATED,
GSV, INC.,
IPSCO-FLORIDA, INC.,
INTERNATIONAL PIPING SERVICES COMPANY,
CYPRESS INDUSTRIES, INC.,
DALCO, LLC,
PLANT SPECIALTIES, INC.,
ENERGY MAINTENANCE, INC.,
PREVENTIVE MAINTENANCE, INC.,
PRODUCTION MACHINE INCORPORATED,
ICE LIQUIDATING, INC.,
VALVE REPAIR OF SOUTH CAROLINA, INC.,
THE SAFE SEAL COMPANY, INC.,
FLICKINGER-BENICIA INC.,
PUGET INVESTMENTS, INC.,
STEAM SUPPLY & RUBBER CO., INC.,
FLICKINGER COMPANY,
BOYDEN, INC.,
VALVE ACTUATION & REPAIR CO.,
INGERSOLL-DRESSER PUMP COMPANY,
IDP ALTERNATE ENERGY COMPANY,
ENERGY HYDRO, INC.
PUMP INVESTMENTS, INC.
FLOWSERVE HOLDINGS, INC.
IPSCO HOLDING, INC.

by /s/ JOHN M. NANOS
-------------------------------
Name:  John M. Nanos
Title:

THE BANK OF NEW YORK,

by /s/ LUIS PEREZ
-------------------------------
Name: Luis Perez 
Title: Assistant V.P.

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RULE 144A/REGULATION S APPENDIX

PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES

1. Definitions

1.1  Definitions

For the purposes of this Appendix the following terms shall
have the meanings indicated below:

"Applicable Procedures" means, with respect to any transfer or
transaction involving a Temporary or Permanent Regulation S Global Security, a
Rule 144A Global Security or beneficial interest therein, the rules and
procedures of the Depository for such Global Security, Euroclear and
Clearstream, in each case to the extent applicable to such transaction and as in
effect from time to time.

"Clearstream" means Clearstream Banking, societe anonyme.

"Depository" means Clearstream, Euroclear, their respective
nominees and their respective successors.

"Euroclear" means Morgan Guaranty Trust Company of New York
(Brussels office) as operator of the Euroclear Clearance System or any successor
securities clearing agency.

"Exchange Securities" means (1) the 12-1/4% Senior
Subordinated Notes Due 2010 issued pursuant to the Indenture in connection with
a Registered Exchange Offer pursuant to a Registration Rights Agreement and (2)
Additional Securities, if any, issued pursuant to a registration statement filed
with the SEC under the Securities Act.

"Global Securities Legend" means the legend set forth under
that caption in Exhibit 1 to this Indenture.

"Initial Purchasers" means (1) with respect to the Initial
Securities issued on the Issue Date, the entities identified as Purchasers in
the Purchase Agreement, and (2) with respect to each issuance of Additional
Securities, the Persons purchasing such Additional Securities under the related
Purchase Agreement.

"Initial Securities" means (1) E.100,00,000 aggregate
principal amount of 12-1/4% Senior Subordinated Notes Due 2010 issued on the
Issue Date and (2) Additional Securities, if any, issued in a transaction exempt
from the registration requirements of the Securities Act.

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"Private Exchange" means the offer by the Issuer, pursuant to
a Registration Rights Agreement, to the Initial Purchasers to issue and deliver
to each Initial Purchaser, in exchange for the Initial Securities held by the
Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.

"Private Exchange Securities" means any 12-1/4% Senior
Subordinated Notes Due 2010 issued in connection with a Private Exchange.

"Purchase Agreement" means (1) with respect to the Initial
Securities issued on the Issue Date, the Purchase Agreement dated August 3, 2000
among the Issuer and the Initial Purchasers, and (2) with respect to each
issuance of Additional Securities, the purchase agreement or underwriting
agreement among the Issuer and the Persons purchasing such Additional
Securities.

"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.

"Registered Exchange Offer" means the offer by the Issuer,
pursuant to a Registration Rights Agreement, to certain Holders of Initial
Securities, to issue and deliver to such Holders, in exchange for the Initial
Securities, a like aggregate principal amount of Exchange Securities registered
under the Securities Act.

"Registration Rights Agreement" means (1) with respect to the
Initial Securities issued on the Issue Date, the Registration Rights Agreement
dated August 3, 2000, among the Issuer, the Company and the Initial Purchasers,
and (2) with respect to each issuance of Additional Securities issued in a
transaction exempt from the registration requirements of the Securities Act, the
registration rights agreement, if any, among the Issuer and the Persons
purchasing such Additional Securities under the related Purchase Agreement.

"Regulation S" means Regulation S under the Securities Act, as
amended.

"Regulation S Securities" means all Initial Securities offered
and sold outside the United States in reliance on Regulation S.

"Restricted Period", with respect to any Securities, means the
period of 40 consecutive days beginning on and including the later of (i) the
day on which such Securities are first offered to persons other than
distributors (as defined in Regulation S under the

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Securities Act) in reliance on Regulation S and (ii) the Issue Date with respect
to such Securities.

"Restricted Securities Legend" means the legend set forth in
Section 2.3(c) herein.

"Rule 144A" means Rule 144A under the Securities Act, as
amended.

"Rule 144A Securities" means all Initial Securities offered
and sold to QIBs in reliance on Rule 144A.

"Securities" means the Initial Securities, the Exchange
Securities and the Private Exchange Securities, treated as a single class.

"Securities Act" means the Securities Act of 1933.

"Securities Custodian" means, with respect to the Securities
issued as Global Securities, the person designated as the common depositary by
Euroclear or Clearstream or their respective successors, which shall initially
be The Bank of New York Depositary (Nominees) Limited.

"Shelf Registration Statement" means the registration
statement issued by the Issuer in connection with the offer and sale of Initial
Securities or Private Exchange Securities pursuant to a Registration Rights
Agreement.

"Transfer Restricted Securities" means Securities that bear or
are required to bear the legend set forth in Section 2.3(c) hereto.

1.2  Other Definitions

Defined in
Term                                                                 Section:
----                                                                ----------

"Agent Members".........................................................   2.1(b)
"Global Security".......................................................   2.1(a)
"Permanent Regulation S Global Security"................................   2.3(b)
"Regulation S Global Securities"........................................   2.1(a)
"Rule 144A Global Security".............................................   2.1(a)
"Temporary Regulation S Global Security"................................   2.1(a)

2. The Securities.

2.1 Form and Dating. The Initial Securities issued on the date hereof
shall be (i) offered and sold by the Issuer pursuant to the Purchase Agreement
and (ii) resold, initially only to (A) QIBs in reliance on Rule 144A and (B)

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Persons other than U.S. Persons (as defined in Regulation S) in reliance on
Regulation S. Such Initial Securities may thereafter be transferred to, among
others, QIBs and purchasers in reliance on Regulation S.

(a) Global Securities. Rule 144A Securities shall be issued
initially in the form of one or more permanent global Securities in definitive,
fully registered form (collectively, the "Rule 144A Global Security") and
Regulation S Securities shall be issued initially in the form of one or more
temporary global Securities (collectively, the "Temporary Regulation S Global
Security"), in each case without interest coupons and bearing the Global
Securities Legend and Restricted Securities Legend, which shall be deposited on
behalf of the purchasers of the Securities represented thereby with the
Securities Custodian, and registered in the name of the Depository or a nominee
of the Depository, duly executed by the Issuer and authenticated by the Trustee
as provided in the Indenture. Except as set forth in Section 2.3, beneficial
ownership interests in the Temporary Regulation S Global Security shall not be
exchangeable for interests in the Rule 144A Global Security or a Permanent
Regulation S Global Security (as defined below) or any other Security without a
Restricted Securities Legend until the expiration of the Restricted Period. Upon
the expiration of the Restricted Period, beneficial interests in the Securities
represented by the Temporary Regulation S Global Security may be exchanged for
interests in the Permanent Regulation S Global Security as described below in
Section 2.3(b). The Rule 144A Global Security, the Temporary Regulation S Global
Security and the Permanent Regulation S Global Security are each referred to
herein as a "Global Security" and are collectively referred to herein as "Global
Securities." The Temporary Regulation S Global Security and the Permanent
Regulation S Global Security are referred to herein as "Regulation S Global
Securities." The aggregate principal amount of the Global Securities may from
time to time be increased or decreased by adjustments made on the records of the
Trustee and the Depository or its nominee as hereinafter provided.

(b) Book-Entry Provisions. This Section 2.1(b) shall apply
only to a Global Security deposited with or on behalf of the Depository.

The Issuer shall execute and the Trustee shall, in accordance
with this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and (b)
shall be delivered by the Trustee to such Depository or pursuant to such
Depository's instructions or held by the Trustee as custodian for the
Depository.

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Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depository, the Securities Custodian or by
the Trustee as the custodian of the Depository or under such Global Security,
and the Issuer, the Trustee and any agent of the Issuer or the Trustee shall be
entitled to treat the Depository as the absolute owner of such Global Security
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices of such Depository governing the
exercise of the rights of a holder of a beneficial interest in any Global
Security.

(c) Certificated Securities. Except as provided in this
Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global
Securities shall not be entitled to receive physical delivery of certificated
Securities.

2.2 Authentication. The Trustee shall authenticate and deliver: (1) on
the Issue Date, an aggregate principal amount of E.100,000,000 12-1/4% Senior
Subordinated Notes Due 2010, (2) any Additional Securities for an original issue
in an aggregate principal amount specified in the written order of the Issuer
pursuant to Section 2.02 of the Indenture and (3) Exchange Securities or Private
Exchange Securities for issue only in a Registered Exchange Offer or a Private
Exchange, respectively, pursuant to a Registration Rights Agreement, for a like
principal amount of Initial Securities, in each case upon a written order of the
Issuer signed by two Officers of the Issuer. Such order shall specify the amount
of the Securities to be authenticated and the date on which the original issue
of Securities is to be authenticated and, in the case of any issuance of
Additional Securities pursuant to Section 2.13 of the Indenture, shall certify
that such issuance is in compliance with Sections 2.13 and 4.03 of the
Indenture.

2.3 Transfer and Exchange.

(a) Transfer and Exchange of Global Securities. (i) The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the Depository, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if

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any) and the procedures of the Depository therefor. A transferor of a beneficial
interest in a Global Security shall deliver to the Registrar a written order
given in accordance with the Depository's procedures containing information
regarding the participant account of the Depository to be credited with a
beneficial interest in the Global Security. The Registrar shall, in accordance
with such instructions instruct the Depository to credit to the account of the
Person specified in such instructions a beneficial interest in the Global
Security and to debit the account of the Person making the transfer the
beneficial interest in the Global Security being transferred. Transfers by an
owner of a beneficial interest in the Rule 144A Global Security to a transferee
who takes delivery of such interest through the Regulation S Global Security,
whether before or after the expiration of the Restricted Period, will be made
only upon receipt by the Trustee of a certification from the transferor to the
effect that such transfer is being made in accordance with Regulation S or (if
available) Rule 144 under the Securities Act and that, if such transfer is being
made prior to the expiration of the Restricted Period, the interest transferred
will be held immediately thereafter through Euroclear or Clearstream.

(ii) If the proposed transfer is a transfer of a beneficial
interest in one Global Security to a beneficial interest in another Global
Security, the Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Security to which such interest
is being transferred in an amount equal to the principal amount of the interest
to be so transferred, and the Registrar shall reflect on its books and records
the date and a corresponding decrease in the principal amount of the Global
Security from which such interest is being transferred.

(iii) Notwithstanding any other provisions of this Appendix
(other than the provisions set forth in Section 2.4), a Global Security may not
be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.

(iv) In the event that a Restricted Global Security is
exchanged for Securities in certificated registered form pursuant to Section 2.4
of this Appendix, prior to the consummation of a Registered Exchange Offer or
the effectiveness of a Shelf Registration Statement with respect to such
Securities, such Securities may be exchanged only in accordance with such
procedures as are substantially consistent with the provisions of this Section
2.3

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(including the certification requirements set forth on the reverse of the
Initial Securities intended to ensure that such transfers comply with Rule 144A
or Regulation S, as the case may be) and such other procedures as may from time
to time be adopted by the Issuer.

(b) Restrictions on Transfer of Temporary Regulation S Global
Security. (i) Prior to the expiration of the Restricted Period, interests in the
Temporary Regulation S Global Security may only be held through Euroclear or
Clearstream. During the Restricted Period, beneficial ownership interests in the
Temporary Regulation S Global Security may only be sold, pledged or transferred
through Euroclear or Clearstream in accordance with the Applicable Procedures
and only (A) to the Issuer, (B) inside the United States to a person whom the
seller reasonably believes is a Qualified Institutional Buyer (as defined in
Rule 144A under the Securities Act) in a transaction meeting the requirements of
Rule 144A, (C) outside the United States in an offshore transaction in
accordance with Rule 904 under the Securities Act, (D) pursuant to an exemption
from registration under the Securities Act provided by Rule 144 (if available),
or (E) pursuant to an effective registration statement under the Securities Act,
in each of cases (A) through (E) in accordance with any applicable securities
laws of any state of the United States.

(ii) Upon the expiration of the Restricted Period, beneficial
ownership interests in the Temporary Regulation S Global Security may be
exchanged for interests in a permanent global security in definitive, fully
registered form without the Restricted Security Legend (the "Permanent
Regulation S Global Security") upon certification to the Trustee that such
interests are owned either by non-U.S. persons or U.S. persons who purchased
such interests pursuant to an exemption from, or transfer not subject to, the
registration requirements of the Securities Act. On or prior to the expiration
of the Restricted Period, each Holder of a Temporary Regulation S Global
Security shall deliver to Euroclear or Clearstream (as applicable) a Regulation
S Certificate in the form of Exhibit B-1 attached hereto; provided, however,
that any Holder of a Temporary Regulation S Global Security upon expiration of
the Restricted Period or on any payment date that has previously delivered a
Regulation S Certificate hereunder shall not be required to deliver any
subsequent Regulation S Certificate (unless the certificate previously delivered
is no longer true as of such subsequent date, in which case such beneficial
owner shall promptly notify Euroclear and Clearstream, as applicable, thereof
and shall deliver to the Paying Agent or the Trustee an updated Regulation S
Certificate). Euroclear or Clearstream, as applicable, shall deliver to the
Paying Agent or the Trustee

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a certificate (a "Non-U.S. Certificate") substantially in the form of Exhibit
B-2 attached hereto promptly upon the receipt of each such Regulation S
Certificate, and no such Holder (or transferee from such Holder) shall be
entitled to receive an interest in a Permanent Regulation S Global Security or
any payment of distributions or a redemption payment, if applicable, or any
other payment with respect to its beneficial interest in a Temporary Regulation
S Global Security prior to the Paying Agent or the Trustee receiving such
Non-U.S. Certificate from Euroclear or Clearstream with respect to the portion
of the Temporary Regulation S Global Security owned by such Holder (and, with
respect to an interest in the Permanent Regulation S Global Security, prior to
the expiration of the Restricted Period).

The Permanent Regulation S Global Security shall bear a legend
in substantially the following form:

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION ORIGINALLY EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY
U.S. PERSON EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS.
TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE
SECURITIES ACT.

(iii) Any payments of distributions or a redemption price, if
applicable, or any other payment on a Temporary Regulation S Global Security
received by Euroclear or Clearstream with respect to any portion of such
Regulation S Global Security owned by a Holder that has not delivered the
Regulation S Certificate required by Section 2.3(b) shall be held by Euroclear
and Clearstream solely as agents for the Paying Agent and the Trustee. Euroclear
and Clearstream shall remit such payments to the applicable Holder (or to a
Euroclear or Clearstream member on behalf of such Holder) only after Euroclear
or Clearstream has received the requisite Regulation S Certificate. Until the
Paying Agent or the Trustee has received a Non-U.S. Certificate from Euroclear
or Clearstream, as applicable, that it has received the requisite Regulation S
Certificate with respect to the beneficial ownership of any portion of a
Temporary Regulation S Global Security, the Paying Agent or the Trustee may
revoke the right of Euroclear or Clearstream, as applicable, to hold any
payments made with respect to such portion of such Regulation S Global Security.
If the Paying Agent or the Trustee exercises its right of revocation pursuant to
the immediately preceding sentence, Euroclear or Clearstream, as applicable,
shall return such payments to the Paying Agent or the Trustee and

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135

the Paying Agent or the Trustee, as applicable, shall hold such payments until
Euroclear or Clearstream, as applicable, has provided the necessary Non-U.S.
Certificates to the Paying Agent or the Trustee (at which time the Paying Agent
shall forward such payments to Euroclear or Clearstream, as applicable, to be
remitted to the beneficial owner that is entitled thereto on the records of
Euroclear or Clearstream (or on the records of their respective members)).

(iv) Upon the expiration of the Restricted Period, the Issuer
shall prepare and execute the Permanent Regulation S Global Security in
accordance with the terms of this Indenture and deliver it to the Trustee for
authentication. The Trustee shall deliver the Permanent Regulation S Global
Security to the Securities Custodian. Any transfers of beneficial ownership
interests in the Temporary Regulation S Global Security made in reliance on
Regulation S shall thenceforth be recorded by the Depository or the Securities
Custodian by making an appropriate increase in the principal amount of the
Permanent Regulation S Global Security and a corresponding decrease in the
principal amount of the Temporary Regulation S Global Security. At such time as
the principal amount of the Temporary Regulation S Global Security has been
reduced to zero, the Depository or the Securities Custodian shall return the
Temporary Regulation S Global Security to the Trustee, who shall cancel the
Temporary Regulation S Global Security and deliver it to the Issuer.

(c) Legend. (i) Except as permitted by the following
paragraphs (ii), (iii) and (iv), and except for the permanent Regulation S
Global Security as provided above, each Security certificate evidencing the
Restricted Global Securities (and all Securities issued in exchange therefor or
in substitution thereof) shall bear a legend in substantially the following
form:

THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS
HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT
(A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (I) TO THE ISSUER, (II) IN THE UNITED STATES TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED

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136

INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE
904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER
(IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE
RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a Restricted
Global Security) pursuant to Rule 144 under the Securities Act, the Registrar
shall permit the transferee thereof to exchange such Transfer Restricted
Security for a certificated Security that does not bear the legend set forth
above and rescind any restriction on the transfer of such Transfer Restricted
Security, if the transferor thereof certifies in writing to the Registrar that
such sale or transfer was made in reliance on Rule 144 (such certification to be
in the form set forth on the reverse of the Security).

(iii) After a transfer of any Initial Securities or Private
Exchange Securities pursuant to and during the period of the effectiveness of a
Shelf Registration Statement with respect to such Initial Securities or Private
Exchange Securities, as the case may be, all requirements pertaining to legends
on such Initial Security or such Private Exchange Security will cease to apply,
the requirements requiring any such Initial Security or such Private Exchange
Security issued to certain Holders be issued in global form will cease to apply,
and a certificated Initial Security or Private Exchange Security or an Initial
Security or Private Exchange Security in global form, in each case without
restrictive transfer legends, will be available to the transferee of the Holder
of such Initial Securities or Private Exchange Securities upon exchange of such
transferring Holder's certificated Initial Security or Private Exchange Security
or directions to transfer such Holder's interest in the Global Security, as
applicable.

(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued in global
form will still apply with respect to Holders of such

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137

Initial Securities that do not exchange their Initial Securities, and Exchange
Securities in certificated or global form will be available to Holders that
exchange such Initial Securities in such Registered Exchange Offer.

(v) Upon the consummation of a Private Exchange with respect
to the Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued in global
form will still apply with respect to Holders of such Initial Securities that do
not exchange their Initial Securities, and Private Exchange Securities in global
form with the global securities legend and the Restricted Securities Legend set
forth in Exhibit 1 hereto will be available to Holders that exchange such
Initial Securities in such Private Exchange.

(c) Cancellation or Adjustment of Global Security. At such
time as all beneficial interests in a Global Security have either been exchanged
for certificated Securities, redeemed, purchased or canceled, such Global
Security shall be returned to the Trustee for cancellation or retained and
canceled by the Depository or the Securities Custodian. At any time prior to
such cancellation, if any beneficial interest in a Global Security is exchanged
for certificated Securities, redeemed, purchased or canceled, the principal
amount of Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Depository with respect
to such Global Security, by the Trustee or the Securities Custodian, to reflect
such reduction.

(d) Obligations with Respect to Transfers and Exchanges of
Securities. (i) To permit registrations of transfers and exchanges, the Issuer
shall execute and the Trustee shall authenticate certificated Securities and
Global Securities at the Registrar's or co-registrar's request.

(ii)No service charge shall be made for any registration of
transfer or exchange, but the Issuer may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar governmental charge payable in
connection therewith (other than any such transfer taxes, assessments or similar
governmental charge payable upon exchange or transfer pursuant to Sections 3.06,
4.06, 4.09 and 9.05 of the Indenture).

(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of any Security for a period beginning 15
Business Days before the mailing of a notice of an offer to repurchase or redeem
Securities or 15 Business Days before an interest payment date.

11

138

(iv) Prior to the due presentation for registration of
transfer of any Security, the Issuer, the Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the person in whose name a
Security is registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and none of
the Issuer, the Trustee, the Paying Agent, the Registrar or any co-registrar
shall be affected by notice to the contrary.

(v) All Securities issued upon any transfer or exchange
pursuant to the terms of the Indenture shall evidence the same debt and shall be
entitled to the same benefits under the Indenture as the Securities surrendered
upon such transfer or exchange.

(e) No Obligation of the Trustee. (i) The Trustee shall have
no responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in the Depository or other Person with respect to
the accuracy of the records of the Depository or its nominee or of any
participant or member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depository) of any notice
(including any notice of redemption) or the payment of any amount, under or with
respect to such Securities. All notices and communications to be given to the
Holders and all payments to be made to Holders under the Securities shall be
given or made only to or upon the order of the registered Holders (which shall
be the Depository or its nominee in the case of a Global Security). The rights
of beneficial owners in any Global Security shall be exercised only through the
Depository subject to the applicable rules and procedures of the Depository. The
Trustee may rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its members, participants and any
beneficial owners.

(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among Depository
participants, members or beneficial owners in any Global Security) other than to
require delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by, the terms
of the Indenture, and to examine the

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139

same to determine substantial compliance as to form with the express
requirements hereof.

2.4 Certificated Securities.

(a) A Restricted Global Security deposited with the
Depository, with the Trustee as custodian for the Depository or with the
Securities Custodian pursuant to Section 2.1 shall be transferred to the
beneficial owners thereof in the form of certificated Securities in an aggregate
principal amount equal to the principal amount of such Global Security, in
exchange for such Global Security, only if such transfer complies with Section
2.3 and (i) the Depository notifies the Issuer that it is unwilling or unable to
continue as Depository for such Restricted Global Security or if at any time
such Depository ceases to be a "clearing agency" registered under the Exchange
Act and a successor depositary is not appointed by the Issuer within 90 days of
such notice, (ii) an Event of Default has occurred and is continuing or (iii)
the Issuer, in its sole discretion, notifies the Trustee in writing that it
elects to cause the issuance of certificated Securities under the Indenture.

(b) Any Restricted Global Security that is transferable to the
beneficial owners thereof pursuant to this Section shall be surrendered by the
Depository to the Trustee located at its principal corporate trust office in the
Borough of Manhattan, The City of New York, to be so transferred, in whole or
from time to time in part, without charge, and the Trustee shall authenticate
and deliver, upon such transfer of each portion of such Restricted Global
Security, an equal aggregate principal amount of certificated Initial Securities
of authorized denominations. Any portion of a Restricted Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of E.1,000 principal amount and any integral
multiple thereof and registered in such names as the Depository shall direct.
Any certificated Initial Security or Private Exchange Security delivered in
exchange for an interest in the Restricted Global Security shall, except as
otherwise provided by Section 2.3(c), bear the restricted securities legend set
forth in Exhibit 1 hereto.

(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Security shall be entitled to grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under the Indenture or the Securities.

13

140

(d) In the event of the occurrence of either of the events
specified in Section 2.4(a), the Issuer shall promptly make available to the
Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.

14

141

EXHIBIT 1
to
RULE 144A/REGULATION S APPENDIX

[FORM OF FACE OF INITIAL SECURITY]

[Global Securities Legend]

UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE EUROCLEAR CLEARANCE SYSTEM ("EUROCLEAR") OR CLEARSTREAM
BANKING, SOCIETE ANONYME ("CLEARSTREAM"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY GLOBAL SECURITY ISSUED IS
REGISTERED IN THE NAME OF BANK OF NEW YORK DEPOSITARY (NOMINEES) LIMITED OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CLEARSTREAM OR
EUROCLEAR, AS THE CASE MAY BE (AND ANY PAYMENT IS MADE TO THE BANK OF NEW YORK
DEPOSITARY (NOMINEES) LIMITED, OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF CLEARSTREAM OR EUROCLEAR, AS THE CASE MAY BE), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, THE BANK OF NEW YORK
DEPOSITARY (NOMINEES) LIMITED, HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CLEARSTREAM OR EUROCLEAR, AS
THE CASE MAY BE, OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE
IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON
THE REVERSE HEREOF.

[Restricted Securities Legend]

THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF
THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
ISSUER THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (I) TO THE ISSUER, (II) IN THE UNITED STATES TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION

142

STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.

2

143

No.:                                                                   ISIN No.:
Common Code No.:

12-1/4% Senior Subordinated Notes Due 2010

Flowserve Finance B.V., a Netherlands besloten vennootschap
with corporate seat in Amsterdam, promises to pay to The Bank of New York
Depositary (Nominees) Limited, or registered assigns, the principal amount set
forth on Schedule A hereto on August 15, 2010.

Interest Payment Dates: February 15 and August 15.

Record Dates: February 1 and August 1.

Additional provisions of this Security are set forth on the
other side of this Security.

Dated: August 8, 2000

144

FLOWSERVE FINANCE B.V.,

by
-------------------------------
Name:  John M. Nanos
Title: Managing Director

by
-------------------------------
Name:  M. Kathleen McVay
Title: Managing Director

FLOWSERVE CORPORATION,

by
-------------------------------
Name:  Renee J. Hornbaker
Title: Vice President and
Chief Financial
Officer

FLOWSERVE RED CORPORATION,
FLOWSERVE FSD CORPORATION,
FLOWSERVE FCD CORPORATION,
FLOWSERVE INTERNATIONAL, INC.,
FLOWSERVE MANAGEMENT COMPANY (DE
BUSINESS TRUST),
BW/IP-NEW MEXICO, INC.,
FLOWSERVE INTERNATIONAL, LLC,
DURAMETALLIC AUSTRALIA HOLDING COMPANY,
FLOWSERVE INTERNATIONAL LIMITED,
INNOVATIVE VALVE TECHNOLOGIES, INC.,
PLANT MAINTENANCE, INC.,
VARCO VALVE, INC.,
COLONIAL EQUIPMENT & SERVICE CO., INC.,
CECORP, INC.,
DIVT ACQUISITION-DELAWARE, LLC,
DIVT SUBSIDIARY, LLC,
SOUTHERN VALVE SERVICE, INC.,
L.T. KOPPL INDUSTRIES, INC.,
KOPPL COMPANY,
KOPPL INDUSTRIAL SYSTEMS, INC.,
HARLEY INDUSTRIES, INC.,
KOPPL COMPANY OF ARIZONA,
SEELEY & JONES, INCORPORATED,
GSV, INC.,
IPSCO-FLORIDA, INC.,

145

INTERNATIONAL PIPING SERVICES COMPANY,
CYPRESS INDUSTRIES, INC.,
DALCO, LLC,
PLANT SPECIALTIES, INC.,
ENERGY MAINTENANCE, INC.,
PREVENTIVE MAINTENANCE, INC.,
PRODUCTION MACHINE INCORPORATED,
ICE LIQUIDATING, INC.,
VALVE REPAIR OF SOUTH CAROLINA, INC.,
THE SAFE SEAL COMPANY, INC.,
FLICKINGER-BENICIA INC.,
PUGET INVESTMENTS, INC.,
STEAM SUPPLY & RUBBER CO., INC.,
FLICKINGER COMPANY,
BOYDEN INC.,
VALVE ACTUATION & REPAIR CO.,
INGERSOLL-DRESSER PUMP COMPANY,
IDP ALTERNATE ENERGY COMPANY,
ENERGY HYDRO, INC.,
PUMP INVESTMENTS, INC.,
FLOWSERVE HOLDINGS, INC.,
IPSCO HOLDING, INC.,

by
-------------------------------
Name:  John M. Nanos
Title:

146

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION

THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.

by
-------------------------------------
Authorized Signatory

147

[FORM OF REVERSE SIDE OF INITIAL SECURITY]

12-1/4% Senior Subordinated Notes Due 2010

1. Interest

Flowserve Finance B.V., a Netherlands besloten vennootschap
with corporate seat in Amsterdam, (such besloten vennootschap, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Issuer"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above; provided, however, that if a
Registration Default (as defined in the Registration Rights Agreement) occurs,
additional interest will accrue on this Security at a rate of 0.50% per annum
(increasing by an additional 0.50% per annum after each consecutive 90-day
period that occurs after the date on which such Registration Default occurs up
to a maximum additional interest rate of 2.00%) from and including the date on
which any such Registration Default shall occur to but excluding the date on
which all Registration Defaults have been cured. The Issuer will pay interest
semiannually on February 15 and August 15 of each year, commencing February 15,
2001. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from August 8, 2000.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Issuer will pay interest on overdue principal at 1% per annum in
excess of the above rate and will pay interest on overdue installments of
interest at such higher rate to the extent lawful.

2. Method of Payment

The Issuer will pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on the February 1 or August 1 next preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a Paying
Agent to collect principal payments. The Issuer will pay principal and interest
in Euro or any successor money of the European Union that at the time of payment
is legal tender for payment of public and private debts. Payments in respect of
the Securities represented by a Global Security (including principal, premium
and interest) will be made by wire transfer of immediately available funds to
the accounts specified by the Depository. The Issuer will make all payments in
respect of

148

a certificated Security (including principal, premium and interest) by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on a certificated Security will be made by wire transfer to a Euro
account maintained by the payee with a bank in a member state of the European
Union if such Holder elects payment by wire transfer by giving written notice to
the Trustee or the Paying Agent to such effect designating such account no later
than 30 days immediately preceding the relevant due date for payment (or such
other date as the Trustee may accept in its discretion).

3. Paying Agent and Registrar

Initially, (a) The Bank of New York, a New York banking
corporation (the "Trustee"), will act as Trustee, U.S. Paying Agent and
Registrar, and (b) Banque Internationale a Luxembourg will act as Luxembourg
Paying Agent. The Issuer may appoint and change any Paying Agent, Registrar or
co-registrar without notice. The Issuer or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4. Indenture

The Issuer issued the Securities under an Indenture dated as
of August 8, 2000 (the "Indenture"), among the Company, the Issuer, the
Subsidiary Guarantors and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on
the date of the Indenture (the "Act"). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the Act for a statement of those terms.

The Securities are general unsecured obligations of the
Issuer. The Issuer shall be entitled, subject to its compliance with Section
4.03 of the Indenture, to issue Additional Securities pursuant to Section 2.13
of the Indenture. The Initial Securities issued on the Issue Date, any
Additional Securities and all Exchange Securities or Private Exchange Securities
issued in exchange therefor will be treated as a single class for all purposes
under the Indenture. The Indenture contains covenants that limit the ability of
the Company to incur additional indebtedness; pay dividends or distributions on,
or redeem or repurchase capital stock; make investments; issue or sell capital
stock of subsidiaries; engage in transactions with affiliates;

2

149

transfer or sell assets; guarantee indebtedness; restrict dividends or other
payments of subsidiaries; and consolidate, merge or transfer all or
substantially all of its assets and the assets of its subsidiaries. The
Indenture also contains covenants that limit the Issuer's ability to engage in
business activities and its ability to use the proceeds from the issuance of
Securities. These covenants are subject to important exceptions and
qualifications.

5. Optional Redemption

Except as set forth below, the Issuer shall not be entitled to
redeem the Securities at its option prior to August 15, 2005.

On and after August 15, 2005, the Issuer shall be entitled at
its option to redeem all or a portion of the Securities upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed in
percentages of principal amount on the redemption date), plus accrued interest
to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the 12-month period commencing on August 15 of the
years set forth below:

Redemption
Period                                              Price
------                                           ----------

2005                                              106.125%
2006                                              104.083
2007                                              102.042
2008 and thereafter                               100.000%

In addition, prior to August 15, 2003, the Issuer shall be
entitled at its option on one or more occasions to redeem Securities (which
includes Additional Securities, if any) in an aggregate principal amount not to
exceed 35% of the aggregate principal amount of the Securities (which includes
Additional Securities, if any) originally issued at a redemption price
(expressed as a percentage of principal amount) of 112.25%, plus accrued and
unpaid interest to the redemption date, with the net cash proceeds contributed
to the Issuer from one or more Public Equity Offerings; provided, however, that
(1) at least 65% of such aggregate principal amount of Securities (which
includes Additional Securities, if any) remains outstanding immediately after
the occurrence of each such redemption (other than Securities held, directly or
indirectly, by the Issuer or its Affiliates); and (2) each such redemption
occurs within 60 days after the closing date of the related Public Equity
Offering.

3

150

6. Notice of Redemption

Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
E.1,000 principal amount may be redeemed in part but only in whole multiples of
E.1,000. If money sufficient to pay the redemption price of and accrued interest
on all Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.

7. Put Provisions

Upon a Change of Control, any Holder of Securities will have
the right to cause the Issuer to repurchase all or any part of the Securities of
such Holder at a repurchase price equal to 101% of the principal amount of the
Securities to be repurchased plus accrued interest to the date of repurchase
(subject to the right of holders of record on the relevant record date to
receive interest due on the related interest payment date) as provided in, and
subject to the terms of, the Indenture.

8. Subordination

The Securities are subordinated to Senior Indebtedness of the
Issuer, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Issuer must be paid before the Securities may be
paid. The Issuer agrees, and each Securityholder by accepting a Security agrees,
to the subordination provisions contained in the Indenture and authorizes the
Trustee to give it effect and appoints the Trustee as attorney-in-fact for such
purpose.

9. Guaranties

The payment by the Issuer of the principal of, and premium and
interest on, the Securities is fully and unconditionally guaranteed on a joint
and several senior subordinated basis by each of the Company and the Subsidiary
Guarantors.

4

151

10. Denominations; Transfer; Exchange

The Securities are in registered form without coupons in
denominations of E.1,000 principal amount and whole multiples of E.1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.

11. Persons Deemed Owners

The registered Holder of this Security may be treated as the
owner of it for all purposes.

12. Unclaimed Money

If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Issuer at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Issuer and not to the Trustee for payment.

13. Discharge and Defeasance

Subject to certain conditions, the Issuer at any time shall be
entitled to terminate some or all of its obligations under the Securities and
the Indenture if the Issuer deposits with the Trustee money, European Government
Obligations or U.S. Government Obligations for the payment of principal and
interest on the Securities to redemption or maturity, as the case may be.

14. Amendment, Waiver

Subject to certain exceptions set forth in the Indenture, (i)
the Indenture and the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a

5

152

majority in principal amount outstanding of the Securities. Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, the Issuer, the Subsidiary Guarantors and the
Trustee shall be entitled to amend the Indenture or the Securities to cure any
ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add guarantees with respect to the
Securities including Subsidiary Guaranties, or to secure the Securities, or to
add additional covenants or surrender rights and powers conferred on the
Company, the Issuer, the Subsidiary Guarantors, or to comply with any request of
the SEC in connection with qualifying the Indenture under the Act, or to make
certain changes in the subordination provisions or to make any change that does
not adversely affect the rights of any Securityholder.

15. Defaults and Remedies

Under the Indenture, Events of Default include (i) default for
30 days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon acceleration or otherwise, or failure by the Issuer to
purchase Securities when required; (iii) failure by the Company or the Issuer,
as applicable, to comply with other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other Indebtedness of the Company, Significant Subsidiaries,
Subsidiary Guarantors, or the Issuer, as applicable, if the amount accelerated
(or so unpaid) exceeds $10.0 million; (v) certain events of bankruptcy or
insolvency with respect to the Company, the Issuer, the Subsidiary Guarantors or
the Significant Subsidiaries; and (vi) certain judgments or decrees for the
payment of money in excess of $10.0 million and (vii) certain defaults with
respect to the Company Guaranty or Subsidiary Guaranties. If an Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities to be due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities being due and payable immediately
upon the occurrence of such Events of Default.

Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives indemnity or security
satisfactory

6

153

to it. Subject to certain limitations, Holders of a majority in principal amount
of the Securities may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.

16. Trustee Dealings with the Issuer

Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Issuer or its Affiliates and may otherwise deal
with the Issuer or its Affiliates with the same rights it would have if it were
not Trustee.

17. No Recourse Against Others

A director, officer, employee or stockholder, as such, of the
Issuer, the Company, any Subsidiary Guarantor or the Trustee shall not have any
liability for any obligations of the Issuer, the Company or any Subsidiary
Guarantor under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.

18. Authentication

This Security shall not be valid until an authorized
signatory of the Trustee (or an authenticating agent) manually signs the
certificate of authentication on the other side of this Security.

19. Abbreviations

Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).

7

154

20. CUSIP, ISIN and Common Code Numbers

Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Issuer has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. To the
extent such numbers have been issued, the Issuer has caused ISIN and Common Code
numbers to be similarly printed on the Securities and has similarly instructed
the Trustee. No representation is made as to the accuracy of such numbers either
as printed on the Securities or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.

21. Holders' Compliance with Registration Rights Agreement.

Each Holder of a Security, by acceptance hereof, acknowledges
and agrees to the provisions of the Registration Rights Agreement, including the
obligations of the Holders with respect to a registration and the
indemnification of the Issuer to the extent provided therein.

22. Governing Law.

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

8

155

THE ISSUER WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE SECURITY HOLDER A COPY OF THE INDENTURE WHICH
HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:

FLOWSERVE FINANCE B.V.
PARALLELWEG 6
ETTEN-LEUR 4870AA
THE NETHERLANDS

ATTENTION: MANAGING DIRECTOR

WITH A COPY TO:

FLOWSERVE CORPORATION
222 WEST LAS COLINAS BLVD.
SUITE 1500
IRVING, TX 75039

ATTENTION: RENEE HORNBAKER

9

156

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

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Print or type assignee's name, address and zip code)

(Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint                           agent to
transfer this Security on the books of the Issuer.  The
agent may substitute another to act for him.

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

Date:                  Your Signature: 
----------------                 -----------------------------
--------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.

In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Issuer or any Affiliate of the Issuer, the undersigned confirms
that such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)  [ ]   to the Issuer; or

(2)  [ ]   pursuant to an effective registration statement under the
Securities Act of 1933; or

(3)  [ ]  inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of
1933) that purchases for its own account or for the account
of a qualified institutional buyer to whom notice is given
that such transfer is being made in reliance on Rule 144A,
in each

157

case pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or

(4)  [ ]   outside the United States in an offshore transaction within
the meaning of Regulation S under the Securities Act of 1933
in compliance with Rule 904 under the Securities Act of
1933; or

(5)  [ ]   pursuant to the exemption from registration provided by Rule
144 under the Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however,
that if box (4) or (5) is checked, the Trustee shall be entitled to
require, prior to registering any such transfer of the Securities, such
legal opinions, certifications and other information as the Issuer has
reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the
exemption provided by Rule 144 under such Act.

--------------------------------
Signature

Signature Guarantee:

----------------------------                    --------------------------------
Signature must be guaranteed                    Signature

Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

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

2

158

TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Issuer as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.

Dated:
----------------                    -------------------------------------
NOTICE: To be executed by
an executive officer

TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing
this Security outside the United States as a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act and is aware that the sale to
it is being made in reliance on Regulation S and acknowledges that a holder of
an interest in a temporary Regulation S global security may not (i) receive the
payment of any distributions, redemption price or any other payments with
respect to the holder's beneficial interest in the temporary global security or
(ii) receive an interest in a permanent Regulation S global security until (A)
expiration of the 40th day after the later of the commencement of the offering
of the Securities and the closing date and (B) certification that the beneficial
owner of the interest in the Security is a non-U.S. person.

Dated:
----------------                    -------------------------------------
NOTICE: To be executed by
an executive officer

159

[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The original principal amount of this Global Security is
_____________. The following increases or decreases in this Global Security have
been made:

Date of           Amount of decrease      Amount of increase      Principal amount         Signature of
Exchange          in Principal            in Principal            of this Global           authorized officer
amount of this          amount of this          Security following       of Trustee or
Global Security         Global Security         such decrease or         Securities
increase)                Custodian

160

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by the
Issuer or the Company pursuant to Section 4.06, 4.09 or 4.10 of the Indenture,
check the box:

[ ]

If you want to elect to have only part of this Security
purchased by the Issuer or the Company pursuant to Section 4.06,
4.09 or 4.10 of the Indenture, state the amount in principal
amount:  Euro __________

Date:                         Your Signature: 
---------------                         ----------------------------
(Sign exactly as your name
appears on the other side of
this Security.)

Signature Guarantee: 
--------------------------------------
(Signature must be guaranteed)

Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

161

EXHIBIT A

[FORM OF FACE OF EXCHANGE SECURITY
OR PRIVATE EXCHANGE SECURITY]

*/**/

----------

*/ [If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "[TO BE ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".]

**/ [If the Security is a Private Exchange Security issued in a Private Exchange
to an Initial Purchaser holding an unsold portion of its initial allotment, add
the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the
Assignment Form included in this Exhibit A with the Assignment Form included in
such Exhibit 1.]

162

No.:                                                                   ISIN No.:
Common Code No.:

12-1/4% Senior Subordinated Notes Due 2010

Flowserve Finance B.V., a Netherlands besloten vennootschap
with corporate seat in Amsterdam, promises to pay to The Bank of New York
Depositary (Nominees) Limited, or registered assigns, the principal amount set
forth on Schedule A hereto on August 15, 2010.

Interest Payment Dates: February 15 and August 15.

Record Dates: February 1 and August 1.

Additional provisions of this Security are set forth on the
other side of this Security.

Dated: August 8, 2000

163

FLOWSERVE FINANCE B.V.,

by
-------------------------------
Name:  John M. Nanos
Title: Managing Director

by
-------------------------------
Name:  M. Kathleen McVay
Title: Managing Director

FLOWSERVE CORPORATION,

by
-------------------------------
Name:  Renee J. Hornbaker
Title: Vice President and
Chief Financial
Officer

FLOWSERVE RED CORPORATION,
FLOWSERVE FSD CORPORATION,
FLOWSERVE FCD CORPORATION,
FLOWSERVE INTERNATIONAL, INC.,
FLOWSERVE MANAGEMENT COMPANY (DE
BUSINESS TRUST),
BW/IP-NEW MEXICO, INC.,
FLOWSERVE INTERNATIONAL, LLC,
DURAMETALLIC AUSTRALIA HOLDING
COMPANY,
FLOWSERVE INTERNATIONAL LIMITED,
INNOVATIVE VALVE TECHNOLOGIES,
INC.,
PLANT MAINTENANCE, INC.,
VARCO VALVE, INC.,
COLONIAL EQUIPMENT & SERVICE CO.,
INC.,
CECORP, INC.,
DIVT ACQUISITION-DELAWARE, LLC,
DIVT SUBSIDIARY, LLC,
SOUTHERN VALVE SERVICE, INC.,
L.T. KOPPL INDUSTRIES, INC.,
KOPPL COMPANY,
KOPPL INDUSTRIAL SYSTEMS, INC.,
HARLEY INDUSTRIES, INC.,
KOPPL COMPANY OF ARIZONA,
SEELEY & JONES, INCORPORATED,
GSV, INC.,
IPSCO-FLORIDA, INC.,

164

INTERNATIONAL PIPING SERVICES
COMPANY,
CYPRESS INDUSTRIES, INC.,
DALCO, LLC,
PLANT SPECIALTIES, INC.,
ENERGY MAINTENANCE, INC.,
PREVENTIVE MAINTENANCE, INC.,
PRODUCTION MACHINE INCORPORATED,
ICE LIQUIDATING, INC.,
VALVE REPAIR OF SOUTH CAROLINA,
INC.,
THE SAFE SEAL COMPANY, INC.,
FLICKINGER-BENICIA INC.,
PUGET INVESTMENTS, INC.,
STEAM SUPPLY & RUBBER CO., INC.,
FLICKINGER COMPANY,
BOYDEN INC.,
VALVE ACTUATION & REPAIR CO.,
INGERSOLL-DRESSER PUMP COMPANY,
IDP ALTERNATE ENERGY COMPANY,
ENERGY HYDRO, INC.,
PUMP INVESTMENTS, INC.,
FLOWSERVE HOLDINGS, INC.,
IPSCO HOLDING, INC.,

by /s/ JOHN M. NANOS
-------------------------------
Name:  John M. Nanos
Title:

165

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION

THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.

by
------------------------------
Authorized Signatory

166

[FORM OF REVERSE SIDE OF [EXCHANGE SECURITY
OR PRIVATE EXCHANGE] SECURITY]

12-1/4% Senior Subordinated Notes Due 2010

1. Interest

Flowserve Finance B.V., a Netherlands besloten vennootschap
with corporate seat in Amsterdam, (such besloten vennootschap, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Issuer"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above; provided, however, that if a
Registration Default (as defined in the Registration Rights Agreement) occurs,
additional interest will accrue on this Security at a rate of 0.50% per annum
(increasing by an additional 0.50% per annum after each consecutive 90-day
period that occurs after the date on which such Registration Default occurs up
to a maximum additional interest rate of 2.00%) from and including the date on
which any such Registration Default shall occur to but excluding the date on
which all Registration Defaults have been cured. The Issuer will pay interest
semiannually on February 15 and August 15 of each year, commencing February 15,
2001. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from August 8, 2000.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Issuer will pay interest on overdue principal at 1% per annum in
excess of the above rate and will pay interest on overdue installments of
interest at such higher rate to the extent lawful.

2. Method of Payment

The Issuer will pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on the February 1 or August 1 next preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a Paying
Agent to collect principal payments. The Issuer will pay principal and interest
in Euro or any successor money of the European Union that at the time of payment
is legal tender for payment of public and private debts. Payments in respect of
the Securities represented by a Global Security (including principal, premium
and interest) will be made by wire transfer of immediately available funds to
the accounts specified by the

167

Depository. The Issuer will make all payments in respect of a certificated
Security (including principal, premium and interest) by mailing a check to the
registered address of each Holder thereof; provided, however, that payments on a
certificated Security will be made by wire transfer to a Euro account maintained
by the payee with a bank in a member state of the European Union if such Holder
elects payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 30 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).

3. Paying Agent and Registrar

Initially, (a) The Bank of New York, a New York banking
corporation (the "Trustee"), will act as Trustee, U.S. Paying Agent and
Registrar, and (b) Banque Internationale a Luxembourg will act as Luxembourg
Paying Agent. The Issuer may appoint and change any Paying Agent, Registrar or
co-registrar without notice. The Issuer or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4. Indenture

The Issuer issued the Securities under an Indenture dated as
of August 8, 2000 (the "Indenture"), among the Company, the Issuer, the
Subsidiary Guarantors and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. Section Section 77aaa-77bbbb) as in
effect on the date of the Indenture (the "Act"). Terms defined in the Indenture
and not defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the Act for a statement of those terms.

The Securities are general unsecured obligations of the
Issuer. The Issuer shall be entitled, subject to its compliance with Section
4.03 of the Indenture, to issue Additional Securities pursuant to Section 2.13
of the Indenture. The Initial Securities issued on the Issue Date, any
Additional Securities and all Exchange Securities or Private Exchange Securities
issued in exchange therefor will be treated as a single class for all purposes
under the Indenture. The Indenture contains covenants that limit the ability of
the Company to incur additional indebtedness; pay dividends or distributions on,
or redeem or repurchase capital stock; make investments; issue or sell capital
stock

2

168

of subsidiaries; engage in transactions with affiliates; transfer or sell
assets; guarantee indebtedness; restrict dividends or other payments of
subsidiaries; and consolidate, merge or transfer all or substantially all of its
assets and the assets of its subsidiaries. The Indenture also contains covenants
that limit the Issuer's ability to engage in business activities and its ability
to use the proceeds from the issuance of Securities. These covenants are subject
to important exceptions and qualifications.

5. Optional Redemption

Except as set forth below, the Issuer shall not be entitled to
redeem the Securities at its option prior to August 15, 2005.

On and after August 15, 2005, the Issuer shall be entitled at
its option to redeem all or a portion of the Securities upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed in
percentages of principal amount on the redemption date), plus accrued interest
to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the 12-month period commencing on August 15 of the
years set forth below:

Redemption
Period                                              Price
------                                           ----------

2005                                              106.125%
2006                                              104.083
2007                                              102.042
2008 and thereafter                               100.000%

In addition, prior to August 15, 2003, the Issuer shall be
entitled at its option on one or more occasions to redeem Securities (which
includes Additional Securities, if any) in an aggregate principal amount not to
exceed 35% of the aggregate principal amount of the Securities (which includes
Additional Securities, if any) originally issued at a redemption price
(expressed as a percentage of principal amount) of 112.25%, plus accrued and
unpaid interest to the redemption date, with the net cash proceeds contributed
to the Issuer from one or more Public Equity Offerings; provided, however, that
(1) at least 65% of such aggregate principal amount of Securities (which
includes Additional Securities, if any) remains outstanding immediately after
the occurrence of each such redemption (other than Securities held, directly or
indirectly, by the Issuer or its Affiliates); and (2) each such redemption
occurs within 60 days after the closing date of the related Public Equity
Offering.

3

169

6. Notice of Redemption

Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
E.1,000 principal amount may be redeemed in part but only in whole multiples of
E.1,000. If money sufficient to pay the redemption price of and accrued interest
on all Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.

7. Put Provisions

Upon a Change of Control, any Holder of Securities will have
the right to cause the Issuer to repurchase all or any part of the Securities of
such Holder at a repurchase price equal to 101% of the principal amount of the
Securities to be repurchased plus accrued interest to the date of repurchase
(subject to the right of holders of record on the relevant record date to
receive interest due on the related interest payment date) as provided in, and
subject to the terms of, the Indenture.

8. Subordination

The Securities are subordinated to Senior Indebtedness of the
Issuer, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Issuer must be paid before the Securities may be
paid. The Issuer agrees, and each Securityholder by accepting a Security agrees,
to the subordination provisions contained in the Indenture and authorizes the
Trustee to give it effect and appoints the Trustee as attorney-in-fact for such
purpose.

9. Guaranties

The payment by the Issuer of the principal of, and premium and
interest on, the Securities is fully and unconditionally guaranteed on a joint
and several senior subordinated basis by each of the Company and the Subsidiary
Guarantors.

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170

10. Denominations; Transfer; Exchange

The Securities are in registered form without coupons in
denominations of E.1,000 principal amount and whole multiples of E.1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.

11. Persons Deemed Owners

The registered Holder of this Security may be treated as the
owner of it for all purposes.

12. Unclaimed Money

If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Issuer at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Issuer and not to the Trustee for payment.

13. Discharge and Defeasance

Subject to certain conditions, the Issuer at any time shall be
entitled to terminate some or all of its obligations under the Securities and
the Indenture if the Issuer deposits with the Trustee money, European Government
Obligations or U.S. Government Obligations for the payment of principal and
interest on the Securities to redemption or maturity, as the case may be.

14. Amendment, Waiver

Subject to certain exceptions set forth in the Indenture, (i)
the Indenture and the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a

5

171

majority in principal amount outstanding of the Securities. Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, the Issuer, the Subsidiary Guarantors and the
Trustee shall be entitled to amend the Indenture or the Securities to cure any
ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add guarantees with respect to the
Securities including Subsidiary Guaranties, or to secure the Securities, or to
add additional covenants or surrender rights and powers conferred on the
Company, the Issuer, the Subsidiary Guarantors, or to comply with any request of
the SEC in connection with qualifying the Indenture under the Act, or to make
certain changes in the subordination provisions or to make any change that does
not adversely affect the rights of any Securityholder.

15. Defaults and Remedies

Under the Indenture, Events of Default include (i) default for
30 days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon acceleration or other wise, or failure by the Issuer to
purchase Securities when required; (iii) failure by the Company or the Issuer,
as applicable, to comply with other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other Indebtedness of the Company, Significant Subsidiaries,
Subsidiary Guarantors, or the Issuer, as applicable, if the amount accelerated
(or so unpaid) exceeds $10.0 million; (v) certain events of bankruptcy or
insolvency with respect to the Company, the Issuer, the Subsidiary Guarantors or
the Significant subsidiaries; and (vi) certain judgments or decrees for the
payment of money in excess of $10.0 million and (vii) certain defaults with
respect to the Company Guaranty or Subsidiary Guaranties. If an Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities to be due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities being due and payable immediately
upon the occurrence of such Events of Default.

Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives indemnity or
security satisfactory

6

172

to it. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in the interest of the Holders.

16. Trustee Dealings with the Issuer

Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Issuer or its Affiliates and may otherwise deal
with the Issuer or its Affiliates with the same rights it would have if it were
not Trustee.

17. No Recourse Against Others

A director, officer, employee or stockholder, as such, of the
Issuer, the Company, any Subsidiary Guarantor or the Trustee shall not have any
liability for any obligations of the Issuer, the Company or any Subsidiary
Guarantor under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.

18. Authentication

This Security shall not be valid until an authorized
signatory of the Trustee (or an authenticating agent) manually signs the
certificate of authentication on the other side of this Security.

19. Abbreviations

Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).

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173

20. CUSIP, ISIN and Common Code Numbers

Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Issuer has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. To the
extent such numbers have been issued, the Issuer has caused ISIN and Common Code
numbers to be similarly printed on the Securities and has similarly instructed
the Trustee. No representation is made as to the accuracy of such numbers either
as printed on the Securities or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.

21. Holders' Compliance with Registration Rights Agreement.

Each Holder of a Security, by acceptance hereof, acknowledges
and agrees to the provisions of the Registration Rights Agreement, including the
obligations of the Holders with respect to a registration and the
indemnification of the Issuer to the extent provided therein.

22. Governing Law.

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

8

174

THE ISSUER WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE SECURITY HOLDER A COPY OF THE INDENTURE WHICH
HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:

FLOWSERVE FINANCE B.V.
PARALLELWEG 6
ETTEN-LEUR 4870AA
THE NETHERLANDS

ATTENTION: MANAGING DIRECTOR

WITH A COPY TO:

FLOWSERVE CORPORATION
222 WEST LAS COLINAS BLVD.
SUITE 1500
IRVING, TX 75039

ATTENTION: RENEE HORNBAKER

9

175

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

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Print or type assignee's name, address and zip code)

(Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint                           agent to
transfer this Security on the books of the Issuer.  The
agent may substitute another to act for him.

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

Date:                  Your Signature:
----------------                 ----------------------------

--------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.

In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Issuer or any Affiliate of the Issuer, the undersigned confirms
that such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)  [ ]   to the Issuer; or

(2)  [ ]   pursuant to an effective registration statement under the
Securities Act of 1933; or

(3)  [ ]   inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of
1933) that purchases for its own account or for the account
of a qualified institutional buyer to whom notice is given
that such transfer is being made in reliance on Rule 144A,
in each

176

case pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or

(4)  [ ]   outside the United States in an offshore transaction within
the meaning of Regulation S under the Securities Act of 1933
in compliance with Rule 904 under the Securities Act of
1933; or

(5)  [ ]   pursuant to the exemption from registration provided by Rule
144 under the Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however,
that if box (4) or (5) is checked, the Trustee shall be entitled to
require, prior to registering any such transfer of the Securities, such
legal opinions, certifications and other information as the Issuer has
reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the
exemption provided by Rule 144 under such Act.

--------------------------------
Signature

Signature Guarantee:

----------------------------                    --------------------------------
Signature must be guaranteed                                Signature

Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

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

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177

TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Issuer as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.

Dated:
----------------                     ------------------------------------
NOTICE: To be executed by
an executive officer

TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing
this Security outside the United States as a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act and is aware that the sale to
it is being made in reliance on Regulation S and acknowledges that a holder of
an interest in a temporary Regulation S global security may not (i) receive the
payment of any distributions, redemption price or any other payments with
respect to the holder's beneficial interest in the temporary global security or
(ii) receive an interest in a permanent Regulation S global security until (A)
expiration of the 40th day after the later of the commencement of the offering
of the Securities and the closing date and (B) certification that the beneficial
owner of the interest in the Security is a non-U.S. person.

Dated:
----------------                     ------------------------------------
NOTICE: To be executed by
an executive officer

178

[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The original principal amount of this Global Security 
is               . The following increases or decreases in this Global Security
have been made:

Date of         Amount of decrease      Amount of increase      Principal amount         Signature of
Exchange        in Principal            in Principal            of this Global           authorized officer
amount of this          amount of this          Security following       of Trustee or
Global Security         Global Security         such decrease or         Securities
increase                 Custodian

4

179

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by the
Issuer or the Company pursuant to Section 4.06, 4.09 or 4.10 of the Indenture,
check the box:

[ ]

If you want to elect to have only part of this Security
purchased by the Issuer or the Company pursuant to Section 4.06,
4.09 or 4.10 of the Indenture, state the amount in principal
amount:  Euro __________

Date:                               Your Signature: 
---------------                               ----------------------------
(Sign exactly as your name
appears on the other side of
this Security.)

Signature Guarantee: --------------------------------------------
(Signature must be guaranteed)

Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

5

180

EXHIBIT B-1

Form of Certification to be Given by Holder of Beneficial
Interest in a Temporary Regulation S Global Security

Re:      FLOWSERVE FINANCE B.V.
(the "Issuer") o% Senior Subordinated
Notes due 2010 (the "Notes")

[Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear
System][Clearstream Banking, Societe anonyme]

Securities, [CUSIP No.     ][ISIN No.        ]

Reference if hereby made to the Indenture dated as of o, 2000
(the "Indenture") between the Issuer and The Bank of New York, as Trustee.
Capitalized terms used herein and not otherwise defined have the meanings set
forth in the Indenture.

[For purposes of acquiring a beneficial interest in the
Permanent Regulation S Global Security upon the expiration of the Restricted
period,] [For purposes of receiving payments under the Temporary Regulation S
Global Security,] the undersigned Holder of a beneficial interest in the
Temporary Regulation S Global Security issued under the Indenture certifies that
it is [not a U.S. Person as defined by Regulation S under][a U.S. Person who
purchased the beneficial interest in the Security pursuant to an exemption from,
or transfer not subject to,] the Securities Act of 1933, as amended.

We undertake to advise you promptly by telex on or prior to
the date on which you intend to submit your corresponding certification relating
to the Securities held by you if any applicable statement herein is not correct
on such date, and in the absence of any such notification it may be assumed that
this certificate applies as of such date.

We understand that this certificate is required in connection
with certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocable authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
for the benefit of the Initial Purchasers.

181

Date:

By:
--------------------------
as, or as agent for, the
Holder of a beneficial
interest in the Securities
to which this certificate
relates

2

182

EXHIBIT B-2

Form of Euroclear and Clearstream Certificate

Re:      FLOWSERVE FINANCE B.V.
(the "Issuer") o% Senior Subordinated
Notes due 2010 (the "Notes")

, as
Paying Agent
[address of Paying Agent]

, as
Trustee
[address of Trustee]

This is to certify that, based solely on the certifications we
have received in writing, by tested telex or by electronic transmission from
member organizations appearing in our records as persons being entitled to a
portion of the principal amount of the Securities set forth below (our "Member
Organizations") substantially to the effect set forth in the Indenture (the
"Indenture") dated as of o, 2000, between the Company and The Bank of New York,
as Trustee, Euro principal amount of the Securities held by us or our behalf are
beneficially owned by non-U.S. person(s). Capitalized terms used herein and not
otherwise defined have the meanings set forth in the Indenture. As used in this
paragraph, the term "U.S. person" has the meaning given to it by Regulation S
under the United States Securities Act of 1933, as amended.

We further certify that as of the date hereof we have not received any
notification from any of our Member Organizations to the effect that the
statements made by such Member Organizations with respect to any interest in the
Securities identified above are no longer true and cannot be relied upon as of
the date hereof.

[Upon expiration of Restricted Period: We hereby acknowledge that no
portion of the Temporary Regulation S Global Security shall be exchanged for an
interest in the Permanent Regulation S Global Security with respect to the
portion thereof for which we have not received the applicable certifications
from our Member Organizations.]

[On               and upon any other payment under the Temporary
Regulation S Global Security: We hereby agree to hold (and return to the [ ]
upon request) any payments received by us on the Temporary Regulation S Global
Security with respect to the portion thereof for which we have not received the
applicable certificates from our Member Organizations.]

183

We understand that this certification is required in connection with
certain securities laws of the United States of America. In connection
therewith, if administrative or legal proceedings are commenced or threatened in
connection with which this certification is or would be relevant, we irrevocable
authorized you to produce this certification to any interested party in such
proceedings.

Dated:

[MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, Brussels office, as
operator of the Euroclear System

or

CLEARSTREAM BANKING, Societe Anonyme]

By:
----------------------------
Name:
Title:
---------

1.  Insert dated of expiration of Restricted Period or
payment date, as the case may be.

2

1
EXECUTION COPY

EXHIBIT 4.10

$290,000,000

FLOWSERVE CORPORATION

12 1/4% SENIOR SUBORDINATED NOTES DUE 2010

REGISTRATION RIGHTS AGREEMENT

August 3, 2000

Credit Suisse First Boston Corporation
Bank of America Securities Inc.
ABN AMRO  Incorporated
Banc One Capital Markets, Inc.
As Representatives of the Several Purchasers, c/o
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York  10010-3629

Dear Sirs:

Flowserve Corporation, a New York corporation (the "ISSUER"), proposes
to issue and sell to Credit Suisse First Boston Corporation, Bank of America
Securities Inc. ABN AMRO Incorporated and Banc One Capital Markets, Inc.
(collectively, the "INITIAL PURCHASERS"), upon the terms set forth in a purchase
agreement of even date herewith (the "PURCHASE AGREEMENT"), $290,000,000
aggregate principal amount of its 121/4% Senior Subordinated Notes due 2010 (the
"INITIAL SECURITIES") to be guaranteed (the "GUARANTIES") by Flowserve RED
Corporation, Flowserve FSD Corporation, Flowserve FCD Corporation, Flowserve
International, Inc., Flowserve Management Company (DE Business Trust), BW/IP-New
Mexico, Inc., Flowserve International, LLC, Durametallic Australia Holding
Company, Flowserve Finance B.V., Flowserve International Limited, Innovative
Valve Technologies, Inc., Plant Maintenance, Inc., Varco Valve, Inc., Colonial
Equipment & Service Co., Inc., CECORP, Inc., DIVT Acquisition-Delaware, LLC,
DIVT Subsidiary, LLC, Southern Valve Service, Inc., L.T. Koppl Industries, Inc.,
Koppl Company, Koppl Industrial Systems, Inc., Harley Industries, Inc., Koppl
Company of Arizona, Seeley & Jones, Incorporated, GSV, Inc., IPSCO-Florida,
Inc., International Piping Services Company, Cypress Industries, Inc., DALCO,
LLC, Plant Specialties, Inc., Energy Maintenance, Inc., Preventive Maintenance,
Inc., Production Machine Incorporated, ICE Liquidating, Inc., Valve Repair of
South Carolina, Inc., The Safe Seal Company, Inc., Flickinger-Benicia Inc.,
Puget Investments, Inc., Steam Supply & Rubber Co., Inc., Flickinger Company,
Boyden, Inc., Valve Actuation & Repair Co., Flowserve Holdings, Inc. and IPSCO
Holding, Inc. (the "GUARANTORS" and, collectively with the Issuer, the
"COMPANY"). The Initial Securities will be issued pursuant to an Indenture,
dated as of August 8, 2000, (the "INDENTURE"), among the Issuer, the Guarantors
named therein and The Bank of New York, as trustee (the "TRUSTEE"). As an
inducement to the Initial Purchasers to enter into the Purchase Agreement, the
Company agrees with the Initial Purchasers, for the benefit of the Initial
Purchasers and the holders of the Securities (as defined below) (collectively
the "HOLDERS"), as follows:

1. Registered Exchange Offer. Unless not permitted by applicable law
(after the Company has complied with the ultimate paragraph of this Section 1),
the Company shall prepare and, not later than 90 days (such 90th day being a
"FILING DEADLINE") after the date on which the Initial Purchasers purchase the
Initial Securities pursuant to the Purchase Agreement (the "CLOSING DATE"), file
with the Securities and Exchange Commission (the "COMMISSION") a registration
statement (the "EXCHANGE OFFER REGISTRATION STATEMENT") on an appropriate form
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), with
respect to a proposed offer (the "REGISTERED EXCHANGE OFFER") to the Holders of
Transfer Restricted Securities (as defined in Section 6 hereof), who are not
prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer, to issue and deliver to such Holders, in exchange for
the Initial Securities, a like aggregate principal amount of debt securities of
the Company issued under the Indenture, identical in all material respects to
the Initial Securities and registered under the Securities Act (the "EXCHANGE
SECURITIES"). The Company shall use its best efforts to (i) cause such Exchange
Offer Registration Statement to become effective under the Securities Act within

2

150 days after the Closing Date (such 150th day being an "EFFECTIVENESS
DEADLINE") and (ii) keep the Exchange Offer Registration Statement effective for
not less than 30 days (or longer, if required by applicable law) after the date
notice of the Registered Exchange Offer is mailed to the Holders (such period
being called the "EXCHANGE OFFER REGISTRATION PERIOD").

If the Company commences the Registered Exchange Offer, the Company (i)
will be entitled to consummate the Registered Exchange Offer 30 days after such
commencement (provided that the Company has accepted all the Initial Securities
theretofore validly tendered in accordance with the terms of the Registered
Exchange Offer) and (ii) will be required to consummate the Registered Exchange
Offer no later than 40 days after the date on which the Exchange Offer
Registration Statement is declared effective (such 40th day being the
"CONSUMMATION DEADLINE").

Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Securities electing to exchange the
Initial Securities for Exchange Securities (assuming that such Holder is not an
affiliate of the Company within the meaning of the Securities Act, acquires the
Exchange Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the Exchange
Securities and is not prohibited by any law or policy of the Commission from
participating in the Registered Exchange Offer) to trade such Exchange
Securities from and after their receipt without any limitations or restrictions
under the Securities Act and without material restrictions under the securities
laws of the several states of the United States.

The Company acknowledges that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Initial Securities, acquired for its own account as a
result of market making activities or other trading activities, for Exchange
Securities (an "EXCHANGING DEALER"), is required to deliver a prospectus
containing the information set forth in (a) Annex A hereto on the cover, (b)
Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of
the Exchange Offer" section, and (c) Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell
Securities (as defined below) acquired in exchange for Initial Securities
constituting any portion of an unsold allotment, is required to deliver a
prospectus containing the information required by Items 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in connection with such sale.

The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided, however, that (i) in the
case where such prospectus and any amendment or supplement thereto must be
delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be
the lesser of 180 days and the date on which all Exchanging Dealers and the
Initial Purchasers have sold all Exchange Securities held by them (unless such
period is extended pursuant to Section 3(j) below) and (ii) the Company shall
make such prospectus and any amendment or supplement thereto available to any
broker-dealer for use in connection with any resale of any Exchange Securities
for a period of not less than 180 days after the consummation of the Registered
Exchange Offer.

If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser upon the written request of such Initial Purchaser, in
exchange (the "PRIVATE EXCHANGE") for the Initial Securities held by such
Initial Purchaser, a like principal amount of debt securities of the Company
issued under the Indenture and identical in all material respects to the Initial
Securities (the "PRIVATE EXCHANGE SECURITIES"). The Initial Securities, the
Exchange Securities and the Private Exchange Securities are herein collectively
called the "SECURITIES".

In connection with the Registered Exchange Offer, the Company shall:

(a) mail to each Holder a copy of the prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;

(b) keep the Registered Exchange Offer open for not less than
30 days (or longer, if required by applicable law) after the date
notice thereof is mailed to the Holders;

2

3

(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York, which may be the Trustee or an affiliate of the Trustee;

(d) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last business day
on which the Registered Exchange Offer shall remain open; and

(e) otherwise comply with all applicable laws.

As soon as practicable after the close of the Registered Exchange Offer
or the Private Exchange, as the case may be, the Company shall:

(x) accept for exchange all the Securities validly tendered
and not withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;

(y) deliver to the Trustee for cancellation all the Initial
Securities so accepted for exchange; and

(z) cause the Trustee to authenticate and deliver promptly to
each Holder of the Initial Securities, Exchange Securities or Private
Exchange Securities, as the case may be, equal in principal amount to
the Initial Securities of such Holder so accepted for exchange.

The Indenture will provide that the Exchange Securities will not be
subject to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.

Interest on each Exchange Security and Private Exchange Security issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Initial Securities surrendered in exchange therefor or, if no interest has been
paid on the Initial Securities, from the date of original issue of the Initial
Securities.

Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule
405 of the Securities Act, of the Company or if it is an affiliate, such Holder
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Securities and (v) if such Holder is a
broker-dealer, that it will receive Exchange Securities for its own account in
exchange for Initial Securities that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Securities.

Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

If following the date hereof there has been announced a change in
Commission policy with respect to exchange offers that in the reasonable opinion
of counsel to the Company raises a substantial question as to whether the
Registered Exchange Offer is permitted by applicable federal law, the Company
will seek a no-action letter or other favorable decision from the Commission
allowing the Company to consummate the Registered Exchange Offer. The Company
will pursue the issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company will take all such other actions as
may be requested by the Commission or otherwise required in connection with the
issuance of 

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such decision, including without limitation (i) participating in telephonic
conferences with the Commission, (ii) delivering to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal bases, if
any, upon which such counsel has concluded that the Registered Exchange Offer
should be permitted and (iii) diligently pursuing a resolution (which need not
be favorable) by the Commission staff.

2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated by the
180th day after the Closing Date, (iii) any Initial Purchaser so requests with
respect to the Initial Securities (or the Private Exchange Securities) not
eligible to be exchanged for Exchange Securities in the Registered Exchange
Offer and held by it following consummation of the Registered Exchange Offer or
(iv) any Holder (other than an Exchanging Dealer) is not eligible to participate
in the Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer, such
Holder does not receive freely tradeable Exchange Securities on the date of the
exchange and any such Holder so requests, the Company shall take the following
actions (the date on which any of the conditions described in the foregoing
clauses (i) through (iv) occur, including in the case of clauses (iii) or (iv)
the receipt of the required notice, being a "TRIGGER DATE"):

(a) The Company shall promptly (but in no event more than 30
days after the Trigger Date (such 30th day being a "FILING DEADLINE"))
file with the Commission and thereafter use its best efforts to cause
to be declared effective no later than 140 days after the Trigger Date
(such 140th day being an "EFFECTIVENESS DEADLINE") a registration
statement (the "SHELF REGISTRATION STATEMENT" and, together with the
Exchange Offer Registration Statement, a "REGISTRATION STATEMENT") on
an appropriate form under the Securities Act relating to the offer and
sale of the Transfer Restricted Securities by the Holders thereof from
time to time in accordance with the methods of distribution set forth
in the Shelf Registration Statement and Rule 415 under the Securities
Act (hereinafter, the "SHELF REGISTRATION"); provided, however, that no
Holder (other than an Initial Purchaser) shall be entitled to have the
Securities held by it covered by such Shelf Registration Statement
unless such Holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such Holder.

(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of
the relevant Securities, for a period of two years (or for such longer
period if extended pursuant to Section 3(j) below) from the date of its
effectiveness or such shorter period that will terminate when all the
Securities covered by the Shelf Registration Statement (i) have been
sold pursuant thereto or (ii) are no longer restricted securities (as
defined in Rule 144 under the Securities Act, or any successor rule
thereof). The Company shall be deemed not to have used its best efforts
to keep the Shelf Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in Holders
of Securities covered thereby not being able to offer and sell such
Securities during that period, unless such action is required by
applicable law.

(c) Notwithstanding any other provisions of this Agreement to
the contrary, the Company shall cause the Shelf Registration Statement
and the related prospectus and any amendment or supplement thereto, as
of the effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:

(a) The Company shall (i) furnish to each Initial Purchaser,
prior to the filing thereof with the Commission, a copy of the
Registration Statement and each amendment thereof and each supplement,
if any, to the prospectus included therein and, in the event that an
Initial Purchaser (with respect to any portion of an unsold allotment
from the original offering) is participating in the Registered Exchange
Offer or the Shelf Registration Statement, the Company shall use its
best efforts to reflect in each such document, when so filed with the
Commission, such comments as such Initial Purchaser reasonably may
propose; (ii) include the information set

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forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section and in Annex C hereto in the "Plan of Distribution"
section of the prospectus forming a part of the Exchange Offer
Registration Statement and include the information set forth in Annex D
hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; (iii) if requested by an Initial Purchaser,
include the information required by Items 507 or 508 of Regulation S-K
under the Securities Act, as applicable, in the prospectus forming a
part of the Exchange Offer Registration Statement; (iv) include within
the prospectus contained in the Exchange Offer Registration Statement a
section entitled "Plan of Distribution," reasonably acceptable to the
Initial Purchasers, which shall contain a summary statement of the
positions taken or policies made by the staff of the Commission with
respect to the potential "underwriter" status of any broker-dealer that
is the beneficial owner (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange
Securities received by such broker-dealer in the Registered Exchange
Offer (a "PARTICIPATING BROKER-DEALER"), whether such positions or
policies have been publicly disseminated by the staff of the Commission
or such positions or policies, in the reasonable judgment of the
Initial Purchasers based upon advice of counsel (which may be in-house
counsel), represent the prevailing views of the staff of the
Commission; and (v) in the case of a Shelf Registration Statement,
include the names of the Holders who propose to sell Securities
pursuant to the Shelf Registration Statement as selling
securityholders.

(b) The Company shall give written notice to the Initial
Purchasers, the Holders of the Securities and any Participating
Broker-Dealer from whom the Company has received prior written notice
that it will be a Participating Broker-Dealer in the Registered
Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall
be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):

(i) when the Registration Statement or any amendment
thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective;

(ii) of any request by the Commission for amendments
or supplements to the Registration Statement or the prospectus
included therein or for additional information;

(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that
purpose;

(iv) of the receipt by the Company or its legal
counsel of any notification with respect to the suspension of
the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any
proceeding for such purpose; and

(v) of the happening of any event that requires the
Company to make changes in the Registration Statement or the
prospectus in order that the Registration Statement or the
prospectus do not contain an untrue statement of a material
fact nor omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the
case of the prospectus, in light of the circumstances under
which they were made) not misleading.

(c) The Company shall make every reasonable effort to obtain
the withdrawal at the earliest possible time, of any order suspending
the effectiveness of the Registration Statement.

(d) The Company shall furnish to each Holder of Securities
included within the coverage of the Shelf Registration, without charge,
at least one copy of the Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits
thereto (including those, if any, incorporated by reference).

(e) The Company shall deliver to each Exchanging Dealer and
each Initial Purchaser, and to any other Holder who so requests,
without charge, at least one copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if any Initial Purchaser or any such
Holder requests, all exhibits thereto (including those incorporated by
reference).

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6

(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Securities included within the coverage of
the Shelf Registration, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in the
Shelf Registration Statement and any amendment or supplement thereto as
such person may reasonably request. The Company consents, subject to
the provisions of this Agreement, to the use of the prospectus or any
amendment or supplement thereto by each of the selling Holders of the
Securities in connection with the offering and sale of the Securities
covered by the prospectus, or any amendment or supplement thereto,
included in the Shelf Registration Statement.

(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other
persons required to deliver a prospectus following the Registered
Exchange Offer, without charge, as many copies of the final prospectus
included in the Exchange Offer Registration Statement and any amendment
or supplement thereto as such persons may reasonably request. The
Company consents, subject to the provisions of this Agreement, to the
use of the prospectus or any amendment or supplement thereto by any
Initial Purchaser, if necessary, any Participating Broker-Dealer and
such other persons required to deliver a prospectus following the
Registered Exchange Offer in connection with the offering and sale of
the Exchange Securities covered by the prospectus, or any amendment or
supplement thereto, included in such Exchange Offer Registration
Statement.

(h) Prior to any public offering of the Securities pursuant to
any Registration Statement the Company shall register or qualify or
cooperate with the Holders of the Securities included therein and their
respective counsel in connection with the registration or qualification
of the Securities for offer and sale under the securities or "blue sky"
laws of such states of the United States as any Holder of the
Securities reasonably requests in writing and do any and all other acts
or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Securities covered by such Registration Statement;
provided, however, that the Company shall not be required to (i)
qualify generally to do business in any jurisdiction where it is not
then so qualified or (ii) take any action which would subject it to
general service of process or to taxation in any jurisdiction where it
is not then so subject.

(i) The Company shall cooperate with the Holders of the
Securities to facilitate the timely preparation and delivery of
certificates representing the Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders may request a
reasonable period of time prior to sales of the Securities pursuant to
such Registration Statement.

(j) Upon the occurrence of any event contemplated by
paragraphs (ii) through (v) of Section 3(b) above during the period for
which the Company is required to maintain an effective Registration
Statement, the Company shall promptly prepare and file a post-effective
amendment to the Registration Statement or a supplement to the related
prospectus and any other required document so that, as thereafter
delivered to Holders of the Securities or purchasers of Securities, the
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. If the Company notifies the
Initial Purchasers, the Holders of the Securities and any known
Participating Broker-Dealer in accordance with paragraphs (ii) through
(v) of Section 3(b) above to suspend the use of the prospectus until
the requisite changes to the prospectus have been made, then the
Initial Purchasers, the Holders of the Securities and any such
Participating Broker-Dealers shall suspend use of such prospectus, and
the period of effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange Offer Registration
Statement provided for in Section 1 above shall each be extended by the
number of days from and including the date of the giving of such notice
to and including the date when the Initial Purchasers, the Holders of
the Securities and any known Participating Broker-Dealer shall have
received such amended or supplemented prospectus pursuant to this
Section 3(j).

(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for the
Initial Securities, the Exchange Securities or the Private Exchange
Securities, as the case may be, and provide the applicable trustee with
printed certificates for the Initial Securities, the Exchange
Securities or the Private Exchange Securities, as the case may be, in a
form eligible for deposit with The Depository Trust Company.

(l) The Company will comply with all rules and regulations of
the Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf 

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7

Registration and will make generally available to its security holders
(or otherwise provide in accordance with Section 11(a) of the
Securities Act) an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act, no later than 45 days after the
end of a 12-month period (or 90 days, if such period is a fiscal year)
beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the Registration Statement,
which statement shall cover such 12-month period.

(m) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely manner
and containing such changes, if any, as shall be necessary for such
qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Company shall
appoint a new trustee thereunder pursuant to the applicable provisions
of the Indenture.

(n) The Company may require each Holder of Securities to be
sold pursuant to the Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of
the Securities as the Company may from time to time reasonably require
for inclusion in the Shelf Registration Statement, and the Company may
exclude from such registration the Securities of any Holder that
unreasonably fails to furnish such information within a reasonable time
after receiving such request.

(o) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form)
and take all such other action, if any, as any Holder of the Securities
shall reasonably request in order to facilitate the disposition of the
Securities pursuant to any Shelf Registration.

(p) In the case of any Shelf Registration, the Company shall
(i) make reasonably available for inspection by the Holders of the
Securities, any underwriter participating in any disposition pursuant
to the Shelf Registration Statement and any attorney, accountant or
other agent retained by the Holders of the Securities or any such
underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the
Company's officers, directors, employees, accountants and auditors to
supply all relevant information reasonably requested by the Holders of
the Securities or any such underwriter, attorney, accountant or agent
in connection with the Shelf Registration Statement, in each case, as
shall be reasonably necessary to enable such persons, to conduct a
reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated on behalf of the Initial
Purchasers by you and on behalf of the other parties, by one counsel
designated by and on behalf of such other parties as described in
Section 4 hereof and only after execution of a confidentiality
agreement satisfactory to the Company.

(q) In the case of any Shelf Registration, the Company, if
requested by any Holder of Securities covered thereby, shall cause (i)
its counsel to deliver an opinion relating to the Securities in
customary form, subject to customary exceptions, qualifications and
assumptions, addressed to such Holders and the managing underwriters,
if any, thereof and dated the effective date of such Shelf Registration
Statement (it being agreed that the matters to be covered by such
opinion shall include, without limitation, the due incorporation and
good standing of the Company and the Guarantors and its significant
foreign subsidiaries; the qualification of the Company and the
Guarantors and its significant foreign subsidiaries to transact
business as foreign corporations; the due authorization, execution and
delivery of the relevant agreement of the type referred to in Section
3(o) hereof; the due authorization, execution, authentication and
issuance, and the validity and enforceability, of the applicable
Securities; the absence of material legal or governmental proceedings
involving the Company and its subsidiaries; the absence of governmental
approvals required to be obtained in connection with the Shelf
Registration Statement, the offering and sale of the applicable
Securities, or any agreement of the type referred to in Section 3(o)
hereof; the compliance as to form of such Shelf Registration Statement
and any documents incorporated by reference therein and of the
Indenture with the requirements of the Securities Act and the Trust
Indenture Act, respectively; and, as of the date of the opinion and as
of the effective date of the Shelf Registration Statement or most
recent post-effective amendment thereto, as the case may be, the
absence from such Shelf Registration Statement and the prospectus
included therein, as then amended or supplemented, and from any
documents incorporated by reference therein of an untrue statement of a
material fact or the omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading (in the case of any such documents, in the light of the
circumstances existing at the time that such documents were filed with
the Commission under the Exchange Act); (ii) its 

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officers to execute and deliver all customary documents and
certificates and updates thereof reasonably requested by any
underwriters of the applicable Securities and (iii) its independent
public accountants to provide to the selling Holders of the applicable
Securities and any underwriter therefor a comfort letter in customary
form and covering matters of the type customarily covered in comfort
letters in connection with primary underwritten offerings, subject to
receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.

(r) In the case of the Registered Exchange Offer, if requested
by any Initial Purchaser or any known Participating Broker-Dealer, the
Company shall cause (i) its counsel to deliver to such Initial
Purchaser or such Participating Broker-Dealer a signed opinion in the
form set forth in Section 6(e) of the Purchase Agreement with such
changes as are customary in connection with the preparation of a
Registration Statement and (ii) its independent public accountants and
the independent public accountants with respect to any other entity for
which financial information is provided in the Registration Statement
to deliver to such Initial Purchaser or such Participating
Broker-Dealer a comfort letter, in customary form, meeting the
requirements as to the substance thereof as set forth in Section 6(a),
(b) and (c) of the Purchase Agreement, with appropriate date changes.

(s) If a Registered Exchange Offer or a Private Exchange is to
be consummated, upon delivery of the Initial Securities by Holders to
the Company (or to such other Person as directed by the Company) in
exchange for the Exchange Securities or the Private Exchange
Securities, as the case may be, the Company shall mark, or caused to be
marked, on the Initial Securities so exchanged that such Initial
Securities are being canceled in exchange for the Exchange Securities
or the Private Exchange Securities, as the case may be; in no event
shall the Initial Securities be marked as paid or otherwise satisfied.

(t) The Company will use its best efforts to (a) if the
Initial Securities have been rated prior to the initial sale of such
Initial Securities, confirm such ratings will apply to the Securities
covered by a Registration Statement, or (b) if the Initial Securities
were not previously rated, cause the Securities covered by a
Registration Statement to be rated with the appropriate rating
agencies, if so requested by Holders of a majority in aggregate
principal amount of Securities covered by such Registration Statement,
or by the managing underwriters, if any.

(u) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Securities or participate as a member
of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Conduct Rules (the "RULES") of
the National Association of Securities Dealers, Inc. ("NASD")) thereof,
whether as a Holder of such Securities or as an underwriter, a
placement or sales agent or a broker or dealer in respect thereof, or
otherwise, the Company will assist such broker-dealer in complying with
the requirements of such Rules, including, without limitation, by (i)
if such Rules, including Rule 2720, shall so require, engaging a
"qualified independent underwriter" (as defined in Rule 2720) to
participate in the preparation of the Registration Statement relating
to such Securities, to exercise usual standards of due diligence in
respect thereto and, if any portion of the offering contemplated by
such Registration Statement is an underwritten offering or is made
through a placement or sales agent, to recommend the yield of such
Securities, (ii) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters
provided in Section 5 hereof and (iii) providing such information to
such broker-dealer as may be required in order for such broker-dealer
to comply with the requirements of the Rules.

(v) The Company shall use its best efforts to take all other
steps necessary to effect the registration of the Securities covered by
a Registration Statement contemplated hereby.

4. Registration Expenses. (a) All expenses incident to the Company's
performance of and compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement is ever filed or becomes
effective, including without limitation;

(i) all registration and filing fees and expenses;

(ii) all fees and expenses of compliance with federal
securities and state "blue sky" or securities laws;

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(iii) all expenses of printing (including printing
certificates for the Securities to be issued in the Registered Exchange
Offer and the Private Exchange and printing of Prospectuses), messenger
and delivery services and telephone;

(iv) all fees and disbursements of counsel for the Company;

(v) all application and filing fees in connection with listing
the Exchange Securities on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and

(vi) all fees and disbursements of independent certified
public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such
performance).

The Company will bear its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expenses of any annual audit and the fees and expenses
of any person, including special experts, retained by the Company.

(b) In connection with any Registration Statement required by this
Agreement, the Company will reimburse the Initial Purchasers and the Holders of
Transfer Restricted Securities who are tendering Initial Securities in the
Registered Exchange Offer and/or selling or reselling Securities pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Cravath, Swaine & Moore
unless another firm shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.

5. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Holder of the Securities, any Participating Broker-Dealer and each
person, if any, who controls such Holder or such Participating Broker-Dealer
within the meaning of the Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer and such controlling persons are referred to
collectively as the "INDEMNIFIED PARTIES") from and against any losses, claims,
damages or liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof; provided, however, that
(i) the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration in reliance
upon and in conformity with written information pertaining to such Holder and
furnished to the Company by or on behalf of such Holder specifically for
inclusion therein and (ii) with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus relating
to a Shelf Registration Statement, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Holder or Participating
Broker-Dealer from whom the person asserting any such losses, claims, damages or
liabilities purchased the Securities concerned, to the extent that a prospectus
relating to such Securities was required to be delivered by such Holder or
Participating Broker-Dealer under the Securities Act in connection with such
purchase and any such loss, claim, damage or liability of such Holder or
Participating Broker-Dealer results from the fact that there was not sent or
given to such person, at or prior to the written confirmation of the sale of
such Securities to such person, a copy of the final prospectus if the Company
had previously furnished copies thereof to such Holder or Participating
Broker-Dealer; provided further, however, that this indemnity agreement will be
in addition to any liability which the Company may otherwise have to such
Indemnified Party. The Company shall also indemnify underwriters, their officers
and directors and each person who controls such underwriters within the meaning
of the Securities Act or the Exchange Act to the same extent as provided above
with respect to the indemnification of the Holders of the Securities if
requested by such Holders.

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(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act from
and against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Company or any such controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Company by or
on behalf of such Holder specifically for inclusion therein; and, subject to the
limitation set forth immediately preceding this clause, shall reimburse, as
incurred, the Company for any legal or other expenses reasonably incurred by the
Company or any such controlling person in connection with investigating or
defending any loss, claim, damage, liability or action in respect thereof. This
indemnity agreement will be in addition to any liability which such Holder may
otherwise have to the Company or any of its controlling persons.

(c) Promptly after receipt by an indemnified party under this Section 5
of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action, and does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.

(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the exchange of the Securities,
pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified party, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid by
an indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding any other provision of this
Section 5(d), the Holders of the Securities shall not be required to contribute
any amount in excess of the amount by which the net proceeds received by such
Holders from the sale of the Securities pursuant to a Registration Statement
exceeds the amount of damages which such Holders have otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to 

10

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contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls such indemnified party within the meaning of the Securities Act or the
Exchange Act shall have the same rights to contribution as such indemnified
party and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.

(e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.

6. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "ADDITIONAL INTEREST") with respect to the Securities shall be
assessed as follows if any of the following events occur (each such event in
clauses (i) through (iv) below being herein called a "REGISTRATION DEFAULT"):

(i)      any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing
Deadline;

(ii)     any Registration Statement required by this Agreement is not
declared effective by the Commission on or prior to the
applicable Effectiveness Deadline;

(iii)    the Registered Exchange Offer has not been consummated on or
prior to the Consummation Deadline; or

(iv)     any Registration Statement required by this Agreement has been
declared effective by the Commission but (A) such Registration
Statement thereafter ceases to be effective or (B) such
Registration Statement or the related prospectus ceases to be
usable in connection with resales of Transfer Restricted
Securities during the periods specified herein because either
(1) any event occurs as a result of which the related
prospectus forming part of such Registration Statement would
include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements
therein in the light of the circumstances under which they
were made not misleading, or (2) it shall be necessary to
amend such Registration Statement or supplement the related
prospectus, to comply with the Securities Act or the Exchange
Act or the respective rules thereunder.

Each of the foregoing will constitute a Registration Default whatever the reason
for any such event and whether it is voluntary or involuntary or is beyond the
control of the Company or pursuant to operation of law or as a result of any
action or inaction by the Commission.

Additional Interest shall accrue on the Securities over and above the
interest set forth in the title of the Securities from and including the date on
which any such Registration Default shall occur to but excluding the date on
which all such Registration Defaults have been cured, at a rate of 0.50% per
annum (the "ADDITIONAL INTEREST RATE") for the first 90-day period immediately
following the occurrence of such Registration Default. The Additional Interest
Rate shall increase by an additional 0.50% per annum with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum Additional Interest Rate of 2.0% per annum.

(b) A Registration Default referred to in Section 6(a)(iv) hereof shall
be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events, with respect
to the Company that would need to be described in such Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company is proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe such events;
provided, however, that in any case if such Registration Default occurs for a
continuous period in excess of 30 days, Additional Interest shall be payable in
accordance with the above paragraph from the day such Registration Default
occurs until such Registration Default is cured.

(c) Any amounts of Additional Interest due pursuant to Section 6(a)
will be payable in cash on the regular interest payment dates with respect to
the Securities. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest Rate by the principal amount of
the Securities and further multiplied by a fraction, the numerator of which is
the number of days such

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Additional Interest Rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months), and the denominator
of which is 360.

(d) "TRANSFER RESTRICTED SECURITIES" means each Security until (i) the
date on which such Security has been exchanged by a person other than a
broker-dealer for a freely transferable Exchange Security in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of an Initial Security for an Exchange Note, the date on which
such Exchange Note is sold to a purchaser who receives from such broker-dealer
on or prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Security has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Security is distributed to the public pursuant to Rule 144 under the Securities
Act or is saleable pursuant to Rule 144(k) under the Securities Act.

7. Rules 144 and 144A. The Company shall use its best efforts to file
the reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time the Company is not required to file
such reports, it will, upon the request of any Holder of Securities, make
publicly available other information so long as necessary to permit sales of
their securities pursuant to Rules 144 and 144A. The Company covenants that it
will take such further action as any Holder of Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including the
requirements of Rule 144A(d)(4)). The Company will provide a copy of this
Agreement to prospective purchasers of Initial Securities identified to the
Company by the Initial Purchasers upon request. Upon the request of any Holder
of Initial Securities, the Company shall deliver to such Holder a written
statement as to whether it has complied with such requirements. Notwithstanding
the foregoing, nothing in this Section 7 shall be deemed to require the Company
to register any of its securities pursuant to the Exchange Act.

8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("MANAGING UNDERWRITERS") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering.

No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.

9. Miscellaneous.

(a) Remedies. The Company acknowledges and agrees that any failure by
the Company to comply with its obligations under Section 1 and 2 hereof may
result in material irreparable injury to the Initial Purchasers or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 1 and
2 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.

(b) No Inconsistent Agreements. The Company will not on or after the
date of this Agreement enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.

(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.

12

13

(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:

(1) if to a Holder of the Securities, at the most current
address given by such Holder to the Company.

(2) if to the Initial Purchasers:

Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.:  (212) 325-8278
Attention:  Transactions Advisory Group

with a copy to:

Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: Stephen L. Burns, Esq.

(3)      if to the Company, at its address as follows:

Flowserve Corporation
222 West Las Colinas Boulevard
Irving, Texas 75039
Attention:  Ronald F. Shuff, Esq.

with a copy to:

Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention:  Christopher C. Paci, Esq.

All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.

(e) Third Party Beneficiaries. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder.

(f) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.

(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.

(j) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of

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any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

(k) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.

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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Issuer a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the several Initial Purchasers, the Issuer and the Guarantors in
accordance with its terms.

Very truly yours,

FLOWSERVE CORPORATION

by    /s/ RENEE J. HORNBAKER
------------------------------------------
Name:  Renee J. Hornbaker
Title: Vice President and Chief Financial
Officer

FLOWSERVE FINANCE B.V.

by    /s/ JOHN M. NANOS
------------------------------------------
Name:  John M. Nanos
Title: Managing Director

by    /s/ M. KATHLEEN MCVAY
------------------------------------------
Name:  M. Kathleen McVay
Title: Managing Director

15

16

Flowserve RED Corporation,
Flowserve FSD Corporation,
Flowserve FCD Corporation,
Flowserve International, Inc.,
Flowserve Management Company (DE Business Trust),
BW/IP-New Mexico, Inc.,
Flowserve International, LLC,
Durametallic Australia Holding Company,
Flowserve International Limited,
Innovative Valve Technologies, Inc.,
Plant Maintenance, Inc.,
Varco Valve, Inc.,
Colonial Equipment & Service Co., Inc.,
CECORP, Inc.,
DIVT Acquisition-Delaware, LLC,
DIVT Subsidiary, LLC,
Southern Valve Service, Inc.,
L.T. Koppl Industries, Inc.,
Koppl Company,
Koppl Industrial Systems, Inc.,
Harley Industries, Inc.,
Koppl Company of Arizona,
Seeley & Jones, Incorporated,
GSV, Inc.,
IPSCO-Florida, Inc.,
International Piping Services Company,
Cypress Industries, Inc.,
DALCO, LLC,
Plant Specialties, Inc.,
Energy Maintenance, Inc.,
Preventive Maintenance, Inc.,
Production Machine Incorporated,
ICE Liquidating, Inc.,
Valve Repair of South Carolina, Inc.,
The Safe Seal Company, Inc.,
Flickinger-Benicia Inc.,
Puget Investments, Inc.,
Steam Supply & Rubber Co., Inc.,
Flickinger Company,
Boyden, Inc.,
Valve Actuation & Repair Co.,
Flowserve Holdings, Inc.,
IPSCO Holding, Inc.,

by /s/ JOHN M. NANOS
------------------------------------------
Name:  John M. Nanos
Title: Senior Associate General Counsel

17

The foregoing Registration 
Rights Agreement is hereby confirmed 
and accepted as of the date first 
above written.

CREDIT SUISSE FIRST BOSTON CORPORATION
BANC OF AMERICA SECURITIES INC.
ABN AMRO INCORPORATED
BANK ONE CAPITAL MARKETS, INC.

By:  CREDIT SUISSE FIRST BOSTON CORPORATION

by  /s/ BRENT PATRY
------------------------------------
Name: Brent Patry
Title: Director

18

ANNEX A

Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Securities received in exchange for Initial Securities
where such Initial Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."

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ANNEX B

Each broker-dealer that receives Exchange Securities for its own
account in exchange for Initial Securities, where such Initial Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Securities. See "Plan of
Distribution."

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ANNEX C

PLAN OF DISTRIBUTION

Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until , 199 , all dealers
effecting transactions in the Exchange Securities may be required to deliver a
prospectus.(1)

The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.

For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.

--------

(1) In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.

1

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EXHIBIT 4.11

EXECUTION COPY

E.100,000,000

FLOWSERVE FINANCE B.V.

12 1/4% SENIOR SUBORDINATED NOTES DUE 2010

REGISTRATION RIGHTS AGREEMENT

August 3, 2000

CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED ("CSFBL")
BANK OF AMERICA INTERNATIONAL LIMITED
ABN AMRO INTERNATIONAL LIMITED
FIRST CHICAGO LIMITED
As Representatives of the Several Purchasers,
CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED
ONE CABOT SQUARE
LONDON, ENGLAND E144QJ

Dear Sirs:

Flowserve Finance B.V. a Netherlands besloten vennootschap (the
"ISSUER"), proposes to issue and sell to Credit Suisse First Boston (Europe)
Limited ("CSFBL"), Bank of America International Limited, ABN AMRO International
Limited, First Chicago Limited and (collectively, the "INITIAL PURCHASERS"),
upon the terms set forth in a purchase agreement of even date herewith (the
"PURCHASE AGREEMENT"), E.100,000,000 aggregate principal amount of its 12 1/4%
Senior Subordinated Notes due 2010 (the "INITIAL SECURITIES") to be guaranteed
(the "GUARANTIES") by and Flowserve Corporation, Flowserve RED Corporation,
Flowserve FSD Corporation, Flowserve FCD Corporation, Flowserve International,
Inc., Flowserve Management Company (DE Business Trust), BW/IP-New Mexico, Inc.,
Flowserve International, LLC, Durametallic Australia Holding Company, Flowserve
International Limited, Innovative Valve Technologies, Inc., Plant Maintenance,
Inc., Varco Valve, Inc., Colonial Equipment & Service Co., Inc., CECORP, Inc.,
DIVT Acquisition-Delaware, LLC, DIVT Subsidiary, LLC, Southern Valve Service,
Inc., L.T. Koppl Industries, Inc., Koppl Company, Koppl Industrial Systems,
Inc., Harley Industries, Inc., Koppl Company of Arizona, Seeley & Jones,
Incorporated, GSV, Inc., IPSCO-Florida, Inc., International Piping Services
Company, Cypress Industries, Inc., DALCO, LLC, Plant Specialties, Inc., Energy
Maintenance, Inc., Preventive Maintenance, Inc., Production Machine
Incorporated, ICE Liquidating, Inc., Valve Repair of South Carolina, Inc., The
Safe Seal Company, Inc., Flickinger-Benicia Inc., Puget Investments, Inc., Steam
Supply & Rubber Co., Inc., Flickinger Company, Boyden, Inc., Valve Actuation &
Repair Co., Flowserve Holdings, Inc. and IPSCO Holding, Inc. (collectively, the
"GUARANTORS" and, collectively with the Issuer, the "COMPANY"). The Initial
Securities will be issued pursuant to an Indenture, dated as of August 8, 2000,
(the "INDENTURE"), among the Issuer, the Guarantors named therein and The Bank
of New York, as trustee (the "TRUSTEE"). As an inducement to the Initial
Purchasers to enter into the Purchase Agreement, the Company agrees with the
Initial Purchasers, for the benefit of the Initial Purchasers and the holders of
the Securities (as defined below) (collectively the "HOLDERS"), as follows:

1. Registered Exchange Offer. Unless not permitted by applicable law
(after the Company has complied with the ultimate paragraph of this Section 1),
the Company shall prepare and, not later than 90 days (such 90th day being a
"FILING DEADLINE") after the date on which the Initial Purchasers purchase the
Initial Securities pursuant to the Purchase Agreement (the "CLOSING DATE"), file
with the Securities and Exchange Commission (the "COMMISSION") a registration
statement (the "EXCHANGE OFFER REGISTRATION STATEMENT") on an appropriate form
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), with
respect to a proposed offer (the "REGISTERED EXCHANGE OFFER") to the Holders of
Transfer Restricted Securities (as defined in Section 6 hereof), who are not
prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer, to issue and deliver to such Holders, in exchange for
the Initial Securities, a like aggregate principal amount of debt securities of
the Company issued under the Indenture, identical in all material respects to
the Initial Securities and registered under the Securities Act (the "EXCHANGE
SECURITIES"). The Company shall use its best efforts to (i) cause such Exchange
Offer Registration Statement to become effective under the Securities Act within

2

150 days after the Closing Date (such 150th day being an "EFFECTIVENESS
DEADLINE") and (ii) keep the Exchange Offer Registration Statement effective for
not less than 30 days (or longer, if required by applicable law) after the date
notice of the Registered Exchange Offer is mailed to the Holders (such period
being called the "EXCHANGE OFFER REGISTRATION PERIOD").

If the Company commences the Registered Exchange Offer, the Company (i)
will be entitled to consummate the Registered Exchange Offer 30 days after such
commencement (provided that the Company has accepted all the Initial Securities
theretofore validly tendered in accordance with the terms of the Registered
Exchange Offer) and (ii) will be required to consummate the Registered Exchange
Offer no later than 40 days after the date on which the Exchange Offer
Registration Statement is declared effective (such 40th day being the
"CONSUMMATION DEADLINE").

Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Securities electing to exchange the
Initial Securities for Exchange Securities (assuming that such Holder is not an
affiliate of the Company within the meaning of the Securities Act, acquires the
Exchange Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the Exchange
Securities and is not prohibited by any law or policy of the Commission from
participating in the Registered Exchange Offer) to trade such Exchange
Securities from and after their receipt without any limitations or restrictions
under the Securities Act and without material restrictions under the securities
laws of the several states of the United States.

The Company acknowledges that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Initial Securities, acquired for its own account as a
result of market making activities or other trading activities, for Exchange
Securities (an "EXCHANGING DEALER"), is required to deliver a prospectus
containing the information set forth in (a) Annex A hereto on the cover, (b)
Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of
the Exchange Offer" section, and (c) Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell
Securities (as defined below) acquired in exchange for Initial Securities
constituting any portion of an unsold allotment, is required to deliver a
prospectus containing the information required by Items 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in connection with such sale.

The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided, however, that (i) in the
case where such prospectus and any amendment or supplement thereto must be
delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be
the lesser of 180 days and the date on which all Exchanging Dealers and the
Initial Purchasers have sold all Exchange Securities held by them (unless such
period is extended pursuant to Section 3(j) below) and (ii) the Company shall
make such prospectus and any amendment or supplement thereto available to any
broker-dealer for use in connection with any resale of any Exchange Securities
for a period of not less than 180 days after the consummation of the Registered
Exchange Offer.

If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser upon the written request of such Initial Purchaser, in
exchange (the "PRIVATE EXCHANGE") for the Initial Securities held by such
Initial Purchaser, a like principal amount of debt securities of the Company
issued under the Indenture and identical in all material respects to the Initial
Securities (the "PRIVATE EXCHANGE SECURITIES"). The Initial Securities, the
Exchange Securities and the Private Exchange Securities are herein collectively
called the "SECURITIES".

In connection with the Registered Exchange Offer, the Company shall:

(a) mail to each Holder a copy of the prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;

(b) keep the Registered Exchange Offer open for not less than
30 days (or longer, if required by applicable law) after the date
notice thereof is mailed to the Holders;

2

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(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York, which may be the Trustee or an affiliate of the Trustee;

(d) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last business day
on which the Registered Exchange Offer shall remain open; and

(e) otherwise comply with all applicable laws.

As soon as practicable after the close of the Registered Exchange Offer
or the Private Exchange, as the case may be, the Company shall:

(x) accept for exchange all the Securities validly tendered
and not withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;

(y) deliver to the Trustee for cancellation all the Initial
Securities so accepted for exchange; and

(z) cause the Trustee to authenticate and deliver promptly to
each Holder of the Initial Securities, Exchange Securities or Private
Exchange Securities, as the case may be, equal in principal amount to
the Initial Securities of such Holder so accepted for exchange.

The Indenture will provide that the Exchange Securities will not be
subject to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.

Interest on each Exchange Security and Private Exchange Security issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Initial Securities surrendered in exchange therefor or, if no interest has been
paid on the Initial Securities, from the date of original issue of the Initial
Securities.

Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule
405 of the Securities Act, of the Company or if it is an affiliate, such Holder
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Securities and (v) if such Holder is a
broker-dealer, that it will receive Exchange Securities for its own account in
exchange for Initial Securities that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Securities.

Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

If following the date hereof there has been announced a change in
Commission policy with respect to exchange offers that in the reasonable opinion
of counsel to the Company raises a substantial question as to whether the
Registered Exchange Offer is permitted by applicable federal law, the Company
will seek a no-action letter or other favorable decision from the Commission
allowing the Company to consummate the Registered Exchange Offer. The Company
will pursue the issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company will take all such other actions as
may be requested by the Commission or otherwise required in connection with the
issuance of 

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such decision, including without limitation (i) participating in telephonic
conferences with the Commission, (ii) delivering to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal bases, if
any, upon which such counsel has concluded that the Registered Exchange Offer
should be permitted and (iii) diligently pursuing a resolution (which need not
be favorable) by the Commission staff.

2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated by the
180th day after the Closing Date, (iii) any Initial Purchaser so requests with
respect to the Initial Securities (or the Private Exchange Securities) not
eligible to be exchanged for Exchange Securities in the Registered Exchange
Offer and held by it following consummation of the Registered Exchange Offer or
(iv) any Holder (other than an Exchanging Dealer) is not eligible to participate
in the Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer, such
Holder does not receive freely tradeable Exchange Securities on the date of the
exchange and any such Holder so requests, the Company shall take the following
actions (the date on which any of the conditions described in the foregoing
clauses (i) through (iv) occur, including in the case of clauses (iii) or (iv)
the receipt of the required notice, being a "TRIGGER DATE"):

(a) The Company shall promptly (but in no event more than 30
days after the Trigger Date (such 30th day being a "FILING DEADLINE"))
file with the Commission and thereafter use its best efforts to cause
to be declared effective no later than 140 days after the Trigger Date
(such 140th day being an "EFFECTIVENESS DEADLINE") a registration
statement (the "SHELF REGISTRATION STATEMENT" and, together with the
Exchange Offer Registration Statement, a "REGISTRATION STATEMENT") on
an appropriate form under the Securities Act relating to the offer and
sale of the Transfer Restricted Securities by the Holders thereof from
time to time in accordance with the methods of distribution set forth
in the Shelf Registration Statement and Rule 415 under the Securities
Act (hereinafter, the "SHELF REGISTRATION"); provided, however, that no
Holder (other than an Initial Purchaser) shall be entitled to have the
Securities held by it covered by such Shelf Registration Statement
unless such Holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such Holder.

(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of
the relevant Securities, for a period of two years (or for such longer
period if extended pursuant to Section 3(j) below) from the date of its
effectiveness or such shorter period that will terminate when all the
Securities covered by the Shelf Registration Statement (i) have been
sold pursuant thereto or (ii) are no longer restricted securities (as
defined in Rule 144 under the Securities Act, or any successor rule
thereof). The Company shall be deemed not to have used its best efforts
to keep the Shelf Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in Holders
of Securities covered thereby not being able to offer and sell such
Securities during that period, unless such action is required by
applicable law.

(c) Notwithstanding any other provisions of this Agreement to
the contrary, the Company shall cause the Shelf Registration Statement
and the related prospectus and any amendment or supplement thereto, as
of the effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:

(a) The Company shall (i) furnish to each Initial Purchaser,
prior to the filing thereof with the Commission, a copy of the
Registration Statement and each amendment thereof and each supplement,
if any, to the prospectus included therein and, in the event that an
Initial Purchaser (with respect to any portion of an unsold allotment
from the original offering) is participating in the Registered Exchange
Offer or the Shelf Registration Statement, the Company shall use its
best efforts to reflect in each such document, when so filed with the
Commission, such comments as such Initial Purchaser reasonably may
propose; (ii) include the information set 

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5

forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section and in Annex C hereto in the "Plan of Distribution"
section of the prospectus forming a part of the Exchange Offer
Registration Statement and include the information set forth in Annex D
hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; (iii) if requested by an Initial Purchaser,
include the information required by Items 507 or 508 of Regulation S-K
under the Securities Act, as applicable, in the prospectus forming a
part of the Exchange Offer Registration Statement; (iv) include within
the prospectus contained in the Exchange Offer Registration Statement a
section entitled "Plan of Distribution," reasonably acceptable to the
Initial Purchasers, which shall contain a summary statement of the
positions taken or policies made by the staff of the Commission with
respect to the potential "underwriter" status of any broker-dealer that
is the beneficial owner (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange
Securities received by such broker-dealer in the Registered Exchange
Offer (a "PARTICIPATING BROKER-DEALER"), whether such positions or
policies have been publicly disseminated by the staff of the Commission
or such positions or policies, in the reasonable judgment of the
Initial Purchasers based upon advice of counsel (which may be in-house
counsel), represent the prevailing views of the staff of the
Commission; and (v) in the case of a Shelf Registration Statement,
include the names of the Holders who propose to sell Securities
pursuant to the Shelf Registration Statement as selling
securityholders.

(b) The Company shall give written notice to the Initial
Purchasers, the Holders of the Securities and any Participating
Broker-Dealer from whom the Company has received prior written notice
that it will be a Participating Broker-Dealer in the Registered
Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall
be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):

(i) when the Registration Statement or any amendment
thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective;

(ii) of any request by the Commission for amendments
or supplements to the Registration Statement or the prospectus
included therein or for additional information;

(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that
purpose;

(iv) of the receipt by the Company or its legal
counsel of any notification with respect to the suspension of
the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any
proceeding for such purpose; and

(v) of the happening of any event that requires the
Company to make changes in the Registration Statement or the
prospectus in order that the Registration Statement or the
prospectus do not contain an untrue statement of a material
fact nor omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the
case of the prospectus, in light of the circumstances under
which they were made) not misleading.

(c) The Company shall make every reasonable effort to obtain
the withdrawal at the earliest possible time, of any order suspending
the effectiveness of the Registration Statement.

(d) The Company shall furnish to each Holder of Securities
included within the coverage of the Shelf Registration, without charge,
at least one copy of the Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits
thereto (including those, if any, incorporated by reference).

(e) The Company shall deliver to each Exchanging Dealer and
each Initial Purchaser, and to any other Holder who so requests,
without charge, at least one copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if any Initial Purchaser or any such
Holder requests, all exhibits thereto (including those incorporated by
reference).

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6

(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Securities included within the coverage of
the Shelf Registration, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in the
Shelf Registration Statement and any amendment or supplement thereto as
such person may reasonably request. The Company consents, subject to
the provisions of this Agreement, to the use of the prospectus or any
amendment or supplement thereto by each of the selling Holders of the
Securities in connection with the offering and sale of the Securities
covered by the prospectus, or any amendment or supplement thereto,
included in the Shelf Registration Statement.

(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other
persons required to deliver a prospectus following the Registered
Exchange Offer, without charge, as many copies of the final prospectus
included in the Exchange Offer Registration Statement and any amendment
or supplement thereto as such persons may reasonably request. The
Company consents, subject to the provisions of this Agreement, to the
use of the prospectus or any amendment or supplement thereto by any
Initial Purchaser, if necessary, any Participating Broker-Dealer and
such other persons required to deliver a prospectus following the
Registered Exchange Offer in connection with the offering and sale of
the Exchange Securities covered by the prospectus, or any amendment or
supplement thereto, included in such Exchange Offer Registration
Statement.

(h) Prior to any public offering of the Securities pursuant to
any Registration Statement the Company shall register or qualify or
cooperate with the Holders of the Securities included therein and their
respective counsel in connection with the registration or qualification
of the Securities for offer and sale under the securities or "blue sky"
laws of such states of the United States as any Holder of the
Securities reasonably requests in writing and do any and all other acts
or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Securities covered by such Registration Statement;
provided, however, that the Company shall not be required to (i)
qualify generally to do business in any jurisdiction where it is not
then so qualified or (ii) take any action which would subject it to
general service of process or to taxation in any jurisdiction where it
is not then so subject.

(i) The Company shall cooperate with the Holders of the
Securities to facilitate the timely preparation and delivery of
certificates representing the Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders may request a
reasonable period of time prior to sales of the Securities pursuant to
such Registration Statement.

(j) Upon the occurrence of any event contemplated by
paragraphs (ii) through (v) of Section 3(b) above during the period for
which the Company is required to maintain an effective Registration
Statement, the Company shall promptly prepare and file a post-effective
amendment to the Registration Statement or a supplement to the related
prospectus and any other required document so that, as thereafter
delivered to Holders of the Securities or purchasers of Securities, the
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. If the Company notifies the
Initial Purchasers, the Holders of the Securities and any known
Participating Broker-Dealer in accordance with paragraphs (ii) through
(v) of Section 3(b) above to suspend the use of the prospectus until
the requisite changes to the prospectus have been made, then the
Initial Purchasers, the Holders of the Securities and any such
Participating Broker-Dealers shall suspend use of such prospectus, and
the period of effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange Offer Registration
Statement provided for in Section 1 above shall each be extended by the
number of days from and including the date of the giving of such notice
to and including the date when the Initial Purchasers, the Holders of
the Securities and any known Participating Broker-Dealer shall have
received such amended or supplemented prospectus pursuant to this
Section 3(j).

(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for the
Initial Securities, the Exchange Securities or the Private Exchange
Securities, as the case may be, and provide the applicable trustee with
printed certificates for the Initial Securities, the Exchange
Securities or the Private Exchange Securities, as the case may be, in a
form eligible for deposit with The Depository Trust Company.

(l) The Company will comply with all rules and regulations of
the Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf 

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7

Registration and will make generally available to its security holders
(or otherwise provide in accordance with Section 11(a) of the
Securities Act) an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act, no later than 45 days after the
end of a 12-month period (or 90 days, if such period is a fiscal year)
beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the Registration Statement,
which statement shall cover such 12-month period.

(m) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely manner
and containing such changes, if any, as shall be necessary for such
qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Company shall
appoint a new trustee thereunder pursuant to the applicable provisions
of the Indenture.

(n) The Company may require each Holder of Securities to be
sold pursuant to the Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of
the Securities as the Company may from time to time reasonably require
for inclusion in the Shelf Registration Statement, and the Company may
exclude from such registration the Securities of any Holder that
unreasonably fails to furnish such information within a reasonable time
after receiving such request.

(o) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form)
and take all such other action, if any, as any Holder of the Securities
shall reasonably request in order to facilitate the disposition of the
Securities pursuant to any Shelf Registration.

(p) In the case of any Shelf Registration, the Company shall
(i) make reasonably available for inspection by the Holders of the
Securities, any underwriter participating in any disposition pursuant
to the Shelf Registration Statement and any attorney, accountant or
other agent retained by the Holders of the Securities or any such
underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the
Company's officers, directors, employees, accountants and auditors to
supply all relevant information reasonably requested by the Holders of
the Securities or any such underwriter, attorney, accountant or agent
in connection with the Shelf Registration Statement, in each case, as
shall be reasonably necessary to enable such persons, to conduct a
reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated on behalf of the Initial
Purchasers by you and on behalf of the other parties, by one counsel
designated by and on behalf of such other parties as described in
Section 4 hereof and only after execution of a confidentiality
agreement satisfactory to the Company.

(q) In the case of any Shelf Registration, the Company, if
requested by any Holder of Securities covered thereby, shall cause (i)
its counsel to deliver an opinion relating to the Securities in
customary form, subject to customary exceptions, qualifications and
assumptions, addressed to such Holders and the managing underwriters,
if any, thereof and dated, the effective date of such Shelf
Registration Statement (it being agreed that the matters to be covered
by such opinion shall include, without limitation, the due
incorporation and good standing of the Company and the Guarantors and
its significant foreign subsidiaries; the qualification of the Company
and the Guarantors and its significant foreign subsidiaries to transact
business as foreign corporations; the due authorization, execution and
delivery of the relevant agreement of the type referred to in Section
3(o) hereof; the due authorization, execution, authentication and
issuance, and the validity and enforceability, of the applicable
Securities; the absence of material legal or governmental proceedings
involving the Company and its subsidiaries; the absence of governmental
approvals required to be obtained in connection with the Shelf
Registration Statement, the offering and sale of the applicable
Securities, or any agreement of the type referred to in Section 3(o)
hereof; the compliance as to form of such Shelf Registration Statement
and any documents incorporated by reference therein and of the
Indenture with the requirements of the Securities Act and the Trust
Indenture Act, respectively; and, as of the date of the opinion and as
of the effective date of the Shelf Registration Statement or most
recent post-effective amendment thereto, as the case may be, the
absence from such Shelf Registration Statement and the prospectus
included therein, as then amended or supplemented, and from any
documents incorporated by reference therein of an untrue statement of a
material fact or the omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading (in the case of any such documents, in the light of the
circumstances existing at the time that such documents were filed with
the Commission under the Exchange Act); (ii) its 

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officers to execute and deliver all customary documents and
certificates and updates thereof reasonably requested by any
underwriters of the applicable Securities and (iii) its independent
public accountants to provide to the selling Holders of the applicable
Securities and any underwriter therefor a comfort letter in customary
form and covering matters of the type customarily covered in comfort
letters in connection with primary underwritten offerings, subject to
receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.

(r) In the case of the Registered Exchange Offer, if requested
by any Initial Purchaser or any known Participating Broker-Dealer, the
Company shall cause (i) its counsel to deliver to such Initial
Purchaser or such Participating Broker-Dealer a signed opinion in the
form set forth in Section 6(e) of the Purchase Agreement with such
changes as are customary in connection with the preparation of a
Registration Statement and (ii) its independent public accountants and
the independent public accountants with respect to any other entity for
which financial information is provided in the Registration Statement
to deliver to such Initial Purchaser or such Participating
Broker-Dealer a comfort letter, in customary form, meeting the
requirements as to the substance thereof as set forth in Section 6(a),
(b) and (c) of the Purchase Agreement, with appropriate date changes.

(s) If a Registered Exchange Offer or a Private Exchange is to
be consummated, upon delivery of the Initial Securities by Holders to
the Company (or to such other Person as directed by the Company) in
exchange for the Exchange Securities or the Private Exchange
Securities, as the case may be, the Company shall mark, or caused to be
marked, on the Initial Securities so exchanged that such Initial
Securities are being canceled in exchange for the Exchange Securities
or the Private Exchange Securities, as the case may be; in no event
shall the Initial Securities be marked as paid or otherwise satisfied.

(t) The Company will use its best efforts to (a) if the
Initial Securities have been rated prior to the initial sale of such
Initial Securities, confirm such ratings will apply to the Securities
covered by a Registration Statement, or (b) if the Initial Securities
were not previously rated, cause the Securities covered by a
Registration Statement to be rated with the appropriate rating
agencies, if so requested by Holders of a majority in aggregate
principal amount of Securities covered by such Registration Statement,
or by the managing underwriters, if any.

(u) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Securities or participate as a member
of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Conduct Rules (the "RULES") of
the National Association of Securities Dealers, Inc. ("NASD")) thereof,
whether as a Holder of such Securities or as an underwriter, a
placement or sales agent or a broker or dealer in respect thereof, or
otherwise, the Company will assist such broker-dealer in complying with
the requirements of such Rules, including, without limitation, by (i)
if such Rules, including Rule 2720, shall so require, engaging a
"qualified independent underwriter" (as defined in Rule 2720) to
participate in the preparation of the Registration Statement relating
to such Securities, to exercise usual standards of due diligence in
respect thereto and, if any portion of the offering contemplated by
such Registration Statement is an underwritten offering or is made
through a placement or sales agent, to recommend the yield of such
Securities, (ii) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters
provided in Section 5 hereof and (iii) providing such information to
such broker-dealer as may be required in order for such broker-dealer
to comply with the requirements of the Rules.

(v) The Company shall use its best efforts to take all other
steps necessary to effect the registration of the Securities covered by
a Registration Statement contemplated hereby.

4. Registration Expenses. (a) All expenses incident to the Company's
performance of and compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement is ever filed or becomes
effective, including without limitation;

(i) all registration and filing fees and expenses;

(ii) all fees and expenses of compliance with federal
securities and state "blue sky" or securities laws;

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(iii) all expenses of printing (including printing
certificates for the Securities to be issued in the Registered Exchange
Offer and the Private Exchange and printing of Prospectuses), messenger
and delivery services and telephone;

(iv) all fees and disbursements of counsel for the Company;

(v) all application and filing fees in connection with listing
the Exchange Securities on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and

(vi) all fees and disbursements of independent certified
public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such
performance).

The Company will bear its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expenses of any annual audit and the fees and expenses
of any person, including special experts, retained by the Company.

(b) In connection with any Registration Statement required by this
Agreement, the Company will reimburse the Initial Purchasers and the Holders of
Transfer Restricted Securities who are tendering Initial Securities in the
Registered Exchange Offer and/or selling or reselling Securities pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Cravath, Swaine & Moore
unless another firm shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.

5. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Holder of the Securities, any Participating Broker-Dealer and each
person, if any, who controls such Holder or such Participating Broker-Dealer
within the meaning of the Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer and such controlling persons are referred to
collectively as the "INDEMNIFIED PARTIES") from and against any losses, claims,
damages or liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof; provided, however, that
(i) the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration in reliance
upon and in conformity with written information pertaining to such Holder and
furnished to the Company by or on behalf of such Holder specifically for
inclusion therein and (ii) with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus relating
to a Shelf Registration Statement, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Holder or Participating
Broker-Dealer from whom the person asserting any such losses, claims, damages or
liabilities purchased the Securities concerned, to the extent that a prospectus
relating to such Securities was required to be delivered by such Holder or
Participating Broker-Dealer under the Securities Act in connection with such
purchase and any such loss, claim, damage or liability of such Holder or
Participating Broker-Dealer results from the fact that there was not sent or
given to such person, at or prior to the written confirmation of the sale of
such Securities to such person, a copy of the final prospectus if the Company
had previously furnished copies thereof to such Holder or Participating
Broker-Dealer; provided further, however, that this indemnity agreement will be
in addition to any liability which the Company may otherwise have to such
Indemnified Party. The Company shall also indemnify underwriters, their officers
and directors and each person who controls such underwriters within the meaning
of the Securities Act or the Exchange Act to the same extent as provided above
with respect to the indemnification of the Holders of the Securities if
requested by such Holders.

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(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act from
and against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Company or any such controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Company by or
on behalf of such Holder specifically for inclusion therein; and, subject to the
limitation set forth immediately preceding this clause, shall reimburse, as
incurred, the Company for any legal or other expenses reasonably incurred by the
Company or any such controlling person in connection with investigating or
defending any loss, claim, damage, liability or action in respect thereof. This
indemnity agreement will be in addition to any liability which such Holder may
otherwise have to the Company or any of its controlling persons.

(c) Promptly after receipt by an indemnified party under this Section 5
of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action, and does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.

(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the exchange of the Securities,
pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified party, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid by
an indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding any other provision of this
Section 5(d), the Holders of the Securities shall not be required to contribute
any amount in excess of the amount by which the net proceeds received by such
Holders from the sale of the Securities pursuant to a Registration Statement
exceeds the amount of damages which such Holders have otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to 

10

11

contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls such indemnified party within the meaning of the Securities Act or the
Exchange Act shall have the same rights to contribution as such indemnified
party and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.

(e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.

6. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "ADDITIONAL INTEREST") with respect to the Securities shall be
assessed as follows if any of the following events occur (each such event in
clauses (i) through (iv) below being herein called a "REGISTRATION DEFAULT"):

(i)      any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing
Deadline;

(ii)     any Registration Statement required by this Agreement is not
declared effective by the Commission on or prior to the
applicable Effectiveness Deadline;

(iii)    the Registered Exchange Offer has not been consummated on or
prior to the Consummation Deadline; or

(iv)     any Registration Statement required by this Agreement has been
declared effective by the Commission but (A) such Registration
Statement thereafter ceases to be effective or (B) such
Registration Statement or the related prospectus ceases to be
usable in connection with resales of Transfer Restricted
Securities during the periods specified herein because either
(1) any event occurs as a result of which the related
prospectus forming part of such Registration Statement would
include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements
therein in the light of the circumstances under which they
were made not misleading, or (2) it shall be necessary to
amend such Registration Statement or supplement the related
prospectus, to comply with the Securities Act or the Exchange
Act or the respective rules thereunder.

Each of the foregoing will constitute a Registration Default whatever the reason
for any such event and whether it is voluntary or involuntary or is beyond the
control of the Company or pursuant to operation of law or as a result of any
action or inaction by the Commission.

Additional Interest shall accrue on the Securities over and above the
interest set forth in the title of the Securities from and including the date on
which any such Registration Default shall occur to but excluding the date on
which all such Registration Defaults have been cured, at a rate of 0.50% per
annum (the "ADDITIONAL INTEREST RATE") for the first 90-day period immediately
following the occurrence of such Registration Default. The Additional Interest
Rate shall increase by an additional 0.50% per annum with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum Additional Interest Rate of 2.0% per annum.

(b) A Registration Default referred to in Section 6(a)(iv) hereof shall
be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events, with respect
to the Company that would need to be described in such Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company is proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe such events;
provided, however, that in any case if such Registration Default occurs for a
continuous period in excess of 30 days, Additional Interest shall be payable in
accordance with the above paragraph from the day such Registration Default
occurs until such Registration Default is cured.

(c) Any amounts of Additional Interest due pursuant to Section 6(a)
will be payable in cash on the regular interest payment dates with respect to
the Securities. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest Rate by the principal amount of
the Securities and further multiplied by a fraction, the numerator of which is
the number of days such 

11

12

Additional Interest Rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months), and the denominator
of which is 360.

(d) "TRANSFER RESTRICTED SECURITIES" means each Security until (i) the
date on which such Security has been exchanged by a person other than a
broker-dealer for a freely transferable Exchange Security in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of an Initial Security for an Exchange Note, the date on which
such Exchange Note is sold to a purchaser who receives from such broker-dealer
on or prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Security has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Security is distributed to the public pursuant to Rule 144 under the Securities
Act or is saleable pursuant to Rule 144(k) under the Securities Act.

7. Rules 144 and 144A. The Company shall use its best efforts to file
the reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time the Company is not required to file
such reports, it will, upon the request of any Holder of Securities, make
publicly available other information so long as necessary to permit sales of
their securities pursuant to Rules 144 and 144A. The Company covenants that it
will take such further action as any Holder of Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including the
requirements of Rule 144A(d)(4)). The Company will provide a copy of this
Agreement to prospective purchasers of Initial Securities identified to the
Company by the Initial Purchasers upon request. Upon the request of any Holder
of Initial Securities, the Company shall deliver to such Holder a written
statement as to whether it has complied with such requirements. Notwithstanding
the foregoing, nothing in this Section 7 shall be deemed to require the Company
to register any of its securities pursuant to the Exchange Act.

8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("MANAGING UNDERWRITERS") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering.

No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.

9. Miscellaneous.

(a) Remedies. The Company acknowledges and agrees that any failure by
the Company to comply with its obligations under Section 1 and 2 hereof may
result in material irreparable injury to the Initial Purchasers or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 1 and
2 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.

(b) No Inconsistent Agreements. The Company will not on or after the
date of this Agreement enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.

(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.

12

13

(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:

(1) if to a Holder of the Securities, at the most current
address given by such Holder to the Company.

(2) if to the Initial Purchasers:

Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group

with a copy to:

Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: Stephen L. Burns, Esq.

(3) if to the Company, at its address as follows:

Flowserve Corporation
222 West Las Colinas Boulevard
Irving, Texas 75039
Attention: Ronald F. Shuff, Esq.

with a copy to:

Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Christopher C. Paci, Esq.

All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.

(e) Third Party Beneficiaries. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder.

(f) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.

(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.

(j) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of 

13

14

any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

(k) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.

If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Issuer a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the several Initial Purchasers, the Issuer and the Guarantors in
accordance with its terms.

Very truly yours,

FLOWSERVE CORPORATION

by /s/ RENEE J. HORNBAKER
-----------------------------------------
Name:  Renee J. Hornbaker
Title: Vice President and Chief Financial
Officer

FLOWSERVE FINANCE B.V.

by /s/ JOHN M. NANOS
------------------------------------------
Name:  John M. Nanos
Title: Managing Director

by /s/ M. KATHLEEN MCVAY
------------------------------------------
Name:  M. Kathleen McVay
Title: Managing Director

15

FLOWSERVE RED CORPORATION, FLOWSERVE
FSD CORPORATION, FLOWSERVE FCD
CORPORATION, FLOWSERVE
INTERNATIONAL, INC.,
FLOWSERVE MANAGEMENT COMPANY (DE BUSINESS TRUST),
BW/IP-NEW MEXICO, INC.,
FLOWSERVE INTERNATIONAL, LLC,
DURAMETALLIC AUSTRALIA HOLDING COMPANY,
FLOWSERVE INTERNATIONAL LIMITED,
INNOVATIVE VALVE TECHNOLOGIES, INC.,
PLANT MAINTENANCE, INC.,
VARCO VALVE, INC.,
COLONIAL EQUIPMENT & SERVICE CO., INC.,
CECORP, INC.,
DIVT ACQUISITION-DELAWARE, LLC,
DIVT SUBSIDIARY, LLC,
SOUTHERN VALVE SERVICE, INC.,
L.T. KOPPL INDUSTRIES, INC.,
KOPPL COMPANY,
KOPPL INDUSTRIAL SYSTEMS, INC.,
HARLEY INDUSTRIES, INC.,
KOPPL COMPANY OF ARIZONA,
SEELEY & JONES, INCORPORATED,
GSV, INC.,
IPSCO-FLORIDA, INC.,
INTERNATIONAL PIPING SERVICES COMPANY,
CYPRESS INDUSTRIES, INC.,
DALCO, LLC,
PLANT SPECIALTIES, INC.,
ENERGY MAINTENANCE, INC.,
PREVENTIVE MAINTENANCE, INC.,
PRODUCTION MACHINE INCORPORATED,
ICE LIQUIDATING, INC.,
VALVE REPAIR OF SOUTH CAROLINA, INC.,
THE SAFE SEAL COMPANY, INC.,
FLICKINGER-BENICIA INC.,
PUGET INVESTMENTS, INC.,
STEAM SUPPLY & RUBBER CO., INC.,
FLICKINGER COMPANY,
BOYDEN, INC.,
VALVE ACTUATION & REPAIR CO.
FLOWSERVE HOLDINGS, INC.
IPSCO HOLDING, INC.

by /s/ JOHN M. NANOS
--------------------------------------
Name:  John M. Nanos
Title:

16

The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.

CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED
BANK OF AMERICA INTERNATIONAL LIMITED
ABN AMRO BANK N.V.
FIRST CHICAGO LIMITED
As Representatives of the Several Euro Notes Purchasers,

By:  CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED

by  /s/ ISABEL SARAGALLI
------------------------------------
Name: Isabel Saragalli
Title:

17

ANNEX A

Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Securities received in exchange for Initial Securities
where such Initial Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."

18

ANNEX B

Each broker-dealer that receives Exchange Securities for its own account
in exchange for Initial Securities, where such Initial Securities were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."

19

ANNEX C

PLAN OF DISTRIBUTION

Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until   , 199 , all dealers
effecting transactions in the Exchange Securities may be required to deliver a
prospectus.(1)

The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.

For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.

----------

(1) In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.

20

ANNEX D

[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

Name:
Address:

If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Initial Securities that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.

1
CONFORMED COPY

EXHIBIT 10.45

================================================================================
CREDIT AGREEMENT

dated as of August 8, 2000,

among

FLOWSERVE CORPORATION,

THE LENDERS NAMED HEREIN,

CREDIT SUISSE FIRST BOSTON,

as Syndication Agent

and

BANK OF AMERICA, N.A.,

as Administrative Agent, Swingline Lender
and Collateral Agent

----------

CREDIT SUISSE FIRST BOSTON

Joint Lead Book Manager and Joint Lead Arranger

BANK OF AMERICA, N.A.

Joint Lead Book Manager

BANC OF AMERICA SECURITIES LLC

Joint Lead Arranger

ABN AMRO BANK N.V.,

BANK ONE, NA

and

SALOMON SMITH BARNEY INC.

Co-Documentation Agents

================================================================================
[CS&M Ref. No. 2163-598]

2

Table of Contents

Page
----

ARTICLE I

Definitions

SECTION 1.01. Defined Terms .............................................................2
SECTION 1.02. Terms Generally ..........................................................28
SECTION 1.03. Classification of Loans and Borrowings ...................................28
SECTION 1.04. Exchange Rates ...........................................................29

ARTICLE II

The Credits

SECTION 2.01. Commitments ..............................................................29
SECTION 2.02. Loans ....................................................................29
SECTION 2.03. Borrowing Procedure ......................................................31
SECTION 2.04. Evidence of Debt; Repayment of Loans .....................................32
SECTION 2.05. Fees .....................................................................33
SECTION 2.06. Interest on Loans ........................................................34
SECTION 2.07. Default Interest .........................................................34
SECTION 2.08. Alternate Rate of Interest ...............................................35
SECTION 2.09. Termination and Reduction of Commitments .................................35
SECTION 2.10. Conversion and Continuation of Borrowings ................................36
SECTION 2.11. Repayment of Term Borrowings .............................................37
SECTION 2.12. Prepayment ...............................................................40
SECTION 2.13. Mandatory Prepayments ....................................................40
SECTION 2.14. Reserve Requirements; Change in Circumstances ............................42
SECTION 2.15. Change in Legality .......................................................43
SECTION 2.16. Indemnity ................................................................44
SECTION 2.17. Pro Rata Treatment .......................................................45
SECTION 2.18. Sharing of Setoffs .......................................................45
SECTION 2.19. Payments .................................................................46
SECTION 2.20. Taxes ....................................................................46
SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty

to
Mitigate ...............................................................................47
SECTION 2.22. Swingline Loans ..........................................................49

3

SECTION 2.23. Letters of Credit ........................................................50

ARTICLE III

Representations and Warranties

SECTION 3.01. Organization; Powers .....................................................55
SECTION 3.04. Governmental Approvals ...................................................56
SECTION 3.05. Financial Statements .....................................................56
SECTION 3.06. No Material Adverse Change ...............................................57
SECTION 3.07. Title to Properties; Possession Under Leases .............................57
SECTION 3.08. Subsidiaries .............................................................57
SECTION 3.09. Litigation; Compliance with Laws .........................................58
SECTION 3.10. Agreements ...............................................................58
SECTION 3.11. Federal Reserve Regulations ..............................................58
SECTION 3.12. Investment Company Act; Public Utility Holding Company Act ...............58
SECTION 3.13. Use of Proceeds ..........................................................58
SECTION 3.14. Tax Returns ..............................................................59
SECTION 3.15. No Material Misstatements ................................................59
SECTION 3.16. Employee Benefit Plans ...................................................59
SECTION 3.17. Environmental Matters ....................................................59
SECTION 3.18. Insurance ................................................................59
SECTION 3.19. Security Documents .......................................................60
SECTION 3.20. Location of Real Property and Leased Premises ............................60
SECTION 3.21. Labor Matters ............................................................61
SECTION 3.22. Solvency .................................................................61

ARTICLE IV

Conditions of Lending

SECTION 4.01. All Credit Events ........................................................62
SECTION 4.02. First Credit Event .......................................................62

ARTICLE V

Affirmative Covenants

SECTION 5.01. Existence; Businesses and Properties .....................................67
SECTION 5.02. Insurance ................................................................67

4

SECTION 5.03. Obligations and Taxes ....................................................68
SECTION 5.04. Financial Statements, Reports, etc. ......................................69
SECTION 5.05. Litigation and Other Notices .............................................70
SECTION 5.06. Information Regarding Collateral .........................................71
SECTION 5.07. Maintaining Records; Access to Properties and Inspections ................71
SECTION 5.08. Use of Proceeds ..........................................................72
SECTION 5.09. Further Assurances .......................................................72
SECTION 5.10. Interest Rate Protection .................................................73

ARTICLE VI

Negative Covenants

SECTION 6.01. Indebtedness .............................................................73
SECTION 6.02. Liens ....................................................................75
SECTION 6.03. Sale and Lease-Back Transactions .........................................77
SECTION 6.04. Investments, Loans and Advances ..........................................77
SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions ................79
SECTION 6.06. Dividends and Distributions; Restrictive Agreements ......................80
SECTION 6.07. Transactions with Affiliates .............................................81
SECTION 6.08. Business of Borrower and Subsidiaries ....................................81
SECTION 6.09. Other Indebtedness and Agreements ........................................82
SECTION 6.10. Capital Expenditures .....................................................82
SECTION 6.11. Interest Coverage Ratio ..................................................83
SECTION 6.12. Fixed Charge Coverage Ratio ..............................................83
SECTION 6.13. Maximum Leverage Ratio ...................................................84
SECTION 6.14. Designated Senior Indebtedness ...........................................84
SECTION 6.15. Fiscal Year ..............................................................84

ARTICLE VII

Events of Default

ARTICLE VIII

The Agents

SECTION 8.01. Appointment ..............................................................88
SECTION 8.02. Liability of Agents ......................................................89

5

SECTION 8.03. Resignation and Replacement ..............................................89
SECTION 8.04. Agent in Individual Capacity .............................................90
SECTION 8.05. Indemnification of Agents ................................................90
SECTION 8.06. No Reliance ..............................................................90
SECTION 8.07. Notice of Default ........................................................91

ARTICLE IX

Miscellaneous

SECTION 9.01. Notices ..................................................................91
SECTION 9.02. Survival of Agreement ....................................................92
SECTION 9.03. Binding Effect ...........................................................92
SECTION 9.04. Successors and Assigns ...................................................92
SECTION 9.05. Expenses; Indemnity ......................................................96
SECTION 9.06. Right of Setoff ..........................................................97
SECTION 9.07. Applicable Law ...........................................................97
SECTION 9.08. Waivers; Amendment .......................................................97
SECTION 9.09. Interest Rate Limitation .................................................98
SECTION 9.10. Entire Agreement .........................................................99
SECTION 9.11. WAIVER OF JURY TRIAL .....................................................99
SECTION 9.12. Severability .............................................................99
SECTION 9.13. Counterparts .............................................................99
SECTION 9.14. Headings ................................................................100
SECTION 9.15. Jurisdiction; Consent to Service of Process .............................100
SECTION 9.16. Judgment Currency .......................................................100
SECTION 9.17. Confidentiality .........................................................101
SECTION 9.18. European Monetary Union .................................................102
SECTION 9.19. Release of Collateral ...................................................102

SCHEDULES:

Schedule 1.01(a) --  Guarantors
Schedule 1.01(b) --  Mortgaged Properties
Schedule 1.01(c) --  Inactive Subsidiaries
Schedule 1.01(d) --  Consolidated EBITDA
Schedule 1.01(e) --  Existing Letters of Credit
Schedule 1.01(f) --  Fifth Third Letters of Credit
Schedule 2.01    --  Commitments
Schedule 3.08    --  Subsidiaries
Schedule 3.09    --  Litigation
Schedule 3.17    --  Environmental Matters
Schedule 3.18    --  Insurance

6

Schedule 3.19(d) --  Mortgage Filing Offices
Schedule 3.20(a) --  Owned Real Property
Schedule 3.20(b) --  Leased Real Property
Schedule 3.20(c) --  Designated Properties
Schedule 4.02(a) --  Local Counsel
Schedule 6.01(a) --  Existing Indebtedness
Schedule 6.01(d) --  Existing Purchase Money Indebtedness
Schedule 6.01(e) --  Existing Capital Lease Obligations
Schedule 6.01(f) --  Outstanding Industrial Revenue Bonds
Schedule 6.01(g) --  Existing Indebtedness of Foreign Subsidiaries
Schedule 6.02    --  Existing Liens
Schedule 6.04    --  Existing Intercompany Loans

EXHIBITS:

Exhibit A   --  Administrative Questionnaire
Exhibit B   --  Assignment and Acceptance
Exhibit C   --  Borrowing Request
Exhibit D   --  Guarantee Agreement
Exhibit E   --  Indemnity, Subrogation and Contribution Agreement
Exhibit F-1 --  Mortgage
Exhibit F-2 --  Deed of Trust
Exhibit G   --  Pledge Agreement
Exhibit H   --  Security Agreement
Exhibit I-1 --  Opinion of Shearman & Sterling
Exhibit I-2 --  Opinion of John M. Nanos
Exhibit I-3 --  Opinion of Local Counsel
Exhibit J   --  U.K. Debenture

7

CREDIT AGREEMENT dated as of August 8, 2000,
among FLOWSERVE CORPORATION, a New York corporation
(the "Borrower"), the Lenders (as defined in Article
I), CREDIT SUISSE FIRST BOSTON, a bank organized
under the laws of Switzerland, acting through its New
York branch ("CSFB"), as syndication agent (the
"Syndication Agent"), and BANK OF AMERICA, N.A., a
national banking association ("BofA"), as swingline
lender (in such capacity, the "Swingline Lender"), as
administrative agent (in such capacity, the
"Administrative Agent") and as collateral agent (in
such capacity, the "Collateral Agent") for the
Lenders.

Pursuant to the Purchase Agreement (such term and each other
capitalized term used but not defined herein having the meaning given it in
Article I), the Borrower will acquire (the "Acquisition"), directly or
indirectly, 100% of the partnership interests of IDP from the Sellers for
$775,000,000 in cash, subject to adjustment as set forth in the Purchase
Agreement.

The Borrower has requested the Lenders to extend credit in the form of
(a) Tranche A Term Loans on the Closing Date, in an aggregate principal amount
not in excess of $275,000,000, (b) Tranche B Term Loans on the Closing Date, in
an aggregate principal amount not in excess of $475,000,000, and (c) Revolving
Loans at any time and from time to time prior to the Revolving Credit Maturity
Date, in an aggregate principal amount at any time outstanding not in excess of
$300,000,000. The Borrower has requested the Swingline Lender to extend credit,
at any time and from time to time prior to the Revolving Credit Maturity Date,
in the form of Swingline Loans. The Borrower has requested the Issuing Banks to
issue letters of credit, in an aggregate face amount at any time outstanding not
in excess of $200,000,000 (or the Alternative Currency Equivalent thereof), to
support payment obligations incurred in the ordinary course of business by the
Borrower and its Subsidiaries. The proceeds of the Term Loans are to be used,
together with the proceeds of the Subordinated Notes, solely to finance the
Acquisition, to refinance the Existing Debt and to pay related fees and
expenses, and the proceeds of the Revolving Loans and the Swingline Loans are to
be used solely for general corporate purposes.

The Lenders are willing to extend such credit to the Borrower and the
Issuing Banks are willing to issue letters of credit for the account of the
Borrower and the Subsidiaries on the terms and subject to the conditions set
forth herein. Accordingly, the parties hereto agree as follows:

8

2

ARTICLE I

Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms shall have the meanings specified below:

"ABN" shall mean ABN Amro Bank N.V. and any successor thereto.

"ABN Standby Credit" shall mean bank guarantees, surety and performance
bonds, letters of credit and similar financial accommodations issued by ABN or
any Affiliate thereof for the account of the Borrower or any Subsidiary solely
to support contractual obligations of the Borrower and its Subsidiaries incurred
in the ordinary course of business of the Borrower and its Subsidiaries.

"ABN Standby Credit Exposure" shall mean, at any time, the sum of (a)
the aggregate principal amount available to be drawn under all ABN Standby
Credits at such time and (b) the aggregate principal amount of all disbursements
or payments made by ABN or any of its Affiliates under any ABN Standby Credit
and not reimbursed by the Borrower or its Subsidiaries at such time. For
purposes of determining the ABN Standby Credit Exposure at any time, any amount
included therein that is denominated in a currency other than dollars shall be
converted to dollars at the applicable Exchange Rate in effect at such time.

"ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.

"Acquisition" shall have the meaning assigned to such term in the
preamble to this Agreement.

"Adjusted LIBO Rate" shall mean, with respect to any Eurocurrency
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate
in effect for such Interest Period and (b) Statutory Reserves.

"Administrative Agent Fees" shall have the meaning assigned to such
term in Section 2.05(b).

"Administrative Agent's Fee Letter" shall mean the Administrative
Agent's Fee Letter dated March 23, 2000, between the Borrower and BofA.

"Administrative Questionnaire" shall mean an Administrative 
Questionnaire in the form of Exhibit A, or such other form as may be supplied 
from time to time by the Administrative Agent.

9

3

"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified, provided that for purposes of Section 6.07, the term "Affiliate"
shall also include any person that directly or indirectly owns more than 5% of
any class of capital stock or other equity interests of the person specified or
that is an officer or director of the person specified.

"Agents" shall mean the Administrative Agent, the Collateral Agent and
the Syndication Agent.

"Aggregate Revolving Credit Exposure" shall mean the aggregate amount
of the Lenders' Revolving Credit Exposures.

"Alternate Base Rate" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of
(a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative
Agent shall have determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Federal Funds Effective Rate
for any reason, including the inability or failure of the Administrative Agent
to obtain sufficient quotations in accordance with the terms of the definition
thereof, the Alternate Base Rate shall be determined without regard to clause
(b) of the preceding sentence, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively. The term "Prime Rate" shall mean the rate of interest per
annum publicly announced from time to time by the Administrative Agent as its
prime rate in effect at its principal office in Charlotte, North Carolina; each
change in the Prime Rate shall be effective on the date such change is publicly
announced as being effective. The term "Federal Funds Effective Rate" shall
mean, for any day, the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for the day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.

"Alternative Currency" shall mean, with respect to any Letter of
Credit, Sterling, euro and any other freely transferable currency (other than
dollars) in which such Letter of Credit shall be denominated, as requested by
the Borrower and agreed to by the applicable Issuing Bank, with prior written
notice to the Administrative Agent.

"Alternative Currency Equivalent" shall mean, on any date of
determination, with respect to an amount in dollars, the equivalent thereof in
the relevant Alternative Currency of such amount, determined by the
Administrative Agent using the Exchange Rate with respect to such Alternative
Currency then in effect pursuant to Section 1.04.

10

4

"Alternative Currency Letter of Credit" shall mean any Letter of Credit
denominated in an Alternative Currency.

"Applicable Percentage" shall mean, for any day, with respect to any
Loan, the applicable percentage set forth below under the caption "Eurocurrency
Spread--Tranche A Term Loans and Revolving Loans", "ABR Spread--Tranche A Term
Loans and Revolving Loans", "Eurocurrency Spread--Tranche B Term Loans" or "ABR
Spread-- Tranche B Term Loans", as the case may be, based upon the Leverage
Ratio as of the relevant date of determination (provided that in the case of
Swingline Loans, the applicable percentage shall be as set forth below under the
caption "ABR Spread-- Tranche A Term Loans and Revolving Loans"):

==============================================================================================================
Eurocurrency           ABR Spread--
Spread--Tranche A        Tranche A Term         Eurocurrency            ABR Spread--
Term Loans and            Loans and          Spread--Tranche B          Tranche B
Leverage Ratio        Revolving Loans        Revolving Loans          Term Loans              Term Loans
--------------------------------------------------------------------------------------------------------------

Category 1

Greater than or
equal to 4.00 to           2.75%                   1.75%                  3.50%                  2.50%
1.00
--------------------------------------------------------------------------------------------------------------
Category 2

Greater than or
equal to 3.50 to
1.00 but less             2.50%                   1.50%                  3.50%                  2.50%
than 4.00 to
1.00
--------------------------------------------------------------------------------------------------------------
Category 3

Greater than or
equal to 3.00 to
1.00 but less             2.25%                   1.25%                  3.25%                  2.25%
than 3.50 to
1.00
--------------------------------------------------------------------------------------------------------------
Category 4

Greater than or
equal to 2.50 to
1.00 but less             1.75%                   0.75%                  3.25%                  2.25%
than 3.00 to
1.00
--------------------------------------------------------------------------------------------------------------
Category 5
1.50%                  0.50%                  3.25%                  2.25%
Less than 2.50
to 1.00
==============================================================================================================

11
5

Each change in the Applicable Percentage resulting from a change in the
Leverage Ratio shall be effective with respect to all Loans and Letters of
Credit outstanding on and after the date of delivery to the Administrative Agent
of the financial statements and certificates required by Section 5.04(a) or (b)
and Section 5.04(d), respectively, indicating such change until the date
immediately preceding the next date of delivery of such financial statements and
certificates indicating another such change. Notwithstanding the foregoing,
until the Borrower shall have delivered the financial statements and
certificates required by Section 5.04(a) or (b) and Section 5.04(d),
respectively, for the period ended March 31, 2001, the Leverage Ratio shall be
deemed to be in Category 1 for purposes of determining the Applicable
Percentage; provided, however, that (a) at any time during which the Borrower
has failed to deliver the financial statements and certificates required by
Section 5.04(a) or (b) and Section 5.04(d), respectively, or (b) at any time
after the occurrence and during the continuance of an Event of Default, the
Leverage Ratio shall be deemed to be in Category 1 for purposes of determining
the Applicable Percentage.

"Asset Sale" shall mean the sale, transfer or other disposition (by way
of merger, casualty, condemnation or otherwise), other than an Asset Swap, by
the Borrower or any of the Subsidiaries to any person other than the Borrower or
any Subsidiary Guarantor of (a) any capital stock or other equity interests of
any of the Subsidiaries (other than directors' qualifying shares) or (b) any
other assets of the Borrower or any of the Subsidiaries (other than (i)
inventory, damaged, obsolete or worn out assets, scrap and Permitted
Investments, in each case disposed of in the ordinary course of business, (ii)
the sale of Program Receivables pursuant to the Receivables Program, (iii)
dispositions between or among Subsidiaries that are not Loan Parties, (iv)
dispositions from Loan Parties to Subsidiaries that are not Loan Parties of
assets having an aggregate value not in excess of $25,000,000 and (v) sales,
transfers or other dispositions (in addition to those described in clauses (i)
through (iv) above) in any fiscal year of the Borrower of assets (other than
Consent Decree Assets) having an aggregate value not in excess of $5,000,000).

"Asset Swap" shall mean any transfer of assets of the Borrower or any
Subsidiary to any person other than the Borrower or any Affiliate of the
Borrower in exchange for assets of such person if such exchange would qualify,
whether in part or in full, as a

12

6

like-kind exchange pursuant to Section 1031 of the Code. Nothing in this
definition shall require the Borrower or any Subsidiary to elect that Section
1031 of the Code be applicable to any Asset Swap.

"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Administrative
Agent, in the form of Exhibit B or such other form as shall be approved by the
Administrative Agent.

"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States of America.

"Borrowing" shall mean (a) Loans of the same Class and Type made,
converted or continued on the same date and, in the case of a Eurocurrency
Borrowing, as to which a single Interest Period is in effect or (b) a Swingline
Loan.

"Borrowing Request" shall mean a request by the Borrower in accordance
with the terms of Section 2.03 and substantially in the form of Exhibit C, or
such other form as shall be approved by the Administrative Agent.

"Business Day" shall mean any day other than a Saturday, Sunday or day
on which banks in New York City or Los Angeles are authorized or required by law
to close; provided, however, that when used in connection with a Eurocurrency
Loan, the term "Business Day" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank market.

"Calculation Date" shall mean (a) the last Business Day of each month,
if any Alternative Currency Letter of Credit is outstanding on such day, and (b)
the Business Day preceding the date of issuance, extension, renewal or amendment
of any Alternative Currency Letter of Credit.

"Capital Expenditures" shall mean, for any period, (a) the additions to
property, plant and equipment and other capital expenditures of the Borrower and
its consolidated Subsidiaries that are (or should be) set forth in a
consolidated statement of cash flows of the Borrower for such period prepared in
accordance with GAAP and (b) Capital Lease Obligations incurred by the Borrower
and its consolidated Subsidiaries during such period, but excluding in each case
any such expenditure made to restore, replace or rebuild property to the
condition of such property immediately prior to any damage, loss, destruction or
condemnation of such property, to the extent such expenditure is made with
insurance proceeds, condemnation awards or damage recovery proceeds relating to
any such damage, loss, destruction or condemnation; provided, however, that
amounts reinvested as contemplated in the proviso to clause (a) in the
definition of Net Cash Proceeds shall not be deemed Capital Expenditures.

"Capital Lease Obligations" of any person shall mean the obligations of
such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of

13

7

such person under GAAP, and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP.

"Casualty" shall have the meaning assigned to such term in the
Mortgages.

"Casualty Proceeds" shall have the meaning assigned to such term in the
Mortgages.

A "Change in Control" shall be deemed to have occurred if (a) any
person or group (within the meaning of Rule 13d-5 of the Securities Exchange Act
of 1934 as in effect on the date hereof) shall own directly or indirectly,
beneficially or of record, shares representing more than 25% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock of
the Borrower; (b) a majority of the seats (other than vacant seats) on the board
of directors of the Borrower shall at any time be occupied by persons who were
neither (i) nominated by the board of directors of the Borrower, nor (ii)
appointed by directors so nominated; or (c) any change in control (or similar
event, however denominated) with respect to the Borrower or any Subsidiary shall
occur under and as defined in any indenture or agreement in respect of Material
Indebtedness to which the Borrower or any Subsidiary is a party.

"Change in Law" shall mean (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender or
Issuing Bank (or, for purposes of Section 2.14, by any lending office of such
Lender or by such Lender's or Issuing Bank's holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.

"Class", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans,
Tranche A Term Loans, Tranche B Term Loans or Swingline Loans and, when used in
reference to any Commitment, refers to whether such Commitment is a Revolving
Credit Commitment, Tranche A Commitment, Tranche B Commitment or Swingline
Commitment.

"Closing Date" shall mean August 8, 2000.

"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

"Collateral" shall mean all the "Collateral" as defined in any Security
Document and shall also include the Mortgaged Properties.

"Commitment" shall mean, with respect to any Lender, such Lender's
Revolving Credit Commitment, Term Loan Commitment and/or Swingline Commitment.

14

8

"Commitment Fee" shall have the meaning assigned to such term in
Section 2.05(a).

"Condemnation" shall have the meaning assigned to such term in the
Mortgages.

"Condemnation Proceeds" shall have the meaning assigned to such term in
the Mortgages.

"Confidential Information Memorandum" shall mean the
Confidential Information Memorandum of the Borrower dated March 2000.

"Consent Decree" shall mean the consent decree dated July 28, 2000, in
the matter of United States of America v. Flowserve Corporation,
Ingersoll-Dresser Pump Company and Ingersoll Rand Company relating to the
purchase of Ingersoll-Dresser Pump Company by Flowserve Corporation.

"Consent Decree Assets" shall mean the assets identified in the Consent
Decree that the Borrower, IDP and Ingersoll-Rand Company have been ordered and
directed to divest in connection with the Acquisition.

"Consolidated EBITDA" shall mean, for any period, Consolidated Net
Income for such period, plus (a) without duplication and to the extent deducted
in determining such Consolidated Net Income, the sum of (i) Consolidated
Interest Expense for such period, (ii) consolidated income tax expense for such
period, (iii) all amounts attributable to depreciation and amortization for such
period, (iv) any extraordinary non-cash charges for such period and (v) cash
integration and restructuring charges in connection with the Acquisition and
taken with respect to periods ended on or prior to December 31, 2001, in an
aggregate amount not to exceed $65,000,000, and minus (b) without duplication
and to the extent included in determining such Consolidated Net Income, any
extraordinary gains for such period, all determined on a consolidated basis in
accordance with GAAP; provided that in the case of the Borrower, Consolidated
EBITDA shall be determined with reference to Schedule 1.01(d).

"Consolidated Fixed Charges" shall mean, for any period, the sum of (a)
Consolidated Interest Expense for such period, (b) the aggregate amount of
scheduled principal payments (whether or not made) during such period in respect
of long term Indebtedness of the Borrower and the Subsidiaries (other than
payments made by the Borrower or any Subsidiary to the Borrower or a
Subsidiary), (c) Capital Expenditures for such period, (d) the aggregate amount
of Taxes paid in cash by the Borrower and the Subsidiaries during such period
and (e) the aggregate amount of Restricted Payments made in cash by the Borrower
and the Subsidiaries during such period in accordance with Section 6.06(a)
(other than Section 6.06(a)(i)).

"Consolidated Interest Expense" shall mean, for any period, for the
Borrower and its Subsidiaries on a consolidated basis, the sum, without
duplication, of (a) all interest, premium payments, fees, charges and related
expenses payable by the Borrower and its Subsidiaries in connection with
borrowed money (including capitalized interest) or in

15

9

connection with the deferred purchase price of assets, in each case to the
extent treated as interest in accordance with GAAP and payable in cash, (b) the
portion of rent payable by the Borrower and its Subsidiaries with respect to
such period under capital leases that is treated as interest in accordance with
GAAP and payable in cash and (c) all fees, discounts, premiums, expenses or
similar amounts incurred by the Borrower or any of its Subsidiaries in
connection with the Receivables Program for such period, including purchase
discounts (net of any loss reserves), purchase premiums, operating expense fees,
structuring fees, collection agent fees, unutilized purchase limit fees and
other similar fees and expenses. For purposes of determining the Interest
Coverage Ratio and the Fixed Charge Coverage Ratio at (i) September 30, 2000,
(ii) December 31, 2000 and (iii) March 31, 2001, Consolidated Interest Expense
shall be deemed to be (x) the sum of the actual Consolidated Interest Expense
for the fiscal quarter ending September 30, 2000, plus $87,000,000, (y) the sum
of the actual Consolidated Interest Expense for the two-fiscal quarter period
ending December 31, 2000, plus $57,000,000, and (z) the sum of the actual
Consolidated Interest Expense for the three-fiscal quarter period ending March
31, 2001, plus $29,000,000, respectively.

"Consolidated Net Income" shall mean, for any period, the net income or
loss of the Borrower and the Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income of any Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by the Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, statute, rule or regulation applicable
to such Subsidiary and (b) the income or loss of any person accrued prior to the
date it becomes a Subsidiary or is merged into or consolidated with the Borrower
or any Subsidiary or the date that such person's assets are acquired by the
Borrower or any Subsidiary.

"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "Controlling" and "Controlled" shall have meanings
correlative thereto.

"Credit Event" shall have the meaning assigned to such term in Section
4.01.

"Current Assets" shall mean, at any time, the consolidated current
assets (other than cash and Permitted Investments) of the Borrower and the
Subsidiaries.

"Current Liabilities" shall mean, at any time, the consolidated current
liabilities of the Borrower and the Subsidiaries at such time, but excluding,
without duplication, (a) the current portion of any long-term Indebtedness and
(b) outstanding Revolving Loans and Swingline Loans.

"Default" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.

16

10

"Defeased IRBs" shall mean the industrial revenue bonds due January 15,
2015 and issued by The City of Albuquerque, New Mexico in the aggregate
principal amount of $15,000,000.

"Designated Properties" shall have the meaning assigned to such term in
Section 3.20(c).

"dollars" or "$" shall mean lawful money of the United States of
America.

"Dollar Equivalent" shall mean, with respect to an amount of any
Alternative Currency on any date, the equivalent in dollars of such amount,
determined by the Administrative Agent pursuant to Section 1.04 using the
applicable Exchange Rate with respect to such currency at the time in effect.

"Dollar Subordinated Note Indenture" shall mean the indenture dated as
of August 8, 2000, between the Borrower, the Guarantors identified therein and
The Bank of New York, as trustee, as in effect on the Closing Date and as
thereafter amended from time to time in accordance with the requirements thereof
and of this Agreement, pursuant to which the Dollar Subordinated Notes are
issued.

"Dollar Subordinated Notes" shall mean the Borrower's 12-1/4% Senior
Subordinated Notes due 2010, in an initial aggregate principal amount of
$290,000,000, issued pursuant to the Dollar Subordinated Note Indenture and any
notes issued by the Borrower in exchange for the Dollar Subordinated Notes, as
contemplated by the Dollar Subordinated Note Indenture, with substantially
identical terms as the Dollar Subordinated Notes.

"Domestic Subsidiaries" shall mean all Subsidiaries incorporated or
organized under the laws of the United States of America, any State thereof or
the District of Columbia.

"EMU Legislation" shall mean the legislative measures of the European
Union for the introduction of, changeover to or operation of the euro in one or
more member states.

"Environmental Laws" shall mean all applicable Federal, state, local
and foreign laws (including common law), treaties, regulations, rules,
ordinances, codes, decrees, judgments and orders (including consent orders), in
each case, relating to protection of the environment, natural resources, human
health and safety as related to Hazardous Materials or the presence, Release of,
or exposure to, Hazardous Materials, or the generation, manufacture, processing,
distribution, use, treatment, storage, transport, recycling or handling of, or
the arrangement for such activities with respect to, Hazardous Materials.

"Environmental Liability" shall mean liabilities,obligations,claims,
actions, suits, judgments or orders under or relating to any Environmental Law
for any damages, injunctive relief, losses, fines, penalties, fees, expenses
(including fees and expenses of

17

11

attorneys and consultants) or costs, including those arising from or relating
to: (a) any action to address the on- or off-site presence, Release of, or
exposure to, Hazardous Materials; (b) permitting and licensing, administrative
oversight, insurance premiums and financial assurance requirements;(c)any
personal injury (including death), property damage (real or personal) or natural
resource damage; and (d) the compliance or non-compliance with any Environmental
Law.

"Equity Issuance" shall mean any issuance or sale by the Borrower or
any of its Subsidiaries of any capital stock or other equity interests of the
Borrower or any Subsidiary, as applicable, or any obligations convertible into
or exchangeable for, or giving any person a right, option or warrant to acquire
such capital stock or equity interests or such convertible or exchangeable
obligations, except in each case for (a) any issuance or sale to the Borrower or
any Subsidiary, (b) any issuance of directors' qualifying shares and (c) sales
or issuances of common stock of the Borrower to management or employees of the
Borrower or any Subsidiary under any employee stock option or stock purchase
plan or employee benefit plan in existence from time to time.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time.

"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code, or solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.

"ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of, or withdrawal from, any Plan or the withdrawal or partial
withdrawal of the Borrower or any of its ERISA Affiliates from any Multiemployer
Plan; (e) the receipt by the Borrower or any of its ERISA Affiliates 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; (f)
the adoption of any amendment to a Plan that would require the provision of
security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (g)
the receipt by the Borrower or any of its ERISA Affiliates of any notice, or the
receipt by any Multiemployer Plan from the Borrower or any of its ERISA
Affiliates of any notice, concerning the imposition of Withdrawal Liability 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; (h) the occurrence
of a "prohibited transaction" (within the meaning of Section 4975 of the Code)
with respect to which the Borrower or any such Subsidiary incurs liability; (i)
any other event or

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condition with respect to a Plan or Multiemployer Plan that could reasonably be
expected to result in liability of the Borrower; or (j) any Foreign Benefit
Event.

"euro" shall mean the single currency of the European Union as
constituted by the Treaty on European Union and as referred to in the EMU
Legislation.

"Eurocurrency", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.

"Euro Subordinated Note Indenture" shall mean the indenture dated as of
August 8, 2000, between FFBV, the Borrower and the other Guarantors identified
therein and The Bank of New York, as trustee, as in effect on the Closing Date
and as thereafter amended from time to time in accordance with the requirements
thereof and of this Agreement, pursuant to which the Euro Subordinated Notes are
issued.

"Euro Subordinated Notes" shall mean FFBV's 12-1/4% Senior Subordinated
Notes due 2010, in an initial aggregate principal amount of euro 100,000,000,
issued pursuant to the Euro Subordinated Note Indenture and any notes issued by
FFBV in exchange for the Euro Subordinated Notes, as contemplated by the Euro
Subordinated Note Indenture, with substantially identical terms as the Euro
Subordinated Notes.

"Event of Default" shall have the meaning assigned to such term in
Article VII.

"Excess Cash Flow" shall mean, for any fiscal year of the Borrower, (a)
the sum, without duplication, of (i) Consolidated EBITDA for such fiscal year
and (ii) reductions to noncash working capital of the Borrower and the
Subsidiaries for such fiscal year (i.e., the decrease, if any, in Current Assets
minus Current Liabilities from the beginning to the end of such fiscal year),
other than any such reduction attributable solely to the establishment during
such fiscal year of the Receivables Program, less (b) the sum, without
duplication, of (i) the amount of any Taxes payable in cash by the Borrower and
the Subsidiaries with respect to such fiscal year, (ii) Consolidated Interest
Expense for such fiscal year, (iii) Capital Expenditures made in cash in
accordance with Section 6.10 during such fiscal year, except to the extent
financed with the proceeds of Indebtedness, Equity Issuances, Casualty Proceeds,
Condemnation Proceeds or other proceeds that would not be included in
Consolidated EBITDA, (iv) permanent repayments of Indebtedness (other than
mandatory prepayments of Loans under Section 2.13) made by the Borrower and the
Subsidiaries during such fiscal year, but only to the extent that such
prepayments by their terms cannot be reborrowed or redrawn and do not occur in
connection with a refinancing of all or any portion of such Indebtedness, (v)
for the fiscal year ending December 31, 2001, cash restructuring expenses and
cash integration expenses, to the extent added to Consolidated Net Income in
determining Consolidated EBITDA for such year, (vi) for the fiscal year ending
December 31, 2001, capitalized cash restructuring expenses and cash integration
expenses in an amount not to exceed $15,000,000, (vii) for any period set forth
on Schedule 1.01(d), the amount of synergies and cost savings for such period
added to Consolidated Net Income in determining Consolidated EBITDA for such
period, and (viii) additions to noncash working capital

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for such fiscal year (i.e., the increase, if any, in Current Assets minus
Current Liabilities from the beginning to the end of such fiscal year); provided
that to the extent otherwise included therein, the Net Cash Proceeds of Asset
Sales shall be excluded from the calculation of Excess Cash Flow.

"Exchange Rate" shall mean, on any day with respect to Alternative
Currency, the rate at which such Alternative Currency may be exchanged into
dollars (or, for purposes of the definition of "Alternative Currency Equivalent"
and Section 2.02(f) or any other provision of this Agreement requiring or
permitting the conversion of an Alternative Currency to dollars, the rate at
which dollars may be exchanged into an Alternative Currency), as set forth at
approximately 11:00 a.m., London time, on such date on the Reuters World
Currency Page for such Alternative Currency. In the event that such rate does
not appear on any Reuters World Currency Page, the Exchange Rate shall be
determined by reference to such other publicly available service for displaying
exchange rates as may be agreed upon by the Administrative Agent and the
Borrower, or, in the absence of such agreement, such Exchange Rate shall instead
be the arithmetic average of the spot rates of exchange of the Administrative
Agent in the primary market where its foreign currency exchange operations in
respect of such Alternative Currency are then being conducted, at or about 10:00
a.m., local time, on such date for the purchase of dollars (or such Alternative
Currency, as the case may be) for delivery two Business Days later; provided
that if at the time of any such determination, for any reason, no such spot rate
is being quoted, the Administrative Agent may use any reasonable method it
deems appropriate to determine such rate, and such determination shall be
presumed correct absent manifest error.

"Excluded Taxes" shall mean, with respect to the Administrative Agent,
any Lender, any Issuing Bank or any other recipient of any payment to be made by
or on account of any obligation of the Borrower hereunder, (a) income or
franchise taxes imposed (or measured) on the basis of the net income of such
recipient by the United States of America, or by the jurisdiction under the laws
of which such recipient is organized or in which its principal office is located
or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which such recipient is
located and (c) in the case of a Foreign Lender (other than an assignee pursuant
to a request by the Borrower under Section 2.21(a)), any withholding tax that is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party to this Agreement (or designates a new lending office) or
is attributable to such Foreign Lender's failure to comply with Section 2.20(e),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment), to
receive additional amounts from the Borrower with respect to such withholding
tax pursuant to Section 2.20(a).

"Existing Debt" shall mean all principal, premium, if any, interest,
fees and other amounts outstanding under (a) the Credit Agreement dated as of
October 7, 1999, as amended, among the Borrower, the Lenders party thereto,
BofA, as administrative agent, Bank One, Texas, NA, as syndication agent, and
ABN Amro Bank N.V., as

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14

documentation agent, (b) the 7.14% Series A Senior Notes due November 15, 2006
and (c) the 7.17% Series B Senior Notes due March 31, 2007.

"Existing Letter of Credit" shall mean each Letter of Credit previously
issued for the account of the Borrower or a Subsidiary that (a) is outstanding
on the Closing Date and (b) is listed on Schedule 1.01(e). Existing Letters of
Credit shall be Financial Letters of Credit, Performance Letters of Credit or
Trade Letters of Credit, as indicated on Schedule 1.01(e).

"Fee Letter" shall mean the Fee Letter dated February 9, 2000, among
the Borrower, CSFB, BofA, Banc of America Securities LLC and the Administrative
Agent.

"Fees" shall mean the Commitment Fees, the Administrative Agent's Fees,
the L/C Participation Fees and the Issuing Bank Fees.

"FFBV" shall mean Flowserve Finance B.V.,a Netherlands corporation
(besloten vennootschap) and a wholly owned subsidiary of the Borrower.

"Fifth Third" shall mean Fifth Third Bancorp, an Ohio corporation, its
subsidiaries and any successor thereto.

"Fifth Third Letter of Credit" shall mean each letter of credit
previously issued for the account of the Borrower or a Subsidiary that (a) is
outstanding on the Closing Date and (b) is listed on Schedule 1.01(f).

"Fifth Third Letter of Credit Exposure" shall mean, at any time, the
sum of (a) the aggregate undrawn amount of all outstanding Fifth Third Letters
of Credit at such time and (b) the aggregate principal amount of all
disbursements or payments made by Fifth Third or any of its Affiliates in
respect of Fifth Third Letters of Credit that have not yet been reimbursed by
the Borrower or its Subsidiaries at such time. For purposes of determining the
Fifth Third Letter of Credit Exposure at any time, any amount included therein
that is denominated in a currency other than dollars shall be converted to
dollars at the applicable Exchange Rate in effect at such time.

"Financial Letter of Credit" shall mean each letter of credit issued
(or deemed issued) pursuant to Section 2.23 under which an Issuing Bank agrees
to make payments for the account of the Borrower or any Subsidiary in respect of
Indebtedness incurred or proposed to be incurred by the Borrower or such
Subsidiary. Any Letter of Credit that is neither a Performance Letter of Credit
nor a Trade Letter of Credit shall be deemed to be a Financial Letter of Credit.

"Financial Officer" of any person shall mean the chief financial
officer, principal accounting officer, treasurer or controller of such person.

"Finsub" shall mean a bankruptcy-remote, wholly owned subsidiary of the
Borrower, organized solely for the purpose of engaging in the Receivables
Program.

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"Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of
(a) Consolidated EBITDA for such period to (b) Consolidated Fixed Charges for
such period.

"Flowserve RED" shall mean Flowserve RED Corporation, a Delaware
corporation and a wholly owned subsidiary of the Borrower.

"Foreign Benefit Event" shall mean, with respect to any Foreign Pension
Plan, (a) 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, (b) the failure to make
the required contributions or payments, under any applicable law, on or before
the due date for such contributions or payments, (c) 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 (d) the incurrence of any liability in excess of $5,000,000 (or the
Dollar Equivalent thereof in another currency) by the Borrower 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 (e) the occurrence of any transaction
that is prohibited under any applicable law that results in the incurrence of
any liability by the Borrower or any of its Subsidiaries, or the imposition on
the Borrower 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 $5,000,000 (or the Dollar Equivalent thereof in another currency).

"Foreign Lender" shall mean any Lender that is organized under the laws
of a jurisdiction other than that in which the Borrower is located. For purposes
of this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

"Foreign Pension Plan" shall mean any benefit plan which under
applicable law is required to be funded through a trust or other funding vehicle
other than a trust or funding vehicle maintained exclusively by a Governmental
Authority.

"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
Subsidiary.

"GAAP" shall mean United States generally accepted accounting
principles applied on a consistent basis.

"Governmental Authority" shall mean any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.

"Granting Lender" shall have the meaning assigned to such term in
Section 9.04(i).

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"Guarantee" of or by any person shall mean any obligation, contingent
or otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other person (the
"primary obligor") in any manner, whether directly or indirectly, and including
any obligation of such person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation or to purchase (or to advance or supply funds for the purchase
of) any security for the payment of such Indebtedness or other obligation, (b)
to purchase or lease property, securities or services for the purpose of
assuring the owner of such Indebtedness or other obligation of the payment of
such Indebtedness or other obligation or (c) to maintain working capital, equity
capital or any other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Indebtedness or other
obligation; provided,however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business.

"Guarantee Agreement" shall mean the Guarantee Agreement,substantially
in the form of Exhibit D, made by the Guarantors in favor of the Collateral
Agent for the benefit of the Secured Parties.

"Guarantors" shall mean each person listed on Schedule 1.01(a) and each
other person that becomes party to a Guarantee Agreement as a Guarantor, and the
permitted successors and assigns of each such person.

"Hazardous Materials" shall mean (a) any petroleum products or
byproducts and all other hydrocarbons, coal ash, radon gas, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls, chlorofluorocarbons
and all other ozone-depleting substances, in each case regulated by any
Environmental Law, and (b) any chemical, material, substance or waste that is
prohibited, limited or regulated by or pursuant to any Environmental Law.

"Hedging Agreement" shall mean any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.

"IDP" shall mean Ingersoll-Dresser Pump Company, a Delaware general
partnership.

"Inactive Subsidiary" shall mean each Subsidiary that (i) has not
conducted any business during the twelve-month period preceding the date of
determination and (ii) has less than $50,000 in assets. The Inactive
Subsidiaries on the Closing Date are listed on Schedule 1.01(c).

"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such person upon which interest charges are customarily paid, (d)
all obligations of such person under conditional sale or other title retention
agreements relating to property or assets

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purchased by such person, (e) all obligations of such person issued or assumed
as the deferred purchase price of property or services (excluding trade accounts
payable and accrued obligations incurred in the ordinary course of business),
(f) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, (g) all Guarantees by such person
of Indebtedness of third parties, (h) all Capital Lease Obligations of such
person, (i) all obligations of such person as an account party in respect of
letters of credit and (j) all obligations of such person in respect of bankers'
acceptances. The Indebtedness of any person shall include the Indebtedness of
any partnership in which such person is a general partner. In addition, for
purposes of this Agreement, the Indebtedness of Finsub shall also include all
consideration provided to Finsub by the purchaser of Program Receivables less
any amounts collected with respect to such Program Receivables. Notwithstanding
the foregoing, so long as the Defeased IRBs are owned by the Borrower or a
wholly owned subsidiary, neither the Defeased IRBs nor any Guarantee thereof
shall constitute Indebtedness hereunder.

"Indemnified Taxes" shall mean Taxes other than Excluded Taxes.

"Indemnity, Subrogation and Contribution Agreement" shall mean the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit E, among the Borrower, the Guarantors and the Collateral Agent.

"Interest Coverage Ratio" shall mean, for any period, the ratio of (a)
Consolidated EBITDA for such period to (b) Consolidated Interest Expense for
such period.

"Interest Payment Date" shall mean, (a) with respect to any ABR Loan
(other than a Swingline Loan), the last Business Day of each March, June,
September and December, (b) with respect to any Eurocurrency Loan, the last day
of the Interest Period applicable to the Borrowing of which such Loan is a part
and, in the case of a Eurocurrency Borrowing with an Interest Period of more
than three months' duration, each day that would have been an Interest Payment
Date had successive Interest Periods of three months' duration been applicable
to such Borrowing, and (c) with respect to any Swingline Loan, the day that such
Loan is required to be repaid pursuant to Section 2.04(a).

"Interest Period" shall mean, with respect to any Eurocurrency
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day (or, if there is no numerically corresponding day,
on the last day) in the calendar month that is 1, 2, 3 or 6 months (or, if each
Lender participating in such Borrowing confirms to the Administrative Agent that
Interest Periods of such duration are acceptable to such Lender, 9 or 12 months)
thereafter, as the Borrower may elect; provided, however, that if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day. Interest shall accrue from
and including the first day of an Interest Period to but excluding the last day
of

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such Interest Period. For purposes hereof, the date of a Borrowing initially
shall be the date on which such Borrowing is made and thereafter shall be the
effective date of the most recent conversion or continuation of such Borrowing.

"Invatec" shall mean Innovative Valve Technologies, Inc., a Delaware
corporation.

"Investment Grade Ratings" shall mean that the credit rating of the
Borrower's senior unsecured, non-credit-enhanced long-term debt (the "Senior
Unsecured Debt") is (a) BBB- or higher, as determined by S&P, and (b) Baa3 or
higher, as determined by Moody's. The Borrower shall be deemed to have obtained
Investment Grade Ratings if it shall deliver to the Agents letters from S&P and
Moody's to the effect that the Senior Unsecured Debt would be so rated assuming
that the Secured Parties had released their liens in the Collateral.

"Issuing Bank" shall mean, as the context may require, (a) BofA, (b)
with respect to each Existing Letter of Credit, the Lender that issued such
Existing Letter of Credit, or (c) any other Lender that may become an Issuing
Bank pursuant to Section 2.23(i) or 2.23(k), with respect to Letters of Credit
issued by such Lender.

"Issuing Bank Fees" shall have the meaning assigned to such term in
Section 2.05(c).

"L/C Commitment" shall mean, with respect to any Issuing Bank, the
commitment of such Issuing Bank to issue Letters of Credit pursuant to Section
2.23.

"L/C Disbursement" shall mean a payment or disbursement made by an
Issuing Bank pursuant to a Letter of Credit.

"L/C Exposure" shall mean, at any time, the sum of (a) the Trade L/C
Exposure and (b) the Standby L/C Exposure at such time. The L/C Exposure of any
Revolving Credit Lender at any time shall equal its Pro Rata Percentage of the
aggregate L/C Exposure at such time.

"L/C Participation Fees" shall have the meaning assigned to such term
in Section 2.05(c).

"Lenders" shall mean (a) the financial institutions listed on Schedule
2.01 (other than any such financial institution that has ceased to be a party
hereto pursuant to an Assignment and Acceptance) and (b) any financial
institution that has become a party hereto pursuant to an Assignment and
Acceptance. Unless the context clearly indicates otherwise, the term "Lenders"
shall include the Swingline Lender.

"Letter of Credit" shall mean any letter of credit issued pursuant to
Section 2.23 and any Existing Letter of Credit.

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"Leverage Ratio" shall mean, on any date, the ratio of Total Debt on
such date to Consolidated EBITDA for the period of four consecutive fiscal
quarters most recently ended on or prior to such date. Solely for purposes of
this definition, if at any time the Leverage Ratio is being determined the
Borrower or any Subsidiary shall have completed a Permitted Acquisition or an
Asset Sale since the beginning of the relevant four fiscal quarter period, the
Leverage Ratio shall be computed on a pro forma basis (in accordance with the
last sentence of Section 6.04(g)) as if such Permitted Acquisition or Asset Sale
and any related incurrence of Indebtedness, had occurred at the beginning of
such period.

"LIBO Rate" shall mean, with respect to any Eurocurrency Borrowing for
any Interest Period, the rate per annum determined by the Administrative Agent
at approximately 11:00 a.m., London time, on the date that is two Business Days
prior to the commencement of such Interest Period by reference to the British
Bankers' Association Interest Settlement Rates for deposits in dollars (as
reflected on the applicable Telerate screen) for a period equal to such Interest
Period; provided that, to the extent that an interest rate is not ascertainable
pursuant to the foregoing provisions of this definition, the "LIBO Rate" shall
be the interest rate per annum determined by the Administrative Agent to be the
rate per annum at which deposits in dollars are offered for such relevant
Interest Period to major banks in the London interbank market by the
Administrative Agent at approximately 11:00 a.m. (London time) on the date that
is two Business Days prior to the beginning of such Interest Period.

"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

"Loan Documents" shall mean this Agreement, the Letters of Credit, the
Guarantee Agreement, the Security Documents and the Indemnity, Subrogation and
Contribution Agreement.

"Loan Parties" shall mean the Borrower and the Guarantors.

"Loans" shall mean the Revolving Loans, the Term Loans and the
Swingline Loans.

"Margin Stock" shall have the meaning assigned to such term in
Regulation U.

"Material Adverse Effect" shall mean (a) a materially adverse effect on
the business, assets, results of operations or financial condition of the
Borrower and the Subsidiaries, taken as a whole, (b) material impairment of the
ability of the Borrower or any other Loan Party to perform any of its
obligations under any Loan Document to which it is or will be a party or (c)
material impairment of the rights of or benefits available to the Lenders under
any Loan Document.

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"Material Indebtedness" shall mean Indebtedness (other than the Loans
and Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of the Borrower and the Subsidiaries in an
aggregate principal amount exceeding $10,000,000. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of the Borrower
or any Subsidiary in respect of any Hedging Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting agreements) that the
Borrower or such Subsidiary would be required to pay if such Hedging Agreement
were terminated at such time.

"Moody's" shall mean Moody's Investors Service, Inc. or any successor
thereto.

"Mortgaged Properties" shall mean the owned real properties and
leasehold and subleasehold interests of the Loan Parties specified on Schedule
1.01(b).

"Mortgages" shall mean the mortgages, deeds of trust, leasehold
mortgages, assignments of leases and rents, modifications and other security
documents delivered pursuant to clause (i) of Section 4.02(j) or pursuant to
Section 5.09, each substantially in the form of Exhibit F.

"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.

"Net Cash Proceeds" shall mean (a) with respect to any Asset Sale, the
cash proceeds (including cash proceeds subsequently received (as and when
received) in respect of noncash consideration initially received), net of (i)
selling expenses (including broker's fees or commissions, legal fees, transfer
and similar taxes and the Borrower's good faith estimate of income taxes paid or
payable in connection with such sale), (ii) amounts provided as a reserve, in
accordance with GAAP, against any liabilities under any indemnification
obligations or purchase price adjustment associated with such Asset Sale
(provided that, to the extent and at the time any such amounts are released from
such reserve, such amounts shall constitute Net Cash Proceeds) and (iii) the
principal amount, premium or penalty, if any, interest and other amounts on any
Indebtedness for borrowed money which is secured by the asset sold in such Asset
Sale and which is required to be repaid with such proceeds (other than any such
Indebtedness assumed by the purchaser of such asset); provided, however, that,
except with respect to the Net Cash Proceeds of Consent Decree Assets, if (x)
the Borrower shall deliver a certificate of a Financial Officer to the
Administrative Agent at the time of receipt thereof setting forth the Borrower's
intent to reinvest such proceeds in productive assets of a kind then used or
usable in the business of the Borrower and its Subsidiaries within 270 days of
receipt of such proceeds and (y) no Default or Event of Default shall have
occurred and shall be continuing at the time of such certificate or at the
proposed time of the application of such proceeds, such proceeds shall not
constitute Net Cash Proceeds except to the extent not so used or contractually
committed to be used at the end of such 270-day period, at which time such
proceeds shall be deemed to be Net Cash Proceeds; and (b) with respect to any
issuance or disposition of Indebtedness or any Equity Issuance or the initial
sale of Program Receivables pursuant to the Receivables Program (or any
subsequent increase thereto permitted hereunder), the cash

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proceeds thereof, net of all taxes and fees, commissions, costs and other
expenses incurred in connection therewith. Any "boot" or other non-like-kind
assets received in connection with an Asset Swap shall, to the extent received
in cash or at the time converted into cash, be considered cash proceeds from the
sale of an asset.

"Obligation Currency" shall have the meaning assigned to such term in
Section 9.16.

"Obligations" shall mean all obligations defined as "Obligations" in
the Guarantee Agreement and the Security Documents.

"Other Taxes" shall mean any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made under any Loan Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document.

"Pari Passu Exposure" shall mean, at any time, the sum of the ABN
Standby Credit Exposure at such time and the Fifth Third Letter of Credit
Exposure at such time.

"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA.

"Perfection Certificate" shall mean the Perfection Certificate
substantially in the form of Annex 1 to the Security Agreement.

"Performance Letter of Credit" shall mean each letter of credit issued
(or deemed issued) pursuant to Section 2.23 under which an Issuing Bank agrees
to make payments for the account of the Borrower or any Subsidiary in respect of
obligations (other than Indebtedness) of, or performance by, the Borrower or
such Subsidiary pursuant to contracts to which the Borrower or such Subsidiary
is or proposes to be a party, in each case in the ordinary course of business of
the Borrower or such Subsidiary.

"Permitted Acquisition" shall have the meaning assigned to such term in
Section 6.04(g).

"Permitted Investments" shall mean:

(a) 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;

(b) 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;

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(c) 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;

(d) 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;

(e) 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

(f) other short-term investments utilized by Foreign Subsidiaries
in accordance with normal investment practices for cash management in
investments of a type analogous to the foregoing.

"Person" shall mean any natural person, corporation, business trust,
joint venture, association, company, limited liability company, partnership or
government, or any agency or political subdivision thereof.

"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 307 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.

"Pledge Agreement" shall mean the Pledge Agreement, substantially in
the form of Exhibit G, between the Borrower, the Subsidiaries party thereto and
the Collateral Agent for the benefit of the Secured Parties.

"Program Receivables" shall mean all trade receivables and related
contract rights originated and owned by the Borrower or any Subsidiary and sold
pursuant to the Receivables Program.

"Pro Rata Percentage" of any Revolving Credit Lender at any time shall
mean the percentage of the Total Revolving Credit Commitment represented by such
Lender's Revolving Credit Commitment. In the event the Revolving Credit
Commitments shall have expired or been terminated, the Pro Rata Percentages
shall be determined on the basis of the Revolving Credit Commitments most
recently in effect.

"Purchase Agreement" shall mean the Purchase Agreement dated as of
February 9, 2000, as amended by Amendment No. 1 dated as of July 14, 2000, among

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the Borrower, Flowserve RED and the Sellers, as the same may be further amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.

"Receivables Program" shall mean, collectively, (a) the sale of, or
transfer of interests in, Program Receivables to Finsub in a "true sale"
transaction and (b) the sale of, or transfer of interests in, such Program
Receivables by Finsub to persons that are not Affiliates of the Borrower;
provided, that all governing terms and conditions (including any terms or
conditions providing for recourse to the Borrower or any of its Subsidiaries
(other than Finsub)) of the Receivables Program shall be subject to the prior
written approval of the Agents, which approval shall not be unreasonably
withheld.

"Receivables Program Documentation" shall mean all written agreements
that may from time to time be entered into by the Borrower and/or any Subsidiary
in connection with the Receivables Program, as such agreements may be amended,
supplemented or otherwise modified from time to time in accordance with the
provisions thereof and hereof.

"Register" shall have the meaning given such term in Section 9.04(d).

"Regulation T" shall mean Regulation T of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

"Related Fund" shall mean, with respect to any Lender that is a fund
that invests in bank loans, any other fund that invests in bank loans and is
advised or managed by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.

"Release" shall mean any release, spill, emission, leaking, dumping,
injection, pouring, deposit, disposal, discharge, dispersal, leaching or
migration into or through the environment or within or upon any building,
structure, facility or fixture.

"Release Date" shall have the meaning assigned to such term in Section
9.19.

"Required Lenders" shall mean, at any time, Lenders having Loans
(excluding Swingline Loans), L/C Exposure, Swingline Exposure and unused
Revolving Credit Commitments and Term Loan Commitments representing at least a
majority of the sum of all Loans outstanding (excluding Swingline Loans), L/C
Exposure, Swingline Exposure and unused Revolving Credit Commitments and Term
Loan Commitments at such time.

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"Responsible Officer" of any person shall mean any executive officer or
Financial Officer of such person and any other officer or similar official
thereof responsible for the administration of the obligations of such person in
respect of this Agreement.

"Restricted Payment" shall have the meaning assigned to such term in
Section 6.06(a).

"Revolving Credit Borrowing" shall mean a Borrowing comprised of
Revolving Loans.

"Revolving Credit Commitment" shall mean, with respect to each Lender,
the commitment of such Lender to make Revolving Loans hereunder as set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender
assumed its Revolving Credit Commitment, as applicable, as the same may be (a)
reduced from time to time pursuant to Section 2.09 and (b) reduced or increased
from time to time pursuant to assignments by or to such Lender pursuant to
Section 9.04.

"Revolving Credit Exposure" shall mean, with respect to any Lender at
any time, the aggregate principal amount at such time of all outstanding
Revolving Loans of such Lender, plus the aggregate amount at such time of such
Lender's L/C Exposure, plus the aggregate amount at such time of such Lender's
Swingline Exposure.

"Revolving Credit Lender" shall mean a Lender with a Revolving Credit
Commitment or an outstanding Revolving Loan.

"Revolving Credit Maturity Date" shall mean June 30, 2006.

"Revolving Loans" shall mean the revolving loans made by the Lenders to
the Borrower pursuant to clause (c) of Section 2.01.

"Secured Parties" shall have the meaning assigned to such term in the
Security Agreement.

"Security Agreement" shall mean the Security Agreement, substantially
in the form of Exhibit H, among the Borrower, the Subsidiaries party thereto and
the Collateral Agent for the benefit of the Secured Parties.

"Security Documents" shall mean the Mortgages, the Security Agreement,
the Pledge Agreement, the U.K. Debenture and each of the security agreements,
mortgages and other instruments and documents executed and delivered pursuant to
any of the foregoing or pursuant to Section 5.09.

"Sellers" shall mean IDP Acquisition, LLC, a Delaware limited liability
company, and Ingersoll-Rand Company, a New Jersey corporation.

"SPC" shall have the meaning assigned to such term in Section 9.04(i).

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"S&P" shall mean Standard & Poor's Ratings Services or any successor
thereto.

"Standby Letter of Credit" shall mean any Financial Letter of Credit or
any Performance Letter of Credit.

"Standby L/C Exposure" shall mean, at any time, the sum of (a) the
aggregate undrawn amount of all outstanding Standby Letters of Credit at such
time that are denominated in dollars, plus the Dollar Equivalent at such time of
the aggregate undrawn amount of all outstanding Alternative Currency Standby
Letters of Credit, and (b) the aggregate principal amount of all L/C
Disbursements in respect of Standby Letters of Credit denominated in dollars
that have not yet been reimbursed at such time plus the Dollar Equivalent at
such time of the aggregate principal amount of all L/C Disbursements in respect
of Standby Letters of Credit denominated in Alternative Currencies that have not
yet been reimbursed at such time. The Standby L/C Exposure of any Revolving
Credit Lender at any time shall equal its Pro Rata Percentage of the aggregate
Standby L/C Exposure at such time.

"Statutory Reserves" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board. Statutory Reserves shall be adjusted automatically on
and as of the effective date of any change in any reserve percentage.

"Sterling" or "(pound)" shall mean lawful money of the United Kingdom.

"Subordinated Note Documents" shall mean the Subordinated Notes, the
Subordinated Note Indentures and all other documents executed and delivered with
respect to the Subordinated Notes and the Subordinated Note Indentures.

"Subordinated Note Indentures" shall mean the Dollar Subordinated Note
Indenture and the Euro Subordinated Note Indenture.

"Subordinated Notes" shall mean the Dollar Subordinated Notes and the
Euro Subordinated Notes.

"subsidiary" shall mean, with respect to any person (herein referred to
as the "parent"), any corporation, partnership, association or other business
entity of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power or more than 50%
of the general partnership interests are, at the time any determination is being
made, owned, controlled or held.

"Subsidiary" shall mean any subsidiary of the Borrower.

"Swingline Commitment" shall mean the commitment of the Swingline
Lender to make loans pursuant to Section 2.22, as the same may be reduced from
time to time pursuant to Section 2.09.

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"Swingline Exposure" shall mean at any time the aggregate principal
amount at such time of all outstanding Swingline Loans. The Swingline Exposure
of any Revolving Credit Lender at any time shall equal its Pro Rata Percentage
of the aggregate Swingline Exposure at such time.

"Swingline Loan" shall mean any loan made by the Swingline Lender
pursuant to Section 2.22.

"Taxes" shall mean any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.

"Term Borrowing" shall mean a Borrowing comprised of Tranche A Term
Loans or Tranche B Term Loans.

"Term Loan Commitments" shall mean the Tranche A Commitments and the
Tranche B Commitments.

"Term Loan Repayment Dates" shall mean the Tranche A Term Loan
Repayment Dates and the Tranche B Term Loan Repayment Dates.

"Term Loans" shall mean the Tranche A Term Loans and the Tranche B Term
Loans.

"Total Debt" shall mean, at any time, the total Indebtedness of the
Borrower and the Subsidiaries at such time (excluding (a) Indebtedness under
Section 6.01(k), (b) Indebtedness under Section 6.01(o) and (c) Indebtedness of
the type described in clause (i) of the definition of such term and under
Section 6.01(l), except in each case to the extent of any unreimbursed drawings
or payments thereunder).

"Total Revolving Credit Commitment" shall mean, at any time, the
aggregate amount of the Revolving Credit Commitments, as in effect at such time.
The initial amount of the Total Revolving Credit Commitment is $300,000,000.

"Trade Letter of Credit" shall mean each commercial documentary letter
of credit issued (or deemed issued) by BofA for the account of the Borrower or
any Subsidiary pursuant to Section 2.23 for the purchase of goods by the
Borrower or such Subsidiary in the ordinary course of its business.

"Trade L/C Exposure" shall mean at any time the sum of (a) the
aggregate undrawn amount of all outstanding Trade Letters of Credit at such time
that are denominated in dollars, plus the Dollar Equivalent at such time of the
aggregate undrawn amount of all outstanding Alternative Currency Trade Letters
of Credit, and (b) the aggregate principal amount of all L/C Disbursements in
respect of Trade Letters of Credit denominated in dollars that have not yet been
reimbursed at such time plus the Dollar Equivalent at such time of the aggregate
principal amount of all L/C Disbursements in respect of Trade Letters of Credit
denominated in Alternative Currencies that have not yet been reimbursed at such
time.

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"Tranche A Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Tranche A Term Loans hereunder as set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender
assumed its Term Loan Commitment, as applicable, as the same may be (a) reduced
from time to time pursuant to Section 2.09 and (b) reduced or increased from
time to time pursuant to assignments by or to such Lender pursuant to Section
9.04. The initial amount of the aggregate Tranche A Commitments is $275,000,000.

"Tranche A Maturity Date" shall mean June 30, 2006.

"Tranche A Term Borrowing" shall mean a Borrowing comprised of Tranche
A Term Loans.

"Tranche A Term Loan Repayment Date" shall have the meaning assigned to
such term in Section 2.11(a)(i).

"Tranche A Term Loans" shall mean the term loans made by the Lenders to
the Borrower pursuant to clause (a) of Section 2.01.

"Tranche B Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Tranche B Term Loans hereunder as set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender
assumed its Term Loan Commitment, as applicable, as the same may be (a) reduced
from time to time pursuant to Section 2.09 and (b) reduced or increased from
time to time pursuant to assignments by or to such Lender pursuant to Section
9.04. The initial amount of the aggregate Tranche B Commitments is $475,000,000.

"Tranche B Maturity Date" shall mean June 30, 2008.

"Tranche B Term Borrowing" shall mean a Borrowing comprised of Tranche
B Term Loans.

"Tranche B Term Loan Repayment Date" shall have the meaning assigned to
such term in Section 2.11(a)(ii).

"Tranche B Term Loans" shall mean the term loans made by the Lenders to
the Borrower pursuant to clause (b) of Section 2.01.

"Transactions" shall mean, collectively, the transactions to occur
pursuant to the Purchase Agreement and the Loan Documents, including (a) the
execution and delivery of the Purchase Agreement and the consummation of the
Acquisition, (b) the execution and delivery of the Loan Documents, the
performance by the Loan Parties of their respective obligations thereunder and
the initial Borrowings hereunder, (c) the execution and delivery of the
Subordinated Note Documents and the issuance of the Subordinated Notes and (d)
the payment of all fees and expenses to be paid on or prior to the Closing Date
and owing in connection with the foregoing.

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"Type", when used in respect of any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined. For purposes hereof, the term "Rate" shall include
the Adjusted LIBO Rate and the Alternate Base Rate.

"U.K. Debenture", shall mean the Debenture, substantially in the form
of Exhibit J, between Flowserve International Limited, a Foreign Subsidiary of
the Borrower organized under the laws of the United Kingdom, and Bank of
America, N.A., as Collateral Agent.

"wholly owned subsidiary" of any person shall mean a subsidiary of such
person of which securities (except for directors' qualifying shares) or other
ownership interests representing 100% of the equity or 100% of the ordinary
voting power or 100% of the general partnership interests are, at the time any
determination is being made, owned, controlled or held by such person or one or
more wholly owned subsidiaries of such person or by such person and one or more
wholly owned subsidiaries of such person.

"Withdrawal Liability" shall mean liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, (a) any reference in this Agreement to any Loan
Document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time and (b) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided, however, that if the Borrower notifies the
Administrative Agent that the Borrower wishes to amend any covenant in Article
VI or any related definition to eliminate the effect of any change in GAAP
occurring after the date of this Agreement on the operation of such covenant (or
if the Administrative Agent notifies the Borrower that the Required Lenders wish
to amend Article VI or any related definition for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Lenders.

SECTION 1.03. Classification of Loans and Borrowings. For purposes of
this Agreement, Loans may be classified and referred to by Class (e.g., a
"Revolving Loan") or by Type (e.g., a "Eurocurrency Loan") or by Class and Type
(e.g., a "Eurocurrency Revolving Loan"). Borrowings also may be classified and
referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a
"Eurocurrency Borrowing") or by Class and Type (e.g., a "Eurocurrency Revolving
Borrowing").

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SECTION 1.04. Exchange Rates. (a) On each Calculation Date, the
Administrative Agent shall (i) determine the relevant Exchange Rates as of such
Calculation Date and (ii) give notice thereof to the Lenders and the Company.
The Exchange Rates so determined shall become effective on the first Business
Day immediately following the relevant Calculation Date (a "Reset Date"), shall
remain effective until the next succeeding Reset Date, and shall for all
purposes of this Agreement (other than Section 2.02(f), Section 2.05(c), Section
2.22(c), Section 9.16 or any other provision expressly requiring the use of a
current Exchange Rate) be the Exchange Rates employed in converting any amounts
between dollars and Alternative Currencies.

(b) Notwithstanding the foregoing, no Default shall be deemed to have
occurred if, solely as a result of changes in exchange rates and not as the
result of additional incurrences of Indebtedness, investments, loans or
advances, the dollar equivalent of any amount subject to a cash basket set forth
in Section 6.01, 6.02 or 6.04 is exceeded.

ARTICLE II

The Credits

SECTION 2.01. Commitments. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, (a) to make a Tranche A Term Loan to the
Borrower, in dollars, on the Closing Date in a principal amount not to exceed
its Tranche A Commitment, (b) to make a Tranche B Term Loan to the Borrower, in
dollars, on the Closing Date in a principal amount not to exceed its Tranche B
Commitment, and (c) to make Revolving Loans to the Borrower, at any time and
from time to time on or after the date hereof, and until the earlier of the
Revolving Credit Maturity Date and the termination of the Revolving Credit
Commitment of such Lender in accordance with the terms hereof, in dollars, in an
aggregate principal amount at any time outstanding that will not result in (i)
such Lender's Revolving Credit Exposure exceeding such Lender's Revolving Credit
Commitment or (ii) the sum of (x) the Aggregate Revolving Credit Exposure and
(y) the Pari Passu Exposure exceeding the Total Revolving Credit Commitment.
Within the limits set forth in clause (c) of the preceding sentence and subject
to the terms, conditions and limitations set forth herein, the Borrower may
borrow, pay or prepay and reborrow Revolving Loans. Amounts paid or prepaid in
respect of Term Loans may not be reborrowed.

SECTION 2.02. Loans. (a) Each Loan (other than Swingline Loans) shall
be made as part of a Borrowing consisting of Loans made by the Lenders ratably
in accordance with their applicable Commitments; provided, however, that the
failure of any Lender to make any Loan shall not in itself relieve any other
Lender of its obligation to lend hereunder (it being understood, however, that
no Lender shall be responsible for the failure of any other Lender to make any
Loan required to be made by such other Lender). Except for Loans deemed made
pursuant to Section 2.02(f), the Loans

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comprising any Borrowing shall be in an aggregate principal amount that is (i)
an integral multiple of $1,000,000 and not less than $5,000,000 or (ii) equal to
the remaining available balance of the applicable Commitments.

(b) Subject to Sections 2.08 and 2.15, each Borrowing shall be
comprised entirely of ABR Loans or Eurocurrency Loans as the Borrower may
request pursuant to Section 2.03. Each Lender may at its option make any
Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan; provided that any exercise of such option shall not
affect the obligation of the Borrower to repay such Loan in accordance with the
terms of this Agreement. Borrowings of more than one Type may be outstanding at
the same time; provided, however, that the Borrower shall not be entitled to
request any Borrowing that, if made, would result in more than 25 Eurocurrency
Borrowings outstanding hereunder at any time. For purposes of the foregoing,
Borrowings having different Interest Periods, regardless of whether they
commence on the same date, shall be considered separate Borrowings.

(c) Except with respect to Loans made pursuant to Section 2.02(f), each
Lender shall make each Loan to be made by it hereunder on the proposed date
thereof by wire transfer of immediately available funds to such account as the
Administrative Agent may designate not later than 11:00 a.m., California time,
and the Administrative Agent shall promptly credit the amounts so received to an
account in the name of the Borrower, maintained with the Administrative Agent
and designated by the Borrower in the applicable Borrowing Request or, if a
Borrowing shall not occur on such date because any condition precedent herein
specified shall not have been met, return the amounts so received to the
respective Lenders.

(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If the Administrative Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Administrative Agent, such Lender and the Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent at (i) in the case of the Borrower, the
interest rate applicable at the time to the Loans comprising such Borrowing and
(ii) in the case of such Lender, a rate determined by the Administrative Agent
to represent its cost of overnight or short-term funds (which determination
shall be conclusive absent manifest error). If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount shall constitute
such Lender's Loan as part of such Borrowing for purposes of this Agreement.

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(e) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request any Revolving Credit Borrowing if the Interest
Period requested with respect thereto would end after the Revolving Credit
Maturity Date.

(f) If, with respect to any L/C Disbursement made under a Standby
Letter of Credit, the applicable Issuing Bank shall not have received from the
Borrower the payment required to be made by Section 2.23(e) within the time
specified in such Section, such Issuing Bank will promptly notify the
Administrative Agent of the L/C Disbursement and the Administrative Agent will
promptly notify each Revolving Credit Lender of such L/C Disbursement, the
Dollar Equivalent thereof (if denominated in an Alternative Currency) and its
Pro Rata Percentage thereof. Each Revolving Credit Lender shall pay by wire
transfer of immediately available dollars to the Administrative Agent not later
than 11:00 a.m., California time, on such date (or, if such Revolving Credit
Lender shall have received such notice later than 9:00 a.m., California time, on
any day, not later than 11:00 a.m., California time, on the immediately
following Business Day), an amount equal to such Lender's Pro Rata Percentage of
such L/C Disbursement (or the Dollar Equivalent thereof, if such L/C
Disbursement was denominated in an Alternative Currency) (it being understood
that such amount shall be deemed to constitute an ABR Revolving Loan of such
Lender and such payment shall be deemed to have reduced the Standby L/C
Exposure), and the Administrative Agent will promptly pay to the applicable
Issuing Bank amounts so received by it from the Revolving Credit Lenders. The
Administrative Agent will promptly pay to the applicable Issuing Bank any
amounts received by it from the Borrower pursuant to Section 2.23(e) prior to
the time that any Revolving Credit Lender makes any payment pursuant to this
paragraph (f); any such amounts received by the Administrative Agent thereafter
will be promptly remitted by the Administrative Agent to the Revolving Credit
Lenders that shall have made such payments and to the applicable Issuing Bank,
as their interests may appear. If any Revolving Credit Lender shall not have
made its Pro Rata Percentage of such L/C Disbursement available to the
Administrative Agent as provided above, such Lender and the Borrower severally
agree to pay interest on such amount, for each day from and including the date
such amount is required to be paid in accordance with this paragraph to but
excluding the date such amount is paid, to the Administrative Agent for the
account of the applicable Issuing Bank at (i) in the case of the Borrower, a
rate per annum equal to the interest rate applicable to Revolving Loans pursuant
to Section 2.06(a), and (ii) in the case of such Lender, for the first such day,
the Federal Funds Effective Rate, and for each day thereafter, the Alternate
Base Rate.

SECTION 2.03. Borrowing Procedure. In order to request a Borrowing
(other than a Swingline Loan or a deemed Borrowing pursuant to Section 2.02(f),
as to which this Section 2.03 shall not apply), the Borrower shall hand deliver
or telecopy to the Administrative Agent a duly completed Borrowing Request (a)
in the case of a Eurocurrency Borrowing, not later than 10:00 a.m., California
time, three Business Days before a proposed Borrowing, and (b) in the case of an
ABR Borrowing, not later than 12:00 noon, California time, one Business Day
before a proposed Borrowing. Each Borrowing Request shall be irrevocable, shall
be signed by or on behalf of the Borrower and shall specify the following
information: (i) whether the Borrowing then being

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requested is to be a Tranche A Term Borrowing, a Tranche B Term Borrowing or a
Revolving Credit Borrowing, and whether such Borrowing is to be a Eurocurrency
Borrowing or an ABR Borrowing (provided that until the Syndication Agent shall
have notified the Borrower and the Administrative Agent that the primary
syndication of the Commitments has been completed (which notice shall be given
as promptly as practicable and, in any event, within 30 days after the Closing
Date), the Borrower shall only request, at its option, either (x) ABR Borrowings
or (y) Eurocurrency Borrowings with one-month Interest Periods all ending on the
same date); (ii) the date of such Borrowing (which shall be a Business Day);
(iii) the number and location of the account to which funds are to be disbursed
(which shall be an account that complies with the requirements of Section
2.02(c); (iv) the amount of such Borrowing and (v) if such Borrowing is to be a
Eurocurrency Borrowing, the Interest Period with respect thereto; provided,
however, that, notwithstanding any contrary specification in any Borrowing
Request, each requested Borrowing shall comply with the requirements set forth
in Section 2.02. If no election as to the Type of Borrowing is specified in any
such notice, then the requested Borrowing shall be an ABR Borrowing. If no
Interest Period with respect to any Eurocurrency Borrowing is specified in any
such notice, then the Borrower shall be deemed to have selected an Interest
Period of one month's duration. The Administrative Agent shall promptly advise
the applicable Lenders of any notice given pursuant to this Section 2.03 (and
the contents thereof), and of each Lender's portion of the requested Borrowing.

SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of each Lender (i) the principal amount of each Term Loan of such Lender
as provided in Section 2.11 and (ii) the then unpaid principal amount of each
Revolving Loan of such Lender on the Revolving Credit Maturity Date. The
Borrower hereby promises to pay the Swingline Lender the then unpaid principal
amount of each Swingline Loan on the earlier of the Revolving Credit Maturity
Date and the first date after such Swingline Loan is made that is the last day
of a calendar month and is at least fifteen days after such Swingline Loan is
made.

(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.

(c) The Administrative Agent shall maintain the Register in which it
will record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder from the Borrower or any Guarantor and each Lender's share thereof.

(d) The entries made in the accounts maintained pursuant to paragraphs
(b) and (c) above shall be prima facie evidence of the existence and amounts of
the obligations therein recorded; provided, however, that the failure of any
Lender or the

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Administrative Agent to maintain such accounts or any error therein shall not in
any manner affect the obligations of the Borrower to repay the Loans in
accordance with their terms. In the event of any inconsistency between the
Register and any Lender's records, the recordations of the Register shall
govern.

(e) Any Lender may request that Loans made by it hereunder be evidenced
by a promissory note. In such event, the Borrower shall execute and deliver to
such Lender a promissory note payable to such Lender and its registered assigns
and in a form and substance reasonably acceptable to the Administrative Agent
and the Borrower. Notwithstanding any other provision of this Agreement, in the
event any Lender shall request and receive such a promissory note, the interests
represented by such note shall at all times (including after any assignment of
all or part of such interests pursuant to Section 9.04) be represented by one or
more promissory notes payable to the payee named therein or its registered
assigns.

SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender,
through the Administrative Agent, on the last Business Day of March, June,
September and December, in each year and on each date on which any Commitment of
such Lender shall expire or be terminated as provided herein, a commitment fee
(a "Commitment Fee") equal to 0.50% per annum on the average daily unused amount
(treating Standby L/C Exposure as usage of the Revolving Credit Commitments) of
the Commitments of such Lender (other than the Swingline Commitment) during the
preceding quarter (or other period commencing with the date hereof or ending
with the Revolving Credit Maturity Date or the date on which the Commitments of
such Lender shall expire or be terminated). All Commitment Fees shall be
computed on the basis of the actual number of days elapsed in a year of 360
days. The Commitment Fee due to each Lender shall commence to accrue on the date
hereof and shall cease to accrue on the date on which the Commitment of such
Lender shall expire or be terminated as provided herein. For purposes of
calculating Commitment Fees only, no portion of the Revolving Credit Commitments
shall be deemed utilized as a result of outstanding Swingline Loans or Trade
Letters of Credit.

(b) The Borrower agrees to pay to the Administrative Agent, for its own
account, the administrative fees set forth in the Administrative Agent's Fee
Letter at the times and in the amounts specified therein (the "Administrative
Agent Fees").

(c) The Borrower agrees to pay (i) to each Revolving Credit Lender, in
dollars, through the Administrative Agent, on the last Business Day of March,
June, September and December, of each year and on the date on which the
Revolving Credit Commitment of such Lender shall be terminated as provided
herein, a fee (an "L/C Participation Fee") calculated on such Lender's Pro Rata
Percentage of the daily aggregate Standby L/C Exposure (excluding the portion
thereof attributable to unreimbursed L/C Disbursements) during the preceding
quarter (or shorter period commencing with the date hereof or ending with the
Revolving Credit Maturity Date or the date on which all Letters of Credit have
been canceled or have expired and the Revolving Credit Commitments of all
Lenders shall have been terminated) at a rate equal to (x) in the case of
Financial Letters of Credit and, during any time the Borrower

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has not obtained and maintained Investment Grade Ratings, Performance Letters of
Credit, the Applicable Percentage from time to time used to determine the
interest rate on Revolving Credit Borrowings comprised of Eurocurrency Loans
pursuant to Section 2.06 (the "Financial L/C Rate") and (y) in the case of
Performance Letters of Credit at any time that the Borrower has obtained and
maintained Investment Grade Ratings, 65% of the Financial L/C Rate, and (ii) to
the applicable Issuing Bank with respect to each Standby Letter of Credit a
fronting fee equal to 1/8 of 1% per annum (or such other amount as may be agreed
upon by the Borrower and the applicable Issuing Bank) on the aggregate face
amount of such Letter of Credit plus the amount of any other issuance and
drawing costs specified from time to time by such Issuing Bank with regard to a
Letter of Credit (the "Issuing Bank Fees"). All L/C Participation Fees and,
except as otherwise agreed by the Borrower and the applicable Issuing Bank,
Issuing Bank Fees shall be computed on the basis of the actual number of days
elapsed in a year of 360 days. For purposes of determining the amount of the L/C
Participation Fees with respect to any Alternative Currency Letter of Credit,
the Standby L/C Exposure shall be determined by the Administrative Agent using
the Exchange Rates in effect at approximately 11:00 a.m., New York City time, on
the date that is two Business Days before the payment of the L/C Participation
Fee.

(d) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Lenders, except that the Issuing Bank Fees shall be paid directly to
the applicable Issuing Bank. Once paid, none of the Fees shall be refundable
under any circumstances.

SECTION 2.06. Interest on Loans. (a) Subject to the provisions of
Section 2.07, the Loans comprising each ABR Borrowing, including each Swingline
Loan, shall bear interest (computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be, when the Alternate
Base Rate is determined by reference to the Prime Rate and over a year of 360
days at all other times) at a rate per annum equal to the Alternate Base Rate
plus the Applicable Percentage in effect from time to time.

(b) Subject to the provisions of Section 2.07, the Loans comprising
each Eurocurrency Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) at a rate per annum equal
to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
plus the Applicable Percentage in effect from time to time.

(c) Interest on each Loan shall be payable on the Interest Payment
Dates applicable to such Loan except as otherwise provided in this Agreement.
The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest
Period or day within an Interest Period, as the case may be, shall be determined
by the Administrative Agent, and such determination shall be conclusive absent
manifest error.

SECTION 2.07. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, by acceleration or otherwise, or under any other Loan Document,
the Borrower shall on

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demand from time to time pay interest, to the extent permitted by law, on such
defaulted amount to but excluding the date of actual payment (after as well as
before judgment) (a) in the case of overdue principal, at the rate otherwise
applicable to such Loan pursuant to Section 2.06 plus 2.00% per annum and (b) in
all other cases, at a rate per annum (computed on the basis of the actual number
of days elapsed over a year of 365 or 366 days, as the case may be, when
determined by reference to the Prime Rate and over a year of 360 days at all
other times) equal to the rate that would be applicable to an ABR Revolving Loan
plus 2.00%.

SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurocurrency Borrowing the Administrative Agent shall have
determined that dollar deposits in the principal amounts of the Loans comprising
such Borrowing are not generally available in the London interbank market, or
that the rates at which such dollar deposits are being offered will not
adequately and fairly reflect the cost to any Lender of making or maintaining
its Eurocurrency Loan during such Interest Period, or that reasonable means do
not exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent
shall, as soon as practicable thereafter, give written or telecopy notice of
such determination to the Borrower and the Lenders. In the event of any such
determination, until the Administrative Agent shall have advised the Borrower
and the Lenders that the circumstances giving rise to such notice no longer
exist, any request by the Borrower for a Eurocurrency Borrowing pursuant to
Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each
determination by the Administrative Agent under this Section 2.08 shall be
conclusive absent manifest error.

SECTION 2.09. Termination and Reduction of Commitments. (a) The Term
Loan Commitments shall automatically terminate at 5:00 p.m., California time, on
the Closing Date. The Revolving Credit Commitments, the Swingline Commitment and
the L/C Commitments shall automatically terminate on the Revolving Credit
Maturity Date. Notwithstanding the foregoing, all the Commitments shall
automatically terminate at 5:00 p.m., California time, on August 8, 2000, if the
first Credit Event shall not have occurred by such time.

(b) Upon at least three Business Days' prior irrevocable written or
telecopy notice to the Administrative Agent, the Borrower may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
the Term Loan Commitments or the Revolving Credit Commitments; provided,
however, that (i) each partial reduction of the Term Loan Commitments or the
Revolving Credit Commitments shall be in an integral multiple of $1,000,000 and
in a minimum amount of $5,000,000 and (ii) the Total Revolving Credit Commitment
shall not be reduced to an amount that is less than the sum of the Aggregate
Revolving Credit Exposure at the time.

(c) Each reduction in the Term Loan Commitments or the Revolving Credit
Commitments hereunder shall be made ratably among the Lenders in accordance with
their respective applicable Commitments. The Borrower shall pay to the
Administrative Agent for the account of the applicable Lenders, on the date of
each termination or

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reduction, the Commitment Fees on the amount of the Commitments so terminated or
reduced accrued to but excluding the date of such termination or reduction.

SECTION 2.10. Conversion and Continuation of Borrowings. The Borrower
shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (a) not later than 10:00 a.m., California time, one
Business Day prior to conversion, to convert any Eurocurrency Borrowing into an
ABR Borrowing, (b) not later than 10:00 a.m., California time, three Business
Days prior to conversion or continuation, to convert any ABR Borrowing into a
Eurocurrency Borrowing or to continue any Eurocurrency Borrowing as a
Eurocurrency Borrowing for an additional Interest Period, and (c) not later than
10:00 a.m., California time, three Business Days prior to conversion, to convert
the Interest Period with respect to any Eurocurrency Borrowing to another
permissible Interest Period, subject in each case to the following:

(i) each conversion or continuation shall be made pro rata among
the Lenders in accordance with the respective principal amounts of the
Loans comprising the converted or continued Borrowing;

(ii) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, then each resulting
Borrowing shall satisfy the limitations specified in Sections 2.02(a)
and 2.02(b) regarding the principal amount and maximum number of
Borrowings of the relevant Type;

(iii) each conversion shall be effected by each Lender and the
Administrative Agent by recording for the account of such Lender the
new Loan of such Lender resulting from such conversion and reducing
the Loan (or portion thereof) of such Lender being converted by an
equivalent principal amount; accrued interest on any Eurocurrency Loan
(or portion thereof) being converted shall be paid by the Borrower at
the time of conversion;

(iv) if any Eurocurrency Borrowing is converted at a time other
than the end of the Interest Period applicable thereto, the Borrower
shall pay, upon demand, any amounts due to the Lenders pursuant to
Section 2.16;

(v) any portion of a Borrowing maturing or required to be repaid
in less than one month may not be converted into or continued as a
Eurocurrency Borrowing;

(vi) any portion of a Eurocurrency Borrowing that cannot be
converted into or continued as a Eurocurrency Borrowing by reason of
the immediately preceding clause shall be automatically converted at
the end of the Interest Period in effect for such Borrowing into an
ABR Borrowing;

(vii) no Interest Period may be selected for any Eurocurrency
Term Borrowing that would end later than a Term Loan Repayment Date
occurring on or after the first day of such Interest Period if, after
giving effect to such selection, the aggregate outstanding amount of
(A) the Eurocurrency Term

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Borrowings comprised of Tranche A Term Loans or Tranche B Term Loans,
as applicable, with Interest Periods ending on or prior to such Term
Loan Repayment Date and (B) the ABR Term Borrowings comprised of
Tranche A Term Loans or Tranche B Term Loans, as applicable would not
be at least equal to the principal amount of Term Borrowings to be
paid on such Term Loan Repayment Date;

(viii) upon notice to the Borrower from the Administrative Agent
given at the request of the Required Lenders, after the occurrence and
during the continuance of a Default or Event of Default, no
outstanding Loan may be converted into, or continued as, a
Eurocurrency Loan; and

(ix) until the Syndication Agent shall have notified the Borrower
and the Administrative Agent that the primary syndication of the
Commitments has been completed (which notice shall be given by the
Syndication Agent as promptly as practicable and, in any event, within
30 days after the Closing Date), no ABR Borrowing may be converted
into a Eurocurrency Borrowing (other than a Eurocurrency Borrowing
with an Interest Period of not more than one-month's duration and
which does not end on a date different from any other outstanding
Eurocurrency Borrowing).

Each notice pursuant to this Section 2.10 shall be irrevocable and
shall refer to this Agreement and specify (i) the identity and amount of the
Borrowing that the Borrower requests be converted or continued, (ii) whether
such Borrowing is to be converted to or continued as a Eurocurrency Borrowing or
an ABR Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if such Borrowing is to be
converted to or continued as a Eurocurrency Borrowing, the Interest Period with
respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Eurocurrency Borrowing, the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. The Administrative Agent shall advise the Lenders of any notice given
pursuant to this Section 2.10 and of each Lender's portion of any converted or
continued Borrowing. If the Borrower shall not have given notice in accordance
with this Section 2.10 to continue any Borrowing into a subsequent Interest
Period (and shall not otherwise have given notice in accordance with this
Section 2.10 to convert such Borrowing), such Borrowing shall, at the end of the
Interest Period applicable thereto (unless repaid pursuant to the terms hereof),
automatically be continued into a new Interest Period as an ABR Borrowing.

SECTION 2.11. Repayment of Term Borrowings. (a) (i) The Borrower shall
pay to the Administrative Agent, for the account of the Lenders, on the dates
set forth below, or if any such date is not a Business Day, on the next
preceding Business Day (each such date being a "Tranche A Term Loan Repayment
Date"), a principal amount of the Tranche A Term Loans (as adjusted from time to
time pursuant to Sections 2.11(b), 2.12 and 2.13(g)) equal to the amount set
forth below for such date, together in each case with accrued and unpaid
interest on the principal amount to be paid to but excluding the

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date of such payment:

Date                                                      Amount
----                                                      ------

June 30, 2001                                               $  5,000,000
September 30, 2001                                             5,000,000
December 31, 2001                                              5,000,000
March 31, 2002                                                 7,500,000
June 30, 2002                                                  7,500,000
September 30, 2002                                            13,000,000
December 31, 2002                                             13,000,000
March 31, 2003                                                13,000,000
June 30, 2003                                                 13,000,000
September 30, 2003                                            15,000,000
December 31, 2003                                             15,000,000
March 31, 2004                                                15,000,000
June 30, 2004                                                 15,000,000
September 30, 2004                                            15,000,000
December 31, 2004                                             15,000,000
March 31, 2005                                                15,000,000
June 30, 2005                                                 15,000,000
September 30, 2005                                            17,000,000
December 31, 2005                                             17,000,000
March 31, 2006                                                17,000,000
Tranche A Maturity Date                                       22,000,000

(ii) The Borrower shall pay to the Administrative Agent, for the
account of the Lenders, on the dates set forth below or, if any such date is not
a Business Day, on the next preceding Business Day (each such date being a
"Tranche B Term Loan Repayment Date"), a principal amount of the Tranche B Term
Loans (as adjusted from time to time pursuant to Sections 2.11(b), 2.12 and
2.13(g)) equal to the amount set forth below for such date, together in each
case with accrued and unpaid interest on the principal amount to be paid to but
excluding the date of such payment:

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Date                                                        Amount
----                                                        ------

June 30, 2001                                               $  1,000,000
September 30, 2001                                             1,000,000
December 31, 2001                                              1,000,000
March 31, 2002                                                 1,000,000
June 30, 2002                                                  1,000,000
September 30, 2002                                             1,000,000
December 31, 2002                                              1,000,000
March 31, 2003                                                 1,000,000
June 30, 2003                                                  1,000,000
September 30, 2003                                             1,000,000
December 31, 2003                                              1,000,000
March 31, 2004                                                 1,000,000
June 30, 2004                                                  1,000,000
September 30, 2004                                             1,000,000
December 31, 2004                                              1,000,000
March 31, 2005                                                 1,000,000
June 30, 2005                                                  1,000,000
September 30, 2005                                             1,000,000
December 31, 2005                                              1,000,000
March 31, 2006                                                 1,000,000
June 30, 2006                                                  1,000,000
September 30, 2006                                             1,000,000
December 31, 2006                                             64,607,143
March 31, 2007                                                64,607,143
June 30, 2007                                                 64,607,143
September 30, 2007                                            64,607,143
December 31, 2007                                             64,857,143
March 31, 2008                                                64,857,143
Tranche B Maturity Date                                       64,857,142

(b) In the event and on each occasion that any Term Loan Commitments
shall be reduced or shall expire or terminate other than as a result of the
making of a Term Loan, the installments payable on each Term Loan Repayment Date
shall be reduced pro rata by an aggregate amount equal to the amount of such
reduction, expiration or termination.

(c) To the extent not previously paid, all Tranche A Term Loans and
Tranche B Term Loans shall be due and payable on the Tranche A Maturity Date and
Tranche B Maturity Date, respectively, together with accrued and unpaid interest
on the principal amount to be paid to but excluding the date of payment.

(d) All repayments pursuant to this Section 2.11 shall be subject to
Section 2.16, but shall otherwise be without premium or penalty.

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SECTION 2.12. Prepayment. (a) The Borrower shall have the right at any
time and from time to time to prepay any Borrowing, in whole or in part, upon at
least three Business Days' prior written or telecopy notice (or telephone notice
promptly confirmed by written or telecopy notice) in the case of Eurocurrency
Loans, or written or telecopy notice (or telephone notice promptly confirmed by
written or telecopy notice) at least one Business Day prior to the date of
prepayment in the case of ABR Loans, to the Administrative Agent before 
10:00a.m., California time; provided, however, that each partial prepayment 
shall be in an amount that is an integral multiple of $1,000,000 and not less 
than $5,000,000.

(b) Optional prepayments of Term Loans shall be allocated pro rata
between the then-outstanding Tranche A Term Loans and Tranche B Term Loans and
applied first, in chronological order to the installments of principal scheduled
to be paid within 12 months after such prepayment and second, pro rata against
the remaining scheduled installments of principal due in respect of the Tranche
A Term Loans and Tranche B Term Loans under Sections 2.11(a)(i) and (ii),
respectively.

(c) Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrower to prepay such Borrowing by the amount
stated therein on the date stated therein. All prepayments under this Section
2.12 shall be subject to Section 2.16 but otherwise without premium or penalty.
All prepayments under this Section 2.12 shall be accompanied by accrued interest
on the principal amount being prepaid to the date of payment.

SECTION 2.13. Mandatory Prepayments. (a) In the event of any
termination of all the Revolving Credit Commitments, the Borrower shall, on the
date of such termination, repay or prepay all its outstanding Revolving Credit
Borrowings and all outstanding Swingline Loans and replace all outstanding
Letters of Credit and/or deposit an amount equal to the L/C Exposure in cash in
a cash collateral account established with the Collateral Agent for the benefit
of the Secured Parties. If (i) at any time as a result of any partial reduction
of the Revolving Credit Commitments, or (ii) on any Calculation Date as a result
of fluctuations in exchange rates, the Aggregate Revolving Credit Exposure would
exceed the Total Revolving Credit Commitment after giving effect thereto, then
the Borrower shall, on the date of such reduction or termination or on such
Calculation Date, as the case may be, repay or prepay Revolving Credit
Borrowings or Swingline Loans (or a combination thereof) and/or replace or cash
collateralize outstanding Letters of Credit in an amount sufficient to eliminate
such excess. In addition, if on any date the sum of the Aggregate Revolving
Credit Exposure and the Pari Passu Exposure would exceed the Total Revolving
Credit Commitment, then on such date the Borrower shall either (i) repay or
prepay Revolving Credit Borrowings or Swingline Loans (or a combination thereof)
and replace or cash collateralize outstanding Letters of Credit and/or (ii)
reduce the Pari Passu Exposure, in either case in an aggregate amount sufficient
to eliminate such excess.

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(b) Not later than the fifth Business Day following the completion of
any Asset Sale, the Borrower shall apply 100% of the Net Cash Proceeds received
with respect thereto to prepay outstanding Term Loans in accordance with Section
2.13(g).

(c) Subject to paragraph (j) below, in the event and on each occasion
that an Equity Issuance occurs, the Borrower shall, substantially simultaneously
with (and in any event not later than the fifth Business Day next following) the
occurrence of such Equity Issuance, apply 75% of the Net Cash Proceeds therefrom
to prepay outstanding Term Loans in accordance with Section 2.13(g); provided,
however, that in the event the Leverage Ratio on the date of such Equity
Issuance (and after giving effect thereto and to the use of the proceeds
thereof) is less than 3.0 to 1.0, such amount shall be reduced to 50%.

(d) Subject to paragraph (j) below, no later than the earlier of (i)
100 days after the end of each fiscal year of the Borrower, commencing with the
fiscal year ending on December 31, 2001, and (ii) the date on which the
financial statements with respect to such period are delivered pursuant to
Section 5.04(a), the Borrower shall prepay outstanding Term Loans in accordance
with Section 2.13(g) in an aggregate principal amount equal to 75% of Excess
Cash Flow for the fiscal year then ended; provided, however, that in the event
the Leverage Ratio at the end of such fiscal year was less than 3.0 to 1.0, such
amount shall be reduced to 50%.

(e) Subject to paragraph (j) below, in the event that any Loan Party or
any subsidiary of a Loan Party shall receive Net Cash Proceeds from (i) the
issuance or other disposition of Indebtedness for money borrowed of any Loan
Party or any subsidiary of a Loan Party (other than Indebtedness for money
borrowed permitted pursuant to Section 6.01) or (ii) the establishment of the
Receivables Program or any subsequent increase thereto, the Borrower shall,
substantially simultaneously with (and in any event not later than the fifth
Business Day next following) the receipt of such Net Cash Proceeds by such Loan
Party or such subsidiary, apply an amount equal to 100% of such Net Cash
Proceeds to prepay outstanding Term Loans in accordance with Section 2.13(g).

(f) Subject to paragraph (j) below, in the event that there shall occur
any Casualty or Condemnation and, pursuant to the applicable Mortgage, the
Casualty Proceeds or Condemnation Proceeds, as the case may be, are required to
be used to prepay the Term Loans, then the Borrower shall apply an amount up to
100% (as determined pursuant to the applicable Mortgage) of such Casualty
Proceeds or Condemnation Proceeds, as the case may be, to prepay outstanding
Term Loans in accordance with Section 2.13(g).

(g) Mandatory prepayments of outstanding Term Loans under this
Agreement shall be allocated pro rata between the then-outstanding Tranche A
Term Loans and Tranche B Term Loans, and, subject to paragraph (i) below,
applied pro rata against the remaining scheduled installments of principal due
in respect of Tranche A Term Loans and Tranche B Term Loans under Sections
2.11(a)(i) and (ii), respectively.

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(h) The Borrower shall deliver to the Administrative Agent, at the time
of each prepayment required under this Section 2.13, (i) a certificate signed by
a Financial Officer of the Borrower setting forth in reasonable detail the
calculation of the amount of such prepayment and (ii) to the extent practicable,
at least three days prior written notice of such prepayment. Each notice of
prepayment shall specify the prepayment date, the Type of each Loan being
prepaid and the principal amount of each Loan (or portion thereof) to be
prepaid. All prepayments of Borrowings under this Section 2.13 shall be subject
to Section 2.16, but shall otherwise be without premium or penalty.

(i) Until the payment in full of the Tranche A Term Loans, any Tranche
B Lender may elect, by notice to the Administrative Agent in writing (or by
telephone or telecopy promptly confirmed in writing) at least two Business Days
prior to any prepayment of Tranche B Term Loans required to be made by the
Borrower for the account of such Lender pursuant to this Section 2.13, to cause
all or a portion of such prepayment to be allocated instead to the
then-outstanding Tranche A Term Loans to be applied pro rata against the
remaining scheduled installments of principal due in respect thereof under
Section 2.11(a)(i).

(j) The provisions of paragraphs (c), (d), (e) and (f) of this Section
2.13 shall cease to be effective upon the Borrower's obtaining, and so long as
the Borrower maintains, Investment Grade Ratings.

SECTION 2.14. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision of this Agreement, if any Change in Law
shall impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of or credit
extended by any Lender or any Issuing Bank (except any such reserve requirement
which is reflected in the Adjusted LIBO Rate) or shall impose on such Lender or
such Issuing Bank or the London interbank market (or other relevant interbank
market) any other condition affecting this Agreement or Eurocurrency Loans made
by such Lender or any Letter of Credit or participation therein, and the result
of any of the foregoing shall be to increase the cost to such Lender or such
Issuing Bank of making or maintaining any Eurocurrency Loan or increase the cost
to any Lender of issuing or maintaining any Letter of Credit or purchasing or
maintaining a participation therein or to reduce the amount of any sum received
or receivable by such Lender or such Issuing Bank hereunder (whether of
principal, interest or otherwise) by an amount deemed by such Lender or such
Issuing Bank to be material, then the Borrower will pay to such Lender or such
Issuing Bank, as the case may be, upon demand such additional amount or amounts
as will compensate such Lender or Issuing Bank, as the case may be, for such
additional costs incurred or reduction suffered.

(b) If any Lender or Issuing Bank shall have determined that any Change
in Law regarding capital adequacy has or would have the effect of reducing the
rate of return on such Lender's or Issuing Bank's capital or on the capital of
such Lender's or Issuing Bank's holding company, if any, as a consequence of
this Agreement or the Loans made or participations in Letters of Credit
purchased by such Lender pursuant hereto or the Letters of Credit issued by such
Issuing Bank pursuant hereto to a level below that

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which such Lender or Issuing Bank or such Lender's or Issuing Bank's holding
company could have achieved but for such Change in Law (taking into
consideration such Lender's or Issuing Bank's policies and the policies of such
Lender's or Issuing Bank's holding company with respect to capital adequacy) by
an amount deemed by such Lender or Issuing Bank to be material, then from time
to time the Borrower shall pay to such Lender or Issuing Bank, as the case may
be, such additional amount or amounts as will compensate such Lender or Issuing
Bank or such Lender's or Issuing Bank's holding company for any such reduction
suffered.

(c) A certificate of a Lender or Issuing Bank setting forth the amount
or amounts necessary to compensate such Lender or Issuing Bank or its holding
company, as applicable, as specified in paragraph (a) or (b) above shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender or Issuing Bank the amount shown as due on any
such certificate delivered by it within 10 days after its receipt of the same.

(d) Failure or delay on the part of any Lender or any Issuing Bank to
demand compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital shall not constitute a waiver of
such Lender's or Issuing Bank's right to demand such compensation; provided that
the Borrower shall not be under any obligation to compensate any Lender or
Issuing Bank under paragraph (a) or (b) above with respect to increased costs or
reductions with respect to any period prior to the date that is 90 days prior to
such request if such Lender or Issuing Bank knew or could reasonably have been
expected to know of the circumstances giving rise to such increased costs or
reductions and of the fact that such circumstances would result in a claim for
increased compensation by reason of such increased costs or reductions; provided
further that the foregoing limitation shall not apply to any increased costs or
reductions arising out of the retroactive application of any Change in Law
within such 90-day period. The protection of this Section shall be available to
each Lender and Issuing Bank regardless of any possible contention of the
invalidity or inapplicability of the law, rule, regulation, agreement, guideline
or other change or condition that shall have occurred or been imposed.

(e) This Section 2.14 shall not apply to any Change in Law with respect
to Taxes, including, but not limited to, changes in the rate of Taxes pertaining
to any particular Lender.

SECTION 2.15. Change in Legality. (a) Notwithstanding any other
provision of this Agreement, if (i) any Change in Law shall make it unlawful for
any Lender to make or maintain any Eurocurrency Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurocurrency Loan, or
shall make it unlawful for any Issuing Bank to issue Letters of Credit
denominated in an Alternative Currency, or (ii) there shall have occurred any
change in national or international financial, political or

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economic conditions (including the imposition of or any change in exchange
controls) or currency exchange rates which would make it impracticable for any
Issuing Bank to issue Letters of Credit denominated in such Alternative
Currency, then, by written notice to the Borrower and to the Administrative
Agent:

(i) such Lender may declare that Eurocurrency Loans will not
thereafter (for the duration of such unlawfulness) be made by such
Lender hereunder (or be continued for additional Interest Periods) and
ABR Loans will not thereafter (for such duration) be converted into
Eurocurrency Loans, whereupon any request for a Eurocurrency Borrowing
(or to convert an ABR Borrowing to a Eurocurrency Borrowing or to
continue a Eurocurrency Borrowing, as the case may be, for an
additional Interest Period) shall, as to such Lender only, be deemed a
request for an ABR Loan (or a request to continue an ABR Loan as such
for an additional Interest Period or to convert a Eurocurrency Loan
into an ABR Loan, as the case may be), unless such declaration shall
be subsequently withdrawn;

(ii) such Lender may require that all outstanding Eurocurrency
Loans made by it be converted to ABR Loans in which event all such
Eurocurrency Loans shall be automatically converted to ABR Loans as of
the effective date of such notice as provided in paragraph (b) below;
and

(iii) in the case of any such change affecting an Issuing Bank's
ability to issue Letters of Credit denominated in an Alternative
Currency, such Issuing Bank may declare that Letters of Credit will
not thereafter be issued in the affected Alternative Currency or
Currencies, whereupon the affected Alternative Currency or Currencies
shall be deemed (for the duration of such unlawfulness and with
respect to such Issuing Bank only) not to constitute an Alternative
Currency.

In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurocurrency Loans that would have been made by such Lender or the
converted Eurocurrency Loans of such Lender shall instead be applied to repay
the ABR Loans made by such Lender in lieu of, or resulting from the conversion
of, such Eurocurrency Loans.

(b) For purposes of this Section 2.15, a notice to the Borrower by any
Lender shall be effective as to each Eurocurrency Loan made by such Lender, if
lawful, on the last day of the Interest Period currently applicable to such
Eurocurrency Loan; in all other cases such notice shall be effective on the date
of receipt by the Borrower.

SECTION 2.16. Indemnity. The Borrower shall indemnify each Lender
against any loss or expense that such Lender may sustain or incur as a
consequence of (a) any event, other than a default by such Lender in the
performance of its obligations hereunder, which results in (i) such Lender
receiving or being deemed to receive any amount on account of the principal of
any Eurocurrency Loan prior to the end of the

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Interest Period in effect therefor, (ii) the conversion of any Eurocurrency Loan
to an ABR Loan, or the conversion of the Interest Period with respect to any
Eurocurrency Loan, in each case other than on the last day of the Interest
Period in effect therefor, or (iii) any Eurocurrency Loan to be made by such
Lender (including any Eurocurrency Loan to be made pursuant to a conversion or
continuation under Section 2.10) not being made after notice of such Loan shall
have been given by the Borrower hereunder (any of the events referred to in this
clause (a) being called a "Breakage Event") or (b) any default in the making of
any payment or prepayment required to be made hereunder. In the case of any
Breakage Event, such loss shall include an amount equal to the excess, as
reasonably determined by such Lender, of (i) its cost of obtaining funds for the
Eurocurrency Loan that is the subject of such Breakage Event for the period from
the date of such Breakage Event to the last day of the Interest Period in effect
(or that would have been in effect) for such Loan over (ii) the amount of
interest likely to be realized by such Lender in redeploying the funds released
or not utilized by reason of such Breakage Event for such period. A certificate
of any Lender setting forth any amount or amounts which such Lender is entitled
to receive pursuant to this Section 2.16 shall be delivered to the Borrower and
shall be conclusive absent manifest error.

SECTION 2.17. Pro Rata Treatment. Except as provided below in this
Section 2.17 with respect to Swingline Loans and as required under Sections
2.13(i) and 2.15, each Borrowing, each payment or prepayment of principal of any
Borrowing, each payment of interest on the Loans, each payment of the Commitment
Fees, each reduction of the Term Loan Commitments or the Revolving Credit
Commitments and each conversion of any Borrowing to or continuation of any
Borrowing as a Borrowing of any Type shall be allocated pro rata among the
Lenders in accordance with their respective applicable Commitments (or, if such
Commitments shall have expired or been terminated, in accordance with the
respective principal amounts of their outstanding Loans). For purposes of
determining the available Revolving Credit Commitments of the Lenders at any
time, each outstanding Swingline Loan shall be deemed to have utilized the
Revolving Credit Commitments of the Lenders (including those Lenders which shall
not have made Swingline Loans) pro rata in accordance with such respective
Revolving Credit Commitments. Each Lender agrees that in computing such Lender's
portion of any Borrowing to be made hereunder, the Administrative Agent may, in
its discretion, round each Lender's percentage of such Borrowing to the next
higher or lower whole dollar amount.

SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower or any other Loan Party, or pursuant to a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, obtain payment (voluntary or involuntary) in respect of any
Loan or Loans or L/C Disbursement as a result of which the unpaid principal
portion of its Loans and participations in L/C Disbursements shall be
proportionately less than the unpaid principal portion of the Loans and
participations in L/C Disbursements of any other Lender, it shall be deemed
simultaneously to have

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purchased from such other Lender at face value, and shall promptly pay to such
other Lender the purchase price for, a participation in the Loans and L/C
Exposure of such other Lender, so that the aggregate unpaid principal amount of
the Loans and L/C Exposure and participations in Loans and L/C Exposure held by
each Lender shall be in the same proportion to the aggregate unpaid principal
amount of all Loans and L/C Exposure then outstanding as the principal amount of
its Loans and L/C Exposure prior to such exercise of banker's lien, setoff or
counterclaim or other event was to the principal amount of all Loans and L/C
Exposure outstanding prior to such exercise of banker's lien, setoff or
counterclaim or other event; provided, however, that if any such purchase or
purchases or adjustments shall be made pursuant to this Section 2.18 and the
payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustment restored without interest. The
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in a Loan or L/C Disbursement deemed to have been
so purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrower to such
Lender by reason thereof as fully as if such Lender had made a Loan directly to
the Borrower in the amount of such participation.

SECTION 2.19. Payments. (a) The Borrower shall make each payment
(including principal of or interest on any Borrowing or any L/C Disbursement or
any Fees or other amounts) hereunder and under any other Loan Document not later
than 10:00 a.m., California time, on the date when due in immediately available
funds, without setoff, defense or counterclaim. Each such payment (other than
(i) Issuing Bank Fees, which shall be paid directly to the applicable Issuing
Bank, and (ii) principal of and interest on Swingline Loans, which shall be paid
directly to the Swingline Lender except as otherwise provided in Section
2.21(e)) shall be made to the Administrative Agent at its offices at Bank of
America, N.A., Agency Administrative Services-West, 1850 Gateway Blvd., 5th
Floor, Concord, CA, 94520, Mail Code CA4-706-05-09, Attention of: Kathy Eddy;
ABA #111 000 012, Dallas, Texas, Account No. 3750836479, Ref: Flowserve
Corporation. Each such payment (other than L/C Disbursements denominated in an
Alternative Currency and Issuing Bank Fees with respect to Letters of Credit
dominated in an Alternative Currency, which shall be made in the applicable
Alternative Currency) shall be made in dollars.

(b) Except as otherwise expressly provided herein, whenever any payment
(including principal of or interest on any Borrowing or any Fees or other
amounts) hereunder or under any other Loan Document shall become due, or
otherwise would occur, on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest or Fees, if applicable.

SECTION 2.20. Taxes. (a) Any and all payments by or on account of any
obligation of the Borrower or any Loan Party hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if the Borrower or any Loan
Party shall be required by law to deduct any Indemnified Taxes or Other Taxes
from such payments, then

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(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section) the Administrative Agent or such Lender (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower or such Loan Party shall make such
deductions and (iii) the Borrower or such Loan Party shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.

(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

(c) The Borrower shall indemnify the Administrative Agent and each
Lender, within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by the Administrative Agent or such
Lender, as the case may be, on or with respect to any payment on account of any
obligation of the Borrower or any Loan Party hereunder or under any other Loan
Document (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable out-of-pocket expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate as to
the amount of such payment or liability delivered to the Borrower by a Lender,
or by the Administrative Agent on its behalf or on behalf of a Lender, shall be
conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower or any other Loan Party to a Governmental Authority,
the Borrower shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.

(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by applicable
law or reasonably requested by the Borrower as will permit such payments to be
made without withholding or at a reduced rate.

SECTION 2.21. Assignment of Commitments Under Certain Circumstances;
Duty to Mitigate. (a) In the event (i) any Lender or Issuing Bank delivers a
certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or
Issuing Bank delivers a notice described in Section 2.15 or (iii) the Borrower
is required to pay any additional amount to any Lender or Issuing Bank or any
Governmental Authority on account of any Lender or Issuing Bank pursuant to
Section 2.20, the Borrower may, at its sole expense and effort (including with
respect to the processing and recordation fee referred to in Section 9.04(b)),
upon notice to such Lender or Issuing Bank and the

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Administrative Agent, require such Lender or Issuing Bank to transfer and
assign, without recourse (in accordance with and subject to the restrictions
contained in Section 9.04), all of its interests, rights and obligations under
this Agreement to an assignee that shall assume such assigned obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
that (x) such assignment shall not conflict with any law, rule or regulation or
order of any court or other Governmental Authority having jurisdiction, (y) the
Borrower shall have received the prior written consent of the Administrative
Agent (and, if a Revolving Credit Commitment is being assigned, of the Issuing
Banks and the Swingline Lender), which consent shall not unreasonably be
withheld, and (z) the Borrower or such assignee shall have paid to the affected
Lender or Issuing Bank in immediately available funds an amount equal to the sum
of the principal of and interest accrued to the date of such payment on the
outstanding Loans or L/C Disbursements of such Lender or Issuing Bank,
respectively, plus all Fees and other amounts accrued for the account of such
Lender or Issuing Bank hereunder (including any amounts under Section 2.14 and
Section 2.16); provided further that, if prior to any such transfer and
assignment the circumstances or event that resulted in such Lender's or Issuing
Bank's claim for compensation under Section 2.14 or notice under Section 2.15 or
the amounts paid pursuant to Section 2.20, as the case may be, cease to cause
such Lender or Issuing Bank to suffer increased costs or reductions in amounts
received or receivable or reduction in return on capital, or cease to have the
consequences specified in Section 2.15, or cease to result in amounts being
payable under Section 2.20, as the case may be (including as a result of any
action taken by such Lender or Issuing Bank pursuant to paragraph (b) below), or
if such Lender or Issuing Bank shall waive its right to claim further
compensation under Section 2.14 in respect of such circumstances or event or
shall withdraw its notice under Section 2.15 or shall waive its right to further
payments under Section 2.20 in respect of such circumstances or event, as the
case may be, then such Lender or Issuing Bank shall not thereafter be required
to make any such transfer and assignment hereunder.

(b) If (i) any Lender or Issuing Bank shall request compensation under
Section 2.14, (ii) any Lender or Issuing Bank delivers a notice described in
Section 2.15 or (iii) the Borrower is required to pay any additional amount to
any Lender or Issuing Bank or any Governmental Authority on account of any
Lender or Issuing Bank, pursuant to Section 2.20, then such Lender or Issuing
Bank shall use reasonable efforts (which shall not require such Lender or
Issuing Bank to incur an unreimbursed loss or unreimbursed cost or expense or
otherwise take any action inconsistent with its internal policies or legal or
regulatory restrictions or suffer any disadvantage or burden deemed by it to be
significant) (x) to file any certificate or document reasonably requested in
writing by the Borrower or (y) to assign its rights and delegate and transfer
its obligations hereunder to another of its offices, branches or affiliates, if
such filing or assignment would reduce its claims for compensation under Section
2.14 or enable it to withdraw its notice pursuant to Section 2.15 or would
reduce amounts payable pursuant to Section 2.20, as the case may be, in the
future. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender or Issuing Bank in connection with any such filing or
assignment, delegation and transfer.

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SECTION 2.22. Swingline Loans. (a) Swingline Commitment. Subject to the
terms and conditions and relying upon the representations and warranties herein
set forth, the Swingline Lender agrees to make loans to the Borrower, in
dollars, at any time and from time to time on and after the Closing Date and
until the earlier of the Revolving Credit Maturity Date and the termination of
the Revolving Credit Commitments in accordance with the terms hereof, in an
aggregate principal amount at any time outstanding that will not result in (i)
the aggregate principal amount of all Swingline Loans (other than Swingline
Loans made pursuant to Section 2.22(c)) exceeding $25,000,000 or (ii) the sum of
the Pari Passu Exposure and the Aggregate Revolving Credit Exposure exceeding
the Total Revolving Credit Commitment. Except for Swingline Loans made pursuant
to Section 2.22(c), each Swingline Loan shall be in a principal amount that is
an integral multiple of $500,000. The Swingline Commitment may be terminated or
reduced from time to time as provided herein. Within the foregoing limits, the
Borrower may borrow, pay or prepay and reborrow Swingline Loans hereunder,
subject to the terms, conditions and limitations set forth herein.

(b) Making of Swingline Loans. Except with respect to Swingline Loans
made pursuant to Section 2.22(c) (as to which this Section 2.22(b) shall not
apply), the Borrower shall notify the Administrative Agent by telecopy, or by
telephone (confirmed by telecopy), not later than 10:00 a.m., California time,
on the day of a proposed Swingline Loan. Such notice shall be delivered on a
Business Day, shall be irrevocable and shall refer to this Agreement and shall
specify the requested date (which shall be a Business Day) and amount of such
Swingline Loan. The Administrative Agent will promptly advise the Swingline
Lender of any notice received from the Borrower pursuant to this paragraph (b).
The Swingline Lender shall make each Swingline Loan available to the Borrower by
means of a credit to the general deposit account of the Borrower with the
Swingline Lender by 3:00 p.m., California time, on the date such Swingline Loan
is so requested.

(c) Trade L/C Disbursements. If the Issuing Bank of any Trade Letters
of Credit shall not have received from the Borrower the payment required to be
made by Section 2.23(e) with respect to such Trade Letters of Credit within the
time specified in such Section, such Issuing Bank will promptly notify the
Administrative Agent and the Swingline Lender of the L/C Disbursement. The
amount of such L/C Disbursement (or the Dollar Equivalent thereof, if
denominated in an Alternative Currency) shall be deemed to constitute a
Swingline Loan of the Swingline Lender made to the Borrower on the date of such
L/C Disbursement and shall be deemed to have reduced the Trade L/C Exposure.

(d) Prepayment. The Borrower shall have the right at any time and from
time to time to prepay any Swingline Loan, in whole or in part, upon giving
written or telecopy notice (or telephone notice promptly confirmed by written,
or telecopy notice) to the Swingline Lender and to the Administrative Agent
before 12:00 (noon), California time, on the date of prepayment at the Swingline
Lender's address for notices specified on Schedule 2.01. All principal payments
of Swingline Loans shall be accompanied by accrued interest on the principal
amount being repaid to the date of payment.

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(e) Interest. Each Swingline Loan shall be an ABR Loan and, subject to
the provisions of Section 2.07, shall bear interest as provided in Section
2.06(a). Interest on each Swingline Loan shall be payable on the Interest
Payment Date with respect thereto.

(f) Participations. If the Borrower does not fully repay a Swingline
Loan on or prior to the due date therefor (whether by demand, acceleration or
otherwise), the Swingline Lender shall promptly notify the Administrative Agent
thereof (by telecopy or by telephone, confirmed in writing), and the
Administrative Agent shall promptly notify each Revolving Credit Lender thereof
(by telecopy or by telephone, confirmed in writing) and of its Pro Rata
Percentage of such Swingline Loan. Upon such notice but without any further
action, the Swingline Lender hereby agrees to grant to each Lender, and each
Lender hereby agrees to acquire from the Swingline Lender, a participation in
such defaulted Swingline Loan equal to such Lender's Pro Rata Percentage of the
aggregate principal amount of such defaulted Swingline Loan. In furtherance of
the foregoing, each Revolving Credit Lender hereby absolutely and
unconditionally agrees, upon receipt of notice as provided above, to pay to the
Administrative Agent, for the account of the Swingline Lender, such Lender's Pro
Rata Percentage of each Swingline Loan that is not repaid when due in accordance
with Section 2.04(a) or Article VII. Each Revolving Credit Lender acknowledges
and agrees that its obligation to acquire participations in Swingline Loans
pursuant to this paragraph is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the occurrence and
continuance of a Default or an Event of Default, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever. Each Revolving Credit Lender shall comply with its obligation under
this paragraph by wire transfer of immediately available funds, in the same
manner as provided in Section 2.02(c) with respect to Loans made by such Lender
(and Section 2.02(c) shall apply, mutatis mutandis, to the payment obligations
of the Lenders) and the Administrative Agent shall promptly pay to the Swingline
Lender the amounts so received by it from the Lenders. The Administrative Agent
shall notify the Borrower of any participations in any Swingline Loan acquired
pursuant to this paragraph and thereafter payments in respect of such Swingline
Loan shall be made to the Administrative Agent and not to the Swingline Lender.
Any amounts received by the Swingline Lender from the Borrower (or other party
on behalf of the Borrower) in respect of a Swingline Loan after receipt by the
Swingline Lender of the proceeds of a sale of participations therein shall be
promptly remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Lenders that shall have made their payments pursuant to this paragraph and
to the Swingline Lender, as their interests may appear. The purchase of
participations in a Swingline Loan pursuant to this paragraph shall not relieve
the Borrower (or other party liable for obligations of the Borrower) of any
default in the payment thereof.

SECTION 2.23. Letters of Credit. (a) General. The Borrower may request
the issuance of a Letter of Credit for its own account or the account of any
wholly owned subsidiary of the Borrower (in which case the Borrower and such
wholly owned subsidiary of the Borrower shall be co-applicants with respect to
such Letter of Credit)

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in a form acceptable to the Administrative Agent and the applicable Issuing
Bank, at any time and from time to time while the Revolving Credit Commitments
remain in effect. This Section shall not be construed to impose an obligation
upon any Issuing Bank to issue any Letter of Credit that is inconsistent with
the terms and conditions of this Agreement.

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. In order to request the issuance of a Letter of Credit (or to amend,
renew or extend an existing Letter of Credit), the Borrower shall hand deliver,
telecopy or send electronically to the applicable Issuing Bank and the
Administrative Agent (two Business Days in advance of the requested date of
issuance, amendment, renewal or extension) a notice requesting the issuance of a
Letter of Credit, or identifying the Letter of Credit to be amended, renewed or
extended, and specifying whether such Letter of Credit is to be a Financial
Letter of Credit, a Performance Letter of Credit or a Trade Letter of Credit
(such designation to be subject to the satisfaction of the Administrative Agent,
acting reasonably), the date of issuance, amendment, renewal or extension, the
date on which such Letter of Credit is to expire (which shall comply with
paragraph (c) below), the amount of such Letter of Credit, the currency in which
such Letter of Credit is to be denominated (which shall be dollars or, subject
to Section 2.15, an Alternative Currency), the name and address of the
beneficiary thereof and such other information as shall be necessary to prepare
such Letter of Credit. A Letter of Credit shall be issued, amended, renewed or
extended only if, and upon issuance, amendment, renewal or extension of each
Letter of Credit the Borrower shall be deemed to represent and warrant that,
after giving effect to such issuance, amendment, renewal or extension (i) the
sum of the L/C Exposure and the Pari Passu Exposure shall not exceed
$200,000,000, (ii) the Trade L/C Exposure shall not exceed $10,000,000 and (iii)
the sum of the Aggregate Revolving Credit Exposure and the Pari Passu Exposure
shall not exceed the Total Revolving Credit Commitment.

(c) Expiration Date. Each Trade Letter of Credit shall expire at the
close of business on the earlier of the date that is 180 days after the date of
issuance of such Letter of Credit and the date that is five Business Days prior
to the Revolving Credit Maturity Date, unless such Letter of Credit expires by
its terms on an earlier date. Each Financial Letter of Credit shall expire at
the close of business on the earlier of the date that is one year after the date
of the issuance of such Letter of Credit and the date that is five Business Days
prior to the Revolving Credit Maturity Date, unless such Letter of Credit
expires by its terms on an earlier date. Each Performance Letter of Credit shall
expire at the close of business on the earlier of the date that is three years
after the date of the issuance of such Letter of Credit and the date that is
five Business Days prior to the Revolving Credit Maturity Date, unless such
Letter of Credit expires by its terms on an earlier date. Notwithstanding the
foregoing, (i) one or more Performance Letters of Credit in an aggregate face
amount not to exceed $20,000,000 at any time outstanding may expire on a date
that is more than three years after the date of issuance thereof (but not later
than five business days prior to the Revolving Credit Maturity Date) and (ii)
one or more Financial Letters of Credit and/or Performance Letters of Credit
may, upon the request of the Borrower, include a provision whereby such Letter
of Credit shall be renewed automatically for additional consecutive periods of
12 months or less

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(but not beyond the date that is five Business Days prior to the Revolving
Credit Maturity Date) unless the applicable Issuing Bank notifies the
beneficiary thereof at least 30 days prior to the then-applicable expiration
date that such Letter of Credit will not be renewed.

(d) Participations. By the issuance of a Standby Letter of Credit and
without any further action on the part of the applicable Issuing Bank or the
Lenders, the applicable Issuing Bank hereby grants to each Revolving Credit
Lender, and each such Lender hereby acquires from the applicable Issuing Bank, a
participation in such Letter of Credit equal to such Lender's Pro Rata
Percentage of the aggregate amount available to be drawn under such Letter of
Credit, effective upon the issuance of such Letter of Credit. In consideration
and in furtherance of the foregoing, each Revolving Credit Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the applicable Issuing Bank, such Lender's Pro Rata Percentage of
each L/C Disbursement made by such Issuing Bank in respect of a Standby Letter
of Credit and not reimbursed by the Borrower (or, if applicable, another party
pursuant to its obligations under any other Loan Document) forthwith on the date
due as provided in Section 2.02(f), in dollars, notwithstanding that such L/C
Disbursement may be denominated in an Alternative Currency. Each Revolving
Credit Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of Standby Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default
or an Event of Default, and that each such payment shall be made without any
offset, abatement, withholding or reduction whatsoever.

(e) Reimbursement. If an Issuing Bank shall make any L/C Disbursement
in respect of a Letter of Credit, the Borrower shall pay to the Administrative
Agent an amount equal to such L/C Disbursement not later than two hours after
the Borrower shall have received notice from such Issuing Bank that payment of
such draft will be made, or, if the Borrower shall have received such notice
later than 10:00 a.m., California time, on any Business Day, not later than
10:00 a.m., California time, on the immediately following Business Day.

(f) Obligations Absolute. The Borrower's obligations to reimburse L/C
Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:

(i) any lack of validity or enforceability of any Letter of
Credit or any Loan Document, or any term or provision therein;

(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of any Letter of Credit or any Loan
Document;

(iii) the existence of any claim, setoff, defense or other
right that the Borrower, any other party guaranteeing, or otherwise
obligated with, the Borrower, any Subsidiary or other Affiliate thereof
or any other person may at

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any time have against the beneficiary under any Letter of Credit, any
Issuing Bank, the Administrative Agent or any Lender or any other
person, whether in connection with this Agreement, any other Loan
Document or any other related or unrelated agreement or transaction;

(iv) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;

(v) payment by the applicable Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not
comply with the terms of such Letter of Credit; and

(vi) any other act or omission to act or delay of any kind of
any Issuing Bank, the Lenders, the Administrative Agent or any other
person or any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of
this Section, constitute a legal or equitable discharge of the
Borrower's obligations hereunder.

Without limiting the generality of the foregoing, it is expressly
understood and agreed that the absolute and unconditional obligation of the
Borrower hereunder to reimburse L/C Disbursements will not be excused by the
gross negligence or wilful misconduct of any Issuing Bank. However, the
foregoing shall not be construed to excuse any Issuing Bank from liability to
the Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
such Issuing Bank's gross negligence or wilful misconduct in determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof; it is understood that each Issuing Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary and, in
making any payment under any Letter of Credit (i) an Issuing Bank's exclusive
reliance on the documents presented to it under such Letter of Credit as to any
and all matters set forth therein, including reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and whether or not any
document presented pursuant to such Letter of Credit proves to be insufficient
in any respect, if such document on its face appears to be in order, and whether
or not any other statement or any other document presented pursuant to such
Letter of Credit proves to be forged or invalid or any statement therein proves
to be inaccurate or untrue in any respect whatsoever and (ii) any noncompliance
in any immaterial respect of the documents presented under such Letter of Credit
with the terms thereof shall, in each case, be deemed not to constitute wilful
misconduct or gross negligence of an Issuing Bank.

(g) Disbursement Procedures. The applicable Issuing Bank shall,
promptly following its receipt thereof, examine all documents purporting to
represent a demand for payment under a Letter of Credit. Such Issuing Bank shall
as promptly as possible

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give telephonic notification, confirmed by telecopy, to the Administrative Agent
and the Borrower of such demand for payment and whether such Issuing Bank has
made or will make an L/C Disbursement thereunder; provided that any failure to
give or delay in giving such notice shall not relieve the Borrower of its
obligation to reimburse the Issuing Bank and the Revolving Credit Lenders with
respect to any such L/C Disbursement. The Administrative Agent shall promptly
give each Revolving Credit Lender notice thereof.

(h) Interim Interest. If an Issuing Bank shall make any L/C
Disbursement in respect of a Standby Letter of Credit, then, unless the Borrower
shall reimburse such L/C Disbursement in full on such date, the unpaid amount
thereof shall bear interest for the account of such Issuing Bank, for each day
from and including the date of such L/C Disbursement, to but excluding the
earlier of the date of payment by the Borrower or the date on which interest
shall commence to accrue thereon as provided in Section 2.02(f), at the rate per
annum that would apply to such amount if such amount were an ABR Revolving Loan.
If such amount is denominated in an Alternative Currency, then the interest rate
applicable thereto shall be determined by such Issuing Bank to be the average
rate (rounded upwards, if necessary, to the next 1/16 of 1%) at which overnight
deposits in such Alternative Currency are obtainable by such Issuing Bank on
such date in the relevant interbank market plus the Applicable Percentage for
Eurocurrency Loans at the time.

(i) Resignation or Removal of an Issuing Bank. An Issuing Bank may
resign at any time by giving 180 days' prior written notice to the
Administrative Agent, the Lenders and the Borrower, and may be removed at any
time by the Borrower by notice to the Issuing Bank, the Administrative Agent and
the Lenders. Subject to the next succeeding paragraph, upon the acceptance of
any appointment as an Issuing Bank hereunder by a Lender that shall agree to
serve as successor Issuing Bank, such successor shall succeed to and become
vested with all the interests, rights and obligations of the retiring Issuing
Bank and the retiring Issuing Bank shall be discharged from its obligations to
issue additional Letters of Credit hereunder. At the time such removal or
resignation shall become effective, the Borrower shall pay all accrued and
unpaid fees pursuant to Section 2.05(c)(ii). The acceptance of any appointment
as an Issuing Bank hereunder by a successor Lender shall be evidenced by an
agreement entered into by such successor, in a form satisfactory to the Borrower
and the Administrative Agent, and, from and after the effective date of such
agreement, (i) such successor Lender shall have all the rights and obligations
of the previous Issuing Bank under this Agreement and the other Loan Documents
and (ii) references herein and in the other Loan Documents to the term "Issuing
Bank" shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall
require. After the resignation or removal of an Issuing Bank hereunder, the
retiring Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of an Issuing Bank under this Agreement and the other
Loan Documents with respect to Letters of Credit issued by it prior to such
resignation or removal, but shall not be required to issue additional Letters of
Credit.

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(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, the Borrower shall, on the Business Day it receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Revolving Credit Lenders holding participations in
outstanding Letters of Credit representing greater than 50% of the aggregate
undrawn amount of all outstanding Standby Letters of Credit) thereof and of the
amount to be deposited, deposit in an account with the Collateral Agent, for the
benefit of the Revolving Credit Lenders, an amount in cash equal to the L/C
Exposure as of such date. Such deposit shall be held by the Collateral Agent as
collateral for the payment and performance of the Obligations. The Collateral
Agent shall have exclusive dominion and control, including the exclusive right
of withdrawal, over such account. Other than any interest earned on the
investment of such deposits in Permitted Investments, which investments shall be
made at the option and sole discretion of the Collateral Agent, such deposits
shall not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall (i) automatically be
applied by the Administrative Agent to reimburse the Issuing Banks for L/C
Disbursements for which they have not been reimbursed, (ii) be held for the
satisfaction of the reimbursement obligations of the Borrower for the L/C
Exposure at such time and (iii) if the maturity of the Loans has been
accelerated (but subject to the consent of Revolving Credit Lenders holding
participations in outstanding Standby Letters of Credit representing greater
than 50% of the aggregate undrawn amount of all outstanding Standby Letters of
Credit), be applied to satisfy the Obligations. If the Borrower is required to
provide an amount of cash collateral hereunder as a result of the occurrence of
an Event of Default, such amount (to the extent not applied as aforesaid) shall
be returned to the Borrower within three Business Days after all Events of
Default have been cured or waived.

(k) Additional Issuing Banks. The Borrower may, at any time and from
time to time with the consent of the Administrative Agent (which consent shall
not be unreasonably withheld) and such Lender, designate one or more additional
Lenders to act as an issuing bank under the terms of the Agreement. Any Lender
designated as an issuing bank pursuant to this paragraph (k) shall be deemed to
be an "Issuing Bank" (in addition to being a Lender) in respect of Letters of
Credit issued or to be issued by such Lender, and, with respect to such Letters
of Credit, such term shall thereafter apply to the other Issuing Banks and such
Lender.

ARTICLE III

Representations and Warranties

The Borrower represents and warrants to the Administrative Agent, the
Collateral Agent, the Issuing Banks and each of the Lenders that:

SECTION 3.01. Organization; Powers. The Borrower and each of the
Subsidiaries (a) (i) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, (ii) has all requisite
power and authority to

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own its property and assets and to carry on its business as now conducted and as
proposed to be conducted and (iii) is qualified to do business in, and is in
good standing in, every jurisdiction where such qualification is required,
except where any such failure, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, and (b) has the
power and authority to execute, deliver and perform its obligations under each
of the Loan Documents and each other agreement or instrument contemplated hereby
to which it is or will be a party and, in the case of the Borrower, to borrow
hereunder.

SECTION 3.02. Authorization. The Transactions (a) have been duly
authorized by all requisite corporate and, if required, stockholder action and
(b) will not (i) violate (A) any provision of law, statute, rule or regulation,
or of the certificate or articles of incorporation or other constitutive
documents or by-laws of the Borrower or any Subsidiary, (B) any order of any
Governmental Authority or (C) any provision of any indenture, agreement or other
instrument to which the Borrower or any Subsidiary is a party or by which any of
them or any of their property is or may be bound, (ii) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or
both) a default under, or give rise to any right to accelerate or to require the
prepayment, repurchase or redemption of any obligation under any such indenture,
agreement or other instrument or (iii) result in the creation or imposition of
any Lien upon or with respect to any property or assets now owned or hereafter
acquired by the Borrower or any Subsidiary (other than any Lien created
hereunder or under the Security Documents).

SECTION 3.03. Enforceability. This Agreement has been duly executed and
delivered by the Borrower and constitutes, and each other Loan Document when
executed and delivered by the each Loan party thereto will constitute, a legal,
valid and binding obligation of such Loan Party enforceable against such Loan
Party in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.

SECTION 3.04. Governmental Approvals. No action, consent or approval
of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except for
(a) the filing of Uniform Commercial Code financing statements and filings with
the United States Patent and Trademark Office and the United States Copyright
Office, (b) recordation of the Mortgages and (c) such as have been made or
obtained and are in full force and effect.

SECTION 3.05. Financial Statements. (a) The Borrower has heretofore
furnished to the Lenders its, IDP's and Invatec's consolidated balance sheets
and statements of income, stockholders' equity (in the case of the Borrower) and
cash flows (i) as of and for the fiscal year ended December 31, 1999, audited by
and accompanied by the opinion of Ernst & Young LLP, independent public
accountants in the case of the Borrower, PricewaterhouseCoopers LLP, independent
public accountants in the case of IDP, and Arthur Andersen LLP, independent
public accountants in the case of Invatec, and (ii) in the case of the Borrower
and IDP, as of and for the fiscal quarter and the

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portion of the fiscal year ended March 31, 2000, certified by its chief
financial officer. Such financial statements present fairly the financial
condition and results of operations and cash flows of the Borrower and its
consolidated Subsidiaries, IDP and Invatec, as the case may be, as of such dates
and for such periods. Such balance sheets and the notes thereto disclose all
material liabilities, direct or contingent, of the Borrower and its consolidated
Subsidiaries, IDP and Invatec, as the case may be, as of the dates thereof. Such
financial statements were prepared in accordance with GAAP.

(b) The Borrower has heretofore delivered to the Lenders its unaudited
pro forma consolidated balance sheet and statements of income as of December 31,
1999, prepared giving effect to the Transactions as if they had occurred, with
respect to such balance sheet, on such date and, with respect to such other
financial statements, on the first day of the 12-month period ending on such
date. Such pro forma financial statements have been prepared in good faith by
the Borrower, based on the assumptions used to prepare the pro forma financial
information contained in the Confidential Information Memorandum (which
assumptions are believed by the Borrower on the date hereof and on the Closing
Date to be reasonable), are based on the best information available to the
Borrower as of the date of delivery thereof, accurately reflect all adjustments
required to be made to give effect to the Transactions and present fairly on a
pro forma basis the estimated consolidated financial position of the Borrower
and its consolidated Subsidiaries as of such date and for such period, assuming
that the Transactions had actually occurred at such date or at the beginning of
such period, as the case may be.

SECTION 3.06. No Material Adverse Change. Since December 31, 1999 and
after giving effect to the Acquisition, no event, change or condition has
occurred that has had, or could reasonably be expected to have, a Material
Adverse Effect.

SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of
the Borrower and the Subsidiaries has valid title to, or valid leasehold
interests in, all its material properties and assets (including all Mortgaged
Property), except for defects in title that do not interfere with its ability to
conduct its business as currently conducted or to utilize such properties and
assets for their intended purposes. All such material properties and assets are
free and clear of Liens, other than Liens expressly permitted by Section 6.02.

(b) Each of the Borrower and the Subsidiaries has complied with all
material obligations under all material leases to which it is a party and, to
the Borrower's knowledge, all such leases are in full force and effect.

SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the Closing
Date a list of all Subsidiaries and the percentage ownership interest of the
Borrower therein. The shares of capital stock or other ownership interests so
indicated on Schedule 3.08 are fully paid and non-assessable and are owned by
the Borrower, directly or indirectly, free and clear of all Liens (other than
Liens created under the Security Documents).

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SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth
on Schedule 3.09, there are not any actions, suits or proceedings at law or in
equity or by or before any Governmental Authority now pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
Subsidiary or any business, property or rights of any such person (i) that
involve any Loan Document or the Transactions or (ii) which could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect.

(b) None of the Borrower or any of the Subsidiaries or any of their
respective material properties or assets is in violation of any law, rule or
regulation (including any zoning, building, Environmental Law, ordinance, code
or approval or any building permits) or any restrictions of record or agreements
affecting the Mortgaged Property, or is in default with respect to any judgment,
writ, injunction, decree or order of any Governmental Authority, where such
violation or default could reasonably be expected to result in a Material
Adverse Effect.

SECTION 3.10. Agreements. (a) Neither the Borrower nor any of the
Subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be expected to
result in a Material Adverse Effect.

(b) Neither the Borrower nor any of the Subsidiaries is in default in
any manner under any provision of any indenture or other agreement or instrument
evidencing Indebtedness, or any other material agreement or instrument to which
it is a party or by which it or any of its properties or assets are or may be
bound, where such default could reasonably be expected to result in a Material
Adverse Effect.

SECTION 3.11. Federal Reserve Regulations. (a) Neither the Borrower nor
any of the Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of buying or
carrying Margin Stock.

(b) No part of the proceeds of any Loan or any Letter of Credit will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, for any purpose that entails a violation of, or that is inconsistent
with, the provisions of the Regulations of the Board, including Regulation T, U
or X.

SECTION 3.12. Investment Company Act; Public Utility Holding Company
Act. Neither the Borrower nor any Subsidiary is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.

SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of
the Loans and will request the issuance of Letters of Credit only for the
purposes specified in the preamble to this Agreement.

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SECTION 3.14. Tax Returns. Each of the Borrower and the Subsidiaries
has filed or caused to be filed all Federal, state, local and foreign tax
returns or materials required to have been filed by it and has paid or caused to
be paid all taxes due and payable by it and all material written assessments
received by it, except taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, shall have set aside on its books adequate reserves.

SECTION 3.15. No Material Misstatements. None of (a) the Confidential
Information Memorandum or (b) any other information, report, financial
statement, exhibit or schedule furnished by or on behalf of the Borrower to the
Administrative Agent or any Lender in connection with the negotiation of any
Loan Document or included therein or delivered pursuant thereto contained,
contains or will contain any material misstatement of fact or omitted, omits or
will omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were, are or will be made,
not misleading; provided that to the extent any such information, report,
financial statement, exhibit or schedule was based upon or constitutes a
forecast or projection, the Borrower represents only that it acted in good faith
and utilized reasonable assumptions and due care in the preparation of such
information, report, financial statement, exhibit or schedule.

SECTION 3.16. Employee Benefit Plans. Each of the Borrower and its
ERISA Affiliates is in compliance in all respects with the applicable provisions
of ERISA and the Code and the regulations and published interpretations
thereunder, except where such non-compliance, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect. No
ERISA Event has occurred or is reasonably expected to occur that, when taken
together with all other such ERISA Events, could reasonably be expected to
result in a Material Adverse Effect. As of the date hereof and the Closing Date,
the present value of all benefit liabilities under each Plan (based on those
assumptions used to fund such Plan) did not, as of the last annual valuation
date applicable thereto, exceed by more than $10,000,000 the fair market value
of the assets of such Plan.

SECTION 3.17. Environmental Matters. (a) Except as set forth in
Schedule 3.17 and except with respect to any other matters that, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed
to comply with any Environmental Law or to obtain, maintain or comply with any
permit, license or other approval required under any Environmental Law, (ii) has
received notice of any claim with respect to any Environmental Liability or
(iii) knows of any basis for any Environmental Liability to which it is or
reasonably could become subject.

(b) Since the date of this Agreement, there has been no change in the
status of the matters disclosed on Schedule 3.17 that, individually or in the
aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect.

SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and
correct description of all insurance maintained by the Borrower or by the
Borrower for its

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Subsidiaries as of the date hereof and the Closing Date. As of each such date,
such insurance is in full force and effect and all premiums have been duly paid.
The Borrower and its Subsidiaries have insurance in such amounts and covering
such risks and liabilities as are in accordance with normal industry practice.

SECTION 3.19. Security Documents. (a) Prior to the Release Date, the
Pledge Agreement is effective to create in favor of the Collateral Agent, for
the ratable benefit of the Secured Parties, a legal, valid and enforceable
security interest in the Collateral (as defined in the Pledge Agreement) and,
when the Collateral is delivered to the Collateral Agent, the Pledge Agreement
shall constitute a fully perfected first priority Lien on, and security interest
in, all right, title and interest of the pledgors thereunder in such Collateral,
in each case prior and superior in right to any other person.

(b) Prior to the Release Date, the Security Agreement is effective to
create in favor of the Collateral Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable security interest in the Collateral (as
defined in the Security Agreement) and, when financing statements in appropriate
form are filed in the offices specified on Schedule 6 to the Perfection
Certificate, the Security Agreement shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the grantors
thereunder in such Collateral (other than the Intellectual Property, as defined
in the Security Agreement), in each case prior and superior in right to any
other person, other than with respect to Liens expressly permitted by Section
6.02.

(c) When the Security Agreement is filed in the United States Patent
and Trademark Office and the United States Copyright Office, prior to the
Release Date, the Security Agreement shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the grantors
thereunder in the Intellectual Property (as defined in the Security Agreement),
in each case prior and superior in right to any other person (it being
understood that subsequent recordings in the United States Patent and Trademark
Office and the United States Copyright Office may be necessary to perfect a lien
on registered trademarks, trademark applications and copyrights acquired by the
grantors after the date hereof).

(d) Prior to the Release Date, the Mortgages are effective to create in
favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a
legal, valid and enforceable Lien on all of the Loan Parties' right, title and
interest in and to the Mortgaged Property thereunder and the proceeds thereof,
and when the Mortgages are filed in the offices specified on Schedule 3.19(d),
the Mortgages shall constitute a fully perfected Lien on, and security interest
in, all right, title and interest of the Loan Parties in such Mortgaged Property
and the proceeds thereof, in each case prior and superior in right to any other
person, other than with respect to the rights of persons pursuant to Liens
expressly permitted by Section 6.02.

SECTION 3.20. Location of Real Property and Leased Premises. (a)
Schedule 3.20(a) lists completely and correctly as of the Closing Date all real
property owned by the Borrower and the Domestic Subsidiaries (excluding sales
offices) and the addresses thereof.

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(b) Schedule 3.20(b) lists completely and correctly as of the Closing
Date all real property leased by the Borrower and the Domestic Subsidiaries
(excluding sales offices) and the addresses thereof.

(c) Schedule 3.20(c) sets forth certain real property (other than
Consent Decree Assets) of the Borrower and the Domestic Subsidiaries which, as
of the Closing Date, the Borrower intends to sell or otherwise dispose of
following the Closing Date (the "Designated Properties").

SECTION 3.21. Labor Matters. As of the date hereof and the Closing
Date, there are no strikes, lockouts or slowdowns against the Borrower or any
Subsidiary pending or, to the knowledge of the Borrower, threatened. Except with
respect to any violations that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, the hours worked
by and payments made to employees of the Borrower and the Subsidiaries have not
been in violation of the Fair Labor Standards Act or any other applicable
Federal, state, local or foreign law dealing with such matters. All payments due
from the Borrower or any Subsidiary, or for which any claim may be made against
the Borrower or any Subsidiary, on account of wages and employee health and
welfare insurance and other benefits, have been paid or accrued as a liability
on the books of the Borrower or such Subsidiary except where the failure to make
or accrue any such payments, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. The consummation
of the Transactions will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which the Borrower or any Subsidiary is bound.

SECTION 3.22. Solvency. Immediately after the consummation of the
Transactions to occur on the Closing Date and immediately following the making
of each Loan and after giving effect to the application of the proceeds of each
Loan, (a) the fair value of the assets of each Loan Party, at a fair valuation,
will exceed its debts and liabilities, subordinated, contingent or otherwise;
(b) the present fair saleable value of the property of each Loan Party will be
greater than the amount that will be required to pay the probable liability of
its debts and other liabilities, subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and matured; (c) each Loan Party
will be able to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured; and (d)
each Loan Party will not have unreasonably small capital with which to conduct
the business in which it is engaged as such business is now conducted and is
proposed to be conducted following the Closing Date.

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ARTICLE IV

Conditions of Lending

The obligations of the Lenders to make Loans and of the Issuing Banks
to issue Letters of Credit hereunder are subject to the satisfaction of the
following conditions:

SECTION 4.01. All Credit Events. On the date of each Borrowing,
including each Borrowing of a Swingline Loan, and on the date of each issuance,
amendment, extension or renewal of a Letter of Credit (each such event being
called a "Credit Event"):

(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 (or such notice shall have been deemed
given in accordance with Section 2.03) or, in the case of the issuance,
amendment, extension or renewal of a Letter of Credit, the applicable Issuing
Bank and the Administrative Agent shall have received a notice requesting the
issuance, amendment, extension or renewal of such Letter of Credit as required
by Section 2.23(b) or, in the case of the Borrowing of a Swingline Loan, the
Swingline Lender and the Administrative Agent shall have received a notice
requesting such Swingline Loan as required by Section 2.22(b).

(b) The representations and warranties set forth in Article III hereof
and in each other Loan Document shall be true and correct in all material
respects on and as of the date of such Credit Event with the same effect as
though made on and as of such date, except to the extent such representations
and warranties expressly relate to an earlier date.

(c) The Borrower and each other Loan Party shall be in compliance with
all the terms and provisions set forth herein and in each other Loan Document on
its part to be observed or performed, and at the time of and immediately after
such Credit Event, no Event of Default or Default shall have occurred and be
continuing.

Each Credit Event shall be deemed to constitute a representation and
warranty by the Borrower on the date of such Credit Event as to the matters
specified in paragraphs (b) and (c) of this Section 4.01.

SECTION 4.02. First Credit Event. On the Closing Date:

(a) The Administrative Agent shall have received, on behalf of
itself, the Lenders and the Issuing Banks, a favorable written opinion
of (i) Shearman & Sterling, counsel for the Borrower, substantially to
the effect set forth in Exhibit I-1, (ii) John M. Nanos, Senior
Associate General Counsel of the Borrower, substantially to the effect
set forth in Exhibit I-2, and (iii) each local counsel listed on
Schedule 4.02(a), substantially to the effect set forth in Exhibit I-3,
in each case (A) dated the Closing Date, (B) addressed to the Issuing
Banks, the Administrative Agent and the Lenders, and (C) covering such
other matters relating to the Loan Documents and the Transactions as
the Agents shall

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reasonably request, and the Borrower hereby requests such counsel to
deliver such opinions.

(b) All legal matters incident to this Agreement, the
Borrowings and extensions of credit hereunder and the other Loan
Documents shall be satisfactory to the Lenders, to the Issuing Banks
and to the Agents.

(c) The Administrative Agent shall have received (i) a copy of
the certificate or articles of incorporation, including all amendments
thereto, of each Loan Party, certified (to the extent relevant) as of a
recent date by the Secretary of State of the state of its organization,
and (to the extent possible) a certificate as to the good standing of
each Loan Party as of a recent date, from such Secretary of State; (ii)
a certificate of the Secretary or Assistant Secretary (or similar
officer) of each Loan Party dated the Closing Date and certifying (A)
that attached thereto is a true and complete copy of the by-laws or
articles of association of such Loan Party as in effect on the Closing
Date and at all times since a date prior to the date of the resolutions
described in clause (B) below, (B) that attached thereto is a true and
complete copy of resolutions duly adopted by the Board of Directors of
such Loan Party authorizing the execution, delivery and performance of
the Loan Documents to which such person is a party and, in the case of
the Borrower, the borrowings hereunder, and that such resolutions have
not been modified, rescinded or amended and are in full force and
effect, (C) that the certificate or articles of incorporation of such
Loan Party have not been amended since the date of the last amendment
thereto shown on the certificate of good standing furnished pursuant to
clause (i) above, and (D) as to the incumbency and specimen signature
of each officer executing any Loan Document or any other document
delivered in connection herewith on behalf of such Loan Party; (iii) a
certificate of another officer as to the incumbency and specimen
signature of the Secretary or Assistant Secretary executing the
certificate pursuant to (ii) above; and (iv) such other documents as
the Lenders, the Issuing Banks or the Agents may reasonably request.

(d) The Administrative Agent shall have received a
certificate, dated the Closing Date and signed by a Financial Officer
of the Borrower, confirming compliance with the conditions precedent
set forth in paragraphs (b) and (c) of Section 4.01.

(e) The Administrative Agent shall have received all Fees and
other amounts due and payable on or prior to the Closing Date,
including, to the extent invoiced at least 1 Business Day prior to the
Closing Date, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder or under
any other Loan Document.

(f) The Pledge Agreement shall have been duly executed by the
parties thereto and delivered to the Collateral Agent and shall be in
full force and effect, and all the outstanding capital stock of the
Subsidiaries (other than Inactive Subsidiaries) shall have been duly
and validly pledged thereunder to the

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Collateral Agent for the ratable benefit of the Secured Parties and
certificates representing such shares, accompanied by instruments of
transfer and stock powers endorsed in blank, shall be in the actual
possession of the Collateral Agent (except with respect to Foreign
Subsidiaries, certificates for which (to the extent available under
applicable law) shall be delivered to the Collateral Agent within 60
days following the Closing Date); provided that to the extent to do so
would cause adverse tax consequences to the Borrower, (i) neither the
Borrower nor any Domestic Subsidiary shall be required to pledge more
than 65% of the voting stock of any Foreign Subsidiary and (ii) no
Foreign Subsidiary shall be required to pledge the capital stock of any
of its Subsidiaries.

(g) The Security Agreement shall have been duly executed by
the Loan Parties party thereto and shall have been delivered to the
Collateral Agent and shall be in full force and effect on such date and
each document (including each Uniform Commercial Code financing
statement) required by law or reasonably requested by the
Administrative Agent to be filed, registered or recorded in order to
create in favor of the Collateral Agent for the benefit of the Secured
Parties a valid, legal and perfected first-priority security interest
in and lien on the Collateral (subject to any Lien expressly permitted
by Section 6.02) described in such agreement shall have been delivered
to the Collateral Agent.

(h) The Collateral Agent shall have received the results of a
search of the Uniform Commercial Code filings (or equivalent filings)
made with respect to the Loan Parties in the states (or other
jurisdictions) in which the chief executive office of each such person
is located, any offices of such persons in which records have been kept
relating to accounts receivable and the other jurisdictions in which
Uniform Commercial Code filings (or equivalent filings) are to be made
pursuant to the preceding paragraph, together with copies of the
financing statements (or similar documents) disclosed by such search,
and accompanied by evidence satisfactory to the Collateral Agent that
the Liens indicated in any such financing statement (or similar
document) would be permitted under Section 6.02 or have been released.

(i) The Collateral Agent shall have received a Perfection
Certificate with respect to the Loan Parties dated the Closing Date and
duly executed by a Responsible Officer of the Borrower.

(j)(i) Each of the Security Documents, in form and substance
satisfactory to the Lenders, relating to each of the Mortgaged
Properties shall have been duly executed by the parties thereto and
delivered to the Collateral Agent and shall be in full force and
effect, (ii) each of such Mortgaged Properties shall not be subject to
any Lien other than those permitted under Section 6.02, (iii) each of
such Security Documents shall have been filed and recorded in the
recording office as specified on Schedule 3.19(d) (or a lender's title
insurance policy, in form and substance acceptable to the Collateral
Agent, insuring such Security Document as a first lien on such
Mortgaged Property (subject to any Lien permitted by Section 6.02)
shall have been received by the Collateral Agent)

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and, in connection therewith, the Collateral Agent shall have received
evidence satisfactory to it of each such filing and recordation and
(iv) the Collateral Agent shall have received such other documents,
including a policy or policies of title insurance issued by a
nationally recognized title insurance company, together with such
endorsements, coinsurance and reinsurance as may be requested by the
Collateral Agent and the Lenders, insuring the Mortgages as valid first
liens on the Mortgaged Properties, free of Liens other than those
permitted under Section 6.02, together with such surveys, abstracts,
appraisals and legal opinions required to be furnished pursuant to the
terms of the Mortgages or as reasonably requested by the Collateral
Agent or the Lenders.

(k) The Guarantee Agreement shall have been duly executed by
the parties thereto, shall have been delivered to the Collateral Agent
and shall be in full force and effect; provided that to the extent to
do so would cause adverse tax consequences to the Borrower, no Foreign
Subsidiary shall be required to guarantee any obligation of the
Borrower or any Domestic Subsidiary.

(l) The Indemnity, Subrogation and Contribution Agreement
shall have been duly executed by the parties thereto, shall have been
delivered to the Collateral Agent and shall be in full force and
effect.

(m) The Administrative Agent shall have received a copy of, or
a certificate as to coverage under, the insurance policies required by
Section 5.02 and the applicable provisions of the Security Documents,
each of which shall be endorsed or otherwise amended to include a
"standard" or "New York" lender's loss payable endorsement and to name
the Collateral Agent as additional insured, in form and substance
satisfactory to the Agents.

(n) The Lenders shall be reasonably satisfied as to the amount
and nature of any environmental exposures to which the Borrower or any
of the Subsidiaries may be subject and with the Borrower's plans with
respect thereto.

(o) The Acquisition shall be consummated simultaneously with
the initial Credit Event in accordance with applicable law and the
Purchase Agreement (without giving effect to any material waiver or
modification thereof not approved by the Lenders); and (i) the Lenders
shall be satisfied with any changes from the pro forma capitalization
and structure described in the Confidential Information Memorandum and
(ii) the sources and uses of funds to finance the Acquisition shall be
consistent with those described in the Confidential Information
Memorandum or, if not so consistent, shall otherwise be reasonably
satisfactory to the Lenders.

(p) The Borrower and FFBV, respectively, shall have received
(i) $285,899,400 in gross cash proceeds from the issuance of the Dollar
Subordinated Notes and (ii) euro 98,586,000 in gross cash proceeds from
the issuance of the Euro Subordinated Notes in a public offering or in
a Rule 144A or other private placement to one or more holders
reasonably satisfactory to the

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Agents, and the terms and conditions of the Subordinated Notes shall be
materially consistent with the terms and conditions described in
Confidential Information Memorandum.

(q) The Existing Debt shall have been repaid in full, all
commitments thereunder terminated and all guarantees thereof and
security therefor released and, after giving effect to the Transactions
and the other transactions contemplated hereby, the Borrower and its
Subsidiaries shall have outstanding no Indebtedness or preferred stock
other than (i) Indebtedness under the Loan Documents, (ii) the
Subordinated Notes and (iii) other Indebtedness set forth on Schedules
6.01(a), (d), (e), (f), (g) and 6.04.

(r) The Lenders shall have received audited consolidated
balance sheets and related statements of income, stockholders' equity
(in the case of the Borrower) and cash flows of the Borrower and IDP
for the 1997, 1998 and 1999 fiscal years (which audits for IDP shall be
reasonably satisfactory to the Lenders) and of Invatec for the 1999
fiscal year.

(s) The Lenders shall have received a pro forma income
statement and a pro forma balance sheet of the Borrower for the 1999
fiscal year, after giving effect to the Transactions and the other
transactions contemplated hereby, which financial statements shall not
be materially inconsistent with those previously provided to the
Lenders.

(t) There shall be no litigation or administrative proceeding
that could reasonably be expected to have a Material Adverse Effect.

(u) All requisite Governmental Authorities and third parties
shall have approved or consented to the Transactions and the other
transactions contemplated hereby to the extent required, all applicable
appeal periods shall have expired and there shall be no governmental or
judicial action, actual or threatened, that could reasonably be
expected to restrain, prevent or impose materially burdensome
conditions on the Transactions.

ARTICLE V

Affirmative Covenants

The Borrower covenants and agrees with each Lender that so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest on each Loan, all Fees and all other expenses
or amounts payable under any Loan Document shall have been paid in full and all
Letters of Credit have been canceled or have expired and all amounts drawn
thereunder have been reimbursed in full, unless the Required Lenders shall
otherwise consent in writing, the Borrower will, and will cause each of the
Subsidiaries to:

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SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to
be done all things necessary to preserve, renew and keep in full force and
effect its legal existence, except as otherwise expressly permitted under
Section 6.05 and except, with respect to any Subsidiary, where the failure to do
so could not reasonably be expected, individually or in the aggregate, to result
in a Material Adverse Effect.

(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of the business of the Borrower and its Subsidiaries
taken as a whole; maintain and operate such business in substantially the manner
in which it is presently conducted and operated; comply in all material respects
with all applicable laws, rules, regulations (including (i) all Environmental
Laws and (ii) any zoning, building, ordinance, code or approval or any building
permits or any restrictions of record or agreements affecting the Mortgaged
Properties) and decrees and orders of any Governmental Authority, whether now in
effect or hereafter enacted, except where the failure to do so could not
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect; and at all times maintain and preserve all property
material to the conduct of such business and keep such property in good repair,
working order and condition and from time to time make, or cause to be made, all
needful and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection therewith
may be properly conducted at all times, except where the failure to do so could
not reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.

SECTION 5.02. Insurance. (a) Keep its insurable properties adequately
insured at all times by financially sound and reputable insurers; maintain such
other insurance, to such extent and against such risks, including fire and other
risks insured against by extended coverage, as is customary with companies in
the same or similar businesses operating in the same or similar locations,
including public liability insurance against claims for personal injury or death
or property damage occurring upon, in, about or in connection with the use of
any properties owned, occupied or controlled by it; and maintain such other
insurance as may be required by law.

(b) Cause all such policies covering any Collateral to be endorsed or
otherwise amended to include a "standard" or "New York" lender's loss payable
endorsement, in form and substance satisfactory to the Administrative Agent and
the Collateral Agent, which endorsement shall provide that, from and after the
Closing Date, if the insurance carrier shall have received written notice from
the Administrative Agent or the Collateral Agent of the occurrence of an Event
of Default, the insurance carrier shall pay all proceeds otherwise payable to
the Borrower or the Loan Parties under such policies directly to the Collateral
Agent; cause all such policies to provide that neither the Borrower, the
Administrative Agent, the Collateral Agent nor any other party shall be a
coinsurer thereunder and to contain a "Replacement Cost Endorsement", without
any deduction for depreciation, and such other provisions as the Administrative
Agent or the Collateral Agent may reasonably require from time to time to
protect their interests; deliver original or certified copies of all such
policies to the Collateral Agent;

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cause each such policy to provide that it shall not be canceled, modified or not
renewed (i) by reason of nonpayment of premium upon not less than 10 days' prior
written notice thereof by the insurer to the Administrative Agent and the
Collateral Agent (giving the Administrative Agent and the Collateral Agent the
right to cure defaults in the payment of premiums) or (ii) for any other reason
upon not less than 30 days' prior written notice thereof by the insurer to the
Administrative Agent and the Collateral Agent; deliver to the Administrative
Agent and the Collateral Agent, prior to the cancelation, modification or
nonrenewal of any such policy of insurance, a copy of a renewal or replacement
policy (or other evidence of renewal of a policy previously delivered to the
Administrative Agent and the Collateral Agent) together with evidence
satisfactory to the Administrative Agent and the Collateral Agent of payment of
the premium therefor.

(c) If at any time the area in which the Premises (as defined in the
Mortgages) are located is designated (i) a "flood hazard area" in any Flood
Insurance Rate Map published by the Federal Emergency Management Agency (or any
successor agency), obtain flood insurance in such total amount as the
Administrative Agent, the Collateral Agent or the Required Lenders may from time
to time require, and otherwise comply with the National Flood Insurance Program
as set forth in the Flood Disaster Protection Act of 1973, as it may be amended
from time to time, or (ii) a "Zone 1" area, obtain earthquake insurance in such
total amount as the Administrative Agent, the Collateral Agent or the Required
Lenders may from time to time require.

(d) With respect to any Mortgaged Property, carry and maintain
comprehensive general liability insurance including the "broad form CGL
endorsement" and coverage on an occurrence basis against claims made for
personal injury (including bodily injury, death and property damage) and
umbrella liability insurance against any and all claims, in no event for a
combined single limit of less than $50,000,000, naming the Collateral Agent as
an additional insured, on forms satisfactory to the Collateral Agent.

(e) Notify the Administrative Agent and the Collateral Agent
immediately whenever any separate insurance concurrent in form or contributing
in the event of loss with that required to be maintained under this Section 5.02
is taken out by the Borrower; and promptly deliver to the Administrative Agent
and the Collateral Agent a duplicate original copy of such policy or policies.

SECTION 5.03. Obligations and Taxes. Pay its Indebtedness promptly and
in accordance with their terms and pay and discharge promptly when due all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or in respect of its property, before the same shall
become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise that, if unpaid, might give rise to a Lien
upon such properties or any part thereof; provided, however, that such payment
and discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and the Borrower shall have
set aside on its books adequate reserves with respect thereto in accordance with
GAAP and such contest operates to suspend collection of the contested
obligation, tax, assessment or

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charge and enforcement of a Lien and, in the case of a Mortgaged Property, there
is no risk of forfeiture of such property.

SECTION 5.04. Financial Statements, Reports, etc. In the case of the
Borrower, furnish to the Administrative Agent and each Lender:

(a) within 100 days after the end of each fiscal year, its
consolidated balance sheet and related statements of income,
stockholders' equity and cash flows showing the financial condition of
the Borrower and its consolidated Subsidiaries as of the close of such
fiscal year and the results of its operations and the operations of
such Subsidiaries during such year, all audited by Ernst & Young LLP or
other independent public accountants of recognized national standing
and accompanied by an opinion of such accountants (which shall not be
qualified in any material respect) to the effect that such consolidated
financial statements fairly present the financial condition and results
of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP;

(b) within 50 days after the end of each of the first three
fiscal quarters of each fiscal year, its consolidated balance sheet and
related statements of income, stockholders' equity and cash flows
showing the financial condition of the Borrower and its consolidated
Subsidiaries as of the close of such fiscal quarter and the results of
its operations and the operations of such Subsidiaries during such
fiscal quarter and the then elapsed portion of the fiscal year,
compared with the consolidated budget for such fiscal quarter as well
as the results of its operations and the operations of its Subsidiaries
in the corresponding quarter from the prior fiscal year, all certified
by one of its Financial Officers as fairly presenting the financial
condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with
GAAP, subject to normal year-end audit adjustments;

(c) unless and until the Borrower shall have obtained, and
during any period the Borrower does not maintain, Investment Grade
Ratings, within 30 days after the end of each of the first two fiscal
months of each fiscal quarter, its consolidated balance sheet and
related statement of income showing the financial condition of the
Borrower and its consolidated Subsidiaries during such fiscal month and
the then elapsed portion of the fiscal year, in such form as the
Borrower shall generally prepare for its internal purposes;

(d) concurrently with any delivery of financial statements
under paragraph (a), (b) or (c) above, a certificate of the accounting
firm (in the case of paragraph (a)) or Financial Officer (in the case
of paragraph (b) or (c)) opining on or certifying such statements
(which certificate, when furnished by an accounting firm, may be
limited to accounting matters and disclaim responsibility for legal
interpretations) certifying that no Event of Default or Default has
occurred or, if such an Event of Default or Default has occurred,
specifying the nature and extent thereof and any corrective action
taken or

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proposed to be taken with respect thereto and, in the case of a
certificate delivered with the financial statements required by
paragraph (a) above, setting forth the Borrower's calculation of Excess
Cash Flow;

(e) at least 10 days prior to the commencement of each fiscal
year of the Borrower, a detailed consolidated budget for such fiscal
year (including a projected consolidated balance sheet and related
statements of projected operations and cash flow as of the end of and
for each quarter of such fiscal year and as of the end of and for such
fiscal year and describing the assumptions used for purposes of
preparing such budget) and, promptly when available, any significant
revisions of such budget;

(f) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials
filed by the Borrower or any Subsidiary with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any or
all of the functions of said Commission, or with any national
securities exchange, or distributed to its share-holders, as the case
may be;

(g) promptly after the receipt thereof by the Borrower or any
of its Subsidiaries, a copy of any final "management letter" received
by any such person from its certified public accountants and the
management's response thereto; and

(h) promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of
the Borrower or any Subsidiary, or compliance with the terms of any
Loan Document, as the Administrative Agent or any Lender may reasonably
request.

SECTION 5.05. Litigation and Other Notices. Furnish to the
Administrative Agent, each Issuing Bank and each Lender prompt written notice of
the following:

(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) taken or proposed to
be taken with respect thereto;

(b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any
Governmental Authority, against the Borrower or any Affiliate thereof
that could reasonably be expected to result in a Material Adverse
Effect;

(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be
expected to result in liability of the Borrower and the Subsidiaries in
an aggregate amount exceeding $5,000,000;

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(d) any notice from S&P or Moody's indicating the possibility
of an adverse change in the credit ratings applicable to the Borrower
or any of its Indebtedness assigned by S&P or Moody's;

(e) any modification of the Consent Decree that imposes
additional obligations on the Borrower or any Subsidiary or otherwise
adversely affects the Borrower or any Subsidiary; and

(f) any development that has resulted in, or could reasonably
be expected to result in, a Material Adverse Effect.

SECTION 5.06. Information Regarding Collateral. (a) Furnish to the
Administrative Agent prompt written notice of any change (i) in any Loan Party's
corporate name or in any trade name used to identify it in the conduct of its
business or in the ownership of its properties, (ii) in the location of any Loan
Party's chief executive office, its principal place of business, any office in
which it maintains books or records relating to Collateral owned by it or any
office or facility at which Collateral owned by it is located (including the
establishment of any such new office or facility), (iii) in any Loan Party's
identity or corporate structure or (iv) in any Loan Party's Federal Taxpayer
Identification Number. The Borrower agrees not to effect or permit any change
referred to in the preceding sentence unless all filings have been made under
the Uniform Commercial Code or otherwise that are required in order for the
Collateral Agent to continue at all times following such change to have a valid,
legal and perfected security interest in all the Collateral. The Borrower also
agrees promptly to notify the Administrative Agent if any material portion of
the Collateral is damaged or destroyed.

(b) Each year, at the time of delivery of the annual financial
statements with respect to the preceding fiscal year pursuant to Section
5.04(a), deliver to the Administrative Agent a certificate of a Financial
Officer setting forth the information required pursuant to Section 2 of the
Perfection Certificate or confirming that there has been no change in such
information since the date of the Perfection Certificate delivered on the
Closing Date or the date of the most recent certificate delivered pursuant to
this Section 5.06.

SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all requirements of law are made of
all dealings and transactions in relation to its business and activities. Each
Loan Party will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender to visit
and inspect the financial records and the properties of the Borrower or any
Subsidiary at reasonable times and as often as reasonably requested and to make
extracts from and copies of such financial records, and permit any
representatives designated by the Administrative Agent or any Lender to discuss
the affairs, finances and condition of the Borrower or any Subsidiary with the
officers thereof and independent accountants therefor; provided that any such
visit or inspection does not interfere with the normal operation of such
business conducted at the properties.

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SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and
request the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement.

SECTION 5.09. Further Assurances. (a) Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including filing Uniform Commercial Code and other financing
statements, mortgages and deeds of trust) that may be required under applicable
law, or that the Required Lenders or the Agents may reasonably request, in order
to effectuate the transactions contemplated by the Loan Documents and in order
to grant, preserve, protect and perfect the validity and first priority of the
security interests created or intended to be created by the Security Documents.
The Borrower will cause any subsequently acquired or organized Domestic
Subsidiary (other than Finsub) to execute a Guarantee Agreement, Indemnity
Subrogation and Contribution Agreement and each applicable Security Document in
favor of the Collateral Agent. In addition, from time to time, the Borrower
will, at its cost and expense, promptly secure the Obligations by pledging or
creating, or causing to be pledged or created, perfected security interests with
respect to such of its assets and properties as the Administrative Agent or the
Required Lenders shall designate (it being understood that it is the intent of
the parties that the Obligations shall be secured by, among other things,
substantially all the assets of the Borrower and its Subsidiaries (including
real and other properties acquired subsequent to the Closing Date but excluding
Program Receivables sold to Finsub pursuant to the Receivables Program
Documentation)). Such security interests and Liens will be created under the
Security Documents and other security agreements, mortgages, deeds of trust and
other instruments and documents in form and substance satisfactory to the
Collateral Agent, and the Borrower shall deliver or cause to be delivered to the
Lenders all such instruments and documents (including legal opinions, title
insurance policies and lien searches) as the Collateral Agent shall reasonably
request to evidence compliance with this Section. The Borrower agrees to provide
such evidence as the Collateral Agent shall reasonably request as to the
perfection and priority status of each such security interest and Lien.

(b) In the event that any one or more of the Designated Properties
continues to be owned by the Borrower or any Domestic Subsidiary and is not
subject to a definitive contract for its sale on the day that is 12 months
following the Closing Date, or, in the event the Borrower determines not to sell
or otherwise dispose of any Designated Property, within 90 days of such
decision, if earlier, execute any and all documents, financing statements,
agreements and instruments, and take all action (including filing Uniform
Commercial Code and other financing statements, mortgages and deeds of trust)
that may be required under applicable law, or that the Required Lenders or the
Agents may reasonably request, in order to grant, preserve, protect and perfect
a valid and first priority security interest in each such Designated Property in
favor of the Collateral Agent for the ratable benefit of the Secured Parties.

(c) Within 60 days after the Closing Date, the Borrower shall deliver
or cause to be delivered to the Collateral Agent such share certificates,
corporate records, instruments and other documents as shall be necessary to
perfect under the laws of the

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relevant jurisdictions the pledge of capital stock or other equity interests of
the Foreign Subsidiaries and other foreign companies listed on Schedule II to
the Pledge Agreement.

SECTION 5.10. Interest Rate Protection. The Borrower shall maintain the
lesser of (a) $375,000,000 in principal amount and (b) 50% of its long-term
Indebtedness as Indebtedness bearing a fixed rate of interest, whether pursuant
to Hedging Agreements (which shall be acceptable to the Agents) or otherwise.

ARTICLE VI

Negative Covenants

The Borrower covenants and agrees with each Lender that, so long as
this Agreement shall remain in effect and until the Commitments have been
terminated and the principal of and interest on each Loan, all Fees and all
other expenses or amounts payable under any Loan Document have been paid in full
and all Letters of Credit have been canceled or have expired and all amounts
drawn thereunder have been reimbursed in full, unless the Required Lenders shall
otherwise consent in writing, the Borrower will not, and will not cause or
permit any of the Subsidiaries to:

SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist
any Indebtedness, except:

(a) Indebtedness for borrowed money existing on the date
hereof and set forth in Schedules 6.01(a), (d), (e), (f) and (g), and
any extensions, renewals or replacements of such Indebtedness to the
extent the principal amount of such Indebtedness is not increased, the
weighted average life to maturity of such Indebtedness is not
decreased, such Indebtedness, if subordinated to the Obligations,
remains so subordinated on terms not less favorable to the Lenders, and
no Loan Party (unless the original obligor in respect of such
Indebtedness) becomes an obligor with respect thereto;

(b) Indebtedness created hereunder and under the other Loan
Documents;

(c) Intercompany Indebtedness of the Borrower and the
Subsidiaries to the extent permitted by Section 6.04(c);

(d) Indebtedness of the Borrower or any Subsidiary incurred to
finance the acquisition, construction or improvement of any fixed or
capital assets, including any Indebtedness assumed in connection with
the acquisition of any such assets or secured by a Lien on any such
assets prior to the acquisition thereof, and extensions, renewals and
replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof; provided that (i) such
Indebtedness is incurred prior to or within 90 days after such
acquisition or within 90 days after the completion of such construction
or improvement and (ii)

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the aggregate principal amount of Indebtedness permitted by this
Section 6.01(d), when combined with the aggregate principal amount of
all Capital Lease Obligations incurred pursuant to Section 6.01(e) and
outstanding Indebtedness listed on Schedules 6.01(d) and 6.01(e), shall
not exceed $25,000,000 at any time outstanding;

(e) Capital Lease Obligations in an aggregate principal
amount, when combined with the aggregate principal amount of all
Indebtedness incurred pursuant to Section 6.01(d) and outstanding
Indebtedness listed on Schedules 6.01(d) and 6.01(e), not in excess of
$25,000,000 at any time outstanding;

(f) Indebtedness under industrial revenue bonds in an
aggregate principal amount, when combined with the outstanding
principal amounts of industrial revenue bonds listed on Schedule
6.01(f), not to exceed $20,000,000 at any time outstanding;

(g) Indebtedness incurred by Foreign Subsidiaries in an
aggregate principal amount, when combined with the outstanding
principal amount of all Indebtedness listed on Schedule 6.01(g), not to
exceed $25,000,000 at any time outstanding;

(h) in respect of the Borrower, unsecured Guarantees of
Indebtedness of Subsidiaries permitted to be incurred pursuant to this
Agreement, provided that if such Indebtedness is subordinated to the
Obligations, the Guarantee thereof by the Borrower shall be
subordinated on terms no less favorable to the Lenders;

(i) Indebtedness of (x) the Borrower under the Dollar
Subordinated Notes in an aggregate principal amount not to exceed
$290,000,000, and the senior subordinated Guarantees thereof by the
Guarantors, and (y) FFBV under the Euro Subordinated Notes in an
aggregate principal amount not to exceed euro 100,000,000, and the
senior subordinated Guarantees thereof by the Guarantors (other than
FFBV) and the Borrower, in each case less the amount of any prepayments
or repurchases thereof after the Closing Date;

(j) Indebtedness of Finsub incurred pursuant to the
Receivables Program Documentation in an amount not exceeding
$200,000,000 in the aggregate at any time outstanding;

(k) in respect of the Loan Parties and after March 31, 2001,
Guarantees of loans, in an aggregate amount outstanding at any time not
to exceed $30,000,000, made by third parties to employees who are
participants in the Borrower's stock purchase program, if implemented,
to enable such employees to purchase common stock of the Borrower;

(l) Indebtedness or other contingent obligations (including
obligations as an account party under any letter of credit), solely in
respect of surety and performance bonds, bank guarantees and similar
obligations in respect of

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contractual obligations of the Borrower or its Subsidiaries, provided
that such obligations are (i) incurred in the ordinary course of
business of the Borrower and the Subsidiaries and (ii) except as
expressly permitted under Section 6.02(l), unsecured;

(m) Indebtedness in respect of the ABN Standby Credit in an
aggregate amount outstanding at any time not to exceed $10,000,000;

(n) Indebtedness in respect of the Fifth Third Letters of
Credit, but not any renewals, extensions or replacements thereof;

(o) to the extent constituting Indebtedness, the unsecured
corporate Guarantee of the Borrower set forth in Section 4.7 of the
Purchase Agreement; and

(p) other unsecured Indebtedness of the Borrower or the
Subsidiaries (other than Foreign Subsidiaries) in an aggregate
principal amount not exceeding $25,000,000 at any time outstanding.

SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien
on any property or assets (including stock or other securities of any person,
including any Subsidiary) now owned or hereafter acquired by it or on any income
or revenues or rights in respect of any thereof, except:

(a) Liens on property or assets of the Borrower and its
Subsidiaries existing on the date hereof and set forth in Schedule
6.02; provided that to the extent such Liens secure obligations, they
shall secure only those obligations which they secure on the date
hereof;

(b) any Lien created under the Loan Documents, including Liens
created under the Security Documents to secure the Pari Passu Exposure,
Hedging Agreements entered into with Lenders or Affiliates of Lenders,
and the Guarantees described in Section 6.01(k);

(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary; provided that
(i) such Lien is not created in contemplation of or in connection with
such acquisition, (ii) such Lien does not apply to any other property
or assets of the Borrower or any Subsidiary and (iii) such Lien does
not (A) materially interfere with the use, occupancy and operation of
any Mortgaged Property, (B) materially reduce the fair market value of
such Mortgaged Property but for such Lien or (C) result in any material
increase in the cost of operating, occupying or owning or leasing such
Mortgaged Property;

(d) Liens for taxes not yet due or which are being contested
in compliance with Section 5.03;

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(e) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business and securing obligations that are not due and payable or
which are being contested in compliance with Section 5.03;

(f) pledges and deposits made in the ordinary course of
business in compliance with workmen's compensation, unemployment
insurance and other social security laws or regulations;

(g) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (other than Capital
Lease Obligations), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in
the ordinary course of business;

(h) zoning restrictions, easements, rights-of-way,
restrictions on use of real property and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate,
are not substantial in amount and do not materially detract from the
value of the property subject thereto or interfere with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries;

(i) purchase money security interests in real property,
improvements thereto or equipment hereafter acquired (or, in the case
of improvements, constructed) by the Borrower or any Subsidiary;
provided that (i) such security interests secure Indebtedness permitted
by Section 6.01, (ii) such security interests are incurred, and the
Indebtedness secured thereby is created, within 90 days after such
acquisition (or construction), (iii) the Indebtedness secured thereby
does not exceed 90% of the lesser of the cost or the fair market value
of such real property, improvements or equipment at the time of such
acquisition (or construction) and (iv) such security interests do not
apply to any other property or assets of the Borrower or any
Subsidiary;

(j) Liens on the property of Finsub incurred pursuant to the
Receivables Program Documentation;

(k) Liens arising out of judgments or awards in respect of
which the Borrower or any of the Subsidiaries shall in good faith be
prosecuting an appeal or proceedings for review in respect of which
there shall be secured a subsisting stay of execution pending such
appeal or proceedings; provided that the aggregate amount of all such
judgments or awards (and any cash and the fair market value of any
property subject to such Liens) does not exceed $10,000,000 at any time
outstanding; and

(l) Liens on assets of Foreign Subsidiaries; provided that (i)
such Liens do not extend to, or encumber, assets which constitute
Collateral or the capital stock of any of the Subsidiaries, and (ii)
such Liens extending to the assets of any Foreign Subsidiary secure
only Indebtedness (x) incurred by such Foreign

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Subsidiary pursuant to Section 6.01(g) or (y) of up to $5,000,000 in
the aggregate incurred by Foreign Subsidiaries pursuant to Section
6.01(l).

SECTION 6.03. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred unless (a) the sale of such
property is permitted by Section 6.05 and (b) any Capital Lease Obligations or
Liens arising in connection therewith are permitted by Sections 6.01 and 6.02,
respectively.

SECTION 6.04. Investments, Loans and Advances. Purchase, hold or
acquire any capital stock, evidences of indebtedness or other securities of,
make or permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, any other person, except:

(a) (i) investments by the Borrower and the Subsidiaries
existing on the date hereof in the capital stock or other equity
interests of the Subsidiaries, (ii) investments in an aggregate amount
not to exceed $30,000,000, the proceeds of which are used, directly or
indirectly, to acquire from any third-party joint venture participant
all such participant's interest in a joint venture, with the result
that the joint venture becomes a wholly owned subsidiary, and (iii)
additional investments by the Borrower and the Subsidiaries in the
capital stock or other equity interests of the Subsidiaries; provided
that (A) any such capital stock or other equity interests held by a
Loan Party shall be pledged pursuant to the Pledge Agreement (subject
to the limitations applicable to voting stock of a Foreign Subsidiary
referred to in Section 4.02(f)) and (B) the aggregate amount of equity
investments made after the Closing Date pursuant to this clause (iii)
by Loan Parties in Subsidiaries that are not Loan Parties shall not
exceed $25,000,000 at any time outstanding;

(b) Permitted Investments;

(c) (i) intercompany loans and advances existing on the
Closing Date (after giving effect to the Acquisition and the financing
therefor) and set forth on Schedule 6.04 and renewals, refinancings,
substitutions and replacements of such intercompany loans and advances
to the extent the aggregate principal amount of all such loans and
advances is not increased, (ii) other loans or advances made by the
Borrower to any Subsidiary and made by any Subsidiary to the Borrower
or any other Subsidiary; provided that (x) any such loans and advances
pursuant to this paragraph (c) made by a Loan Party to a Subsidiary
that is not a Loan Party shall be evidenced by a senior promissory note
(in form and substance satisfactory to the Agents) and (y) the amount
of such loans and advances made pursuant to clause (ii) of this
paragraph (c) by Loan Parties to Subsidiaries that are not Loan Parties
shall not exceed (A) $40,000,000 at any time outstanding prior to the
six-month anniversary of the Closing Date and

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(B) $25,000,000 at any time outstanding thereafter; (iii) a loan of
approximately $3,000,000 (or the equivalent thereof in another
currency) to be made to a subsidiary of Ingersoll-Rand Company in
connection with the Acquisition and required to be repaid within five
Business Days following the Closing Date and (iv) the Borrower or a
wholly owned subsidiary may own the Defeased IRBs;

(d) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes
with, customers and suppliers, in each case in the ordinary course of
business;

(e) the Borrower and the Subsidiaries may make loans and
advances in the ordinary course of business to their respective
employees so long as the aggregate principal amount thereof at any time
outstanding (determined without regard to any write-downs or write-offs
of such loans and advances) shall not exceed $5,000,000;

(f) the Borrower may enter into Hedging Agreements that (i)
are required by Section 5.10 or (ii) are not speculative in nature, are
entered into in the ordinary course of business and are related to
interest rate hedging for floating interest rate exposure or hedging of
bookings, sales, income and dividends derived from the foreign
operations of the Borrower or any Subsidiary or otherwise related to
purchases from foreign suppliers;

(g) the Borrower or any Subsidiary may acquire all or
substantially all the assets of a person or line of business of such
person, or not less than 100% of the capital stock or other equity
interests of a person (referred to herein as the "Acquired Entity");
provided that (i) 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 Borrower or any Subsidiary; (ii) the
Acquired Entity shall be a going concern, shall be in a similar line of
business as that of the Borrower and the Subsidiaries as conducted
during the current and most recent calendar year and shall have had
positive Consolidated EBITDA over the twelve month period preceding the
Acquisition; and (iii) at the time of such transaction (A) both before
and after giving effect thereto, no Event of Default or Default shall
have occurred and be continuing; (B) the Borrower would be in
compliance with the covenants set forth in Sections 6.11 and 6.12 and
the Leverage Ratio shall be at least 25 basis points below the maximum
Leverage Ratio permitted at the time pursuant to Section 6.13, in each
case as of the most recently completed period of four consecutive
fiscal quarters ending prior to such transaction for which the
financial statements and certificates required by Section 5.04(a) or
5.04(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
Section 6.04(g) occurring after such period) as if such transaction had
occurred as of the first day of such period; (C) after giving effect to
such acquisition, there must be at least $60,000,000 of unused

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and available Revolving Credit Commitments; and (D) the aggregate of
the consideration paid in connection with all such acquisitions
(including any Indebtedness of the Acquired Entity that is assumed by
the Borrower or any Subsidiary following such acquisition) shall not
exceed (x) in the event that the Borrower's Leverage Ratio calculated
as provided under clause (iii)(B) above is greater than 2.5 to 1.0,
$50,000,000 for all such acquisitions, and (y) in the event that the
Borrower's Leverage Ratio calculated as provided under clause 
(iii)(B) above is equal to or less than 2.5 to 1.0, $100,000,000 in any
fiscal year of the Borrower, which amount may be increased in any
fiscal year (to an amount not to exceed $150,000,000) by the amount of
consideration for any such acquisition in such fiscal year consisting
solely of common stock of the Borrower (any acquisition of an Acquired
Entity meeting all the criteria of this Section 6.04(g) being referred
to herein as a "Permitted Acquisition"). All pro forma calculations
required to be made pursuant to this Section 6.04(g) shall (i) include
only those adjustments that would be permitted or required by
Regulation S-X under the Securities Act of 1933, as amended, are
reviewed by the Borrower's independent certified public accountants and
are based on reasonably detailed written assumptions reasonably
acceptable to the Agents and (ii) be certified to by a Financial
Officer as having been prepared in good faith based upon reasonable
assumptions; and

(h) in addition to investments permitted by clauses (a)
through (g) above, additional investments, loans and advances by the
Borrower and the Subsidiaries (other than equity investments in Foreign
Subsidiaries) so long as the aggregate amount invested, loaned or
advanced pursuant to this paragraph (h) (determined without regard to
any write-downs or write-offs of such investments, loans and advances)
does not exceed $10,000,000 in the aggregate.

SECTION 6.05. Mergers, Consolidations, Sales of Assets and
Acquisitions. (a) Merge into or consolidate with any other person, or permit any
other person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of transactions) all or
substantially all the assets of the Borrower (whether now owned or hereafter
acquired) or any capital stock of any Subsidiary, or purchase, lease or
otherwise acquire (in one transaction or a series of transactions) all or any
substantial part of the assets of any other person, except that (i) the Borrower
and any Subsidiary may purchase and sell inventory in the ordinary course of
business, (ii) if at the time thereof and immediately after giving effect
thereto no Event of Default or Default shall have occurred and be continuing (x)
any wholly owned subsidiary of the Borrower may merge into the Borrower in a
transaction in which the Borrower is the surviving corporation and (y) any
wholly owned subsidiary of the Borrower may merge into or consolidate with any
other wholly owned subsidiary of the Borrower in a transaction in which the
surviving entity is a wholly owned subsidiary of the Borrower and no person
other than the Borrower or a wholly owned subsidiary of the Borrower receives
any consideration, (iii) the Acquisition may be consummated, (iv) the Borrower
and the Subsidiaries may make Permitted Acquisitions, (v) any Inactive
Subsidiary may be liquidated, (vi) any Loan Party (other than the Borrower) may
sell, transfer, lease or otherwise dispose of (in one transaction or a series

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of transactions) all or substantially all of the assets of such Loan Party to
another Loan Party and (vii) the Borrower or any Subsidiary may sell Program
Receivables to Finsub, and Finsub may sell Program Receivables pursuant to the
Receivables Program Documentation.

(b) Engage in any Asset Sale otherwise permitted under paragraph (a)
above unless (i) such Asset Sale is for consideration at least 75% of which is
cash, (ii) except with respect to Asset Sales of Designated Properties or
Consent Decree Assets, such consideration is at least equal to the fair market
value (as determined in good faith by the board of directors of the Borrower) of
the assets being sold, transferred, leased or disposed of and (iii) except with
respect to Asset Sales of Designated Properties or Consent Decree Assets, the
fair market value of all assets sold, transferred, leased or disposed of
pursuant to this paragraph (b) shall not exceed (i) $50,000,000 in any fiscal
year or (ii) $150,000,000 in the aggregate.

(c) Engage in any Asset Swap otherwise permitted by Section 6.05(a)
unless all of the following conditions are met: (i) such exchange complies with
the definition of Asset Swap, (ii) if the fair market value of the assets
transferred exceeds $25,000,000, the board of directors of the Borrower approves
such exchange and the Borrower secures an appraisal given by an unaffiliated
third party in form and substance reasonably satisfactory to the Administrative
Agent, (iii) the fair market value of all assets of the Borrower and the
Subsidiaries transferred pursuant to Asset Swaps shall not exceed $100,000,000
in the aggregate and (iv) the fair market value of any property or assets
received is at least equal to the fair market value of the property or assets so
transferred.

SECTION 6.06. Dividends and Distributions; Restrictive Agreements. (a)
Declare or pay, directly or indirectly, any dividend or make any other
distribution (by reduction of capital or otherwise), whether in cash, property,
securities or a combination thereof, with respect to any shares of its capital
stock or directly or indirectly redeem, purchase, retire or otherwise acquire
for value (or permit any Subsidiary to purchase or acquire) any shares of any
class of its capital stock or set aside any amount for any such purpose (a
"Restricted Payment"); provided, however, that (i) any Subsidiary may declare
and pay dividends or make other distributions ratably to its shareholders, (ii)
so long as no Event of Default or Default shall have occurred and be continuing
or would result therefrom, the Borrower may repurchase shares of its capital
stock owned by employees of the Borrower or the Subsidiaries or make payments to
employees of the Borrower or the Subsidiaries in connection with the exercise of
stock options, stock appreciation rights or similar equity incentives or equity
based incentives upon termination of employment or in connection with the death
or disability of such employees, in an aggregate amount not to exceed $5,000,000
in any fiscal year, (iii) so long as no Event of Default or Default shall have
occurred and be continuing or would result therefrom, the Borrower may
repurchase shares of its capital stock for contribution to employee benefit
plans maintained by the Borrower and the Subsidiaries, in an aggregate amount
not to exceed $5,000,000 in any fiscal year and (iv) so long as the Borrower has
obtained and maintains Investment Grade Ratings, and so long as no Event of
Default or Default shall have occurred and be continuing or would result
therefrom, the Borrower may make

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Restricted Payments in an amount not to exceed in the aggregate 50% of the
Consolidated Net Income accrued during the period (treated as one accounting
period) from the beginning of the fiscal quarter immediately following the
fiscal quarter during which the Investment Grade Ratings are obtained to the end
of the most recent fiscal quarter for which financial statements have been
delivered to the Lenders pursuant to Section 5.04(a) or (b) prior to the date of
such Restricted Payment.

(b) Enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (i) the
ability of the Borrower or any Subsidiary to create, incur or permit to exist
any Lien upon any of its property or assets to secure the Obligations, or (ii)
the ability of any Subsidiary to pay dividends or other distributions with
respect to any shares of its capital stock or to make or repay loans or advances
to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the
Borrower or any other Subsidiary; provided that (A) the foregoing shall not
apply to restrictions and conditions imposed by law or by any Loan Document or
Subordinated Note Document, (B) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder,
(C) the foregoing shall not apply to restrictions and conditions imposed on
Finsub under the Receivables Program Documentation, (D) the foregoing shall not
apply to restrictions and conditions imposed on any Foreign Subsidiary by the
terms of any Indebtedness of such Foreign Subsidiary permitted to be incurred
hereunder, (E) clause (i) of the foregoing shall not apply to restrictions or
conditions imposed by any agreement relating to secured Indebtedness permitted
by this Agreement if such restrictions or conditions apply only to the property
or assets securing such Indebtedness and (F) clause (i) of the foregoing shall
not apply to customary provisions in leases and other contracts restricting the
assignment thereof.

SECTION 6.07. Transactions with Affiliates. Except for transactions by
or among Loan Parties, sell or transfer any property or assets to, or purchase
or acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except that (a) the Borrower or any
Subsidiary may engage in any of the foregoing transactions in the ordinary
course of business at prices and on terms and conditions not less favorable to
the Borrower or such Subsidiary than could be obtained on an arm's-length basis
from unrelated third parties, (b) reasonable and customary fees may be paid to
members of the Board of Directors, officers, employees and consultants of the
Borrower and the Subsidiaries for services rendered to the Borrower or any such
Subsidiary in the ordinary course of business, together with customary
indemnities in connection therewith and in accordance with applicable law, (c)
dividends and other payments permitted to be made under Section 6.06 will be
permitted, (d) the Borrower, Finsub and the other Subsidiaries may consummate
the transactions contemplated by the Receivables Program Documentation, (e) the
Borrower and the Subsidiaries may enter into intercompany transactions permitted
by Sections 6.04 and (f) the Borrower and the Subsidiaries may consummate the
Transactions.

SECTION 6.08. Business of Borrower and Subsidiaries. Engage at any time
in any business or business activity other than the business currently conducted
by it and

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business activities reasonably incidental thereto, which, in the case of Finsub,
shall be limited solely to performing its obligations under the Receivables
Program Documentation and, in the case of FFBV, shall be limited solely to
performing its obligations under the Subordinated Note Documents and the Loan
Documents.

SECTION 6.09. Other Indebtedness and Agreements. (a) Permit any waiver,
supplement, modification, amendment, termination or release of any indenture,
instrument or agreement pursuant to which any Material Indebtedness of the
Borrower or any of the Subsidiaries is outstanding if the effect of such waiver,
supplement, modification, amendment, termination or release would materially
increase the obligations of the obligor or confer additional material rights on
the holder of such Indebtedness in a manner adverse to the Borrower, any of the
Subsidiaries or the Lenders.

(b)(i) Make any distribution, whether in cash, property, securities or
a combination thereof, other than regular scheduled payments of interest as and
when due (to the extent not prohibited by applicable subordination provisions),
in respect of, or pay, or offer or commit to pay, or directly or indirectly
redeem, repurchase, retire or otherwise acquire for consideration, or set apart
any sum for the aforesaid purposes, any subordinated Indebtedness (including the
Subordinated Notes), or (ii) pay in cash any amount in respect of any
Indebtedness or preferred equity interests that may at the obligor's option be
paid in kind or in other securities.

SECTION 6.10. Capital Expenditures. Until such time as the Borrower
obtains, and during any period in which the Borrower does not maintain,
Investment Grade Ratings, permit the aggregate amount of Capital Expenditures
made by the Borrower and the Subsidiaries (a) from the Closing Date through and
including December 31, 2000, to exceed $40,000,000 in the aggregate and (b) in
any fiscal year thereafter, to exceed $50,000,000 in the aggregate.

The amount of permitted Capital Expenditures set forth above in respect of any
fiscal year commencing with the fiscal year ending on December 31, 2001, shall
be increased (but not reduced) by (i) the amount of unused permitted Capital
Expenditures for the immediately preceding fiscal year less (ii) an amount equal
to unused Capital Expenditures carried forward to such preceding fiscal year.

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SECTION 6.11. Interest Coverage Ratio. Permit the Interest Coverage
Ratio for any period of four consecutive fiscal quarters, in each case taken as
one accounting period, ending during any period set forth below to be less than
the ratio set forth opposite such period below:

Period                                                   Ratio
------                                                   -----

From and including September 30, 2000                       1.85 to 1.00
through and including September 29, 2001

From and including September 30, 2001                       2.00 to 1.00
through and including September 29, 2002

From and including September 30, 2002                       2.25 to 1.00
through and including September 29, 2003

From and including September 30, 2003                       3.00 to 1.00
through and including September 29, 2004

Thereafter                                                  4.00 to 1.00

SECTION 6.12. Fixed Charge Coverage Ratio. Permit the Fixed Charge
Coverage Ratio for any period of four consecutive fiscal quarters, in each case
taken as one accounting period, ending during any period set forth below to be
the less than the ratio set forth opposite such period below:

Period                                                    Ratio
------                                                    -----

From and including September 30, 2000                        1.10 to 1.00
through and including September 29, 2003

From and including September 30, 2003                        1.15 to 1.00
through and including September 29, 2004

Thereafter                                                   1.20 to 1.00

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SECTION 6.13. Maximum Leverage Ratio. Permit the Leverage Ratio at any
time during a period set forth below to be greater than the ratio set forth
opposite such period below:

Period                                                    Ratio
------                                                    -----

From and including September 30, 2000                        5.00 to 1.00
through and including June 29, 2001

From and including June 30, 2001                             4.75 to 1.00
through and including September 29, 2001

From and including September 30, 2001                        4.50 to 1.00
through and including March 30,  2002

From and including March 31, 2002                            4.25 to 1.00
through and including June 29, 2002

From and including June 30, 2002                             3.75 to 1.00
through and including December 30, 2002

From and including December 31, 2002                         3.50 to 1.00
through and including September 29, 2003

From and including September 30, 2003                        3.00 to 1.00
through and including September 29, 2004

Thereafter                                                   2.50 to 1.00

SECTION 6.14. Designated Senior Indebtedness. Designate any
Indebtedness as "Designated Senior Indebtedness" for purposes of either the
Dollar Subordinated Note Indenture or the Euro Subordinated Note Indenture.

SECTION 6.15. Fiscal Year. With respect to the Borrower, change its
fiscal year-end to a date other than December 31; provided that the Borrower may
use a 52/53 week fiscal year ending around December 31.

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ARTICLE VII

Events of Default

In case of the happening of any of the following events ("Events of
Default"):

(a) any representation or warranty made or deemed made in or in
connection with any Loan Document or the borrowings or issuances of Letters of
Credit hereunder, or any representation, warranty, statement or information
contained in any report, certificate, financial statement or other instrument
furnished in connection with or pursuant to any Loan Document, shall prove to
have been false or misleading in any material respect when so made, deemed made
or furnished;

(b) default shall be made in the payment in the applicable currency of
any principal of any Loan or the reimbursement with respect to any L/C
Disbursement (after giving effect to the reimbursement of the applicable Issuing
Bank out of the proceeds of a Revolving Loan or Swingline Loan pursuant to
Section 2.02(f) or Section 2.22(c), respectively) when and as the same shall
become due and payable, whether at the due date thereof or at a date fixed for
prepayment thereof or by acceleration thereof or otherwise;

(c) default shall be made in the payment in the applicable currency of
any interest on any Loan or any Fee or L/C Disbursement or any other Obligation
(other than an amount referred to in (b) above) due under any Loan Document,
when and as the same shall become due and payable, and such default shall
continue unremedied for a period of three Business Days;

(d) default shall be made in the due observance or performance by the
Borrower or any Subsidiary of any covenant, condition or agreement contained in
Section 5.01(a), 5.05 or 5.08 or in Article VI;

(e) default shall be made in the due observance or performance by the
Borrower or any Subsidiary of any covenant, condition or agreement contained in
any Loan Document (other than those specified in (b), (c) or (d) above) and such
default shall continue unremedied for a period of 15 days after notice thereof
from the Administrative Agent or any Lender to the Borrower;

(f) the Borrower or any Subsidiary shall (i) fail to pay any principal
or interest, regardless of amount, due in respect of any Material Indebtedness
when and as the same shall become due and payable, or (ii) fail to observe or
perform any other term, covenant, condition or agreement contained in any
agreement or instrument evidencing or governing any such Indebtedness if the
effect of any failure referred to in this clause (ii) is to cause, or to permit
the holder or holders of such Indebtedness or a trustee on its or their behalf
to cause, such Indebtedness to become due prior to its stated maturity;

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(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Borrower or any Subsidiary (other than any Inactive
Subsidiary), or of a substantial part of the property or assets of the Borrower
or a Subsidiary (other than any Inactive Subsidiary), under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
Federal, state or foreign bankruptcy, insolvency, receivership or similar law,
(ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Subsidiary (other than
any Inactive Subsidiary) or for a substantial part of the property or assets of
the Borrower or a Subsidiary (other than any Inactive Subsidiary) or (iii) the
winding-up or liquidation of the Borrower or any Subsidiary (other than any
Inactive Subsidiary); and such proceeding or petition shall continue undismissed
for 60 days or an order or decree approving or ordering any of the foregoing
shall be entered;

(h) the Borrower or any Subsidiary (other than any Inactive Subsidiary)
shall (i) voluntarily commence any proceeding or file any petition seeking
relief under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other Federal, state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or the filing of any
petition described in (g) above, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any Subsidiary (other than any Inactive Subsidiary) or for a
substantial part of the property or assets of the Borrower or any Subsidiary
(other than any Inactive Subsidiary), (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors, (vi) become unable, admit in
writing its inability or fail generally to pay its debts as they become due or
(vii) take any action for the purpose of effecting any of the foregoing;

(i) one or more judgments for the payment of money in an aggregate
amount in excess of $10,000,000 shall be rendered against the Borrower, any
Subsidiary (other than any Inactive Subsidiary) or any combination thereof and
the same shall remain undischarged for a period of 30 consecutive days during
which execution shall not be effectively stayed, or any action shall be legally
taken by a judgment creditor to levy upon assets or properties of the Borrower
or any Subsidiary (other than any Inactive Subsidiary) to enforce any such
judgment;

(j) an ERISA Event shall have occurred that, in the reasonable opinion
of the Required Lenders, when taken together with all other such ERISA Events,
could reasonably be expected to result in a Material Adverse Effect;

(k) any Guarantee under the Guarantee Agreement for any reason shall
cease to be in full force and effect (other than in accordance with its terms),
or any Guarantor shall deny in writing that it has any further liability under
its Guarantee Agreement (other than as a result of the discharge of such
Guarantor in accordance with the terms of the Loan Documents);

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(l) any security interest purported to be created by any Security
Document shall cease to be, or shall be asserted by the Borrower or any other
Loan Party not to be, a valid, perfected, first priority (except as otherwise
expressly provided in this Agreement or such Security Document) security
interest in the securities, assets or properties covered thereby, except to the
extent that any such loss of perfection or priority results from the failure of
the Collateral Agent to maintain possession of certificates representing
securities pledged under the Pledge Agreement and except to the extent that such
loss is covered by a lender's title insurance policy and the related insurer
promptly after such loss shall have acknowledged in writing that such loss is
covered by such title insurance policy;

(m) any of the Obligations shall cease to constitute "Senior
Indebtedness" under and as defined in either the Dollar Subordinated Note
Indenture or the Euro Subordinated Note Indenture; or

(n) there shall have occurred a Change in Control;

then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at the request of
the Required Lenders shall, by notice to the Borrower, take either or both of
the following actions, at the same or different times: (i) terminate forthwith
the Commitments and (ii) declare the Loans then outstanding to be forthwith due
and payable in whole or in part, whereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and any
unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder
and under any other Loan Document, shall become forthwith due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by the Borrower, anything contained herein or
in any other Loan Document to the contrary notwithstanding; and in any event
with respect to the Borrower described in paragraph (g) or (h) above, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and any unpaid accrued Fees
and all other liabilities of the Borrower accrued hereunder and under any other
Loan Document, shall automatically become due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrower, anything contained herein or in any other Loan
Document to the contrary notwithstanding.

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ARTICLE VIII

The Agents

SECTION 8.01. Appointment. (a) Each Lender hereby irrevocably (subject
to Section 8.03) appoints Bank of America, N.A. to act as Administrative Agent
and Collateral Agent on behalf of the Lenders and the Issuing Banks and Credit
Suisse First Boston to act as Syndication Agent. Each of the Lenders and each
assignee of any such Lender hereby irrevocably authorizes the Agents to take
such actions on behalf of such Lender or assignee or Issuing Bank and to
exercise such powers as are specifically delegated to the Agents by the terms
and provisions hereof and of the other Loan Documents, together with such
actions and powers as are reasonably incidental thereto. The Administrative
Agent is hereby expressly authorized by the Lenders and the Issuing Banks,
without hereby limiting any implied authority, (i) to receive on behalf of the
Lenders and the Issuing Banks all payments of principal of and interest on the
Loans, all payments in respect of L/C Disbursements and all other amounts due to
the Lenders hereunder, and promptly to distribute to each Lender or Issuing Bank
its proper share of each payment so received; (ii) to give notice on behalf of
each of the Lenders to the Borrower of any Event of Default specified in this
Agreement of which the Administrative Agent has actual knowledge acquired in
connection with its agency hereunder; and (iii) to distribute to each Lender
copies of all notices, financial statements and other materials delivered by the
Borrower or any other Loan Party pursuant to this Agreement or the other Loan
Documents as received by the Administrative Agent. Without limiting the
generality of the foregoing, the Agents are hereby expressly authorized to
execute any and all documents (including releases) with respect to the
Collateral and the rights of the Secured Parties with respect thereto, as
contemplated by and in accordance with the provisions of this Agreement and the
Security Documents. Notwithstanding any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document, no Agent shall have
any duties or responsibilities except those expressly set forth herein, nor
shall any Agent have or be deemed to have any fiduciary relationship with any
Lender or participant, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or any
other Loan Document or otherwise exist against any Agent. Without limiting the
generality of the foregoing sentence, the use of the term "agent" in this
Agreement with reference to any Agent is not intended to connote any fiduciary
or other implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative relationship between
independent contracting parties.

(b) The Issuing Banks shall act on behalf of the Lenders with respect
to any Letters of Credit issued by them and the documents associated therewith
until such time and except for so long as the Administrative Agent may agree at
the request of the Required Lenders to act for such Issuing Bank with respect
thereto; provided, however, that the Issuing Banks shall have all of the
benefits and immunities (i) provided to the Agents in this Article VIII with
respect to any acts taken or omissions suffered by an Issuing Bank in connection
with Letters of Credit issued by it or proposed to be issued

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by it and the application and agreements for letters of credit pertaining to the
Letters of Credit as fully as if the term "Agent" as used in this Article VIII
included Issuing Banks with respect to such acts or omissions and (ii) as
additionally provided in this Agreement with respect to Issuing Banks.

SECTION 8.02. Liability of Agents. Neither the Agents nor any of their
respective directors, officers, employees or agents shall be liable as such for
any action taken or omitted by any of them except for its or his own gross
negligence or wilful misconduct, or be responsible for any statement, warranty
or representation herein or the contents of any document delivered in connection
herewith, or be required to ascertain or to make any inquiry concerning the
performance or observance by the Borrower or any other Loan Party of any of the
terms, conditions, covenants or agreements contained in any Loan Document. The
Agents shall not be responsible to the Lenders for the due execution,
genuineness, validity, enforceability or effectiveness of this Agreement or any
other Loan Documents, instruments or agreements. The Agents shall in all cases
be fully protected in acting, or refraining from acting, in accordance with
written instructions signed by the Required Lenders and, except as otherwise
specifically provided herein, such instructions and any action or inaction
pursuant thereto shall be binding on all the Lenders. Each Agent shall, in the
absence of knowledge to the contrary, be entitled to rely on any instrument or
document believed by it in good faith to be genuine and correct and to have been
signed or sent by the proper person or persons. Neither the Agents nor any of
their respective directors, officers, employees or agents shall have any
responsibility to the Borrower or any other Loan Party on account of the failure
of or delay in performance or breach by any Lender or Issuing Bank of any of its
obligations hereunder or to any Lender or Issuing Bank on account of the failure
of or delay in performance or breach by any other Lender or Issuing Bank or the
Borrower or any other Loan Party of any of their respective obligations
hereunder or under any other Loan Document or in connection herewith or
therewith. Each of the Agents may execute any and all duties hereunder by or
through agents or employees and shall be entitled to rely upon the advice of
legal counsel selected by it with respect to all matters arising hereunder and
shall not be liable for any action taken or suffered in good faith by it in
accordance with the advice of such counsel.

SECTION 8.03. Resignation and Replacement. Subject to the appointment
and acceptance of a successor Agent as provided below, any Agent may resign at
any time by notifying the Lenders and the Borrower. Upon any such resignation,
the Required Lenders shall have the right to appoint a successor acceptable to
the Borrower, such consent not to be unreasonably withheld; provided, however,
that the consent of the Borrower shall not be required to any such appointment
during the continuance of any Event of Default. If no successor shall have been
so appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation, then
the retiring Agent may, on behalf of the Lenders, appoint a successor Agent
which shall be a bank with an office in the United States, having a combined
capital and surplus of at least $500,000,000 or an Affiliate of any such bank.
Upon the acceptance of any appointment as Agent hereunder by a successor bank,
such successor shall succeed to and become vested with all the rights, powers,
privileges and

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duties of the retiring Agent and the retiring Agent shall be discharged from its
duties and obligations hereunder. After the Agent's resignation hereunder, the
provisions of this Article and Section 9.05 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.

SECTION 8.04. Agent in Individual Capacity. With respect to the Loans
made by it hereunder, each Agent in its individual capacity and not as Agent
shall have the same rights and powers as any other Lender and may exercise the
same as though it were not an Agent, and the Agents and their Affiliates may
accept deposits from, lend money to and generally engage in any kind of business
with the Borrower or any Subsidiary or other Affiliate thereof as if it were not
an Agent.

SECTION 8.05. Indemnification of Agents. Each Lender agrees (a) to
reimburse the Agents, on demand, in the amount of its pro rata share (based on
the aggregate amount of its outstanding Term Loans and its Revolving Credit
Commitments hereunder) of any expenses incurred for the benefit of the Lenders
by the Agents, including reasonable counsel fees and disbursements, the
allocated cost of internal legal services, all disbursements of internal counsel
and compensation of agents and employees paid for services rendered on behalf of
the Lenders, that shall not have been reimbursed by the Borrower and (b) to
indemnify and hold harmless each Agent and any of its directors, officers,
employees or agents, on demand, in the amount of such pro rata share, from and
against any and all liabilities, taxes, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by or asserted against it in
its capacity as Agent or any of them in any way relating to or arising out of
this Agreement or any other Loan Document or any action taken or omitted by it
or any of them under this Agreement or any other Loan Document, to the extent
the same shall not have been reimbursed by the Borrower or any other Loan Party,
provided that no Lender shall be liable to an Agent or any such other
indemnified person for any portion of such liabilities, taxes, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements that is determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or wilful
misconduct of such Agent or any of its directors, officers, employees or agents.
Each Revolving Credit Lender agrees to reimburse each Issuing Bank and its
directors, employees and agents, in each case, to the same extent and subject to
the same limitations as provided above for the Agents.

SECTION 8.06. No Reliance. Each Lender acknowledges that it has,
independently and without reliance upon the Agents or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agents or
any other Lender and based on such documents and information as it shall from
time to time deem appropriate, continue to make its own decisions in taking or
not taking action under or based upon this Agreement or any other Loan Document,
any related agreement or any document furnished hereunder or thereunder.

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SECTION 8.07. Notice of Default. No Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default,
except, in the case of the Administrative Agent, with respect to defaults in the
payment of principal, interest and fees required to be paid to the
Administrative Agent for the account of the Lenders, unless such Agent shall
have received written notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". An Agent will notify the Lenders of its receipt
of any such notice. The Administrative Agent shall take such action with respect
to such Default or Event of Default as may be directed by the Required Lenders;
provided, however, that unless and until the Administrative Agent has received
any such direction, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interest
of the Lenders.

ARTICLE IX

Miscellaneous

SECTION 9.01. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:

(a) if to the Borrower, to it at 222 W. Las Colinas Boulevard,
Suite 1500, Irving, TX 75039, Attention of Ms. Renee Hornbaker
(Telecopy No. (972) 443-6912);

(b) if to the Administrative Agent, to Bank of America, N.A.,
Agency Management-Los Angeles, Mail Code CA9-706-11-03, 555 South
Flower St., Los Angeles, CA 90071, Attention of Gina Meador (Telecopy
No. (213) 228-2299), with a copy to Bank of America, N.A., CPM-General
Corporate-West, Mail Code CA9-706-11-07, 555 South Flower St., Los
Angeles, CA 90071, Attention of Therese Fontaine (Telecopy No. (213)
623-1959);

(c) if to the Syndication Agent, to Credit Suisse First
Boston, Eleven Madison Avenue, New York, NY 10010, Attention of Mr.
James Moran (Telecopy No. (212) 325-8615); and

(d) if to a Lender, to it at its address (or telecopy number)
set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant
to which such Lender shall have become a party hereto.

All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case

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delivered, sent or mailed (properly addressed) to such party as provided in this
Section 9.01 or in accordance with the latest unrevoked direction from such
party given in accordance with this Section 9.01.

SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Banks and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Banks, regardless of any investigation made by the Lenders or the
Issuing Banks or on their behalf, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any Fee or any
other amount payable under this Agreement or any other Loan Document is
outstanding and unpaid or any Letter of Credit is outstanding and so long as the
Commitments have not been terminated. The provisions of Sections 2.14, 2.16,
2.20 and 9.05 shall remain operative and in full force and effect regardless of
the expiration of the term of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Loans, the
expiration of the Commitments, the expiration of any Letter of Credit, the
invalidity or unenforceability of any term or provision of this Agreement or any
other Loan Document, or any investigation made by or on behalf of the
Administrative Agent, the Collateral Agent, any Lender or any Issuing Bank.

SECTION 9.03. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof
(including as contemplated by Section 9.13 herein) which, when taken together,
bear the signatures of each of the other parties hereto, and thereafter shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.

SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the permitted successors and assigns of such party, which shall include,
in the case of a Lender, any entity resulting from a merger or consolidation;
and all covenants, promises and agreements by or on behalf of the Borrower, the
Administrative Agent, the Issuing Banks or the Lenders that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.

(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided,
however, that (i) except in the case of an assignment to a Lender or an
Affiliate or Related Fund of a Lender, (x) the Borrower and the Administrative
Agent (and, in the case of any assignment of a Revolving Credit Commitment, the
Issuing Banks and the Swingline Lender) must give their prior written consent to
such assignment (which consent shall not be unreasonably withheld or delayed);
provided, however, that the consent of the Borrower shall not be required to any
such assignment during the continuance of any Event of Default, and

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(y) the amount of the Commitment of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Administrative Agent) shall not be less
than $2,500,000 (or, if less, the entire remaining amount of such Lender's
Commitment), (ii) the parties to each such assignment shall execute and deliver
to the Administrative Agent an Assignment and Acceptance, together with a
processing and recordation fee of $3,500; provided, however, that such
processing and recordation fee shall not apply to any Assignment and Acceptances
delivered to the Administrative Agent on or before the second Business Day
following the Closing Date and (iii) the assignee, if it shall not be a Lender,
shall deliver to the Administrative Agent an Administrative Questionnaire. Upon
acceptance and recording pursuant to paragraph (e) of this Section 9.04, from
and after the effective date specified in each Assignment and Acceptance, (A)
the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement and (B) the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.14, 2.16, 2.20 and 9.05, as well as to any Fees accrued
for its account and not yet paid).

(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Term Loan Commitment and Revolving Credit Commitment, and the outstanding
balances of its Term Loans and Revolving Loans, in each case without giving
effect to assignments thereof which have not become effective, are as set forth
in such Assignment and Acceptance, (ii) except as set forth in (i) above, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of the Borrower or any Subsidiary or the
performance or observance by the Borrower or any Subsidiary of any of its
obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such Assignment and
Acceptance; (iv) such assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements referred
to in Section 3.05(a) or delivered pursuant to Section 5.04 and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (v) such
assignee will independently and without reliance upon the Administrative Agent,
the Collateral Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not

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taking action under this Agreement; (vi) such assignee appoints and authorizes
the Administrative Agent and the Collateral Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement as are delegated
to the Administrative Agent and the Collateral Agent, respectively, by the terms
hereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms
all the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.

(d) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in Los Angeles a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans owing to, each Lender pursuant to the terms hereof from time
to time (the "Register"). The entries in the Register shall be conclusive and
the Borrower, the Administrative Agent, the Issuing Banks, the Collateral Agent
and the Lenders may treat each person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, the Issuing Banks, the Collateral
Agent and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.

(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) above and, if required, the written consent of the Borrower, the Swingline
Lender, the Issuing Banks and the Administrative Agent to such assignment, the
Administrative Agent shall (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Lenders, the Issuing Banks and the Swingline Lender. No
assignment shall be effective unless it has been recorded in the Register as
provided in this paragraph (e). Prior to such recordation, all amounts owed with
respect to the applicable Commitment or outstanding Loan shall be owed to the
Lender listed in the Register as the owner thereof, and any request, authority
or consent of any Person who, at the time of making such request or giving such
authority or consent, is listed in the Register as the Lender shall be
conclusive and binding on any subsequent holder, assignee or transferee of the
corresponding Commitments or Loans.

(f) Each Lender may, without the consent of the Borrower, the Swingline
Lender, the Issuing Banks or the Administrative Agent, sell participations to
one or more banks or other entities in all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it); provided, however, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) the participating banks or other entities shall be
entitled to the benefit of the cost protection provisions contained in Sections
2.14, 2.16 and 2.20 to the same extent as if they were Lenders provided that the
Borrower shall not be required to reimburse the participating banks or other
entities

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pursuant to Section 2.14, 2.16 or 2.20 in an amount in excess of the amount that
would have been payable thereunder to such Lender had such Lender not sold such
participation, and (iv) the Borrower, the Administrative Agent, the Issuing
Banks and the Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement, and such Lender shall retain the sole right to enforce the
obligations of the Borrower relating to the Loans or L/C Disbursements and to
approve any amendment, modification or waiver of any provision of this Agreement
(other than amendments, modifications or waivers decreasing any fees payable
hereunder or the amount of principal of or the rate at which interest is payable
on the Loans, extending any scheduled principal payment date or date fixed for
the payment of interest on the Loans, increasing or extending the Commitments or
releasing any Guarantor or all or any substantial part of the Collateral).

(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender by
or on behalf of the Borrower; provided that, prior to any such disclosure of
information designated by the Borrower as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 9.17.

(h) Any Lender may at any time assign all or any portion of its rights
under this Agreement to secure extensions of credit to such Lender without the
consent of either the Borrower or the Administrative Agent; provided that no
such assignment shall release a Lender from any of its obligations hereunder or
substitute any such assignee for such Lender as a party hereto.

(i) Notwithstanding anything to the contrary contained herein, any
Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an
"SPC"), identified as such in writing from time to time by the Granting Lender
to the Administrative Agent and the Borrower, the option to provide to the
Borrower all or any part of any Loan that such Granting Lender would otherwise
be obligated to make to the Borrower pursuant to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC to make any Loan and
(ii) if an SPC elects not to exercise such option or otherwise fails to provide
all or any part of such Loan, the Granting Lender shall be obligated to make
such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as
if, such Loan were made by such Granting Lender. Each party hereto hereby agrees
that no SPC shall be liable for any indemnity or similar payment obligation
under this Agreement (all liability for which shall remain with the Granting
Lender). In furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that, prior to the
date that is one year and one day after the payment in full of all outstanding
commercial paper or other senior indebtedness of any SPC, it will not institute
against, or join any other

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person in instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under the laws of the United
States or any State thereof. In addition, notwithstanding anything to the
contrary contained in this Section 9.04, any SPC may (i) with notice to, but
without the prior written consent of, the Borrower and the Administrative Agent
and without paying any processing fee therefor, assign all or a portion of its
interests in any Loans to the Granting Lender or to any financial institutions
(consented to by the Borrower and Administrative Agent) providing liquidity
and/or credit support to or for the account of such SPC to support the funding
or maintenance of Loans and (ii) disclose on a confidential basis any non-public
information relating to its Loans to any rating agency, commercial paper dealer
or provider of any surety, guarantee or credit or liquidity enhancement to such
SPC.

(j) The Borrower shall not assign or delegate any of its rights or
duties hereunder without the prior written consent of the Administrative Agent,
the Issuing Banks and each Lender, and any attempted assignment without such
consent shall be null and void.

SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all
out-of-pocket expenses, the allocated cost of internal legal services and
disbursements of internal counsel incurred by the Agents, the Issuing Banks and
the Swingline Lender in connection with the syndication of the credit facilities
provided for herein and the preparation and administration of this Agreement and
the other Loan Documents or in connection with any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the transactions
hereby or thereby contemplated shall be consummated) or incurred by the Agents
or any Lender in connection with the enforcement or protection of its rights in
connection with this Agreement and the other Loan Documents or in connection
with the Loans made or Letters of Credit issued hereunder, including the
reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel
for the Agents, and O'Melveny and Myers LLP, special counsel for the
Administrative Agent, and, in connection with any such enforcement or
protection, the fees, charges and disbursements of any other counsel (including
the allocated costs of internal counsel) for the Agents or any Lender.

(b) The Borrower agrees to indemnify the Agents, each Lender and each
Issuing Bank, each Affiliate of any of the foregoing persons and each of their
respective directors, officers, employees, agents, trustees and investment
advisors (each such person being called an "Indemnitee") against, and to hold
each Indemnitee harmless from, any and all losses, claims, damages, liabilities
and related expenses, including reasonable counsel fees, charges and
disbursements and the allocated cost of internal legal services and
disbursements of internal counsel, incurred by or asserted against any
Indemnitee arising out of, in any way connected with, or as a result of (i) the
execution or delivery of this Agreement or any other Loan Document or any
agreement or instrument contemplated thereby, the performance by the parties
thereto of their respective obligations thereunder or the consummation of the
Transactions and the other transactions contemplated thereby, (ii) the use of
the proceeds of the Loans or issuance of Letters of Credit, (iii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, or (iv) any actual or alleged
presence or Release of Hazardous Materials on or from any property currently

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or formerly owned or operated by the Borrower or any of the Subsidiaries, or any
Environmental Liability related in any way to the Borrower or any of the
Subsidiaries; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or wilful
misconduct of such Indemnitee.

(c) The provisions of this Section 9.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the expiration
of any Letter of Credit, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the any Agent, any Lender or any Issuing Bank. All
amounts due under this Section 9.05 shall be payable on written demand therefor.

SECTION 9.06. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, except to the extent prohibited by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender to or
for the credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Agreement and
other Loan Documents held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement or such other Loan
Document and although such obligations may be unmatured. The rights of each
Lender under this Section 9.06 are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.

SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN
DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.

SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent, the Collateral Agent, any Lender or any Issuing Bank in
exercising any power or right hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power.

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The rights and remedies of the Administrative Agent, the Collateral Agent, the
Issuing Banks and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or any other Loan
Document or consent to any departure by the Borrower or any other Loan Party
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice or demand
on the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances.

(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders; provided, however, that
no such agreement shall (i) decrease the principal amount of, or extend the
maturity of or any scheduled principal payment date or date for the payment of
any interest on any Loan or any date for reimbursement of an L/C Disbursement,
or waive or excuse any such payment or any part thereof, or decrease the rate of
interest on any Loan or L/C Disbursement, without the prior written consent of
each Lender affected thereby, (ii) increase or extend the Commitment or decrease
or extend the date for payment of the Fees due to any Lender without the prior
written consent of such Lender, (iii) amend or modify the pro rata requirements
of Section 2.17, the provisions of Section 9.04(j), the provisions of this
Section, the definition of the term "Required Lenders" or release any Guarantor
or all or any substantial part of the Collateral (except, in each case, any
release expressly permitted by the Loan Documents), without the prior written
consent of each Lender, (iv) change the provisions of any Loan Document in a
manner that by its terms adversely affects the rights in respect of payments due
to Lenders holding Loans of one Class differently from the rights of Lenders
holding Loans of any other Class without the prior written consent of Lenders
holding a majority in interest of the outstanding Loans and unused Commitments
of each adversely affected Class, (v) change the rights of the Lenders holding
Tranche B Term Loans to reject prepayments under Section 2.13(i) without the
prior written consent of the Lenders holding a majority of the aggregate
outstanding principal amount of the Tranche B Term Loans or modify the
protections afforded to an SPC pursuant to the provisions of Section 9.04(i)
without the written consent of such SPC; provided further that no such agreement
shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent, the Collateral Agent, the Syndication Agent, any Issuing
Bank or the Swingline Lender hereunder or under any other Loan Document without
the prior written consent of the Administrative Agent, the Collateral Agent, the
Syndication Agent, such Issuing Bank or the Swingline Lender.

SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein
to the contrary, if at any time the interest rate applicable to any Loan or
participation in any L/C Disbursement, together with all fees, charges and other
amounts which are treated as interest on such Loan or participation in such L/C
Disbursement under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan or participation in
accordance with applicable law, the rate of interest

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payable in respect of such Loan or participation hereunder, together with all
Charges payable in respect thereof, shall be limited to the Maximum Rate and, to
the extent lawful, the interest and Charges that would have been payable in
respect of such Loan or participation but were not payable as a result of the
operation of this Section 9.09 shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or participations or periods
shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender.

SECTION 9.10. Entire Agreement. This Agreement, the Administrative
Agent's Fee Letter, the Fee Letter and the other Loan Documents constitute the
entire contract between the parties relative to the subject matter hereof. Any
other previous agreement among the parties with respect to the subject matter
hereof is superseded by this Agreement and the other Loan Documents. Nothing in
this Agreement or in the other Loan Documents, expressed or implied, is intended
to confer upon any party other than the parties hereto and thereto any rights,
remedies, obligations or liabilities under or by reason of this Agreement or the
other Loan Documents.

SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

SECTION 9.12. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby (it being understood that
the invalidity of a particular provision in a particular jurisdiction shall not
in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

SECTION 9.13. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which when taken together shall
constitute a single contract, and

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shall become effective as provided in Section 9.03. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be as effective
as delivery of a manually signed counterpart of this Agreement.

SECTION 9.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.

SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) The
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that any
Agent, any Issuing Bank or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement or the other Loan Documents against the
Borrower or its properties in the courts of any jurisdiction.

(b) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

SECTION 9.16. Judgment Currency. (a) The obligations of the Borrower
and the other Loan Parties hereunder and under the other Loan Documents to make
payments in dollars or in any Alternative Currency (the "Obligation Currency")
shall not be discharged or satisfied by any tender or recovery pursuant to any
judgment expressed in or converted into any currency other than the Obligation
Currency, except to the extent that such tender or recovery results in the
effective receipt by the Administrative Agent or a Lender or an Issuing Bank of
the full amount of the Obligation Currency expressed to be payable to the
Administrative Agent or such Lender or Issuing Bank under this Agreement or the
other Loan Documents. If, for the purpose of obtaining or

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enforcing judgment against the Borrower or any other Loan Party or in any court
or in any jurisdiction, it becomes necessary to convert into or from any
currency other than the Obligation Currency (such other currency being
hereinafter referred to as the "Judgment Currency") an amount due in the
Obligation Currency, the conversion shall be made at the Alternative Currency
Equivalent or Dollar Equivalent, in the case of any Alternative Currency or
dollars, and, in the case of other currencies, the rate of exchange (as quoted
by the Administrative Agent or if the Administrative Agent does not quote a rate
of exchange on such currency, by a known dealer in such currency designated by
the Administrative Agent) determined, in each case, as of the date immediately
preceding the day on which the judgment is given (such Business Day being
hereinafter referred to as the "Judgment Currency Conversion Date").

(b) If there is a change in the rate of exchange prevailing between the
Judgment Currency Conversion Date and the date of actual payment of the amount
due, the Borrower covenants and agrees to pay, or cause to be paid, as a
separate obligation and notwithstanding any judgment, such additional amounts,
if any (but in any event not a lesser amount), as may be necessary to ensure
that the amount paid in the Judgment Currency, when converted at the rate of
exchange prevailing on the date of payment, will produce the amount of the
Obligation Currency which could have been purchased with the amount of Judgment
Currency stipulated in the judgment or judicial award at the rate of exchange
prevailing on the Judgment Currency Conversion Date.

(c) For purposes of determining the Alternative Currency Equivalent or
Dollar Equivalent or rate of exchange for this Section, such amounts shall
include any premium and costs payable in connection with the purchase of the
Obligation Currency.

SECTION 9.17. Confidentiality. The Agents, each Issuing Bank and each
of the Lenders agrees to keep confidential (and to use its best efforts to cause
its respective agents and representatives to keep confidential) the Information
(as defined below) and all copies thereof, extracts therefrom and analyses or
other materials based thereon, except that any Agent, any Issuing Bank or any
Lender shall be permitted to disclose Information (a) to such of its respective
officers, directors, employees, agents, affiliates and representatives as need
to know such Information, (b) to a potential assignee or participant of such
Lender or any direct or indirect contractual counterparty in any swap agreement
relating to the Loans or such potential assignee's or participant's or
counterparty's advisors who need to know such Information (provided that any
such potential assignee or participant or counterparty shall, and shall use
commercially reasonable efforts to cause its advisors to, keep confidential all
such Information on the terms set forth in this Section 9.17), (c) to the extent
requested by any regulatory authority or quasi-regulatory authority such as the
National Association of Insurance Commissioners (NAIC), (d) to the extent
otherwise required by applicable laws and regulations or by any subpoena or
similar legal process, (e) in connection with any suit, action or proceeding
relating to the enforcement of its rights hereunder or under the other Loan
Documents or (f) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section 9.17 or (ii) becomes
available to any Agent, any Issuing Bank or any Lender on a nonconfidential
basis from a source other than the Borrower. For the purposes of this Section,
"Information" shall mean all

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financial statements, certificates, reports, agreements and information
(including all analyses, compilations and studies prepared by any Agent, any
Issuing Bank or any Lender based on any of the foregoing) that are received from
the Borrower and related to the Borrower, any shareholder of the Borrower or any
employee, customer or supplier of the Borrower, other than any of the foregoing
that were available to any Agent, any Issuing Bank or any Lender on a
nonconfidential basis prior to its disclosure thereto by the Borrower, and which
are in the case of Information provided after the date hereof, clearly
identified at the time of delivery as confidential. The provisions of this
Section 9.17 shall remain operative and in full force and effect regardless of
the expiration and term of this Agreement.

SECTION 9.18. European Monetary Union. If, as a result of the further
implementation of European monetary union, (a) any Alternative Currency (other
than the euro) ceases to be lawful currency of the nation issuing the same and
is replaced by the euro, then any amount payable hereunder by any party hereto
in such currency shall instead be payable in euro and the amount so payable
shall be determined by translating the amount payable in such currency to euro
at the exchange rate recognized by the European Central Bank for the purpose of
replacing such currency by the euro, or (b) any such Alternative Currency and
the euro are at the same time recognized by the central bank or comparable
authority of the nation issuing such currency as lawful currency of such nation,
then (i) any Alternative Currency Letter of Credit issued at such time that
would otherwise be denominated in such currency shall be denominated in euro and
(ii) any other amount payable by any party hereto in such currency shall be
payable in such currency or in euro (in an amount determined as set forth in
clause (a)), at the election of the obligor.

SECTION 9.19. Release of Collateral. (a) Notwithstanding any other
provision of this Agreement or any Security Document, all Collateral held under
any Security Document shall be released from the Liens created thereunder, in
each case without representation, warranty or recourse of any nature, on a
Business Day specified by the Borrower (the "Release Date"), and the provisions
of Section 5.09 of this Agreement insofar as they relate to Collateral shall
cease to be of any force or effect, upon satisfaction of the following
conditions precedent:

(i) the Borrower shall have given written notice to the Agents
at least 30 days prior to the Release Date, specifying the proposed
Release Date;

(ii) as of the Release Date, the Borrower shall have obtained,
and for a period of not less than 90 consecutive days, maintained
Investment Grade Ratings;

(iii) no Default or Event of Default shall have occurred and
be continuing as of the Release Date; and

(iv) on the Release Date, the Collateral Agent shall have
received a certificate, dated the Release Date and executed on behalf
of the Borrower by the

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President, a Vice President or a Financial Officer of the Borrower,
confirming the satisfaction of the conditions set forth in clauses (ii)
and (iii) above.

(b) Subject to the satisfaction of the conditions set forth in
paragraph (a) above, on or after the Release Date, the Lenders hereby expressly
authorize the Collateral Agent to, and the Collateral Agent hereby agrees to,
deliver the Pledged Securities (as defined in the Pledge Agreement) to the
Borrower and to execute and deliver to the Borrower all such instruments and
documents as the Borrower may reasonably request to effectuate, evidence or
confirm the releases of Collateral provided for in this Section 9.19. Any
execution and delivery of documents pursuant to this Section 9.19 shall be
without recourse to or warranty by the Collateral Agent.

(c) Without limiting the provisions of Section 9.05, the Borrower shall
reimburse the Agents and the Lenders upon demand for all costs and expenses,
including attorneys fees and disbursements and the allocated costs and
disbursements of internal legal counsel, incurred by any of them in connection
with any action contemplated by this Section 9.19.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

FLOWSERVE CORPORATION,

by /s/ John M. Nanos
------------------------------------------
Name: John M. Nanos
Title: Assistant Secretary

CREDIT SUISSE FIRST BOSTON,
individually and as Syndication Agent,

by /s/ James P. Moran
------------------------------------------
Name: James P. Moran
Title: Director

by /s/ David W. Kratovil
------------------------------------------
Name: David W. Kratovil
Title: Director

BANK OF AMERICA, N.A.,
individually and as Administrative Agent,
Collateral Agent and Swingline Lender

by /s/ Mark E. Kelley
------------------------------------------
Name: Mark E. Kelley
Title: Managing Director

SALOMON SMITH BARNEY INC.,
as Co-Documentation Agent,

by /s/ Nicolas T. Erni
------------------------------------------
Name: Nicolas T. Erni
Title: Attorney In Fact

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BANK ONE, NA,                       

by /s/ Gina A. Norris               
------------------------------------------
Name: Gina A. Norris            
Title: Managing Director        

ABN AMRO BANK N.V.,                 

by /s/ Elizabeth Hurst              
------------------------------------------
Name: Elizabeth Hurst           
Title: Group Vice President     

by /s/ C. David Allman              
------------------------------------------
Name: C. David Allman           
Title: Assistant Vice President 

CITICORP USA, INC.,                 

by /s/ Nicolas T. Erni              
------------------------------------------
Name: Nicolas T. Erni           
Title: Vice President           

SUNTRUST BANK,                      

by /s/ Linda L. Stanley             
------------------------------------------
Name: Linda L. Stanley          
Title: Director                 

DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN
BRANCHES,

by /s/ B. Craig Erickson            
------------------------------------------
Name: B. Craig Erickson         
Title: Vice President           

by /s/ Richard Morris               
------------------------------------------
Name: Richard Morris            
Title: Senior Vice President    

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HSBC BANK USA,                            

by /s/ J. B. Lyons                        
------------------------------------------
Name: J. B.  Lyons                    
Title: Senior Vice President          

THE INDUSTRIAL BANK OF JAPAN, LIMITED NEW
YORK BRANCH.,

by /s/ Ryusuke Aya                        
------------------------------------------
Name: Ryusuke Aya                     
Title: Senior Vice President, Houston 
Office                                

THE BANK OF TOKYO-MITSUBISHI, LTD., 

by /s/ D. Barnell                         
------------------------------------------
Name: D. Barnell                      
Title: Vice President                 

by /s/ J. Mearns                          
------------------------------------------
Name: J. Mearns                       
Title: VP & Manager                   

COMERICA BANK,                            

by /s/ T. Bancroft Mattei                 
------------------------------------------
Name: T. Bancroft Mattei              
Title: Account Officer                

CREDIT AGRICOLE INDOSUEZ,                 

by /s/ Patrick Cocquerel                  
------------------------------------------
Name: Patrick Cocquerel               
Title: FVP, Managing Director         

by /s/ Michael R. Quiray                  
------------------------------------------
Name: Michael R. Quiray               
Title: Vice President                 
Senior Relationship Manager 

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BANK OF CHINA, LOS ANGELES BRANCH,         

by /s/ Luo, Xiao Ming                      
------------------------------------------
Name: Luo, Xiao Ming                   
Title: Branch Manager                  

LLOYDS TSB BANK PLC,                       

by /s/ Peter J. Cannon                     
------------------------------------------
Name: Peter J. Cannon                  
Title: Director and Head of Acquisition
Finance                         

by /s/ Ian Dimmock                         
------------------------------------------
Name: Iam Dimmock                      
Title: Vice President, Acquisition     
Finance  D080                   

THE MITSUBISHI TRUST & BANKING             
CORPORATION,                               

by /s/ Nobuo Tominaga                      
------------------------------------------
Name: Nobuo Tominaga                   
Title: Chief Manager                   

NATIONAL CITY BANK,                        

by /s/ Kelly L. Moyer                      
------------------------------------------
Name: Kelly L. Moyer                   
Title: Assistant Vice President        

ORIX BUSINESS CREDIT, INC.,                

by /s/ Michael J. Cox                      
------------------------------------------
Name: Michael J. Cox                   
Title: Senior Vice President           

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FRANKLIN FLOATING RATE TRUST,      

by /s/ Chauncey Lufkin             
------------------------------------------
Name: Chauncey Lufkin          
Title: Vice President          

KZH STERLING LLC,                  

by /s/ Scott Hignett               
------------------------------------------
Name: Scott Hignett            
Title: Authorized Agent        

CANADIAN IMPERIAL BANK OF COMMERCE,

by /s/ William M. Swenson          
------------------------------------------
Name: William M. Swenson       
Title: Authorized Signatory    

METROPOLITAN PROPERTY AND CASUALTY 
INSURANCE COMPANY,                 

by /s/ James R. Dingler            
------------------------------------------
Name: James R. Dingler         
Title: Authorized Signatory    

MORGAN STANLEY DEAN WITTER PRIME   
INCOME TRUST,                      

by /s/ Peter Gewirtz               
------------------------------------------
Name: Peter Gewirtz            
Title: Vice President          

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NATEXIS BANQUES POPULAIRES,               

by /s/ Daniel Payer                       
------------------------------------------
Name: Daniel Payer                    
Title: Assistant Vice President       

by /s/ Louis P. Laville, III              
------------------------------------------
Name: Louis P. Laville, III           
Title: Vice President and Group Manger

HELLER FINANCIAL, INC.,                   

by /s/ K. Craig Gallehugh                 
------------------------------------------
Name: K. Craig Gallehugh              
Title: Vice President                 

SAWGRASS TRADING LLC,                     

by /s/ Ann E. Morris                      
------------------------------------------
Name: Ann E. Morris                   
Title: Assistant Vice President       

THE TRAVELERS INSURANCE COMPANY,          

by /s/ Allen R. Cantrell                  
------------------------------------------
Name: Allen R. Cantrell               
Title: Investment Officer             

KZH SOLEIL LLC,                           

by /s/ Scott Hignett                      
------------------------------------------
Name: Scott Hignett                   
Title: Authorized Agent               

KZH SOLEIL-2 LLC,                         

by /s/ Scott Hignett                      
------------------------------------------
Name: Scott Hignett                   
Title: Authorized Agent               

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HARCH CLO I LIMITED,                       

by /s/ Michael E. Lewitt                   
------------------------------------------
Name: Michael E. Lewitt                
Title: Authorized Signatory            

By: PPM America, Inc., as Attorney-in-fact,
on behalf of Jackson National Life         
Insurance Company,                         

by /s/ John Walding                        
------------------------------------------
Name: John Walding                     
Title: Managing Director               

KZH CYPRESSTREE-1 LLC,                     

by /s/ Scott Hignett                       
------------------------------------------
Name: Scott Hignett                    
Title: Authorized Agent                

MONY LIFE INSURANCE COMPANY                
OF AMERICA,                                

by /s/ Barry J. Scheinholtz                
------------------------------------------
Name: Barry J. Scheinholtz             
Title: Authorized Agent                

PPM SPYGLASS FUNDING TRUST,                

by /s/ Kelly C. Walker                     
------------------------------------------
Name: Kelly C. Walker                  
Title: Authorized Agent                

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STEIN ROE FLOATING RATE LIMITED           
LIABILITY COMPANY,                        

by /s/ Kathleen A. Zarn                   
------------------------------------------
Name: Kathleen A. Zarn                
Title: Vice President                 
Stein Roe & Farnham            
Incorporated, as Advisor to the
Stein Roe Floating Rate Limited
Liability Company              

OLYMPIC FUNDING TRUST, SERIES             
1999-1                                    

by /s/ Ashley R. Hamilton                 
------------------------------------------
Name: Ashley R. Hamilton              
Title: Authorized Agent               

OSPREY INVESTMENTS PORTFOLIO,             
By: Citibank, N.A., as Manager            

by /s/ Daniel Slotkin                     
------------------------------------------
Name: Daniel Slotkin                  
Title: Vice President                 

GALAXY CLO 1999-1, LTD.,                  
By: SAI Investment Adviser, Inc.          
its Collateral Manager,                   

by /s/ John Lapham                        
------------------------------------------
Name: John Lapham                     
Title: Authorized Agent               

KZH CRESCENT-2 LLC,                       

by /s/ Scott Hignett                      
------------------------------------------
Name: Scott Hignett                   
Title: Authorized Agent               

118

112

KZH RIVERSIDE LLC,                       

by /s/ Scott Hignett                     
------------------------------------------
Name: Scott Hignett                  
Title: Authorized Agent              

MONY LIFE INSURANCE COMPANY,             

by /s/ Barry J. Scheinholtz              
------------------------------------------
Name: Barry J. Scheinholtz           
Title: Investment Vice President     

THE SUMITOMO TRUST & BANKING             
CO., LTD., NEW YORK BRANCH,              

by /s/ Stephanie Fowler                  
------------------------------------------
Name: Stephanie Fowler               
Title: Vice President                

TORONTO DOMINION (NEW YORK),             
INC.,                                    

by /s/ Gwen Zirkle                       
------------------------------------------
Name: Gwen Zirkle                    
Title: Vice President                

TRAVELERS CORPORATE LOAN FUND INC.,      
By: TRAVELERS ASSET                      
MANAGEMENT INTERNATIONAL COMPANY LLC,    

by /s/ Allen R. Cantrell                 
------------------------------------------
Name: Allen R. Cantrell              
Title: Investment Officer            

119

113

KZH CRESCENT-3 LLC,                     

by /s/ Scott Hignett                    
------------------------------------------
Name: Scott Hignett                 
Title: Authorized Agent             

SRF 2000 LLC,                           

by /s/ Ann E. Morris                    
------------------------------------------
Name: Ann E. Morris                 
Title: Assistant Vice President     

KZH CRESCENT LLC,                      

by /s/ Scott Hignett                    
------------------------------------------
Name: Scott Hignett                 
Title: Authorized Agent             

UNITED OF OMAHA LIFE INSURANCE          
COMPANY,                                
By: TCW Asset Management Company,       
its Investment Advisor,                 

by /s/ Mark L. Gold                     
------------------------------------------
Name: Mark L. Gold                  
Title: Managing Director            

by /s/ Richard F. Kurth                 
------------------------------------------
Name: Richard F. Kurth              
Title: Vice President               

CONTINENTAL ASSURANCE COMPANY SEPARATE  
ACCOUNT (E)                             
By: TCW Asset Management Company as     
Attorney-in-Fact,                       

by /s/ Mark L. Gold                     
------------------------------------------
Name: Mark L. Gold                  
Title: Managing Director            

by /s/ Richard F. Kurth                 
------------------------------------------
Name: Richard F. Kurth              
Title: Vice President               

120

114

FRANKLIN FLOATING RATE MASTER           
SERIES,                                 

by /s/ Chauncey Lufkin                  
------------------------------------------
Name: Chauncey Lufkin               
Title: Vice President               

KEMPER FLOATING RATE FUND,              

by /s/ Kelly D. Babson                  
------------------------------------------
Name: Kelly D. Babson               
Title: Managing Director            

LIBERTY - STEIN ROE ADVISOR FLOATING    
RATE ADVANTAGE FUND                     
By: Stein Roe & Farnham Incorporated, as
Advisor,                                

by /s/ Kathleen A. Zarn                 
------------------------------------------
Name: Kathleen A. Zarn              
Title: Vice President               

NORTH AMERICAN SENIOR FLOATING RATE     
FUND,                                   

By: CypressTree Investment Management   
Company, Inc. as Portfolio Manager,     

by /s/ Jeffery W. Heuer                 
------------------------------------------
Name: Jeffery W. Heuer              
Title: Principal                    

121

115

CYPRESSTREE INVESTMENT FUND, LLC           

By: CypressTree Investment Management      
Company, Inc. its Managing Member,         

by /s/ Jeffrey W. Heuer                    
------------------------------------------
Name: Jeffrey W. Heuer                 
Title: Principal                       

CYPRESSTREE INVESTMENT MANAGEMENT          
COMPANY, INC.,                             

As: Attorney-in-Fact and on behalf of First
Allmerica Financial Life Insurance         
Company as Portfolio Manager               

by /s/ Jeffrey W. Heuer                    
------------------------------------------
Name: Jeffrey W. Heuer                 
Title: Principal                       

122

SCHEDULE 1.01(d)

Consolidated EBITDA, for any fiscal quarter ending on a date set forth
below, shall be equal to the actual Consolidated EBITDA of the Borrower and IDP
for such fiscal quarter plus the amount representing synergies and cost savings
set forth opposite such fiscal quarter below:

Date                              Amount
----                              ------

September 30, 2000                 $ 36,000,000
December 31, 2000                  $ 24,000,000
March 31, 2001                     $ 12,000,000

1
EXHIBIT 10.46

EXECUTION COPY

SECURITY AGREEMENT dated as of August 8, 2000,
among FLOWSERVE CORPORATION, a New York corporation (the
"Borrower"), each Subsidiary of the Borrower listed on
Schedule I hereto (each such Subsidiary individually a
"Guarantor" and collectively, the "Guarantors"; the
Guarantors and the Borrower are referred to collectively
herein as the "Grantors") and BANK OF AMERICA, N.A., a
national banking association ("BofA"), as collateral agent
(in such capacity, the "Collateral Agent") for the Secured
Parties (as defined herein).

Reference is made to (a) the Credit Agreement dated as of August 8, 2000
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the lenders from time to time party thereto
(the "Lenders"), Credit Suisse First Boston, as syndication agent, and BofA, as
swingline lender, administrative agent and Collateral Agent and (b) the
Guarantee Agreement dated as of August 8, 2000 (as amended, supplemented or
otherwise modified from time to time, the "Guarantee Agreement"), among the
Guarantors and the Collateral Agent.

The Lenders have agreed to make Loans to the Borrower, and the Issuing
Banks have agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Each of the Guarantors has agreed to guarantee, among other
things, all the obligations of the Borrower under the Credit Agreement. The
obligations of the Lenders to make Loans and of the Issuing Banks to issue
Letters of Credit are conditioned upon, among other things, the execution and
delivery by the Grantors of an agreement in the form hereof to secure (a) the
due and punctual payment by the Borrower of (i) the principal of and premium, if
any, and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each payment required to be made by the Borrower under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
the Borrower to the Secured Parties under the Credit Agreement and the other
Loan Documents, (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Borrower under or pursuant to the
Credit Agreement and the other Loan Documents, (c) the due and punctual payment
and performance of all the covenants, agreements, obligations and liabilities of
each Loan Party under or pursuant to this Agreement and the other Loan
Documents, (d) the due and punctual payment and performance of all obligations
of the Borrower under each Hedging Agreement entered into with any counterparty
that was a Lender (or an Affiliate of a Lender) at the time such Hedging
Agreement was entered into, (e) the due and punctual payment and performance of
all obligations of the Borrower and the Guarantors pursuant to the ABN Standby
Credit not incurred in violation of the Credit Agreement, and (f) each payment
required to be made by the Borrower or any Guarantor in respect of any Fifth
Third Letter of Credit, when and as due, including payments in respect of
reimbursement of disbursements and interest thereon (all the monetary and other
obligations described in the preceding clauses (a) through (f) being
collectively referred to as the "Obligations").

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2

Accordingly, the Grantors and the Collateral Agent, on behalf of itself
and each Secured Party (and each of their respective successors or assigns),
hereby agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Definition of Terms Used Herein. Unless the context
otherwise requires, all capitalized terms used but not defined herein shall have
the meanings set forth in the Credit Agreement and all references to the Uniform
Commercial Code shall mean the Uniform Commercial Code in effect in the State of
New York on the date hereof.

SECTION 1.02. Definition of Certain Terms Used Herein. As used herein,
the following terms shall have the following meanings:

"Account Debtor" shall mean any person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.

"Accounts" shall mean any and all right, title and interest of any
Grantor to payment for goods and services sold or leased, including any such
right evidenced by chattel paper, whether due or to become due, whether or not
it has been earned by performance, and whether now or hereafter acquired or
arising in the future, including accounts receivable from Affiliates of the
Grantors.

"Accounts Receivable" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired.

"Chattel Paper" shall mean (a) a writing or writings which evidence both
a monetary obligation and a security interest in or a lease of specific
Equipment and (b) all other property now or hereafter constituting "chattel
paper" under the Uniform Commercial Code as in effect in the State of New York
or its equivalent in other jurisdictions, in each case that are now or hereafter
owned by any Grantor.

"Collateral" shall mean all (a) Accounts Receivable, (b) Documents, (c)
Chattel Paper, (d) Equipment, (e) General Intangibles, (f) Inventory, (g) cash
and cash accounts, (h) Investment Property and (i) Proceeds, except any
Equipment that is subject to a purchase money lien permitted under the Credit
Agreement in favor of any person (other than the Collateral Agent) if the
documents relating to such lien do not permit other liens.

"Commodity Account" shall mean an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.

"Commodity Contract" shall mean a commodity futures contract, an option
on a commodity futures contract, a commodity option or any other contract that,
in each case, is (a) traded on or subject to the rules of a board of trade that
has been designated as a contract market for such a contract pursuant to the
federal commodities laws or (b) traded on a foreign

3

3

commodity board of trade, exchange or market, and is carried on the books of a
Commodity Intermediary for a Commodity Customer.

"Commodity Customer" shall mean a person for whom a Commodity
Intermediary carries a Commodity Contract on its books.

"Commodity Intermediary" shall mean (a) a person who is registered as a
futures commission merchant under the federal commodities laws or (b) a person
who in the ordinary course of its business provides clearance or settlement
services for a board of trade that has been designated as a contract market
pursuant to federal commodities laws.

"Copyright License" shall mean any written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor or which such Grantor otherwise has the right to
license, or granting any right to such Grantor under any copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.

"Copyrights" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (b) all registrations and applications
for registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office,
including those listed on Schedule II.

"Credit Agreement" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.

"Documents" shall mean all instruments, files, records, ledger sheets
and documents covering or relating to any of the Collateral.

"Entitlement Holder" shall mean a person identified in the records of a
Securities Intermediary as the person having a Security Entitlement against the
Securities Intermediary. If a person acquires a Security Entitlement by virtue
of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such person is the
Entitlement Holder.

"Equipment" shall mean all equipment, furniture and furnishings, and all
tangible personal property similar to any of the foregoing, including tools,
parts and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, that are now or hereafter owned by any
Grantor. The term Equipment shall include Fixtures.

"Equity Interest" shall mean shares of capital stock, partnership
interests, membership interests in a limited liability company or beneficial
interests in a trust or other equity ownership interests in a person.

"Financial Asset" shall mean (a) a Security, (b) an obligation of a
person or a share, participation or other interest in a person or in property or
an enterprise of a person, which is, or is of a type, dealt with in or traded on
financial markets, or which is recognized in any area in which it is issued or
dealt in as a medium for investment or (c) any property that is held by a
Securities Intermediary for another person in a Securities Account if the
Securities Intermediary has expressly agreed with the other person that the
property is to be treated as

4

4

a Financial Asset under Article 8 of the Uniform Commercial Code. As the context
requires, the term Financial Asset shall mean either the interest itself or the
means by which a person's claim to it is evidenced, including a certificated or
uncertificated Security, a certificate representing a Security or a Security
Entitlement.

"Fixtures" shall mean all items of Equipment, whether now owned or
hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under any real estate law applicable
thereto.

"General Intangibles" shall mean all choses in action and causes of
action and all other assignable intangible personal property of any Grantor of
every kind and nature (other than Accounts Receivable) now owned or hereafter
acquired by any Grantor, including all rights and interests in partnerships,
limited partnerships, limited liability companies and other unincorporated
entities, corporate or other business records, indemnification claims, contract
rights (including rights under leases, whether entered into as lessor or lessee,
Hedging Agreements and other agreements), Intellectual Property, goodwill,
registrations, franchises, tax refund claims and any letter of credit,
guarantee, claim, security interest or other security held by or granted to any
Grantor to secure payment by an Account Debtor of any of the Accounts
Receivable.

"Hedging Agreement" shall mean any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.

"Intellectual Property" shall mean all intellectual and similar property
of any Grantor of every kind and nature now owned or hereafter acquired by any
Grantor, including inventions, designs, Patents, Copyrights, Licenses,
Trademarks, trade secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information, software and
databases and all embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the
foregoing.

"Inventory" shall mean all goods of any Grantor, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service, or consumed in any Grantor's business,
including raw materials, intermediates, work in process, packaging materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing supplies
and spare parts, and all such goods that have been returned to or repossessed by
or on behalf of any Grantor.

"Investment Property" shall mean all Securities (whether certificated or
uncertificated), Security Entitlements, Securities Accounts, Commodity
Contracts, Commodity Accounts and Equity Interests of any Grantor, whether now
owned or hereafter acquired by any Grantor.

"License" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party,
including those listed on Schedule III (other than those license agreements in
existence on the date hereof and listed on Schedule III and those license
agreements entered into after the date hereof, which by their terms prohibit
(whether through automatic termination, the requirement of consent or otherwise)
assignment or a grant of a security interest by such Grantor as licensee
thereunder).

5

5

"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.

"Patent License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.

"Patents" shall mean all of the following now owned or hereafter acquired
by any Grantor: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office or any similar offices in any other country, including
those listed on Schedule IV, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to exclude others from making,
using and/or selling the inventions disclosed or claimed therein.

"Perfection Certificate" shall mean a certificate substantially in the
form of Annex 1 hereto, completed and supplemented with the schedules and
attachments contemplated thereby, and duly executed by a Financial Officer of or
legal counsel for the Borrower.

"Proceeds" shall mean any consideration received from the sale, exchange,
license, lease or other disposition of any asset or property that constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include, (a) any claim of any Grantor against any third
party for (and the right to sue and recover for and the rights to damages or
profits due or accrued arising out of or in connection with) (i) past, present
or future infringement of any Patent now or hereafter owned by any Grantor, or
licensed under a Patent License, (ii) past, present or future infringement or
dilution of any Trademark now or hereafter owned by any Grantor or licensed
under a Trademark License or injury to the goodwill associated with or
symbolized by any Trademark now or hereafter owned by any Grantor, (iii) past,
present or future breach of any License and (iv) past, present or future
infringement of any Copyright now or hereafter owned by any Grantor or licensed
under a Copyright License and (b) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.

"Secured Parties" shall mean (a) the Lenders, (b) the Administrative
Agent, (c) the Collateral Agent, (d) the Issuing Banks, (e) each counterparty to
a Hedging Agreement entered into with the Borrower if such counterparty was a
Lender (or an Affiliate of a Lender) at the time the Hedging Agreement was
entered into, (f) the beneficiaries of each indemnification obligation
undertaken by any Grantor under any Loan Document, (g) in respect of the ABN
Standby Credit, ABN Amro Bank N.V. and its Affiliates, (h) in respect of the
Fifth Third Letters of Credit, Fifth Third Bancorp and its subsidiaries and (i)
the successors and assigns of each of the foregoing.

6

6

"Securities" shall mean any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of shares,
participations, interests or obligations and (c) (i) are, or are of a type,
dealt with or traded on securities exchanges or securities markets or (ii) are a
medium for investment and by their terms expressly provide that they are a
security governed by Article 8 of the Uniform Commercial Code, provided that
"Securities" shall not include more than 65% of the voting equity interests of
any non-United States issuer.

"Securities Account" shall mean an account to which a Financial Asset is
or may be credited in accordance with an agreement under which the person
maintaining the account undertakes to treat the person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.

"Securities Intermediary" shall mean (a) a clearing corporation or (b) a
person, including a bank or broker, that in the ordinary course of its business
maintains Securities Accounts for others and is acting in that capacity.

"Security Entitlements" shall mean the rights and property interests of
an Entitlement Holder with respect to a Financial Asset.

"Security Interest" shall have the meaning assigned to such term in
Section 2.01.

"Trademark License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.

"Trademarks" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and registration applications (but excluding any United States intent-to-use
applications prior to the filing and acceptance of a Statement of Use or an
Amendment to allege use in connection therewith to the extent a valid security
interest may not be taken in such an intent-to-use application under applicable
law) in the United States Patent and Trademark Office, any State of the United
States or any similar offices in any other country or any political subdivision
thereof, and all extensions or renewals thereof, including those listed on
Schedule V, (b) all goodwill associated therewith or symbolized thereby and (c)
all other assets, rights and interests that uniquely reflect or embody such
goodwill.

SECTION 1.03. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.

7

7

ARTICLE II

Security Interest

SECTION 2.01. Security Interest. As security for the payment or
performance, as the case may be, in full of the Obligations, and any extensions,
renewals, modifications or refinancings of the Obligations, each Grantor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to the Collateral Agent, its successors and assigns, for the
ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest in, all of such Grantor's right, title and interest
in, to and under the Collateral (the "Security Interest"). Without limiting the
foregoing, the Collateral Agent is hereby authorized to file one or more
financing statements (including fixture filings), continuation statements,
filings with the United States Patent and Trademark Office or United States
Copyright Office (or any successor office or any similar office in any other
country) or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted by each
Grantor, without the signature of any Grantor, and naming any Grantor or the
Grantors as debtors and the Collateral Agent as secured party.

SECTION 2.02. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Collateral Agent or any other
Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of the Collateral.

ARTICLE III

Representations and Warranties

The Grantors jointly and severally represent and warrant to the
Collateral Agent and the Secured Parties that:

SECTION 3.01. Title and Authority. Each Grantor has good and valid
rights in and title to the Collateral with respect to which it has purported to
grant a Security Interest hereunder and has full power and authority to grant to
the Collateral Agent the Security Interest in such Collateral pursuant hereto
and to execute, deliver and perform its obligations in accordance with the terms
of this Agreement, without the consent or approval of any other person other
than any consent or approval which has been obtained.

SECTION 3.02. Filings. (a) The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete in all material respects. Fully executed Uniform Commercial
Code financing statements (including fixture filings, as applicable) or other
appropriate filings, recordings or registrations containing a description of the
Collateral have been delivered to the Collateral Agent for filing in each
governmental, municipal or other office specified in Schedule 6 to the
Perfection Certificate, which are all the filings, recordings and registrations
(other than filings required to be made in the United States Patent and
Trademark Office and the United States Copyright Office in order to perfect the
Security Interest in Collateral consisting of United States Patents, Trademarks
and Copyrights) that are necessary to publish notice of and protect the validity
of and to establish a legal, valid and perfected security interest in favor of
the Collateral Agent (for the ratable benefit of the Secured Parties) in respect
of all

8

8

Collateral in which the Security Interest may be perfected by filing, recording
or registration in the United States (or any political subdivision thereof) and
its territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any
such jurisdiction, except as provided under applicable law with respect to the
filing of continuation statements or with respect to the filing of amendments or
new filings to reflect the change of any Grantor's name, location, identity or
corporate structure.

(b) Each Grantor represents and warrants that fully executed security
agreements in the form hereof and containing a description of all Collateral
consisting of Intellectual Property with respect to United States Patents and
United States registered Trademarks (and Trademarks for which United States
registration applications (other than any United States intent-to-use
applications prior to the filing and acceptance of a Statement of Use or an
Amendment to allege use in connection therewith) are pending) and United States
registered Copyrights have been delivered to the Collateral Agent for recording
by the United States Patent and Trademark Office and the United States Copyright
Office pursuant to 35 U.S.C. Section 261, 15 U.S.C. Section 1060 or 17 U.S.C.
Section 205 and the regulations thereunder, as applicable, and otherwise as may
be required pursuant to the laws of any other necessary jurisdiction, to protect
the validity of and to establish a legal, valid and perfected security interest
in favor of the Collateral Agent (for the ratable benefit of the Secured
Parties) in respect of all Collateral consisting of Patents, Trademarks and
Copyrights in which a security interest may be perfected by filing, recording or
registration in the United States (or any political subdivision thereof) and its
territories and possessions, or in any other necessary jurisdiction, and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary (other than such actions as are necessary to perfect
the Security Interest with respect to any Collateral consisting of Patents,
Trademarks and Copyrights (or registration or application for registration
thereof) acquired or developed after the date hereof).

SECTION 3.03. Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to the
filings described in Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording or
registering a financing statement or analogous document in the United States (or
any political subdivision thereof) and its territories and possessions pursuant
to the Uniform Commercial Code or other applicable law in such jurisdictions and
(c) a security interest that shall be perfected in all Collateral in which a
security interest may be perfected upon the receipt and recording of this
Agreement with the United States Patent and Trademark Office and the United
States Copyright Office, as applicable and otherwise as may be required pursuant
to the laws of any other necessary jurisdiction. The Security Interest is and
shall be prior to any other Lien on any of the Collateral, other than Liens
expressly permitted to be prior to the Security Interest pursuant to Section
6.02 of the Credit Agreement.

SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement. Grantor has not filed or
consented to the filing of (a) any financing statement or analogous document
under the Uniform Commercial Code or any other applicable laws covering any
Collateral, (b) any assignment in which any Grantor assigns any Collateral or
any security agreement or similar instrument covering any Collateral with the
United States Patent and Trademark Office or the United States Copyright Office
or (c) any assignment in which any Grantor assigns any Collateral or any
security agreement or similar

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instrument covering any Collateral with any foreign governmental, municipal or
other office, which financing statement or analogous document, assignment,
security agreement or similar instrument is still in effect, except, in each
case, for Liens expressly permitted pursuant to Section 6.02 of the Credit
Agreement.

ARTICLE IV

Covenants

SECTION 4.01. Change of Name; Location of Collateral; Records; Place of
Business. (a) Each Grantor agrees promptly to notify the Collateral Agent in
writing of any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility),
(iii) in its identity or corporate structure or (iv) in its Federal Taxpayer
Identification Number. Each Grantor agrees not to effect or permit any change
referred to in the preceding sentence unless all filings have been made under
the Uniform Commercial Code or otherwise that are required in order for the
Collateral Agent to continue at all times following such change to have a valid,
legal and perfected first priority security interest in all the Collateral. Each
Grantor agrees promptly to notify the Collateral Agent if any material portion
of the Collateral owned or held by such Grantor is damaged or destroyed.

(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which such Grantor is engaged, but in any event to include complete
accounting records indicating all payments and proceeds received with respect to
any part of the Collateral, and, at such time or times as the Collateral Agent
may reasonably request, promptly to prepare and deliver to the Collateral Agent
a duly certified schedule or schedules in form and detail satisfactory to the
Collateral Agent showing the identity, amount and location of any and all
Collateral.

SECTION 4.02. Periodic Certification. Each year, at the time of delivery
of annual financial statements with respect to the preceding fiscal year
pursuant to Section 5.04 of the Credit Agreement, the Borrower shall deliver to
the Collateral Agent a certificate executed by a Financial Officer of or legal
counsel for the Borrower (a) setting forth the information required pursuant to
Section 2 of the Perfection Certificate or confirming that there has been no
change in such information since the date of such certificate or the date of the
most recent certificate delivered pursuant to this Section 4.02 and (b)
certifying that all Uniform Commercial Code financing statements (including
fixture filings, as applicable) or other appropriate filings, recordings or
registrations, including all refilings, rerecordings and reregistrations,
containing a description of the Collateral have been filed of record in each
governmental, municipal or other appropriate office in each jurisdiction
identified pursuant to clause (a) above to the extent necessary to protect and
perfect the Security Interest for a period of not less than 18 months after the
date of such certificate (except as noted therein with respect to any
continuation statements to be filed within such period). Each certificate
delivered pursuant to this Section 4.02 shall identify in the format of Schedule
II, III, IV or V, as applicable, all Intellectual Property of any Grantor
material to the conduct of any

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Grantor's business in existence on the date thereof and not then listed on such
Schedules or previously so identified to the Collateral Agent.

SECTION 4.03. Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all actions necessary to defend title to the
Collateral against all persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien not
expressly permitted pursuant to Section 6.02 of the Credit Agreement.

SECTION 4.04. Further Assurances. Each Grantor agrees, at its own
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Collateral
Agent may from time to time request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements (including fixture filings) or other
documents in connection herewith or therewith. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be
immediately pledged and delivered to the Collateral Agent, duly endorsed in a
manner satisfactory to the Collateral Agent.

Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to
supplement this Agreement by supplementing Schedule II, III, IV or V hereto or
adding additional schedules hereto to specifically identify any asset or item
that may constitute Copyrights, Licenses, Patents or Trademarks; provided,
however, that any Grantor shall have the right, exercisable within 10 days after
it has been notified by the Collateral Agent of the specific identification of
such Collateral, to advise the Collateral Agent in writing of any inaccuracy of
the representations and warranties made by such Grantor hereunder with respect
to such Collateral. Each Grantor agrees that it will use its best efforts to
take such action as shall be necessary in order that all representations and
warranties hereunder shall be true and correct with respect to such Collateral
within 30 days after the date it has been notified by the Collateral Agent of
the specific identification of such Collateral.

SECTION 4.05. Inspection and Verification. The Collateral Agent and such
persons as the Collateral Agent may reasonably designate shall have the right,
at the Grantors' own cost and expense, to inspect the Collateral, all records
related thereto (and to make extracts and copies from such records) and the
premises upon which any of the Collateral is located, to discuss the Grantors'
affairs with the officers of the Grantors and their independent accountants and
to verify under reasonable procedures the validity, amount, quality, quantity,
value, condition and status of, or any other matter relating to, the Collateral,
including, in the case of Accounts or Collateral in the possession of any third
person, by contacting Account Debtors or the third person possessing such
Collateral for the purpose of making such a verification. The Collateral Agent
shall have the absolute right to share any information it gains from such
inspection or verification with any Secured Party (it being understood that any
such information shall be deemed to be "Information" subject to the provisions
of Section 9.16).

SECTION 4.06. Taxes; Encumbrances. At its option, the Collateral Agent
may discharge past due taxes, assessments, charges, fees, Liens, security
interests or other encumbrances at any time levied or placed on the Collateral
and not permitted pursuant to

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Section 6.02 of the Credit Agreement, and may pay for the maintenance and
preservation of the Collateral to the extent any Grantor fails to do so as
required by the Credit Agreement or this Agreement, and each Grantor jointly and
severally agrees to reimburse the Collateral Agent on demand for any payment
made or any expense incurred by the Collateral Agent pursuant to the foregoing
authorization; provided, however, that nothing in this Section 4.06 shall be
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on the Collateral Agent or any Secured Party to cure or perform, any
covenants or other promises of any Grantor with respect to taxes, assessments,
charges, fees, liens, security interests or other encumbrances and maintenance
as set forth herein or in the other Loan Documents.

SECTION 4.07. Assignment of Security Interest. If at any time any Grantor
shall take a security interest in any property of an Account Debtor or any other
person to secure payment and performance of an Account, such Grantor shall
promptly assign such security interest to the Collateral Agent. Such assignment
need not be filed of public record unless necessary to continue the perfected
status of the security interest against creditors of and transferees from the
Account Debtor or other person granting the security interest.

SECTION 4.08. Continuing Obligations of the Grantors. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless the Collateral Agent and the Secured Parties from and against any and
all liability for such performance.

SECTION 4.09. Use and Disposition of Collateral. None of the Grantors
shall make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral, except as
expressly permitted by Section 6.02 of the Credit Agreement; provided, however,
that nothing herein shall be construed to prohibit the Grantors from granting or
receiving any licenses or sub-licenses of Intellectual Property. None of the
Grantors shall make or permit to be made any transfer of the Collateral and each
Grantor shall remain at all times in possession of the Collateral owned by it,
except that (a) Inventory may be sold in the ordinary course of business and (b)
unless and until the Collateral Agent shall notify the Grantors that an Event of
Default shall have occurred and be continuing and that during the continuance
thereof the Grantors shall not sell, convey, lease, assign, transfer or
otherwise dispose of any Collateral (which notice may be given by telephone if
promptly confirmed in writing), the Grantors may use and dispose of the
Collateral in any lawful manner not inconsistent with the provisions of this
Agreement, the Credit Agreement or any other Loan Document. Without limiting the
generality of the foregoing, each Grantor agrees that it shall not permit any
Inventory to be in the possession or control of any warehouseman, bailee, agent
or processor at any time unless such warehouseman, bailee, agent or processor
shall have been notified of the Security Interest and shall have agreed in
writing to hold the Inventory subject to the Security Interest and the
instructions of the Collateral Agent and to waive and release any Lien held by
it with respect to such Inventory, whether arising by operation of law or
otherwise.

SECTION 4.10. Limitation on Modification of Accounts. None of the
Grantors will, without the Collateral Agent's prior written consent, grant any
extension of the time of payment of any of the Accounts Receivable, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partly, any person liable for the payment thereof or allow any credit
or discount whatsoever thereon, other than extensions, credits,

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discounts, compromises or settlements granted or made in the ordinary course of
business and consistent with its current practices and in accordance with such
prudent and standard practices used in industries that are the same as or
similar to those in which such Grantor is engaged.

SECTION 4.11. Insurance. The Grantors, at their own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage to
the Inventory and Equipment in accordance with Section 5.02 of the Credit
Agreement. Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact)
for the purpose, during the continuance of an Event of Default, of making,
settling and adjusting claims in respect of Collateral under policies of
insurance, endorsing the name of such Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that
any Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto, the Collateral Agent may, without waiving or releasing any
obligation or liability of the Grantors hereunder or any Event of Default, in
its sole discretion, obtain and maintain such policies of insurance and pay such
premium and take any other actions with respect thereto as the Collateral Agent
deems advisable. All sums disbursed by the Collateral Agent in connection with
this Section 4.11, including reasonable attorneys' fees, court costs, expenses
and other charges relating thereto, shall be payable, upon demand, by the
Grantors to the Collateral Agent and shall be additional Obligations secured
hereby.

SECTION 4.12. Covenants Regarding Patent, Trademark and Copyright
Collateral. (a) Each Grantor agrees that it will not, and it will exercise its
reasonable best efforts to ensure that its licensees will not, do any act, or
omit to do any act, whereby any Patent that is material to the conduct of such
Grantor's business may become invalidated or dedicated to the public, and agrees
that it shall continue to mark any products covered by a Patent with the
relevant patent number as necessary and sufficient to establish and preserve its
maximum rights under applicable patent laws.

(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark that is material to the conduct of such
Grantor's business, (i) maintain such Trademark in full force free from any
claim of abandonment or invalidity for non-use, (ii) maintain the quality of
products and services offered under such Trademark, (iii) display such Trademark
with notice of Federal or foreign registration to the extent necessary and
sufficient to establish and preserve its maximum rights under applicable law and
(iv) not knowingly use or knowingly permit the use of such Trademark in
violation of any third party rights.

(c) Each Grantor (either itself or through licensees) will, for each
work covered by a Copyright that is material to the conduct of any Grantor's
business, continue to publish, reproduce, display, adopt and distribute the work
with appropriate copyright notice as necessary and sufficient to establish and
preserve its maximum rights under applicable copyright laws.

(d) Each Grantor shall notify the Collateral Agent immediately if it
knows or has reason to know that any Patent, Trademark or Copyright material to
the conduct of its business may become abandoned, lost or dedicated to the
public, or of any materially adverse determination or development (including the
institution of, or any such determination or

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development in, any proceeding in the United States Patent and Trademark Office,
United States Copyright Office or any court or similar office of any country)
regarding such Grantor's ownership of any Patent, Trademark or Copyright, its
right to register the same, or to keep and maintain the same.

(e) In no event shall any Grantor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or in any
other country or any political subdivision thereof, unless it promptly informs
the Collateral Agent, and, upon request of the Collateral Agent, executes and
delivers any and all agreements, instruments, documents and papers as the
Collateral Agent may reasonably request to evidence the Collateral Agent's
security interest in such Patent, Trademark or Copyright, and each Grantor
hereby appoints the Collateral Agent as its attorney-in-fact to execute and file
such writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable.

(f) Each Grantor will take all necessary steps that are consistent with
the practice in any proceeding before the United States Patent and Trademark
Office, United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof, to maintain and pursue each material application relating
to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant
or registration) and to maintain each issued Patent and each registration of the
Trademarks and Copyrights that is material to the conduct of any Grantor's
business, including timely filings of applications for renewal, affidavits of
use, affidavits of incontestability and payment of maintenance fees, and, if
consistent with good business judgment, to initiate opposition, interference and
cancelation proceedings against third parties.

(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor promptly shall notify
the Collateral Agent and shall, if consistent with good business judgment, sue
for infringement, misappropriation or dilution and to recover any and all
damages for such infringement, misappropriation or dilution, and take such other
actions as are appropriate under the circumstances to protect such Collateral.

(h) Upon and during the continuance of an Event of Default, each Grantor
shall use its best efforts to obtain all requisite consents or approvals by the
licensor of each Copyright License, Patent License or Trademark License to
effect the assignment of all of such Grantor's right, title and interest
thereunder to the Collateral Agent or its designee.

ARTICLE V

Power of Attorney

Each Grantor irrevocably makes, constitutes and appoints the Collateral
Agent (and all officers, employees or agents designated by the Collateral Agent)
as such Grantor's true and lawful agent and attorney-in-fact, and in such
capacity the Collateral Agent shall have

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the right, with power of substitution for each Grantor and in each Grantor's
name or otherwise, for the use and benefit of the Collateral Agent and the
Secured Parties, upon the occurrence and during the continuance of an Event of
Default (a) to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Collateral or any part thereof; (b) to demand, collect, receive payment
of, give receipt for and give discharges and releases of all or any of the
Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading
relating to any of the Collateral; (d) to send verifications of Accounts
Receivable to any Account Debtor; (e) to commence and prosecute any and all
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Collateral or
to enforce any rights in respect of any Collateral; (f) to settle, compromise,
compound, adjust or defend any actions, suits or proceedings relating to all or
any of the Collateral; (g) to notify, or to require any Grantor to notify,
Account Debtors to make payment directly to the Collateral Agent; and (h) to
use, sell, assign, transfer, pledge, make any agreement with respect to or
otherwise deal with all or any of the Collateral, and to do all other acts and
things necessary to carry out the purposes of this Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of the
Collateral for all purposes; provided, however, that nothing herein contained
shall be construed as requiring or obligating the Collateral Agent or any
Secured Party to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent or any Secured
Party, or to present or file any claim or notice, or to take any action with
respect to the Collateral or any part thereof or the moneys due or to become due
in respect thereof or any property covered thereby, and no action taken or
omitted to be taken by the Collateral Agent or any Secured Party with respect to
the Collateral or any part thereof shall give rise to any defense, counterclaim
or offset in favor of any Grantor or to any claim or action against the
Collateral Agent or any Secured Party. It is understood and agreed that the
appointment of the Collateral Agent as the agent and attorney-in-fact of the
Grantors for the purposes set forth above is coupled with an interest and is
irrevocable. The provisions of this Section shall in no event relieve any
Grantor of any of its obligations hereunder or under any other Loan Document
with respect to the Collateral or any part thereof or impose any obligation on
the Collateral Agent or any Secured Party to proceed in any particular manner
with respect to the Collateral or any part thereof, or in any way limit the
exercise by the Collateral Agent or any Secured Party of any other or further
right which it may have on the date of this Agreement or hereafter, whether
hereunder, under any other Loan Document, by law or otherwise.

ARTICLE VI

Remedies

SECTION 6.01. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver each item of
Collateral to the Collateral Agent on demand, and it is agreed that the
Collateral Agent shall have the right to take any of or all the following
actions at the same or different times: (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the Security Interest
to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Collateral Agent, or to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any such Collateral throughout the world on such terms
and conditions and in such manner as the Collateral Agent shall determine (other
than in violation of any then-existing licensing

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arrangements to the extent that waivers cannot be obtained), and (b) with or
without legal process and with or without prior notice or demand for
performance, to take possession of the Collateral and without liability for
trespass to enter any premises where the Collateral may be located for the
purpose of taking possession of or removing the Collateral, exercise any
Grantor's right to bill and receive payment for completed work and, generally,
to exercise any and all rights afforded to a secured party under the Uniform
Commercial Code or other applicable law. Without limiting the generality of the
foregoing, each Grantor agrees that the Collateral Agent shall have the right,
subject to the mandatory requirements of applicable law, to sell or otherwise
dispose of all or any part of the Collateral, at public or private sale or at
any broker's board or on any securities exchange, for cash, upon credit or for
future delivery as the Collateral Agent shall deem appropriate. The Collateral
Agent shall be authorized at any such sale (if it deems it advisable to do so)
to restrict the prospective bidders or purchasers to persons who will represent
and agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale the Collateral Agent shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the property
sold absolutely, free from any claim or right on the part of any Grantor, and
each Grantor hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which such Grantor now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted.

The Collateral Agent shall give the Grantors 10 days' written notice
(which each Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions) of the Collateral Agent's intention to
make any sale of Collateral. Such notice, in the case of a public sale, shall
state the time and place for such sale and, in the case of a sale at a broker's
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion thereof,
will first be offered for sale at such board or exchange. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Collateral Agent may fix and state in the notice (if any)
of such sale. At any such sale, the Collateral, or portion thereof, to be sold
may be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The Collateral Agent
shall not be obligated to make any sale of any Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral
shall have been given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section, any Secured Party may bid for or purchase, free (to
the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of any Grantor (all said rights being also hereby waived
and released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due and payable to such Secured Party from any Grantor as a credit against the
purchase price, and such Secured Party may, upon compliance with the

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terms of sale, hold, retain and dispose of such property without further
accountability to any Grantor therefor. For purposes hereof, a written agreement
to purchase the Collateral or any portion thereof shall be treated as a sale
thereof; the Collateral Agent shall be free to carry out such sale pursuant to
such agreement and no Grantor shall be entitled to the return of the Collateral
or any portion thereof subject thereto, notwithstanding the fact that after the
Collateral Agent shall have entered into such an agreement all Events of Default
shall have been remedied and the Obligations paid in full. As an alternative to
exercising the power of sale herein conferred upon it, the Collateral Agent may
proceed by a suit or suits at law or in equity to foreclose this Agreement and
to sell the Collateral or any portion thereof pursuant to a judgment or decree
of a court or courts having competent jurisdiction or pursuant to a proceeding
by a court-appointed receiver.

SECTION 6.02. Application of Proceeds. The Collateral Agent shall apply
the proceeds of any collection or sale of the Collateral, as well as any
Collateral consisting of cash, as follows:

FIRST, to the payment of all costs and expenses incurred by the
Administrative Agent or the Collateral Agent (in its capacity as such
hereunder or under any other Loan Document) in connection with such
collection or sale or otherwise in connection with this Agreement or any
of the Obligations, including all court costs and the fees and expenses
of its agents and legal counsel, the repayment of all advances made by
the Collateral Agent hereunder or under any other Loan Document on behalf
of any Grantor and any other costs or expenses incurred in connection
with the exercise of any right or remedy hereunder or under any other
Loan Document;

SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in
accordance with the amounts of the Obligations owed to them on the date
of any such distribution); and

THIRD, to the Grantors, their successors or assigns, or as a court
of competent jurisdiction may otherwise direct.

The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.

SECTION 6.03. Grant of License to Use Intellectual Property. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or

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printout thereof. The use of such license by the Collateral Agent may be
exercised, at the option of the Collateral Agent, upon the occurrence and during
the continuation of an Event of Default; provided that any license, sub-license
or other transaction entered into by the Collateral Agent in accordance herewith
shall be binding upon the Grantors notwithstanding any subsequent cure of an
Event of Default.

ARTICLE VII

Miscellaneous

SECTION 7.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.01 of the Credit Agreement. All communications and notices
hereunder to any Guarantor shall be given to it in care of the Borrower.

SECTION 7.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other collateral, or
any release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement (other
than the indefeasible payment in full of all the Obligations and termination of
all commitments of the Lenders and the Issuing Banks).

SECTION 7.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans,
regardless of any investigation made by the Lenders or on their behalf, and
shall continue in full force and effect until this Agreement shall terminate.

SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign or
transfer its rights or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void) except as
expressly contemplated by this Agreement or the Credit Agreement. This Agreement
shall be construed as a separate agreement with respect to each Grantor and may
be amended, modified, supplemented,

18

18

waived or released with respect to any Grantor without the approval of any other
Grantor and without affecting the obligations of any other Grantor hereunder.

SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.

SECTION 7.06. Collateral Agent's Fees and Expenses; Indemnification. (a)
Each Grantor jointly and severally agrees to pay upon demand to the Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees, disbursements and other charges of its counsel and of any experts or
agents, which the Collateral Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody or preservation of, or the
sale of, collection from or other realization upon any of the Collateral, (iii)
the exercise, enforcement or protection of any of the rights of the Collateral
Agent hereunder or (iv) the failure of any Grantor to perform or observe any of
the provisions hereof.

(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Grantor jointly and severally agrees to indemnify the
Collateral Agent and the other Indemnitees against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable fees, disbursements and other charges of counsel,
incurred by or asserted against any of them arising out of, in any way connected
with, or as a result of, the execution, delivery or performance of this
Agreement or any claim, litigation, investigation or proceeding relating hereto
or to the Collateral, whether or not any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.

(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 7.06 shall remain operative and in full force and effect
regardless of the termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf
of the Collateral Agent or any Lender. All amounts due under this Section 7.06
shall be payable on written demand therefor.

SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.

SECTION 7.08. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent, the Issuing Banks, the

19

19

Administrative Agent and the Lenders under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provisions of this Agreement or any other Loan
Document or consent to any departure by any Grantor therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice to or demand on any Grantor in any case
shall entitle such Grantor or any other Grantor to any other or further notice
or demand in similar or other circumstances.

(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and Grantor with respect to which such
waiver, amendment or modification is to apply, subject to any consent required
in accordance with Section 9.08 of the Credit Agreement.

SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09.

SECTION 7.10. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

SECTION 7.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract (subject to Section 7.04), and
shall become effective as provided in Section 7.04. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.

SECTION 7.12. Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.

20

20

SECTION 7.13. Jurisdiction; Consent to Service of Process. (a) Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final non-appealable judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Collateral Agent, the Administrative Agent, the Issuing Banks or
any Lender may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against any Grantor or its properties in
the courts of any jurisdiction.

(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.01. Nothing in this
Agreement will affected the right of any party to this Agreement to serve
process in any other manner permitted by law.

SECTION 7.14. Termination. This Agreement and the Security Interest shall
terminate when all the Obligations (other than wholly contingent indemnification
obligations) then due and owing have been indefeasibly paid in full, the Lenders
have no further commitment to lend, the L/C Exposure has been reduced to zero
and the Issuing Banks have no further commitment to issue Letters of Credit
under the Credit Agreement, at which time the Collateral Agent shall execute and
deliver to the Grantors, at the Grantors' expense, all Uniform Commercial Code
termination statements and similar documents which the Grantors shall reasonably
request to evidence such termination. Any execution and delivery of termination
statements or documents pursuant to this Section 7.14 shall be without recourse
to or warranty by the Collateral Agent. A Grantor shall automatically be
released from its obligations hereunder and the Security Interest in the
Collateral of such Grantor shall be automatically released without further
action in the event that all of the Equity Interests of such Grantor shall be
sold, transferred or otherwise disposed of to a person that is not an Affiliate
of the Borrower in accordance with the terms of the Credit Agreement; provided
that the Required Lenders shall have consented to such sale, transfer or other
disposition (to the extent required by the Credit Agreement) and the terms of
such consent did not provide otherwise.

(b) Upon any sale or other transfer by any Grantor of any Collateral that
is permitted under the Credit Agreement to any person that is not a Grantor, or,
upon the effectiveness of any written consent to the release of the security
granted hereby in any Collateral pursuant to Section 9.08(b) of the Credit
Agreement, the security interest in such Collateral shall be automatically
released.

21

21

SECTION 7.15. Additional Grantors. Upon execution and delivery by the
Collateral Agent and a Domestic Subsidiary of an instrument in the form of Annex
2 hereto, such Domestic Subsidiary shall become a Grantor hereunder with the
same force and effect as if originally named as a Grantor herein. The execution
and delivery of any such instrument shall not require the consent of any Grantor
hereunder. The rights and obligations of each Grantor hereunder shall remain in
full force and effect notwithstanding the addition of any new Grantor as a party
to this Agreement.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.

FLOWSERVE CORPORATION,

by: /s/ JOHN M. NANOS
--------------------------------
Name: John M. Nanos
Title: Assistant Secretary

FLOWSERVE RED CORPORATION,

by: /s/ JOHN M. NANOS
--------------------------------
Name: John M. Nanos
Title: Vice President

FLOWSERVE FSD CORPORATION,

by: /s/ JOHN M. NANOS
--------------------------------
Name: John M. Nanos
Title: Vice President

FLOWSERVE FCD CORPORATION,

by: /s/ JOHN M. NANOS
--------------------------------
Name: John M. Nanos
Title: Vice President

FLOWSERVE INTERNATIONAL, INC.,

by: /s/ JOHN M. NANOS
--------------------------------
Name: John M. Nanos
Title: Vice President

22

22

FLOWSERVE MANAGEMENT                
COMPANY,                            

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

BW/IP-NEW MEXICO, INC.,             

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

FLOWSERVE INTERNATIONAL, LLC,       

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

DURAMETALLIC AUSTRALIA              
HOLDING COMPANY,                    

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

INNOVATIVE VALVE TECHNOLOGIES,      
INC.,                               

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

PLANT MAINTENANCE, INC.,            

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

23

23

VARCO VALVE, INC.,                  

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

COLONIAL EQUIPMENT & SERVICE        
CO., INC.,                          

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

24

24

CECORP, INC.,                       

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

DIVT ACQUISITION-DELAWARE, LLC,  

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

DIVT SUBSIDIARY, LLC,               

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

SOUTHERN VALVE SERVICE, INC.,       

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

L.T. KOPPL INDUSTRIES, INC.,        

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

KOPPL COMPANY,                      

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

25

25

KOPPL INDUSTRIAL SYSTEMS, INC.,     

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

HARLEY INDUSTRIES, INC.,            

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

KOPPL COMPANY OF ARIZONA,           

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

SEELEY & JONES, INCORPORATED,       

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

GSV, INC.,                          

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

IPSCO-FLORIDA, INC.,                

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

26

26

INTERNATIONAL  PIPING  SERVICES     
COMPANY,                            

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

CYPRESS INDUSTRIES, INC.,           

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

DALCO, LLC,                         

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

PLANT SPECIALTIES, INC.,            

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

ENERGY MAINTENANCE, INC.,           

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

27

27

PREVENTIVE MAINTENANCE, INC.,       

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

PRODUCTION MACHINE                  
INCORPORATED,                       

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

ICE LIQUIDATING, INC.,              

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

VALVE REPAIR OF SOUTH               
CAROLINA, INC.,                     

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

THE SAFE SEAL COMPANY., INC.,       

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

FLICKINGER-BENICIA INC.,            

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

28

28

PUGET INVESTMENTS, INC.,            

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

STEAM SUPPLY & RUBBER CO., INC., 

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

FLICKINGER COMPANY,                 

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

BOYDEN INC.,                        

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

VALVE ACTUATION & REPAIR CO.,       

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

INGERSOLL-DRESSER PUMP              
COMPANY,                            

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

29

29

IDP ALTERNATE ENERGY COMPANY,       

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

ENERGY HYDRO, INC.,                 

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

PUMP INVESTMENTS, INC.,             

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

FLOWSERVE HOLDINGS, INC.,           

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

IPSCO HOLDING, INC.,                

by: /s/ JOHN M. NANOS
---------------------------------
Name: John M. Nanos            
Title: Vice President          

BANK OF AMERICA, N.A., as Collateral
Agent,                              

by: /s/ THERESE FONTAINE
---------------------------------
Name: Therese Fontaine         
Title: Managing Director       

30
SCHEDULE I TO THE
SECURITY AGREEMENT

GUARANTORS

A. FLOWSERVE

SUBSIDIARY                           JURISDICTION OF INCORPORATION
----------                           -----------------------------

Flowserve RED Corporation                       Delaware

Flowserve FSD Corporation

Flowserve FCD Corporation

Flowserve International, Inc.

Flowserve Management Company
(DE Business Trust)

BW/IP-New Mexico, Inc.

Flowserve International, LLC

Flowserve Holdings, Inc.

Durametallic Australia Holding Company          Michigan

B. INVATEC

SUBSIDIARY                           JURISDICTION OF INCORPORATION
----------                           -----------------------------

Innovative Valve Technologies, Inc.             Delaware

Plant Maintenance, Inc.

Varco Valve, Inc.

Colonial Equipment & Service Co., Inc.

CECORP, Inc.

DIVT Acquisition-Delaware, LLC

DIVT Subsidiary, LLC 
IPSCO Holding, Inc.

Southern Valve Service, Inc.                    Alabama

L.T. Koppl Industries, Inc.                     California

Koppl Company

Koppl Industrial Systems, Inc.

Harley Industries, Inc.

Koppl Company of Arizona                        Arizona

Seeley & Jones, Incorporated                    Connecticut

GSV, Inc.                                       Florida

IPSCO-Florida, Inc.

International Piping Services Company           Illinois

Cypress Industries, Inc.

31

SUBSIDIARY                           JURISDICTION OF INCORPORATION
----------                           -----------------------------

DALCO, LLC                                      Kentucky

Plant Specialties, Inc.                         Louisiana

Energy Maintenance, Inc.                        Missouri

Preventive Maintenance, Inc.                    North Carolina

Production Machine Incorporated                 Oklahoma

ICE Liquidating, Inc.                           Pennsylvania

Valve Repair of South Carolina, Inc.            South Carolina

The Safe Seal Company, Inc.                     Texas

Flickinger-Benicia Inc.                         Washington

Puget Investments, Inc.

Steam Supply & Rubber Co., Inc.

Flickinger Company

Boyden Inc.                                     West Virginia

Valve Actuation & Repair Co.

C. IDP

SUBSIDIARY                           JURISDICTION OF INCORPORATION
----------                           -----------------------------

Ingersoll-Dresser Pump Company                 Delaware
(DE Partnership)

IDP Alternate Energy Company

Energy Hydro, Inc.

Pump Investments, Inc.

32

SCHEDULE II TO THE
SECURITY AGREEMENT

COPYRIGHTS

A. FLOWSERVE

1. U.S. COPYRIGHT REGISTRATIONS

NONE

2. PENDING U.S. COPYRIGHT APPLICATIONS FOR REGISTRATION

NONE

3. NON-U.S. COPYRIGHT REGISTRATIONS

NONE

4 NON-U.S. PENDING COPYRIGHT APPLICATIONS FOR REGISTRATIONS

NONE

33

B. INVATEC

1. U.S. COPYRIGHT REGISTRATIONS

NONE

2. PENDING U.S. COPYRIGHT APPLICATIONS FOR REGISTRATION

NONE

3. NON-U.S. COPYRIGHT REGISTRATIONS

NONE

4 NON-U.S. PENDING COPYRIGHT APPLICATIONS FOR REGISTRATIONS

NONE

34

C. IDP

1. U.S. COPYRIGHT REGISTRATIONS

(All Ingersoll-Dresser Pump Company Intellectual Property to be assigned
to Flowserve Management Company immediately after Closing).

REGISTRATION       REGISTRATION
GUARANTOR                         TITLE                          NUMBER             DATE
---------                         -----                          ------------       ------------

Ingersoll Dresser Pump Company    CAMERON HYDRAULIC DATA BOOK
IDP Alternate Energy Company      NONE
Energy Hydro, Inc.                NONE
Pump Investments, Inc.            NONE

2. PENDING U.S. COPYRIGHT APPLICATIONS FOR REGISTRATION

NONE

3. NON-U.S. COPYRIGHT REGISTRATIONS

NONE

4 NON-U.S. PENDING COPYRIGHT APPLICATIONS FOR REGISTRATIONS

NONE

35
SCHEDULE V TO THE
SECURITY AGREEMENT

TRADEMARKS

A. FLOWSERVE TRADEMARKS

1. U.S. TRADEMARK REGISTRATIONS

REGISTRATION        REGISTRATION 
GRANTOR                                TRADEMARK                          NUMBER              DATE
-------                                ---------                          ------------        ------------

Flowserve FCD Corporation              ACCORD (STYLIZED)                  1597174             5/22/2000

Flowserve FCD Corporation              AUTOMAX INC & DESIGN               1517015             12/20/2008

Flowserve FCD Corporation              CENTURA                            1721600             10/6/2002

Flowserve FCD Corporation              CHANNELSTREAM                      1393912             5/20/2006

Flowserve FCD Corporation              PHAROS                             1652259             7/30/2001

Flowserve FCD Corporation              PHAZER                             1828775             3/2/2004

Flowserve FCD Corporation              ULTRASWITCH                        1647324

Flowserve FCD Corporation              KAMMER (STYLIZED)                  1850586             8/23/2004

Flowserve FCD Corporation              VALDISK                            1,135,629

Flowserve FCD Corporation              VALTEK INC. (w/design)             895,854

Flowserve FCD Corporation              VALTEK MAXFLO                       2142246            3/10/2008

Anchor Darling                         ADAC                               1170933             9/29/2001
[Assigned to Flowserve Management
Company]

Flowserve Management Company           BIG MAX                            1149600             3/31/2001

Flowserve Management Company           BW SEALS                           1728892             11/3/2002

Flowserve Management Company           BW/IP (STYLIZED)                   1548874             7/25/2009

Flowserve Management Company           BYRON JACKSON                      378463              6/11/2000

Flowserve Management Company           DURCO                              295561              7/5/2002
432949              9/28/2007
417872              11/20/2005
418706              1/8/2006

Flowserve Management Company           DURCO-CAST                         0774446             8/4/2004

Flowserve Management Company           DURCO-D                            743252              1/8/2003
743264              1/8/2003
743322              1/8/2003
761525              12/17/2003
761311              12/10/2003
761329              12/10/2003
761338              12/10/2003
761630              12/17/2003
Flowserve Management Company           DURCOMETER                         1245145             --

Flowserve Management Company           DURCON                             772193              6/30/2004
611024              8/23/2005
Flowserve Management Company           DURCOPUMP                          395550              6/2/2002

Flowserve Management Company           FIVE STAR SEAL & DESIGN            1291851             8/28/2004

Flowserve Management Company           LIFESHIELD                         1857472             10/11/2004

Flowserve Management Company           GASPAC                             1941730             12/12/2005

Flowserve Management Company           PAC-SEAL                           2073563

36

REGISTRATION        REGISTRATION 
GRANTOR                                TRADEMARK                          NUMBER              DATE
-------                                ---------                          ------------        ------------

Flowserve Management Company           SLEEVELINE                          697997             5/24/2000

Flowserve Management Company           T-LINE                             912253              6/8/2001
892839              6/16/2000

Flowserve Management Company           UNITED CENTRIFUGAL                 1644974             5/21/2001

Flowserve Management Company           WILSON-SNYDER                      551064              11/20/2001

Flowserve Management Company           UPC                                213477803           2/3/2008

Innovative Valve Technologies          PWR.SEAL TECHNOLOGY                2283194             10/5/2009
[Assigned to Flowserve Management
Company]

Innovative Valve Technologies          INNOVATIVE VALVE TECHNOLOGIES,     2304575             12/28/2009
[Assigned to Flowserve Management      INC.
Company]

Innovative Valve Technologies          INVATEC                            2304574             12/28/2009
[Assigned to Flowserve Management
Company]

Flowserve International, Inc.          BYRON JACKSON/UNITED               2,034,059

Flowserve International, Inc.          FIVE STAR SEAL DESIGN (DOUBLE)     1624849             11/27/2000

Flowserve International, Inc.          FIVE STAR SEAL DESIGN (SINGLE)     1674796             2/11/2002

Flowserve FSD Corporation              DMC                                0979,376

Flowserve FSD Corporation              DURAFITE                            0902,609

Flowserve FSD Corporation              DURAFLON                           0 861,684

Flowserve FSD Corporation              DURA HOOKS                         0347,926

Flowserve FSD Corporation              DURA LAPPER                        0789,961

Flowserve FSD Corporation              DURAMETALLIC                       183,441
1,283,049

Flowserve FSD Corporation              DURA SEAL                          0319,472

1,022,668
Flowserve FSD Corporation              METAL FAB                          1,388,031

Flowserve Corporation                  DURIRON                            0591017             6/15/2004
0606594             5/31/2005
0603774             3/29/2005
0096259             4/14/2004

Flowserve Corporation                  MAGNALERT                          1,808,367

Flowserve Corporaiton                  QUADRA PRESS                       1,127,811

Flowserve Corporation                  FLOWSERVE                          2333567             3/21/2010
2286139             10/12/2009
2261469             7/13/2009
2261470             7/13/2009
2333568             3/21/2010

Flowserve Corporation                  GUARDIAN                           1746297             1/12/2003

The Safe Seal Company, Inc.            SAFE SEAL                          2194856             10/13/2008

Flowserve RED Corporation              NONE

BW/IP - New Mexico, Inc.               NONE

Flowserve International,  LLC          NONE

Durametallic Australia Holding         NONE
Company

2

37

A. FLOWSERVE TRADEMARKS

2. U.S. TRADEMARK APPLICATIONS

APPLICATION         FILING 
GRANTOR                                  TRADEMARK                      NUMBER              DATE
-------                                  ---------                      -----------         ------

Flowserve FCD Corporation                VALTEK                         Pending             --
Pending

Flowserve Management Company             NONE

Flowserve International, Inc.            NONE

Flowserve FSD Corporation                NONE

Flowserve Corporation                    FLOWSERVE                      75-312447

Flowserve RED Corporation                NONE

BW/IP - New Mexico, Inc.                 NONE

Flowserve International, LLC             NONE

Durametallic Australia Holding Company   NONE

3

38

A. FLOWSERVE TRADEMARKS

3. NON-U.S. TRADEMARK REGISTRATIONS

REGISTRATION          REGISTRATION 
GRANTOR                          TRADEMARK               COUNTRY             NUMBER                DATE
-------                          ---------               -------             ------------          ------------ 

Anchor Darling [Assigned to      ANCHOR DARLING          France              1559256               12/20/1979
Flowserve Management Company]
Anchor Darling [Assigned to      ANCHOR / DARLING        UK                  B1125895              12/19/1979
Flowserve Management Company]                            Germany             1010076               12/22/1979
Israel              49248                 12/26/1979
Italy               381394                1/10/1980
South Korea         71163                 7/31/1980
Taiwan              134160                6/1/1990

Anchor Darling [Assigned to      ANCHOR / DARLING        Benelux             363296                12/18/1979
Flowserve Management Company]    (DEVICE)

Flowserve Management Company     BW SEALS                Australia           611424                9/14/1993
Benelux             470167                10/25/1989
Canada              443166                5/26/1995
Colombia            179838                7/12/1993
Denmark             00161/1992            1/17/1992
France              1718690               7/28/1989
Iran                71748                 12/12/1993
Italy               575671                10/1/1992
Mexico              386883                6/1/1990
Philippines         58015                 5/12/1994
Saudi Arabia        255/91                9/23/1990
Singapore           B4733/92              6/24/1992
Spain               1516478               11/5/1991
Taiwan              733726                10/31/1996
UK                  1403594               5/11/1989

Flowserve Management Company     BW SEALS LOGO           Argentina           1600234               5/17/1996

Flowserve Management Company     BW/IP                   Venezuela           153127                2/16/1994
Venezuela           153128                2/16/1994

Flowserve Management Company     BW/IP (DESIGN)          Venezuela           153126                2/16/1994

Flowserve Management Company     BW/IP (DEVICE)          Spain               1307428               6/5/1990

4

39

REGISTRATION          REGISTRATION 
GRANTOR                          TRADEMARK               COUNTRY             NUMBER                DATE
-------                          ---------               -------             ------------          ------------ 

Flowserve Management Company     BW/IP (STYLIZED)        Thailand            46469                 7/2/1996
Argentina           1332325               2/15/1989
Benelux             483051                2/22/1989
Canada              TMA404402             11/6/1992
France              1533629               5/30/1989
Germany             1182902               12/17/1991
Indonesia           280410                10/2/1992
Italy               575749                10/1/1992
Japan               2448338               8/31/1992
Saudi Arabia        222/46                7/29/1990
Singapore           B4732/92              6/24/1992
Switzerland         370960                2/23/1989
Philippines         55437                 6/21/1993
UK                  1403598               10/27/1989
Saudi Arabia        222/47                7/29/1990
Thailand            44725                 8/2/1995
Iran                69211                 10/17/1992

Flowserve Management Company     BW/IP Design            Venezuela           153125                2/16/1994

Flowserve Management Company     BW/IP DESIGN            Mexico              381137                8/16/1990
Mexico              381138                8/16/1990

5

40

REGISTRATION          REGISTRATION 
GRANTOR                          TRADEMARK               COUNTRY             NUMBER                DATE
-------                          ---------               -------             ------------          ------------ 

Flowserve Management Company     BYRON JACKSON           Argentina           1592107               1933
Australia           B273316               10/23/1970
Australia           B243395               10/23/1970
Australia           B243398               1970
Austria             56302                 12/17/1965
Benelux             103007                12/24/1971
Bolivia             32922                 2/4/1977
Brazil              811047318             1/8/1985
Bulgaria            9174                  10/30/1973
Canada              2/997                 2/2/1933
Chile               417153                11/28/1933
China               161183                8/15/1982
Costa Rica          64298                 1/17/1985
Czech Republic      162135                1974
Czech Republic      162136                3/13/1974
Denmark             1137                  4/30/1966
France              1336929               1/3/1986
Germany             823449                8/29/1966
UK                  2006989               1/6/1995
Greece              33890                 8/5/1965
Hungary             116847                11/20/1973
Indonesia           403517                11/6/1997
Iran                56125                 2/23/1983
Italy               568658                1992
Italy               714612                6/18/1997
Japan               718894                9/6/1966
Japan               490789                10/31/1956
South Korea         10159                 8/12/1965
Kuwait              14439                 3/26/1993
Malaysia            M/B73923              1/6/1977
Malaysia            M/B73924              1/6/1977
Mexico              45819                 4/15/1943
Panama              032840                10/14/1983
Paraguay            193760                7/1/1976
Peru                18972                 11/22/1963
Philippines         35460                 3/5/1986
Poland              52491                 10/29/1974
Qatar               3471                  4/19/1983
Saudi Arabia        113/31                3/25/1985
Slovak Republic     162135                3/13/1974
South Africa        B65/4411              11/1/1965
Spain               482836                9/5/1967
Spain               482838                1/24/1967
Spain               482837                5/7/1969
Switzerland         340713                7/21/1965
Taiwan              90605                 7/1/1977
Taiwan              400009                1988
Thailand            55986                 1/14/1977
Russian Fed.        50609                 9/25/1973
Uruguay             291852                2/26/1977
Venezuela           21242                 8/13/1949
Algeria             40160                 5/24/1978

6

41

REGISTRATION          REGISTRATION 
GRANTOR                          TRADEMARK               COUNTRY             NUMBER                DATE
-------                          ---------               -------             ------------          ------------ 

Cuba                96258                 4/8/1958
Equador             3162-9                7/12/1983
Romania             1725                  8/21/1933
Turkey              110427                12/2/1968
East Germany        640369                8/21/1974

Flowserve Management Company     BYRON JACKSON           Taiwan              00880863              1/31/2000

Flowserve Management Company     BYRON JACKSON           Mexico              45824                 4/15/1943
Slovak Republic     162136                3/13/1974

Flowserve Management Company     BYRON JACKSON (in       Japan               2076780               9/30/1988
katakana)

Flowserve Management Company     CHEMSTAR                France              1519103               3/14/1989
Germany             1182630               11/29/1991
UK                  1372876               2/14/1989

Flowserve Management Company     CHLORIMET               France              RN 1492413            1968
Italy               RN 0550867            1968

7

42

REGISTRATION          REGISTRATION 
GRANTOR                          TRADEMARK               COUNTRY             NUMBER                DATE
-------                          ---------               -------             ------------          ------------ 

Flowserve Management Company     DURAMETALLIC            Argentina           RN 621597             1969
Argentina           RN 1373154            1990
Australia           RN A208222            1974
Bahrain             RN 9654               1985
Benelux             RN 033985             1971
Brazil              RN 1232/0602.251      1974
Canada              RN 241/52108          1931
Canada              RN 334048             1987
Chile               RN 446515             1995
Columbia            RN 173759             1995
Czechoslovakia      RN 176969             1992
Ecuador             RN 4752               1995
France              RN 958262             1976
Germany             RN 750438             1958
Germany             RN 869521             1969
Great Britain       RN 906510             1967
Hungary             RN 136020             1992
India               RN 241039             1967
Indonesia           RN 116961             1977
Iran                RN 33231              1969
Israel              RN 36261              1972
Italy               RN 218996             1967
Japan               RN 513658             1958
Kuwait              RN 6808               1974
Malaysia            RN M/093116           1981
Mexico              RN 39918              1939
Mexico              RN 156614             1969
New Zealand         RN 131582             1980
Nigeria             RN 23849              1973
Paraguay            RN 185241             1996
Peru                RN 13454              1995
Philippines         RN 22830              1976
Poland              RN 82720              1992
Saudi Arabia        RN 94/22              1980
Singapore           RN 61098              1974
Slovakia            RN 173000             1992
South Africa        RN 66/5169            1966
South Africa        RN 67/1391            1967
South Korea         RN 129459             1986
Spain               RN 603129             1972
Sweden              RN 120581             1967
Taiwan              RN 328389             1986
Thailand            RN 86654              1981
Turkey              RN 46211              1972
Uruguay             RN 272.756            1996
Venezuela           RN 11934              1958
Venezuela           RN 22.662-D           1987

8

43

REGISTRATION          REGISTRATION 
GRANTOR                          TRADEMARK               COUNTRY             NUMBER                DATE
-------                          ---------               -------             ------------          ------------ 

Flowserve Management Company     DURA SEAL               Argentina           RN 527070             1964
Australia           RN A166362            1961
Bahrain             RN 9655               1985
Benelux             RN 033986             1971
Brazil              RN 384364             1968
Canada              RN 9678               1937
China               RN 780617             1995
Czec. Republic      RN 178691             1992
Ecuador             RN 4759               1995
France              RN 47714              1939
Germany             RN 909544             1966
Great Britian       RN 609037             1940
Hungary             RN 136019             1992
India               RN 210230             1962
Indonesia           RN 120468             1977
Iran                RN 38061              1972
Israel              RN 36260              1972
Italy               RN 218995             1967
Japan               RN 557204             1960
Kuwait              RN 6807               1974
Mexico              RN 39919              1939
New Zealand         RN B131581            1980
Nigeria             RN 27231              1973
Paraguay            RN 181.028            1995
Peru                RN 13453              1995
Phillipines         RN 23124              1976
Poland              RN 82721              1992
Saudi Arabia        RN 92/23              1980
Singapore           RN 61099              1974
Slovakia            RN 175122             1992
South Africa        RN 63/0686            1963
South Korea         RN 129458             1986
Taiwan              RN 328388             1986
Thailand            RN 77295              1981
Turkey              RN 46426              1972
Venezuela           RN 11933              1939

Flowserve Management Company     DURCO                   China               358021                8/20/1989
France              1483334               9/9/1968
India               418546                3/5/1984
India               418547                3/5/1984
Italy               547399                9/9/1968
Mexico              90568                 8/13/1957
Mexico              90569                 10/19/1957
Taiwan              278199                5/16/1985
South Korea         104174                8/10/1984
UK                  782884                10/16/1958

Flowserve Management Company     DURCO (IN CHINESE)      China               358019                8/20/1989

Flowserve Management Company     DURCO-CAST              Canada              136531                7/10/1964

9

44

REGISTRATION          REGISTRATION 
GRANTOR                          TRADEMARK               COUNTRY             NUMBER                DATE
-------                          ---------               -------             ------------          ------------ 

Flowserve Management Company     DURCO-D                 Argentina           1615654               9/16/1996
Argentina           156695                1/2/1996
Argentina           113245/8              10/28/1963
Australia           A172743               3/22/1962
Australia           A172744               3/22/1962
Benelux             40702                 5/28/1971
Brazil              750152842             2/16/1982
Brazil              004067282             9/2/1970
Brazil              3693198               3/11/1978
Canada              128754                11/6/1962
Chile               330102                4/28/1988
France              1389966               1/19/1987
Germany             783072                3/7/1963
India               215280                5/1/1963
International Reg   368605                3/25/1970
Italy               413319                3/6/1962
Mexico              110692                3/20/1962
Mexico              110691                3/20/1962
Peru                10765                 3/16/1972
Peru                10548                 3/16/1972
Peru                10766                 3/16/1972
South Africa        62/0682               3/5/1962
South Korea         165048                12/21/1988
Venezuela           44835                 4/8/1963
Venezuela           44836                 4/8/1963
Venezuela           44837                 4/8/1963
Venezuela           64187                 3/26/1971
UK                  833681                4/25/1962
UK                  846573                3/18/1963
UK                  850693                6/21/1963
UK                  950481                11/3/1969
UK                  833682                4/25/1962
UK                  833683                4/25/1962
UK                  846574                3/18/1963

Flowserve Management Company     DURCO-D (IN CHINESE)    China               258472                8/10/1986
China               259910                3/20/1996

Flowserve Management Company     DURCOMETER              Canada              TMA288833             1984

Flowserve Management Company     DURCON                  Canada              103755                7/6/1956
UK                  744126                7/6/1955

Flowserve Management Company     DURCOPUMP               Canada              UCA15306              7/18/1941
UK                  782885                10/16/1958

10

45

REGISTRATION          REGISTRATION 
GRANTOR                          TRADEMARK               COUNTRY             NUMBER                DATE
-------                          ---------               -------             ------------          ------------ 

Flowserve Management Company     DURICHLOR               UK                  943818                6/9/1969
UK                  943819                6/9/1969
International Reg   368601                3/25/1970
Argentina           1315522               1988
Argentina           1315523               1988
Argentina           1315526               1988
Argentina           1315525               1988
Argentina           1315521               1988
France              1483333               1968
Italy               547398                1968

Flowserve Management Company     DURIMET                 Benelux             33460                 5/19/1971
South Korea         107674                11/29/1984
France              1483452               1968
Italy               0550084               1968

Flowserve Management Company     DURIRON                 Argentina           1315519               10/27/1988
Argentina           1315520               10/27/1988
Argentina           1315518               10/27/1988
Benelux             33452                 5/19/1971
Brazil              002468808             2/3/1981
Brazil              006075851             4/25/1985
Canada              TMDA29960             12/1/1921
Chile               326316                4/25/1957
Chile               357611                4/17/1970
France              1423120               6/18/1952
India               418545                3/5/1984
International Reg   368604                3/25/1970
Italy               339499                12/21/1956
Mexico              20277                 12/14/1921
South Africa        84/6546               7/24/1984
South Africa        84/6547               7/24/1984
South Korea         107833                12/6/1984
Spain               91228                 9/22/1932
Spain               86177                 7/7/1931
Spain               91227                 2/14/1933
Taiwan              268088                12/16/1984
UK                  421025                11/29/1921

Flowserve Management Company     DURIRON (IN CHINESE)    China               258471                8/10/1986
China               259911                8/20/1986
China               358018                8/20/1989

Flowserve Management Company     ENZINGER                Canada              RN 107692             1957

Flowserve Management Company     FIVE STAR SEAL          Canada              TMA373450             9/14/1990

Flowserve Management Company     FIVE STAR SEAL DESIGN   Canada              TMA370794             7/13/1990
(DOUBLE)

Flowserve Management Company     FIVE STAR SEAL DESIGN   Canada              TMA371345             7/27/1990
(SINGLE)

Flowserve Management Company     GASPAC                  Germany             396344321             10/15/1996

11

46

REGISTRATION          REGISTRATION 
GRANTOR                          TRADEMARK               COUNTRY             NUMBER                DATE
-------                          ---------               -------             ------------          ------------ 

Flowserve Management Company     GASPAC                  Canada              467701                12/16/1996
UK                  2018793               4/26/1995
Malaysia            95/13380              12/8/1995
Singapore           11912/95

Flowserve Management Company     HELITORK                Canada              RN282225              1983
Italy               RN 413372             1986

Flowserve Management Company     LIFECHAMBER             Canada              RN TMA385799          1991
Canada              RN TMA398208          1992

Flowserve Management Company     LIFESHIELD              Canada              TMA425667             1994
Canada              TMA425661             1994

Flowserve Management Company     PETCH                   Indonesia           RN 268397             1991

Flowserve Management Company     SLEEVELINE              Benelux             RN 33459              1971
Canada              RN 171469             1970
France              RN 1483454            1968
Italy               RN 0550082            1968

Flowserve Management Company     T-LINE                  Canada              RN 173563             1970
France              RN 1483455            1978
Italy               RN 0550083            1968

Flowserve Management Company     UNITED                  Australia           RN A158675            1960
Benelux             RN 490849             1991
France              RN 1636285            1991
Iran                RN 73859              1994
Italy               RN 611343             1993
Mexico              RN 539198             1996
Thailand            RN TM42107            1995

Flowserve Management Company     UNITED CENTRIFUGAL      Argentina           1507406               2/28/1994

Flowserve Management Company     UNITED CENTRIFUGAL      Mexico              539199                11/6/1991

Flowserve Management Company     UNITED PUMPS            Canada              TMA409344             3/12/1993

Flowserve Management Company     WILSON-SNYDER           Mexico              514129                11/16/1995
India               270853B               8/13/1973

Flowserve Management Company     WILSON-SNYDER           China               244200                2/27/1996

Flowserve Management Company     UPC                     Canada              TMA452634             12/29/1995

12

47

REGISTRATION          REGISTRATION 
GRANTOR                          TRADEMARK               COUNTRY             NUMBER                DATE
-------                          ---------               -------             ------------          ------------ 

Flowserve Corporation            VALTEK                  UK                  1063895               6/4/1976
UK                  1063896               6/4/1976
UK                  1063897               6/4/1976
Australia           600966                11/25/1996
Brazil              817548130             2/25/1998
China               1177794               5/21/1998
Denmark             2020/74               6/28/1974
France              93477871              7/26/1993
Germany             20262319              4/15/1994
Italy               694721                7/2/1977
Japan               1407928               2/29/1980
Norway              89814                 12/14/1973
Sweden              146507                3/22/1974

Flowserve Corporation            VALTEK                  UK                  1063894               6/4/1976

Flowserve Corporation            DURCO-D                 Argentina           1615655               9/16/1996

Flowserve Corporation            FLOWSERVE               Argentina           1.721.932             2/16/1999
Argentina           1.721.931             2/16/1999
Australia           750973                7/3/1998
Canada              520991                1/4/2000
Chile               519.695               8/19/1998
Chile               519.696               8/19/1998
China               1279596               5/28/1999
China               1293761               7/14/1999
Czech Republic      217863                5/27/1999
European Com.       707901                12/16/1999
Hungary             156813                6/21/1999
Indonesia           432025                2/10/1998
Indonesia           432026                2/10/1998
Mexico              579538                6/29/1998
New Zealand         286127                6/20/1997
New Zealand         286128                6/17/1998
Norway              195411                1/21/1999
Peru                46832                 6/24/1998
Peru                46833                 6/24/1998
Singapore           T97/15408H            6/20/1997
Slovenia            Z9870142              10/5/1998
South Korea         443203                3/4/1999
South Korea         40-448007             5/18/1999
Switzerland         456623                10/12/1998

Flowserve FCD Corporation        AUTOMAX                 Benelux             542479                9/1/1994
Germany             2101813               11/21/1996
UK                  1555542               12/3/1993
UK                  1555501               12/3/1993
Saudi Arabia        316/55                8/8/1994
Saudi Arabia        316/56                8/8/1994
Singapore           S/9706/93             12/8/1993

Flowserve FCD Corporation        AUTOMAX (STYLIZED)      Australia           617760                12/3/1993
Australia           617761                12/3/1993
Italy               00678836              5/17/1996

13

48

REGISTRATION          REGISTRATION 
GRANTOR                          TRADEMARK               COUNTRY             NUMBER                DATE
-------                          ---------               -------             ------------          ------------ 

Flowserve FCD Corporation        AUTOMAX INC & DESIGN    France              93/495315             12/6/1993
South Korea         316236                6/26/1995
South Korea         307062                1/25/1995
South Africa        93/11482              12/3/1993
South Africa        93/11483              12/3/1993
Spain               1793584               12/9/1993
Spain               1793585               12/9/1993

Flowserve FCD Corporation        KAMMER                  Australia           A600968               9/19/1994
Brazil              817553762             12/19/1995
France              93477872              7/26/1993
Germany             2062764               4/20/1994
UK                  1527113               2/25/1993

Flowserve FSD Corporation        DURA                    Italy               RN 175446             1961

Flowserve FSD Corporation        DURAFITE                Canada              RN 179128             1971
Germany             RN 893562             1970

Flowserve FSD Corporation        DURAFLON                Argentina           RN 1073602             1984

Flowserve FSD Corporation        DURA HOOKS              Canada              RN 9928               1937

Flowserve FSD Corporation        DURA LAPPER             Canada              RN 141841             1965

Flowserve Corporation            QUADRA PRESS            Canada              RN 254349             1981

Flowserve RED Corporation        NONE

Flowserve FSD Corporation        NONE

Flowserve International, Inc.    NONE

BW/IP - New Mexico, Inc.         NONE

Flowserve International, LLC     NONE

Durametallic Australia Holding   NONE
Company

Flowserve Finance B.V.           NONE

Flowserve International 
Limited                          NONE

14

49

A. FLOWSERVE TRADEMARKS

4. NON-U.S. TRADEMARK APPLICATIONS

GRANTOR                              TRADEMARK            COUNTRY        APPLICATION NUMBER  FILING DATE
----------------------------              ------------------    ---------------    ------------------  -----------

Flowserve Management Company              BW SEALS              Malaysia              Pending             --

Flowserve Management Company              BW SEALS              Venezuela             666190              8/6/1999

Flowserve Management Company              BW/IP DESIGN          Malaysia              Pending             --
Malaysia              Pending             --

Flowserve Corporation                     VALTEK                India                 Pending             --

Flowserve Corporation                     FLOWSERVE & DESIGN    Brazil                Published           --
Brazil                Published           --

Flowserve Corporation                     FLOWSERVE             Brazil                Published           --
Brazil                Published           --
Croatia               Pending             --
India                 Pending             --
India                 Pending             --
Japan                 Published           --
Malaysia              Pending             --
Malaysia              Pending             --
Mexico                Pending             --
Morocco               Pending             --
Saudi Arabia          Pending             --
Saudi Arabia          Pending             --
Singapore             Published           --
Slovak Republic       Pending             --
Slovak Republic       Pending             --
South Africa          Pending             --
South Africa          Pending             --
Venezuela             Published           --
Venezuela             Published           --
Russian Fed           Pending             --

Flowserve FCD Corporation                 AUTOMAX               India                 Pending             --
India                 Pending             --
Singapore             Pending             --

Flowserve RED Corporation                 NONE

Flowserve FSD Corporation                 NONE

Flowserve International, Inc.             NONE

BW/IP - New Mexico, Inc.                  NONE

Flowserve International, LLC              NONE

Durametallic Australia Holding Company    NONE

Flowserve Finance B.V.                    NONE

Flowserve International Limited           NONE

15

50

B. INVATEC TRADEMARKS

1. U.S. TRADEMARK REGISTRATIONS

GRANTOR                            TRADEMARK         REGISTRATION NUMBER   REGISTRATION DATE
-------------------------------------       ---------------------   -------------------   -----------------

Innovative Valve Technologies, Inc.         INNOVATIVE VALVE           2304575               12/28/99
TECHNOLOGIES, INC.

Innovative Valve Technologies, Inc.         INVATEC                    2304574               12/28/99

Innovative Valve Technologies, Inc.         PWR.  SEAL TECHNOLOGY      2,283,194             10/15/99

The Safe Seal Company, Inc.                 SAFE SEAL & design         2,194,856             10/13/98

IPSCO Holding, Inc.                         IPSCO                      0753197               7/23/63

Plant Maintenance                           NONE

Varco Valve, Inc.                           NONE

Colonial Equipment & Service Co., Inc.      NONE

CECORP, Inc.                                NONE

DIVT Acquisition-Delaware, LLC              NONE

DIVT Subsidiary, LLC                        NONE

Southern Valve Service                      NONE

L.T. Koppl Industries                       NONE

Koppl Company                               NONE

Koppl Industrial Systems, Inc.              NONE

Harley Industries, Inc.                     NONE

Koppl Company of Arizona                    NONE

Seeley & Jones, Incorporated                NONE

GSV, Inc.                                   NONE

IPSCO-Florida, Inc.                         NONE

International Piping Services Company       NONE

Cypress Industries, Inc.                    NONE

DALCO, LLC                                  NONE

Plant Specialties, Inc.                     NONE

Energy Maintenance, Inc.                    NONE

Preventive Maintenance, Inc.                NONE

Production Machine Incorporated             NONE

ICE Liquidating, Inc.                       NONE

Valve Repair of South Carolina, Inc.        NONE

Flickinger-Benicia Inc.                     NONE

Puget Investments, Inc.                     NONE

Steam Line Supply & Rubber Co., Inc.        NONE

Flickinger Company                          NONE

Boyden Inc.                                 NONE

Valve Actuation & Repair Co.                NONE

16

51

B. INVATEC TRADEMARKS

2. U.S. TRADEMARK APPLICATIONS

NONE

3. NON-U.S. TRADEMARK REGISTRATIONS

NONE

4. NON-U.S. TRADEMARK APPLICATIONS

NONE

17

52

C. IDP TRADEMARKS

1. U.S. TRADEMARK REGISTRATIONS

(All Ingersoll-Dresser Pump Company Intellectual Property to be assigned
to Flowserve Management Company immediately after Closing).

GRANTOR                       TRADEMARK        REGISTRATION NUMBER      REGISTRATION DATE
----------------------       ---------------------   -------------------      -----------------

Ingersoll-Dresser Pump         AKTIV-RUDER                      0695564            4/5/1960
Company

Ingersoll-Dresser Pump         BRUTE JR                         1778681            6/29/1993
Company

Ingersoll-Dresser Pump         CHEMLINER                        0973917            11/27/1973
Company

Ingersoll-Dresser Pump         CLEAN-LOCK                       1710041            8/25/1992
Company

Ingersoll-Dresser Pump         FAST RESPONSE CENTER             1121582            7/3/1979
Company

Ingersoll-Dresser Pump         GEAREX (STYLIZED)                0585955            2/23/1954
Company

Ingersoll-Dresser Pump         HYDREX                           0606355            5/24/1955
Company

Ingersoll-Dresser Pump         IDP LOGO                         1848852            8/9/1994
Company

Ingersoll-                     P & DESIGN                       0622620            3/6/1956
Dressner Pump
Company

Ingersoll-                     PACIFIC                          0591926            6/29/1954
Dresser Pump
Company

Ingersoll-                     PLEUGER                          2045357            3/18/1997
Dresser Pump
Company

Ingersoll-                     PUMPTRAC &                       2013429            11/5/1996
Dresser Pump                   DESIGN
Company

Ingersoll-                     SCIENCO                          1659448            10/8/1991
Dresser Pump
Company

Ingersoll-                     SIER-BATH                        0741577            12/4/1962
Dresser Pump
Company

Ingersoll-                     WESTERN                          1996129            8/20/1996
Dresser Pump                   LAND ROLLER
Company

Ingersoll-                     Worthington                      0641707            2/19/1957
Dresser Pump
Company

Ingersoll-                     WORTHINGTON                      0945715            10/24/1972
Dresser Pump                   N & W                            0692784            2/9/1960

IDP Alternate Energy Company   NONE

Energy Hydro, Inc.             NONE

Pump Investments, Inc.         NONE

18

53

C. IDP TRADEMARKS

2. U.S. TRADEMARK APPLICATIONS

(All Ingersoll-Dresser Pump Company Intellectual Property
to be assigned to Flowserve Management Company
immediately after Closing).

GRANTOR                  TRADEMARK         APPLICATION NUMBER        FILING DATE
--------------------        -------------       ------------------       -----------

Ingersoll-                  X-CAVALLOY          75707286                  5/17/1999
Dresser Pump
Company

Ingersoll-                  BARBARIAN           75676712                  4/7/1999
Dresser Pump
Company

Ingersoll-                  DESIGN              PENDING
Dresser Pump                (ILLUSTRATION
Company                     OF BARBARIAN)

Ingersoll-                  PROS+               75655861                  3/8/1999
Dresser Pump
Company

IDP Alternate Energy        NONE
Company

Energy Hydro, Inc.          NONE

Pump Investments, Inc.      NONE

19

54

C. IDP TRADEMARKS

3. NON-U.S. TRADEMARK REGISTRATIONS

(All Ingersoll-Dresser Pump Company Intellectual Property to be assigned
to Flowserve Management Company immediately after Closing).

GRANTOR                  TRADEMARK              COUNTRY       REGISTRATION NUMBER   REGISTRATION DATE
----------------------     --------------------    ---------------   -------------------   -----------------

Ingersoll-Dresser Pump     AKTIV-RUDER             Benelux               R237252               --
Company                                            France                R237252               --
Germany               664696                9/24/1951
Intern'l Design       R237252               11/21/1960
Spain                 R237252               --

Ingersoll-Dresser Pump     ALDRICH                 Canada                TMDA 39314            --
Company

Ingersoll-Dresser Pump     CAMERON                 Canada                121/28041             2/19/1986
Company

Ingersoll-Dresser Pump     CLEAN-LOCK              Canada                TMA392819             1/10/1992
Company                                                                  TMA450179             11/17/1995

Ingersoll-Dresser Pump     GEAREX                  Benelux               384827                9/28/1982
Company                                            Canada                132237                8/9/1963

Ingersoll-Dresser Pump     HYDREX                  Benelux               384828                9/28/1982
Company                                            Canada                134070                1/3/1964

Ingersoll-Dresser Pump     IDP INGERSOLL-DRESSER   Indonesia             365914                7/6/1995
Company                    PUMPS                   Indonesia             370229                7/6/1995
Indonesia             373167                7/6/1995

Ingersoll-Dresser          IDP LOGO                Algeria               049894                11/29/195
Pump Company                                       Argentina             1506140               2/28/1994
Argentina             1506141               2/28/1994
Australia             593536                1/5/1993
Australia             593538                1/5/1993
Australia             659118                1/5/1993
Austria               147697                6/23/1993
Benelux               528270                1/15/1993
Brazil                817240764             1/10/1995
Brazil                817240772             5/23/1995
Canada                TMA427902             5/27/1994
China                 798459                12/14/1995
China                 822508                3/14/1996
China                 799915                12/14/1995
Chile                 453959                12/11/1995
Chile                 467412                9/9/1996
Colombia              172195                1/26/1995
Colombia              171406                1/20/1995
Costa Rica            86750                 4/25/1994
Costa Rica            84221                 10/14/1993
Denmark               VR081491995           12/1/1995
Ecuador               1209-97               4/28/1997
Ecuador               550-97                4/28/1997
Ecuador               551-97                4/28/1997
Finland               143741                4/22/1996
France                93451897              1/22/1993
Germany               2075241               1/8/1993

20

55

GRANTOR                  TRADEMARK              COUNTRY       REGISTRATION NUMBER   REGISTRATION DATE
----------------------     --------------------    ---------------   -------------------   -----------------

Greece                124281                5/10/1995
Hong Kong             B04012/1997           6/8/1995
Hong Kong             B09594/1997           6/8/1995
Hong Kong             B09593/1997           6/8/1995
Hungary               147483                9/14/1995
Iran                  79008                 4/23/1996
Ireland, Rep. of      B1666568              4/25/1995
Ireland, Rep. of      202043                7/1/1996
Israel                98344                 4/30/1995
Israel                98345                 4/30/1995
Israel                98346                 4/30/1995
Italy                 666822                1/26/1993
Japan                 3225117               11/29/1996
Japan                 3265253               2/24/1997
Jordan                9172                  4/21/1996
Jordan                9171                  4/2/1996
Korea, South          330667                1/31/1996
Korea, South          28587                 9/14/1995
Korea, South          331768                1/18/1996
Mexico                438613                8/2/1993
Mexico                505029                3/25/1993
New Zealand           248571                4/27/1995
New Zealand           248572                4/27/1995
New Zealand           248573                4/27/1995
Nigeria               55389                 2/23/1993
Norway                179628                2/6/1997
Peru                  9342                  8/15/1994
Peru                  1790                  4/4/1994
Portugal              309651                5/6/1996
Portugal              309653                5/6/1996
Portugal              309654                5/6/1996
Romania               23417                 6/15/1994
Russian Fed.          132875                6/23/1994
Saudi Arabia          339/44                5/16/1995
Saudi Arabia          339/45                5/16/1995
Saudi Arabia          339/46                5/16/1995
Singapore             S/B275/93             1/13/1993
Singapore             T93/00274G            1/13/1993
South Africa          95/05647              5/2/1995
South Africa          95/05648              5/2/1995
South Africa          95/05649              5/2/1995
Spain                 1742151               1/29/1993
Spain                 1742152               1/29/1993
Sweden                311096                4/4/1996
Switzerland           403673                2/4/1993
Switzerland           409245                4/1/1993
Taiwan                74683                 3/1/1995
Taiwan                678390                4/15/1995
Taiwan                676627                3/31/1995
Thailand              261269                7/27/1994
Thailand              BOR2856               7/26/1994
Tunisia               951375                10/23/1995
Turkey                163994                9/18/1995

21

56

GRANTOR                  TRADEMARK              COUNTRY       REGISTRATION NUMBER   REGISTRATION DATE
----------------------     --------------------    ---------------   -------------------   -----------------

Turkey                170364                9/18/1995
UK                    B1523024              12/31/1992
Vietnam               10557                 3/20/1993
Zimbabwe              B679/94               5/11/1994
Zimbabwe              B680/94               5/11/1994
Zimbabwe              B681/94               5/11/1994

Ingersoll-                 MONOBLOC                Algeria               044988                2/19/1966
Dresser Pump                                       Austria               21508                 2/27/1951
Company                                            France                92423560              6/16/1992

Ingersoll-                 NIIGATA-                Japan                 49354                 1/14/1957
Dresser Pump               WORTHINGTON

Ingersoll-                 NIIGATA-                Japan                 494355                1/14/1957
Dresser Pump               WORTHINGTON
Company                    (KATAKANA)

Ingersoll-                 P & DESIGN              Colombia              125406                12/12/1988
Dresser Pump                                       Germany               1021743               2/18/1981
Company                                            Jordan                19659                 2/11/1982
Korea, South          83789                 9/10/1982
Germany               545478                1/24/1941
Japan                 176997                9/26/1984

Pleuger                    P & DESIGN              Mexico                253672                4/15/1980
Worthington
GMBH

Ingersoll-                 PACIFIC                 Argentina             1666563               9/30/1959
Dresser Pump                                       Argentina             1666564               9/30/1959
Company                                            Australia             A127250               4/11/1956
Austria               49220                 12/3/1962
Bangladesh            27507                 10/5/1988
Benelux               62720                 9/24/1971
Bolivia               54431-A               6/27/1989
Brazil                003391612             8/22/1956
Canada                NS68/17863            1/13/1943
Canada                128775                11/16/1962
Chile                 451999                12/10/1965
Colombia              139822                6/25/1992
Denmark               VR023321965           9/4/1965
Ecuador               710-90                4/6/1990
France                1719792               7/25/1980
Germany               688516                11/2/1954
Greece                33333                 4/3/1965
India                 210610                8/13/1962
Iran                  26725                 4/22/1965
Israel                24302                 3/21/1965
Italy                 694846                4/24/1954
Japan                 488284                9/19/1956
Korea, South          9723                  4/2/1965
Kuwait                2386                  10/17/1965
Mexico                80531                 11/10/1954
New Zealand           953440                7/5/1944
Norway                67207                 10/21/1965
Paraguay              134770                6/30/1989
Peru                  37498                 11/2/1965
Philippines           12329                 5/26/1966

22

57

GRANTOR                  TRADEMARK              COUNTRY       REGISTRATION NUMBER   REGISTRATION DATE
----------------------     --------------------    ---------------   -------------------   -----------------

Portugal              129783                5/25/1966
South Africa          62/2628               8/7/1962
Sweden                106339                5/31/1963
Taiwan                23742                 10/1/1966
Thailand              KOR29864              4/1/1995
Turkey                119076                5/12/1965
UK                    B751119               2/20/1956
Uruguay               303877                8/17/1966
Venezuela             31189-F               10/4/1956

Ingersoll-                 PACIFIC                 China                 530868                10/10/1990
Dresser Pump               (MANDARIN)
Company

Ingersoll-                 PLEMA                   France                R396448               --
Dresser Pump                                       Intern'l Design       R396448               12/19/1972
Company                                            Liechtenstein         R396448               --
Switzerland           R396448               --

Ingersoll-                 PLEUGER                 Algeria               R467259               --
Dresser Pump                                       Australia             A523499               11/16/1989
Company                                            Austria               R467267               --
Canada                280382                6/17/1983
Chile                 413406                9/27/1993
China                 530863                10/10/1990
Colombia              147082                5/21/1992
Czech Republic        166564                8/28/1986
Germany               1021744               2/18/1981
Greece                70143                 10/26/1981
Intern'l Design       R467269               9/28/1981
Italy                 R4672699              --
Japan                 1885896               8/28/1986
Japan                 2014542               1/26/1998
Japan                 2207997               1/30/1990
Jordan                20834                 4/20/1983
Korea, South          257166                1/13/1993
Korea, South          82705                 6/30/1982
Morocco               R467269               --
Portugal              215114                10/17/1988
Portugal              215113                10/17/1998
Romania               R467269               --
Slovenia              7881112               --
South Africa          81/8001               8/19/1981
Switzerland           R467269               --
Tunisia               R467269               --
UK                    1435951               8/13/1990
Venezuela             117058-F              4/18/1986
Venezuela             114275-F              9/23/1985
Yugoslavia            27109                 9/15/1983

Ingersoll-                 PLEUGER                 Argentina             1273631               3/7/1998
Dresser Pump                                       Argentina             1273632               3/7/1988
Company                                            Benelux               412115                9/23/1985
Japan                 2207997               6/30/1990
Mexico                269420                4/15/1980
Spain                 828086                9/30/1976
Spain                 828087                10/5/1978

23

58

GRANTOR                  TRADEMARK              COUNTRY       REGISTRATION NUMBER   REGISTRATION DATE
----------------------     --------------------    ---------------   -------------------   -----------------

Ingersoll-                 PLEUGER                 Slovak Republic       166564                8/28/1986
Dresser Pump
Company

Ingersoll-                 PLEUGER & P             Brazil                007230664             10/25/1980
Dresser Pump               (DESIGN)                Egypt                 65019                 12/15/1984
Company                                            France                1737816               10/9/1981
Jordan                28428                 12/3/1990
Jordan                28427                 12/3/1990

Ingersoll-                 PLEUGER & P             Philippines           39734                 6/27/1998
Dresser Pump               (DESIGN)
Company

Ingersoll-                 PLEUGER & P             Taiwan                172547                2/16/1982
Dresser Pump               DESIGN
Company

Ingersoll-                 PLEUGER &               Taiwan                172546                2/16/1982
Dresser Pump               PLEUGER SEE
Company                    REMARKS

Ingersoll-                 PLEUGER                 Taiwan                172545                2/16/1982
Dresser Pump               (CHINESE
Company                    CHARACTERS)

Ingersoll-                 PLEUGER                 China                 530870                10/10/1990
Dresser Pump               (MANDARIN)
Company

Ingersoll-                 PLEUGER-                Germany               521654                1/23/1940
Dresser Pump               PUMPE
Company

Ingersoll-                 SIER-BATH               Benelux               384826                9/28/1982
Dresser Pump                                       France                1420115               6/4/1962
Company                                            Germany               808839                5/2/1962
Italy                 409304                6/26/1962
Japan                 652223                9/8/1964
Canada                TMA453078             1/26/1996
Ingersoll-                 WASSERSTAN              Germany               454359                1/12/1933
Dresser Pump               DSWACHTER
Company
Ingersoll-                 WORTHINGTON             Algeria               052062                1/10/1952
Dresser Pump                                       Australia             A32253                --
Company                                            Austria               24604                 11/30/1951
Brazil                003299457             4/16/1966
Canada                TMDA02715             7/16/1986
Egypt                 9511                  6/23/1943
France                1719794               3/9/1990
Germany               785822                10/17/1962
Germany               631079                10/18/1962
India                 7542                  11/9/1942
Ireland, Rep. of      48179
Ireland, Rep. of      32244                 10/27/1984
Italy                 334337                6/21/1956
Morocco               45536                 11/1/1990
New Zealand           B20315                7/5/1937
Norway                10709
Paraguay              167252                4/17/1983

24

59

GRANTOR                  TRADEMARK              COUNTRY       REGISTRATION NUMBER   REGISTRATION DATE
----------------------     --------------------    ---------------   -------------------   -----------------

South Africa          997/21
South Africa          88/1404               2/24/1988
Sweden                75754                 4/2/1954
Tanganyika            18465                 12/31/1980
Tanganyika            18467                 12/31/1980
Thailand              KOR64963              9/29/1994
Trinidad &
Tobago              85/21                 12/15/1921
Tunisia               EE95.1547             1/27/2022
Turkey                83509                 11/30/1944
Uganda                15292                 2/14/1980
UK                    418012                8/26/1921
UK                    40477                 10/27/1984
UK                    2104125               7/2/1996
Uruguay               313638                1/31/1957
Venezuela             14197                 --
Zanzibar              81/1987               12/19/1980
Zanzibar              82/1987               12/19/1980

Ingersoll-                 WORTHINGTON             Algeria               047465                9/24/1966
Dresser Pump               N & W                   Argentina             1563127               11/23/1959
Company                    (DESIGN)                Argentina             1551784               1/31/1995
Argentina             1626931               11/23/1959
Australia             A175418               8/13/1962
Austria               41819                 8/3/1959
Bangladesh            29796                 11/28/1989
Benelux               105862                12/31/1971
Bolivia               51199-C               4/2/1991
Brazil                003013529             7/13/1964
Canada                125466                2/16/1962
Chile                 351922                6/5/1959
China                 503488                11/10/1989
Colombia              44963                 12/3/1959
Costa Rica            77072                 9/12/1991
Cuba                  107546                5/6/1964
Denmark               VR195901859           10/10/1959
Ecuador               1372-95               7/11/1960
Finland               40461                 3/21/1963
France                1261905               4/20/1959
Germany               775252                6/26/1959
Greece                24454                 6/17/1959
Guatemala             48989                 8/16/1985
Hong Kong             724/1965              8/28/1962
India                 211269                9/13/1962
Iran                  19478                 6/20/1959
Ireland, Rep. of      72136                 5/12/1966
Israel                17813                 6/26/1959
Israel                17814                 6/26/1959
Italy                 374820                6/19/1959
Jamaica               8031                  12/8/1959
Japan                 638392                3/9/1964
Korea, South          189582                3/19/1990
Malaysia              88/04833              9/19/1988
Mexico                246309                12/13/1979

25

60

GRANTOR                  TRADEMARK              COUNTRY       REGISTRATION NUMBER   REGISTRATION DATE
----------------------     --------------------    ---------------   -------------------   -----------------

Mexico                345651                9/11/1986
New Zealand           B71515                8/10/1962
Nicaragua             10061                 10/23/1959
Norway                54110                 6/17/1959
Pakistan              37565                 8/22/1962
Panama                8642                  4/12/1965
Paraguay              137393                7/6/1989
Peru                  057243                4/29/1985
Portugal              178044                10/4/1962
Puerto Rico           12247                 8/30/1962
Romania               R2665                 11/17/1951
Samoa                 1272                  6/7/1974
South Africa          88/1405               2/24/1988
Spain                 407727                1/9/1963
Spain                 407725                1/9/1963
Spain                 407724                1/9/1963
Spain                 407729                1/15/1963
Spain                 407730                3/20/1967
Spain                 407728                8/28/1962
Sweden                89544                 5/20/1960
Switzerland           320566                1/18/1962
Syria                 10572                 8/5/1959
Taiwan                354221                1/16/1987
Tanganyika            18466                 12/31/1980
Turkey                108317                2/16/1962
Uganda                15291                 2/14/1980
UK                    B839392               9/18/1962
Uruguay               280992                8/31/1964
Venezuela             43704F                2/4/1963
Zanzibar              83/1987               12/19/1980
Zimbabwe              B112/88               3/4/1988

Ingersoll-                 WORTHINGTON             China                 530869                10/9/1990
Dresser Pump               (MANDARIN)
Company

Ingersoll-                 WORTHINGTON             Malaysia              M/82471               5/25/1979
Dresser Pump               SIMPSON                 Malaysia              M/82472               5/25/1979
Company                                            Malaysia              M/82470               5/25/1979
Singapore             S/1348/85             3/28/1985
Singapore             S/1349/85             3/28/1985
Singapore             01350                 3/28/1985
Singapore             01351                 3/28/1985
Singapore             80485                 5/23/1979
Singapore             80488                 5/23/1979
Singapore             80486                 5/23/1979
Singapore             80487                 5/23/1979
UK                    899194                9/8/1966
UK                    899195                9/8/1966
UK                    899196                9/8/1966
UK                    899197                9/8/1966

Ingersoll-                 WORTHITE                Algeria               044987                6/17/1948
Dresser Pump
Company

Ingersoll- Dresser         X-CAVALLOY              Austria               161571                12/31/1995
Pump Company                                       Benelux               581951                8/3/1995

26

61

GRANTOR                  TRADEMARK              COUNTRY       REGISTRATION NUMBER   REGISTRATION DATE
----------------------     --------------------    ---------------   -------------------   -----------------

China                 1289361               6/28/1999
Denmark               VR015321998           3/27/1998
Finland               212294                12/15/1998
France                95584375              8/10/1995
Germany               39531732              8/2/2005
Italy                 730621                9/20/1995
Japan                 4312981               9/10/1999
Korea, South          436662                12/30/1998
Mexico                577363                3/9/1998
Norway                190988                6/18/1998
Poland                R-103163              8/25/1995
Portugal              311811                7/9/1996
Spain                 1980408               8/3/1995
Switzerland           430859                7/28/1995
UK                    2028853               3/29/1996

IDP Alternate Energy       NONE
Company

Energy Hydro, Inc.         NONE

Pump Investments, Inc.     NONE

27

62

C. IDP TRADEMARKS

4. NON-U.S. TRADEMARK APPLICATIONS

(All Ingersoll-Dresser Pump Company Patents to be assigned
to Flowserve Management Company immediately after Closing).

APPLICATION    FILING
GRANTOR                 TRADEMARK               COUNTRY             NUMBER        DATE
-----------------          -------------           ------------        -----------    -------

Ingersoll-Dresser          IDP LOGO                Egypt                 PENDING
Pump Company                                       Egypt                 PENDING
Egypt                 PENDING
India                 PENDING
Kuwait                PENDING
Kuwait                PENDING
Kuwait                PENDING
Lebanon               PENDING
Malaysia              PENDING
Malaysia              PENDING
Malaysia              PENDING
Pakistan              PENDING
Qatar                 PENDING
Qatar                 PENDING
Qatar                 PENDING
Venezuela             PENDING
Venezuela             PENDING

Ingersoll-                 PLEUGER                 Bosnia-Herz.          PENDING        --
Dresser Pump                                       Croatia               PENDING
Company                                                                                 --

Ingersoll-                 WORTHINGTON             Philippines           PENDING
Dresser Pump               N & W
Company                    (DESIGN)

Ingersoll-                 X-CAVALLOY              Brazil                PENDING
Dresser Pump                                       Canada                PUBLISHED
Company                                            Czech Republic        PUBLISHED
India                 PENDING
Romania               PENDING
Slovak Rep.           PENDING
South Africa          PENDING
Sweden                PENDING
Taiwan                PUBLISHED
Turkey                PENDING
Venezuela             PUBLISHED

IDP Alternate Energy       NONE
Company

Energy Hydro, Inc.         NONE

Pump Investments, Inc.     NONE

28

63
SCHEDULE III TO THE
SECURITY AGREEMENT

LICENSES

--------------------------------------------------------------------------------
PART I

A. LICENSES / SUBLICENSES OF FLOWSERVE GRANTORS

1. COPYRIGHTS

None

2. PATENTS

FLOWSERVE INTERNATIONAL, INC.

DATE OF                                    APPLICATION DATE       APPLICATION/PATENT
LICENSEE NAME         LICENSE/SUBLICENSE     TITLE OF U.S. PATENT     FILED/ISSUE DATE            NUMBER
-------------         ------------------     --------------------     ----------------       ------------------

Mitsubishi Heavy             9/24/87             Not Specified
Industries

United Pumps of Canada,          8/13/91                   "
Ltd.

BW Mechanical Seals            1/1/93                    "
(S.E.A.) PTE, Ltd.

BW/IP de Venezuela S.A.          Undated                   "

BW/IP International            1/1/93                    "
B.V. (Netherlands)

BW/IP International,           1/1/93                    "
Ltd.

EMCO Fluid Systems, Inc.         8/1/87                    "

Borg Warner                1/1/81                    "
Australia Ltd.

1

64

FLOWSERVE FSD CORPORATION

APPLICATION
DATE
DATE OF          TITLE OF NON-U.S.                  FILED/ISSUE    APPLICATION/PATENT
LICENSEE NAME         LICENSE/SUBLICENSE         PATENT           COUNTRY         DATE              NUMBER
------------------------  ------------------    -----------------     -------     ------------    -------------------

Arabian Seals             12/18/91         Self-Cooled Seal
Company Limited                               Bellows Seal
Face

Arrangement

Bellows Seal
Tapered Seat

HSB Dura Seal

Integral Pumping
Device
(XRO/RA)

Seal
Arrangement for
Mill Roll

Coolant
Circulation Tube

Bearing Guard

Korea Seal Master            1/8/90            Dry Running
Co. Ltd.                                       Seal

Split Mixer Seal

Split Pump Seal

Bearing Guard

High
Performance

Split Seal

Dry Running
Seal

Durametallic India Ltd.        11/24/75          Not Specified

Petech/Durametallic          6/30/89          Petch Split Seal    New Zealand
(New Zealand) Ltd.

Petech/Durametallic          6/30/89          Thermal Bushing      Australia
(Australia) Pty Ltd.

Integral Pumping     Australia
Feature

Magnetic Seal       Australia        1989            4,795,168

Durametallic Asia            9/1/83          Mechanical Seal      Malaysia                         MY-104440A
Pte. Ltd.

2

65

3. TRADEMARKS

FLOWSERVE INTERNATIONAL, INC.

APPLICATION DATE
DATE OF              TITLE OF U.S.        FILED/REGISTRATION        APPLICATION/
LICENSEE NAME         LICENSE/SUBLICENSE          TRADEMARK                 DATE            REGISTRATION NUMBER
-------------         ------------------        -------------        -------------------    -------------------

Mitsubishi Heavy             9/24/87             Not Specified
Industries

PT BW Mechanical Seals          12/1/93                   "
Indonesia

BW Mechanical Seals            1/1/93                    "
(S.E.A.) PTE, Ltd.

BW/IP de Venezuela S.A.          Undated                   "

BW/IP International B.V.         1/1/93                    "

BW/IP International,           1/1/93                    "
Ltd.

EMCO Fluid Systems, Inc.         8/1/87                    "

Borg Warner                1/1/81
Australia Ltd.

FLOWSERVE FSD CORPORATION

APPLICATION
DATE FILED/      APPLICATION/
LICENSEE NAME AND            DATE OF            TITLE OF NON-U.S.                    REGISTRATION      REGISTRATION
ADDRESS           LICENSE/SUBLICENSE        TRADEMARK          COUNTRY            DATE              NUMBER

Arabian Seals Company         12/18/91           Not Specified
Limited

Korea Seal Master Co.          1/8/90                  "
Ltd.

Petech/Durametallic          6/30/89              Dura Seal        New Zealand          1980          RN B131581
(New Zealand) Ltd.                              Durametallic       New Zealand

Durafite         New Zealand

Petech/Durametallic          6/30/89              Dura Seal         Australia           1961          RN A166362

(Australia) Pty Ltd.                             Durametallic        Australia           1974          RN A208222

Dura Lapper        Australia

Durafite          Australia

Durametallic Asia            9/1/83              BW Seals          Singapore         B4733/92         6/24/1992

Pte. Ltd.                                BW/IP (Stylized)      Singapore         B4732/92         6/24/1992

Durametallic        Singapore         RN 61098           1974
Dura Seal         Singapore         RN 61099           1974

Flowserve         Singapore        T97/15408H        6/20/1997

Automax          Singapore        S/9706/93         12/8/1993

Byron Jackson        Malaysia         M/B73923         1/6/1977

Byron Jackson        Malaysia         M/B73924         1/6/1997

Durametallic        Malayasia       RN M/093116          1981

BW/IP (Stylized)      Indonesia          280410          10/2/1992

3

66

APPLICATION
DATE FILED/      APPLICATION/
LICENSEE NAME AND            DATE OF            TITLE OF NON-U.S.                    REGISTRATION      REGISTRATION
ADDRESS           LICENSE/SUBLICENSE        TRADEMARK          COUNTRY            DATE              NUMBER
-----------------       ------------------      -----------------    -------         ------------      ------------

Byron Jackson       Indonesia          403517          11/6/1997

Durametallic        Indonesia        RN 116961           1997

Dura Seal         Indonesia        RN 120468           1977

Flowserve         Indonesia          432025          2/10/1998

Flowserve         Indonesia          432026          2/10/1998

BW/IP (Stylized)       Thailand          44725           8/2/1995

Byron Jackson        Thailand          55986           1/14/1977

Durametallic         Thailand         RN 86654           1981

Dura Seal          Thailand         RN 77295           1981

United            Thailand        RN TM42107          1995

BW Seals         Philippines         58015           5/12/1994

BW/IP (Stylized)     Philippines         55437           6/21/1993

Byron Jackson      Philippines         35460           3/5/1986

Durametallic       Philippines        RN 22830           1976

Dura Seal        Philippines        RN 23124           1976

Durametallic               9/1/89            Not Specified
Europe N.V.

Durametallic GmbH            1/1/90              Durafite           Germany         RN 893562           1970
(Germany)

4

67

B. LICENSES / SUBLICENSES OF INVATEC GRANTORS

1. COPYRIGHTS

None

2. PATENTS

None

3. TRADEMARKS

None

5

68

C. LICENSES / SUBLICENSES OF IDP GRANTORS

1. COPYRIGHTS

None

2. PATENTS

None

3. TRADEMARKS

None

6

69

PART 2
--------------------------------------------------------------------------------

A. LICENSES / SUBLICENSES OF FLOWSERVE GRANTORS
AS LICENSEE ON DATE HEREOF

1. COPYRIGHTS

None

2. PATENTS

FLOWSERVE INTERNATIONAL, INC.

DATE OF                                    APPLICATION DATE     APPLICATION/PATENT
LICENSOR NAME         LICENSE/SUBLICENSE     TITLE OF U.S. PATENT     FILED/ISSUE DATE            NUMBER
--------------        ------------------     --------------------     ----------------     ------------------

Technip and                9/13/95             Not Specified
Snamprogetti S.p.A.

BW Mechanical Seals            1/1/91                    "

Ebara Corporation             11/9/92                   "

3. TRADEMARKS

FLOWSERVE INTERNATIONAL, INC.

APPLICATION DATE
DATE OF              TITLE OF U.S.        FILED/REGISTRATION        APPLICATION/
LICENSOR NAME         LICENSE/SUBLICENSE          TRADEMARK                 DATE            REGISTRATION NUMBER
-------------         -------------------       -------------        ------------------     -------------------

BW/Abahsain Seal             Undated             Not Specified
Company, Ltd.

BW Mechanical Seals            1/1/91                    "

Ebara Corporation             11/9/92                   "

7

70

B. LICENSES / SUBLICENSES OF INVATEC GRANTORS
AS LICENSEE ON DATE HEREOF

1. COPYRIGHTS

None

2. PATENTS

None

3. TRADEMARKS

None

8

71

B. LICENSES / SUBLICENSES OF IDP GRANTORS
AS LICENSEE ON DATE HEREOF

1. COPYRIGHTS

None

2. PATENTS

None

3. TRADEMARKS

None

9

72
SCHEDULE IV TO THE
SECURITY AGREEMENT

PATENTS

A. FLOWSERVE PATENTS

1. U.S. PATENT REGISTRATIONS

GRANTOR                 PATENT NAME                                 PATENT NUMBER           ISSUE DATE
-------                 -----------                                 -------------           ----------

Flowserve Management    HALL EFFECT MONITORING OF BEARINGS          5336996                 8/9/1994
Company                 SUPPORTING A ROTOR WITHIN A STATIONARY
HOUSING

Flowserve Management    METHOD FOR INDUCTION MELTING REACTIVE       4738713                 1/4/1994
Company                 METALS AND ALLOYS (2 RE-EXAMS OF U.S.
PATENT NO.  4,738,713)

Flowserve Management    METHOD FOR INDUCTION MELTING REACTIVE       4738713                 4/19/1988
Company                 METALS AND ALLOYS

Flowserve Management    POLYMERIC FLUOROCARBON                      4312961                 1/26/1982
Company                 ROTOMOLDING/ROTOLINING  COMPOSITION

Flowserve Management    METHOD OF JOINING MATERIALS BY MECHANICAL   4560607                 12/24/1985
Company                 INTERLOCK AND ARTICLE

Flowserve Management    ADJUSTABLE BALL VALVE                       5746417                 5/5/1998
Company

Flowserve Management    PLUG VALVE ASSEMBLY                         4055324                 10/25/1977
Company

Flowserve Management    HIGH PERFORMANCE BUTTERFLY VALVE            6029949                 2/29/2000
Company

Flowserve Management    FIRE RESISTANT SEAL FOR FLOW CONTROL VALVE  4373543                 2/15/1983
Company

Flowserve Management    PLUG VALVE                                  4711264                 12/8/1987
Company

Flowserve Management    LINED CORROSION RESISTANT PUMP              4722664                 2/2/1988
Company

Flowserve Management    SEAL CHAMBER SPLASH GUARD                   5807086                 9/15/1998
Company

Flowserve Management    HEAT TREATMENT OF CAST ALPHA / BETA         5900083                 5/4/1999
Company                 METALS AND METAL ALLOYS AND CAST ARTICLES
WHICH HAVE BEEN SO TREATED

1

73

GRANTOR                 PATENT NAME                                 PATENT NUMBER           ISSUE DATE
-------                 -----------                                 -------------           ----------

Flowserve Management    METHOD OF APPARATUS TO FACILITATE THE       5062439                 11/5/1991
Company                 INJECTION OF SEALANT INTO A PRESSURIZED     5052427                 10/1/1991
FLUID MEMBER

Flowserve Management    METHOD OF APPARATUS TO FACILITATE THE       RE35116                 10/1/1991
Company                 INJECTION OF SEALANT INTO A PRESSURIZED
FLUID MEMBER
(Reissue of U.S. 5052427)

Flowserve Management    FRICTION WELDING                            5558265                 9/24/1996
Company                 APPARATUS                                   5735447                 4/7/1998

Flowserve Management    MECHANICAL SEAL WITH IMPROVED FACE RING     4,261,581               1981
Company                 MOUNTING.

Flowserve Management    CABLE GUIDE FOR A TUBULAR ANODE             4,268,371               1981
Company

Flowserve Management    THRUST BEARING ARRANGEMENT                  4363608                 1982
Company

Flowserve Management    TAPERED SEAL SEAT BETWEEN STATIONARY        4,364,571               1982
Company                 INSERT AND GLAND

Flowserve Management    BACK-UP MECHANICAL SEAL                     189746                  1983
Company

Flowserve Management    MECHANICAL SEALS FOR USE WITH SLURRY PUMPS  4418919 (RE32646)       Issued 1983
Company                                                                                     (RE1988)

Flowserve Management    IMPROVED MECHANICAL SEAL                    4,418,921               1983
Company

Flowserve Management    IMPROVED MECHANICAL SEAL ASSEMBLY           4426092                 1984
Company

Flowserve Management    MECHANICAL SEAL ASSEMBLY                    4448428                 1984
Company

Flowserve Management    VACUUM BREAKER VALVE WITH INTERNALLY        4502503                 1985
Company                 BALANCED DISC.

Flowserve Management    PUMP-MECHANICAL SEAL CONSTRUCTION WITH      4509773                 1985
Company                 AXIAL ADJUSTMENT MEANS

Flowserve Management    MECHANICAL SEAL WITH CYLINDRICAL BALANCE    4511149                 1985
Company                 SLEEVE

2

74

GRANTOR                 PATENT NAME                                 PATENT NUMBER           ISSUE DATE
-------                 -----------                                 -------------           ----------

Flowserve Management    HYDRAULIC PROXIMITY PROBE                   4,523,451               1985
Company

Flowserve Management    SHAFT SEAL                                  4,538,820               1985
Company

Flowserve Management    MECHANICAL SEAL ASSEMBLY WITH COOLANT       4,560,173               1985
Company                 CIRCULATION STRUCTURE

Flowserve Management    DOUBLE DISC GATE VALVE                      4,573,660               1986
Company

Flowserve Management    IMPROVED MECHANICAL SEAL                    4586719                 1986
Company

Flowserve Management    PUMP IMPROVEMENT                            4,621,981               1986
Company

Flowserve Management    ADJUSTABLE STATOR MECHANISM FOR HIGH        4,629,396               1986
Company                 PRESSURE RADIAL TURBINES AND THE LIKE

Flowserve Management    MECHANICAL SEAL WITH AUTOMATIC GAP          4,643,437               1987
Company                 CONVERGENCE CONTROL

Flowserve Management    IMPROVED MECHANICAL SEAL FOR PUMPS AND      4,653,980               1987
Company                 METHOD OF FABRICATING SAME

Flowserve Management    HYDROSTATIC BEARING FOR PUMPS AND THE LIKE  4684318                 1987
Company

Flowserve Management    PUMP CONSTRUCTION                           4688990                 1987
Company

Flowserve Management    ADAPTIVE CONTROL SYSTEM FOR MECHANICAL      4,691,276               1987
Company                 SEAL ASSEMBLY

Flowserve Management    ISOSTATIC MOLDING AND BONDING               4,701,291               1987
Company

Flowserve Management    IMPROVER MECHANICAL SEAL FOR PUMPS          4,703,939               1987
Company

Flowserve Management    PLUG VALVE                                  4,711,264               1987
Company

Flowserve Management    MECHANICAL SEAL ASSEMBLY WITH COOLANT       4,721,311               1988
Company                 CIRCULATION TUBE

3

75

GRANTOR                 PATENT NAME                                 PATENT NUMBER           ISSUE DATE
-------                 -----------                                 -------------           ----------

Flowserve Management    FLUID FLOW CONTROL MEANS FOR PUMPS AND      4,721,435               1988
Company                 THE LIKE

Flowserve Management    FACE SEAL WITH AUTOMATIC FACE CONVERGENCE   4722534                 1988
Company                 MEANS

Flowserve Management    BEARING PROTECTOR                           4,743,034               1988
Company

Flowserve Management    BELLOWS MECHANICAL SEAL WITH INACTIVE       4,744,569               1988
Company                 DIAPHRAGMS

Flowserve Management    LOW NOISE PLUG VALVE                        4,774,984               1988
Company

Flowserve Management    PUMP WITH HEAT EXCHANGER                    4,775,293               1988
Company

Flowserve Management    MAGNETIC SEAL ASSEMBLY                      4,795,168               1989
Company

Flowserve Management    MECHANICAL SEAL LUBRICATION IMPROVEMENT     4,804,194               1989
Company

Flowserve Management    PUMP HOUSING, MOULD PARTS OF A MOULD WALL   4,869,643
Company                 FOR A PUMP HOUSING AND METHOD OF
MANUFACTURING A PUMP HOUSING

Flowserve Management    BELLOWS SEAL WITH VIBRATION DAMPER          4,890,851               1990
Company

Flowserve Management    BEARING PROTECTOR WITH SLINGER RING         4,890,941               1990
Company

Flowserve Management    CROSS-FLOW TRAP                             4,923,487               1990
Company

Flowserve Management    PUMP WITH HEAT EXCHANGER                    4,932,836               1990
Company

Flowserve Management    LIGHTWEIGHT HYDROGEL-BOUND                  4,963,515               1990
Company                 AGGREGATESHAPES AND PROCESS FOR PRODUCING
SAME

Flowserve Management    FLUID HANDLING APPARATUS WITH SHAFT         4,964,646               1990
Company                 SLEEVE AND EXTENSION

Flowserve Management    MULTI-ELEMENT, BI-DIRECTIONAL VALVE SEAT    4,968,001               1990
Company

4

76

GRANTOR                 PATENT NAME                                 PATENT NUMBER           ISSUE DATE
-------                 -----------                                 -------------           ----------

Flowserve Management    FILTER LEAF                                 4,968,423               1990
Company

Flowserve Management    MECHANICAL SEAL ASSEMBLY                    4,971,337               1990
Company

Flowserve Management    REDUCTION OF TRANSIENT THERMAL STRESSES     4,997,341               1991
Company                 IN MACHINE COMPONENTS

Flowserve Management    HOUSING SEAL CHAMBER BODY                   5,035,436
Company

Flowserve Management    PUMP HOUSING, MOULD PARTS OF A MOULD WALL   5,035,574               1991
Company                 FOR A PUMP HOUSING AND METHOD OF
MANUFACTURING A PUMP HOUSING

Flowserve Management    REDUCTION OF TRANSIENT THERMAL STRESSES     5,072,608               1991
Company                 IN MACHINE COMPONENTS

Flowserve Management    MECHANICAL SEAL                             5,076,589               1991
Company

Flowserve Management    PUMP WITH SEAL PURGE HEATER                 5,143,515               1992
Company

Flowserve Management    PRESSURE RECOVERY SEAL                      5,193,974               1993
Company

Flowserve Management    HEAT EXCHANGER THERMAL SHIELD WITH FLOW     5,246,337               1993
Company                 GUIDE

Flowserve Management    BEARING PROTECTION DEVICE                   5,290,047               1994
Company

Flowserve Management    SEMI-CARTRIDGE SEAL                         5,294,132               1994
Company

Flowserve Management    METHOD FOR CONSTRUCTING A PUMPING           5,304,034               1994
Company                 INSTALLATION

Flowserve Management    MULTI-STAGE CENTRIFUGAL PUMP                5,340,272               1994
Company

Flowserve Management    NON-CANTACTING FACE SEAL                    5,370,403               1994
Company

Flowserve Management    BALL VALVE COUPLING                         5,386,967               1995
Company

5

77

GRANTOR                 PATENT NAME                                 PATENT NUMBER           ISSUE DATE
-------                 -----------                                 -------------           ----------

Flowserve Management    FLUID FILM SEAL                             5,388,843               1995
Company

Flowserve Management    PUMP WITH MEDIUM TIGHT SHELL AND VENTING    5,435,701               1995
Company                 MEANS

Flowserve Management    PUMP WITH MEDIUM TIGHT SHELL AND VENTING    2,274,683
Company                 MEANS

Flowserve Management    IMPROVED EFFICIENCY MULTI-STAGE PUMP        5,445,494               1995
Company

Flowserve Management    SHAFT ALIGNMENT DEVICE                      5,479,718               1996
Company

Flowserve Management    SECONDARY GAS/LIQUID MECHANICAL SEAL        5,487,550               1996
Company                 ASSEMBLY

Flowserve Management    DOUBLE GAS BARRIER SEAL                     5,498,007               1996
Company

Flowserve Management    FACE SEAL WITH ANGLED GROOVES               5,531,458               1996
Company

Flowserve Management    NON-CONTACTING SEAL WITH CENTERING SPRING   5,533,739               1996
Company                 MOUNTED IN DOVETAILED GROOVED

Flowserve Management    FACE RING RETAINER ARRANGEMENT FOR          5,551,708               1996
Company                 MECHANICAL SEAL

Flowserve Management    ENCLOSURE FOR BRITTLE MECHANICAL SEAL       5,556,110               1996
Company                 FACE MATERIALS

Flowserve Management    FACE SEAL WITH ANGLED GROOVES AND SHALLOW   5,556,111               1996
Company                 ANNULAR GROOVE

Flowserve Management    MECHANICAL SEAL WITH SPRING DRIVE           5,558,342               1996
Company

Flowserve Management    MECHANICAL SEAL WITH SPRING DRIVE           2,305,982
Company

Flowserve Management    SECONDARY SEAL FOR NON-CONTACTING FACE      5,560,622               1996
Company                 SEAL ASSEMBLY

Flowserve Management    BACK UP SEAL FOR SEALING BETWEEN A SHAFT    5,562,294               1996
Company                 AND HOUSING

6

78

GRANTOR                 PATENT NAME                                 PATENT NUMBER           ISSUE DATE
-------                 -----------                                 -------------           ----------

Flowserve Management    PUMP BOX WITH REPLACABLE EROSION PROTECTOR  5,630,699               1997
Company

Flowserve Management    VALVE TRIM                                  5,732,738               1998
Company

Flowserve Management    GUIDED GATE VALVE                           5,704,594               1998
Company

Flowserve Management    DIAMETRIC PLANE SPLIT MECHANICAL FACE SEAL  5,716,054               1998
Company

Flowserve Management    FACE SEAL WITH ANGLED GROOVES AND SHALLOW   5,702,110               1997
Company                 ANNULAR GROOVE

Flowserve Management    MECHANICAL SEAL WITH CONTROLLER FOR         5,762,342               1998
Company                 REGULATING FACE CONTACT PRESSURE

Flowserve Management    SPIRAL GROOVE FACE SEAL                     5,722,665               1998
Company

Flowserve Management    MECHANICAL SEAL FOR WATER PUMP OF HEAVY     5,797,602               1998
Company                 DUTY VEHICLE

Flowserve Management    GREASE SEAL                                 5,803,463               1998
Company

Flowserve Management    GUIDED GATE VALVE                           5,820,106               1998
Company

Flowserve Management    METHOD FOR FORMING A WAVY FACE RING         5,833,518               1998
Company

Flowserve Management    GUIDED GATE VALVE                           5,836,569               1998
Company

Flowserve Management    HEAT EXCHANGER BAFFLE DESIGN                5,845,704               1999
Company

Flowserve Management    DOUBLE GAS SEAL WITH BELLOWS SUPPORTED BY   5,924,697               1999
Company                 BACKING AND SUPPORT RINGS

Flowserve Management    DOUBLE GAS SEAL HAVING AN IMPROVED          5,941,531               1999
Company                 BELLOWS ARRANGEMENT

Flowserve Management    WAVY FACE RING                              5,947,481               1999
Company

7

79

GRANTOR                 PATENT NAME                                 PATENT NUMBER           ISSUE DATE
-------                 -----------                                 -------------           ----------

Flowserve Management    SPLIT MECHANICAL FACE SEAL AND METHOD OF    5,961,122               1999
Company                 ASSEMBLY THEREOF

Flowserve Management    HYBRID FLOATING BRUSH SEAL                  5,997,004               1999
Company

Flowserve FCD           VALVE POSITIONER HAVING ADJUSTABLE GAIN     5345856                 9/13/1994
Corporation

Flowserve FCD           LOCKOUT MODULES                             5116018                 5/26/1992
Corporation                                                         5236172                 8/17/1993

Flowserve FCD           FLUID VALVES                                5566923                 10/22/1996
Corporation                                                         5386967                 2/7/1995

Flowserve FCD           INNER-LOOP VALVE SPOOL POSITIONING          5884894                 3/23/1999
Corporation             CONTROL APPARATUS

Flowserve FCD           UNITARY FLUID FLOW PRODUCTION AND CONTROL   5307288                 4/26/1994
Corporation             SYSTEM

Flowserve FCD           INTEGRATED PROCESS CONTROL VALVE            5251148                 10/5/1993
Corporation

Flowserve FCD           PNUMATIC VALVE POSITIONER WITH ADJUSTABLE   5974945                 11/2/1999
Corporation             GAIN

Flowserve FCD           FLUID PRESSURE MODULATOR                    5282489                 2/1/1994
Corporation

Flowserve FCD           ANTI-CAVITATION LOW-NOISE CONTROL VALVE     4567915                 2/4/1986
Corporation             CAGE TRIM FOR HIGH PRESSURE REDUCING
SERVICE IN LIQUID OR GASEOUS FLOW

Flowserve RED           NONE
Corporation

Flowserve FSD           NONE
Corporation

Flowserve               NONE
International, Inc.

BW/IP - New Mexico,     NONE
Inc.

Flowserve               NONE
International, LLC

Durametallic            NONE
Australia Holding
Company

Flowserve Finance B.V.  NONE

Flowserve               NONE
International Limited

8

80

A. FLOWSERVE PATENTS

2. U.S. PATENT APPLICATIONS

PATENT                  
APPLICATION
GRANTOR                 PATENT NAME                                 NUMBER                  FILING DATE
-------                 -----------                                 ------                  -----------

Flowserve Management    SHAFT GUARD                                 Pending                 --
Company

Flowserve Management    HERMATICALLY SEALED PUMP WITH NON-WETTED    Pending                 --
Company                 MOTOR

Flowserve Management    PUMP ASSEMBLY INCLUDING INTEGRATED ADAPTER  Pending                 --
Company

Flowserve RED           NONE
Corporation

Flowserve FSD           NONE
Corporation

Flowserve               NONE
International, Inc.

BW/IP - New Mexico,     NONE
Inc.

Flowserve               NONE
International, LLC

Durametallic            NONE
Australia Holding
Company

Flowserve Finance B.V.  NONE

Flowserve               NONE
International Limited

9

81

A. FLOWSERVE PATENTS

3. NON-U.S. PATENT REGISTRATIONS

PATENT              
GRANTOR            PATENT NAME                         COUNTRY          NUMBER              ISSUE DATE
-------            -----------                         -------          ------              ----------

Flowserve          METHOD FOR INDUCTION MELTING        Australia        608785              4/18/1991
Management         REACTIVE METALS AND ALLOYS          Canada           1329990             6/7/1994
Company                                                Japan            2128541             4/25/1997

Flowserve          PTFE LINED BEARING GUIDE            Canada           1185306             4/9/1985
Management
Company

Flowserve          METHOD OF APPARATUS TO FACILITATE   Australia        659607              6/14/1995
Management         THE INJECTION OF SEALANT INTO A
Company            PRESSURIZED FLUID MEMBER

Flowserve          MECHANICAL SEAL WITH IMPROVED       Canada           1,150,744
Management         FACE RING MOUNTING.
Company

Flowserve          CABLE GUIDE FOR A TUBULAR ANODE     Canada           1,151,592
Management
Company

Flowserve          THRUST BEARING ARRANGEMENT          Australia        542077
Management                                             Canada           1,177,511
Company                                                France           82/06671
Germany          DE3212985
Holland          189.424
Japan            1,545,335
Switzerland      660,063
UK               2,097,069

Flowserve          BACK-UP MECHANICAL SEAL             Canada           1629982
Management                                             Jap
Company

Flowserve          MECHANICAL SEALS FOR USE WITH       Australia        59595
Management         SLURRY PUMPS                        Australia        571185
Company                                                Canada           1,245,684
Chile            4334.411
European (FR,    0 120 158
GB, DE & NL)
Finland          75,910
Finland          78,540
Finland          79,174
Finland          78,539
Japan            1667198
Japan            1634296
Japan            1736046
South Africa     83/6670
Spain            527.055
Spain            529.137

10

82

PATENT              
GRANTOR            PATENT NAME                         COUNTRY          NUMBER              ISSUE DATE
-------            -----------                         -------          ------              ----------

Flowserve          IMPROVED MECHANICAL SEAL            Canada           1,193,629
Management
Company

Flowserve          IMPROVED MECHANICAL SEAL ASSEMBLY   Canada           1179700
Management                                             European (FR,    0079116
Company                                                DE, NL & GB)
Japan            1937277

Flowserve          MECHANICAL SEAL ASSEMBLY            Canada           1,214,479
Management                                             European (FR,    0 086 561
Company                                                DE, GB, IT &
SE)
Japan            1751474

Flowserve          PUMP-MECHANICAL SEAL CONSTRUCTION   Australian       571306
Management         WITH AXIAL ADJUSTMENT MEANS         Canada           1,262,741
Company                                                Chile            35,365
European (FR,    0 164 177
IT, NL, GB, &
DE)
Finland          79,897
Japan            1,858,616
South Africa     85/0651
Spain            540.004

Flowserve          MECHANICAL SEAL WITH CYLINDRICAL    Canada South     1,244,848
Management         BALANCE SLEEVE                      Korea            52236
Company                                                Spain            536.339

Flowserve          HYDRAULIC PROXIMITY PROBE           Australia        574,394
Management                                             Canada           1212439
Company

Flowserve          SHAFT SEAL                          Canada           1,244,849
Management
Company

Flowserve          MECHANICAL SEAL ASSEMBLY WITH       Australia        577,241
Management         COOLANT CIRCULATION STRUCTURE       Canada           1,266,689
Company                                                India            164,831
Mexico           163,522
South Korea      29998
Venezuela        47.826

Flowserve          MECHANICAL SEAL ASSEMBLY WITH       Canada           1,181,779
Management         INTEGRAL PUMPING  DEVICE
Company

11

83

PATENT              
GRANTOR            PATENT NAME                         COUNTRY          NUMBER              ISSUE DATE
-------            -----------                         -------          ------              ----------

Flowserve          IMPROVED MECHANICAL SEAL            Argentina        233.760
Management                                             Australia        566210
Company                                                Australia        574828
Canada           1,245,685
Canada           1,257,308
European- (FR,   0 134 068
NL, CH, GB &
DE)
European- (FR,   0 177 161
NL, CH, GB &
DE)
Japan            818323
South Korea      48362
Spain            532.612
Spain            543.022

Flowserve          PUMP IMPROVEMENT                    Germany          DE3337839
Management                                             Japan            Japan
Company

Flowserve          ADJUSTABLE STATOR MECHANISM FOR     Australia        575434
Management         HIGH PRESSURE RADIAL TURBINES AND   Canada           1,209,049
Company            THE LIKE                            European (FR,    0179 580
NL, CH, GB &
DE)

Flowserve          MECHANICAL SEAL WITH AUTOMATIC      UK
Management         GAP CONVERGENCE CONTROL             Germany
Company                                                Japan

Flowserve          CARTRIDGE TYPE ROTARY SHORT SEAL    Canada           1,219,887
Management         WITH BEARING AND BELLOWS
Company

Flowserve          IMPROVED MECHANICAL SEAL FOR        Australia        589205
Management         PUMPS AND METHOD OF FABRICATING     Canada           1,325,648
Company            SAME                                European (FR,    0 213 888
IT, NL, GB &
DE)              162197
Japan            48,575
Venezuela

Flowserve          HYDROSTATIC BEARING FOR PUMPS AND   Canada           1245508
Management         THE LIKE                            European (FR,    0163434
Company                                                NL, SE, CH, GB
& DE)

Flowserve          PUMP CONSTRUCTION                   Canada           1235606
Management                                             Italy            1175589
Company                                                Spain            535.437

12

84

PATENT              
GRANTOR            PATENT NAME                         COUNTRY          NUMBER              ISSUE DATE
-------            -----------                         -------          ------              ----------

Flowserve          ADAPTIVE CONTROL SYSTEM FOR         Argentina        241,549
Management         MECHANICAL SEAL ASSEMBLY            Australia        580191
Company                                                Canada           1,282,476
China            86106617
European (FR,    0 220 531
DE, GB, NL,
IT, CH & ES)
Finland          85620
India            167,664
Israel           P/80053
Japan            178535
South Africa     86/7396
South Korea      75164

Flowserve          IMPROVER MECHANICAL SEAL FOR PUMPS  Australia        57720
Management                                             Canada           1,335,112
Company                                                France           86 10016

Flowserve          FLUID FLOW CONTROL MEANS FOR        Canada           1,255,152
Management         PUMPS AND THE LIKE                  (European (FR,   0 244 082
Company                                                DE, GB, NL, SE
& CH)

Flowserve          BEARING PROTECTOR                   Brazil           P18801288
Management                                             Canada           1,281,757
Company                                                India            168269
Mexico           166,30

Flowserve          BELLOWS MECHANICAL SEAL WITH        Argentina        239.145
Management         INACTIVE DIAPHRAGMS                 Australia        603426
Company                                                Canada           1,295,642
Europe (DE,      0 312 184
NL, IT, ES &
GB)

Flowserve          PUMP WITH HEAT EXCHANGER            Canada           1,332,035
Management                                             Canada           1,319,564
Company                                                Canada           1,332, 034
European         0 283 292
France           FR283292
Germany          P3872903.2
Japan            1873188
Netherlands      NL283292
Spain            ES283292
Switzerland      CH283292
United Kingdom   GB283292

Flowserve          MAGNETIC SEAL ASSEMBLY              Canada           1,319,715
Management                                             India            169679
Company                                                Mexico           172056
South Korea      55753

Flowserve          MECHANICAL SEAL LUBRICATION         Canada
Management         IMPROVEMENT
Company

13

85

PATENT              
GRANTOR            PATENT NAME                         COUNTRY          NUMBER              ISSUE DATE
-------            -----------                         -------          ------              ----------

Flowserve          PUMP HOUSING, MOULD PARTS OF A      Australia        563,613
Management         MOULD WALL FOR A PUMP HOUSING AND   Austria          010128B2
Company            METHOD OF MANUFACTURING A PUMP      Canada           1,221,877
HOUSING                             Belgium          563,613
EPO              0101628B2
Germany          0101628B2
Great Britain    0101628B2
France           0101628B2
Holland          0101628B2
Italy            0101628B2
Japan            16.17.833
Luxembourg       0101628B2
Sweden           0101628B2
Switzerland      0101626B2

Flowserve          BELLOWS SEAL WITH VIBRATION DAMPER  Argentina        243,657
Management                                             Australia        620005
Company                                                Brazil           P19000187
Mexico           167641
India
South Korea

Flowserve          FILTER LEAF                         Canadian         1,304,007
Management
Company

Flowserve          MECHANICAL SEAL ASSEMBLY            Australia        610397
Management                                             Brazil           PI89023781
Company                                                Canada           1312345
Columbia         23758
European         0 345 944
Malaysia         MY-104440A
South Africa     89/3818
Japan

Flowserve          HOUSING SEAL CHAMBER BODY           Canada           2,020,421
Management
Company

Flowserve          MECHANICAL SEAL                     Belgium          0 446 531
Management                                             European         0 446 531
Company                                                France           0 446 531
Germany          P69025168.8-08
Spain            0 446 531
Switzerland      0 446 531
Japan

Flowserve          PUMP WITH SEAL PURGE HEATER
Management                                             European         0 470 747
Company

14

86

PATENT              
GRANTOR            PATENT NAME                         COUNTRY          NUMBER              ISSUE DATE
-------            -----------                         -------          ------              ----------

Flowserve          IMPROVED EFFICIENCY MULTI-STAGE     Belgium
Management         PUMP                                UK
Company                                                France
Germany
Netherlands
Italy
Spain
Switzerland

Flowserve          ENCLOSURE FOR BRITTLE MECHANICAL    Europe           0 659 251
Management         SEAL FACE MATERIALS                 France           0 659 251
Company

Flowserve          FACE SEAL WITH ANGLED GROOVES AND   Australia        685,502
Management         SHALLOW ANNULAR GROOVE
Company

Flowserve          MECHANICAL SEAL WITH SPRING DRIVE   UK               2,305,982
Management
Company

Flowserve FCD      INNER-LOOP VALVE SPOOL              EP               Published           --
Corporation        POSITIONING CONTROL APPARATUS

Flowserve FCD      INTEGRATED PROCESS CONTROL VALVE    Australia        653151              6/17/1999
Corporation                                            Brazil           Appealed            --
Canada           Allowed             --
Japan            2772159             4/17/1998
France (EP)      0462432             12/9/1998
DE (EP)          69130592.7          12/9/1998
GB (EP)          0462432             12/9/1998
Italy (EP)       0462432             12/9/1998
NL (EP)          0462432             12/9/1998

Flowserve FCD      ANTI-CAVITATION LOW-NOISE CONTROL   Brazil           PI8505165           9/25/1990
Corporation        VALVE CAGE TRIM FOR HIGH PRESSURE   France (EP)      0174340             5/31/1989
REDUCING SERVICE IN LIQUID OR       DE (EP)          P3570722.4          5/31/1989
GASEOUS FLOW                        GB (EP)          01743402.4          5/31/1989
Japan            1780112             8/13/1993
Germany          0174340
Australia        568,054
Canada           1,237,634
Italy            1,214,484

Flowserve RED      NONE
Corporation

Flowserve FSD      NONE
Corporation

Flowserve          NONE
International,
Inc.

BW/IP - New        NONE
Mexico, Inc.

Flowserve          NONE
International,
LLC

15

87

PATENT              
GRANTOR            PATENT NAME                         COUNTRY          NUMBER              ISSUE DATE
-------            -----------                         -------          ------              ----------

Durametallic       NONE
Australia
Holding Company

Flowserve          NONE
Finance B.V.

Flowserve          NONE
International
Limited

16

88

A. FLOWSERVE PATENTS

4. NON-U.S. PATENT APPLICATIONS

PATENT              
APPLICATION         FILING 
GRANTOR            PATENT NAME                         COUNTRY          NUMBER              DATE
-------            -----------                         -------          ------              ----

Flowserve          METHOD OF APPARATUS TO FACILITATE   Canada           Pending             --
Management         THE INJECTION OF SEALANT INTO A     Japan            Pending             --
Company            PRESSURIZED FLUID MEMBER

Flowserve          FRICTION WELDING                    Canada           Pending             --
Management         APPARATUS                           IN               Pending             --
Company

Flowserve RED      NONE
Corporation

Flowserve FSD      NONE
Corporation

Flowserve          NONE
International,
Inc.

BW/IP - New        NONE
Mexico, Inc.

Flowserve          NONE
International,
LLC

Durametallic       NONE
Australia
Holding Company

Flowserve          NONE
Finance B.V.

Flowserve          NONE
International
Limited

17

89

B. INVATEC PATENTS

1. U.S. PATENT REGISTRATIONS

PATENT 
GRANTOR                       PATENT NAME                    NUMBER                ISSUE DATE
-------                       -----------                    ------                ----------

The Safe Seal Company, Inc.   FRICTION WELDING APPARATUS     5,558,265             2/4/94
(Apparatus)

The Safe Seal Company, Inc.   FRICTION WELDING APPARATUS     5,735,447             9/23/96
(Method)

The Safe Seal Company, Inc.   METHOD AND APPARATUS TO        5,062,439             6/14/90
FACILITATE THE INJECTION OF
SEALANT INTO A PRESSURIZED
FLUID MEMBER

The Safe Seal Company, Inc    METHOD AND APPARATUS TO        5,052,427             9/20/90
FACILITATE THE INJECTION OF    RE 35116
SEALANT INTO A PRESSURIZED
FLUID MEMBER

Innovative Valve              NONE
Technologies, Inc.

Plant Maintenance, Inc.       NONE

Varco Valve, Inc.             NONE

Colonial Equipment &          NONE
Service Co., Inc.

CECORP, Inc.                  NONE

DIVT Acquisition-Delaware,    NONE
LLC

DIVT Subsidiary, LLC          NONE

Southern Valve Service, Inc.  NONE

L.T. Koppl Industries         NONE

Harley Industries, Inc.       NONE

Koppl Company of Arizona      NONE

Seeley & Jones, Incorporated  NONE

GSV, Inc.                     NONE

IPSCO-Florida, Inc.           NONE

International Piping          NONE
Sevices Company

Cypress Industries, Inc.      NONE

DALCO, LLC                    NONE

Plant Specialties, Inc.       NONE

Energy Maintenance, Inc.      NONE

18

90

PATENT 
GRANTOR                       PATENT NAME                    NUMBER                ISSUE DATE
-------                       -----------                    ------                ----------

Preventive Maintenance, Inc.  NONE

Production Machine            NONE
Incorporated

ICE Liquidating, Inc.         NONE

Valve Repair of South         NONE
Carolina, Inc.

Flickinger-Benicia Inc.       NONE

Puget Investments, Inc.       NONE

Steam Supply & Rubber Co.,    NONE
Inc.

Flickinger Company            NONE

Boyden Inc.                   NONE

Valve Actuation & Repair      NONE
Company, Inc.

19

91

B. INVATEC PATENTS

2. U.S. PATENT APPLICATIONS

NONE

3. NON-U.S. PATENT REGISTRATIONS

GRANTOR                 PATENT NAME                    COUNTRY        PATENT NUMBER       ISSUE DATE
-------                 -----------                    -------        -------------       ----------

The Safe Seal           METHOD AND APPARATUS TO        Australia      659607              issue date 6/14/95
Company, Inc.           FACILITATE THE INJECTION OF
SEALANT INTO A PRESSURIZED     Europe         EP 053839-B1        issue date 6/14/96
FLUID MEMBER

Innovative Valve        NONE
Technologies, Inc.     

Plant Maintenance,      NONE
Inc.                   

Varco Valve, Inc.       NONE

Colonial Equipment      NONE
& Service Co., Inc.    

CECORP, Inc.            NONE

DIVT                    NONE
Acquisition-Delaware,  
LLC                    

DIVT Subsidiary, LLC    NONE

Southern Valve          NONE
Service, Inc.          

L.T. Koppl              NONE
Industries             

Harley Industries,      NONE
Inc.                   

Koppl Company of        NONE
Arizona                

Seeley & Jones,         NONE
Incorporated           

GSV, Inc.               NONE

IPSCO-Florida, Inc.     NONE

International           NONE
Piping Sevices         
Company                

Cypress Industries,     NONE
Inc.                   

DALCO, LLC              NONE

20

92

GRANTOR                 PATENT NAME                    COUNTRY        PATENT NUMBER       ISSUE DATE
-------                 -----------                    -------        -------------       ----------

Plant Specialties,      NONE
Inc.                   

Energy Maintenance,     NONE
Inc.                   

Preventive              NONE
Maintenance, Inc.      

Production Machine      NONE
Incorporated           

ICE Liquidating,        NONE
Inc.                   

Valve Repair of         NONE
South Carolina, Inc.   

Flickinger-Benicia      NONE
Inc.                   

Puget Investments,      NONE
Inc.                   

Steam Supply &          NONE
Rubber Co., Inc.       

Flickinger Company      NONE

Boyden Inc.             NONE

Valve Actuation &       NONE
Repair Company, Inc.                                                                   

21

93

B. INVATEC PATENTS

4. NON-U.S. PATENT APPLICATIONS

PATENT                     
GRANTOR               PATENT NAME               COUNTRY        APPLICATION NUMBER         FILING DATE
-------               -----------               -------        ------------------         -----------

The Safe Seal         FRICTION WELDING          Canada         pending                    2/3/95
Company, Inc.         APPARATUS                 India          pending                    2/3/95

The Safe Seal         METHOD AND APPARATUS TO   Japan          pending                    6/14/91
Company, Inc.         FACILITATE THE
INJECTION OF SEALANT
INTO A PRESSURIZED
FLUID MEMBER

Innovative Valve      NONE
Technologies, Inc.

Plant Maintenance,    NONE
Inc.

Varco Valve, Inc.     NONE

Colonial Equipment    NONE
& Service Co., Inc.

CECORP, Inc.          NONE

DIVT                  NONE
Acquisition-Delaware,
LLC

DIVT Subsidiary, LLC  NONE

Southern Valve        NONE
Service, Inc.

L.T. Koppl            NONE
Industries

Harley Industries,    NONE
Inc.

Koppl Company of      NONE
Arizona

Seeley & Jones,       NONE
Incorporated

GSV, Inc.             NONE

IPSCO-Florida, Inc.   NONE

International         NONE
Piping Services
Company

Cypress Industries,   NONE
Inc.

DALCO, LLC            NONE

22

94

PATENT                     
GRANTOR               PATENT NAME               COUNTRY        APPLICATION NUMBER         FILING DATE
-------               -----------               -------        ------------------         -----------

Plant Specialties,    NONE
Inc.

Energy Maintenance,   NONE
Inc.

Preventive            NONE
Maintenance, Inc.

Production Machine    NONE
Incorporated

ICE Liquidating,      NONE
Inc.

Valve Repair of       NONE
South Carolina, Inc.

Flickinger-Benicia    NONE
Inc.

Puget Investments,    NONE
Inc.

Steam Supply &        NONE
Rubber Co., Inc.

Flickinger Company    NONE

Boyden Inc.           NONE

Valve Actuation &     NONE
Repair Company, Inc.

23

95

C. IDP PATENTS

1. U.S. PATENT REGISTRATIONS

(All Ingersoll-Dresser Pump Company Intellectual Property to be assigned
to Flowserve Management Company immediately after Closing).

GRANTOR                   PATENT                       PATENT NUMBER           ISSUE DATE
-------                   ------                       -------------           ----------

Ingersoll-                IMPELLAR FOR                 2068854
Dresser Pump              CENTRIFUGAL                  5192193                 3/9/1993
Company                   PUMPS

Ingersoll-                MAGNETICALLY                 5248245                 9/28/1993
Dresser Pump              COUPLED
Company                   CENTRIFUGAL
PUMP WITH
IMPROVED
COOLING AND
LUBRICATION

Ingersoll-                CENTRIFUGAL                  5344285                 9/6/1994
Dresser Pump              PUMP WITH
Company                   MONOLITHIC
DIFFUSER AND
RETURN VANE
CHANNEL RING
MEMBER

Ingersoll-                CENTRIFUGAL                  5456577                 10/10/1995
Dresser Pump              PUMP WITH
Company                   RESILIENTLY
BIASING DIFFUSER

Ingersoll-                CENTRIFUGAL                  5385445                 1/31/1995
Dresser Pump              PUMP
Company

Ingersoll-
Dresser Pump              BUSHING                      357030                  4/14/1995
Company

Ingersoll-                CAVITATION                   5514329                 5/7/1996
Dresser Pump              RESISTANT FLUID
Company                   IMPELLERS AND
METHOD FOR
MAKING SAME

Ingersoll-                CENTRIFUGAL                  5871332                 2/16/1999
Dresser Pump              PUMP
Company

Ingersoll-                FLUID JET                    5816505                 10/6/1998
Dresser Pump              DECOKING TOOL
Company

Ingersoll-                OPEN BOWL FOR A              ALLOWED                 11/30/1999
Dresser Pump              VERTICAL                     5993153
Company                   TURBINE PUMP

24

96

GRANTOR                   PATENT                       PATENT NUMBER           ISSUE DATE
-------                   ------                       -------------           ----------

Ingersoll-                CONSTANT FLOW CASCADE        5779005                 7/14/1998
Dresser Pump              LUBRICATION
Company                   SYSTEM

Ingersoll-                FRONT- REMOVABLE BEARING     5944482                 8/31/1999
Dresser Pump              HOUSING FOR VERTICAL
Company                   TURBINE PUMP

Ingersoll-                MULTI-STAGE VERTICAL         ALLOWED
Dresser Pump              TURBINE PUMP
Company                   WITH COMMINUTION

Ingersoll-                ROTO-DYNAMIC                 4375937                 3/8/1983
Dresser Pump              PUMP WITH
Company                   BACKFLOW
RECIRCULATOR

Ingersoll-                PUMPING APPARATUS            4557669                 12/10/1985
Dresser Pump
Company

Ingersoll-                PUMPING SYSTEM               4570833                 2/18/1986
Dresser Pump
Company

Ingersoll-                PUMP WITH REPLACEABLE        4614481                 9/30/1986
Dresser Pump              CARTRIDGE
Company

Ingersoll-                PUMPING SYSTEM WITH          4685592                 8/11/1987
Dresser Pump              CONTROL VALVE
Company

Ingersoll-                RETURNABLE CONTAINER SYSTEM  4804109                 2/14/1989
Dresser Pump
Company

Ingersoll-                DETACHABLE CHEMICAL SPRAYER  4826083                 5/2/1989
Dresser Pump
Company

Ingersoll-                QUICK AND DRY                4986304                 1/22/1991
Dresser Pump              COUPLING                     5168897                 12/8/1992
Company                                                5092363                 3/3/1992

Ingersoll-                JOURNAL BEARING              5683185                 11/4/1997
Dresser Pump              RETAINER
Company                   SYSTEM WITH
ECCENTRIC
LOCK

Ingersoll-                TAMPER EVIDENT               5160054                 11/3/1992
Dresser Pump              VENT SYSTEM
Company                   FOR CONTAINERS

Ingersoll- Dresser Pump   COMPACT INTERBOWL ASSEMBLY   5921750                 7/13/1999
Company                   COUPLED FOR VERTICAL 

25

97

GRANTOR                   PATENT                       PATENT NUMBER           ISSUE DATE
-------                   ------                       -------------           ----------

TURBINE PUMPS

Ingersoll-                FITTING FOR                  5186365                 2/16/1993
Dresser Pump              EMPTYING A
Company                   CONTAINER

Ingersoll-                SEAL ENGAGING                5184747                 2/9/1993
Dresser Pump              RING                         354681
Company                                                358988

Ingersoll-                SEALLESS PUMP                5297940                 3/29/1994
Dresser Pump              CORROSION
Company                   DETECTOR

Ingersoll-                MAGNETICALLY                 5269664                 12/14/1993
Dresser Pump              COUPLED
Company                   CENTRIFUGAL
PUMP

Ingersoll-                PUMP W/FAILURE               5366351                 11/12/1994
Dresser Pump              RESPONSIVE                   5450987                 9/19/1995
Company                   DISCHARGE
VALVE

Ingersoll-                SYSTEM FOR                   5638285                 6/10/1997
Dresser Pump              DISPENSING DRY
Company                   AGRICULTURAL
CHEMICALS

Ingersoll-                METHOD FOR                   5737221                 4/7/1998
Dresser Pump              DISPENSING DRY
Company                   GRANULAR
MATERIALS

Ingersoll-                METERING DEVICE              5524794                 6/11/1996
Dresser Pump              FOR GRANULAR
Company                   MATERIALS

Ingersoll-                POWER                        5539669                 7/23/1996
Dresser Pump              SEQUENCING
Company                   METHOD FOR
ELECTRO-
MECHANICAL
DISPENSING DEVICE

Ingersoll-                ENCAPSULATED                 5831364                 11/3/1998
Dresser Pump              MAGNET CARRIER
Company

Ingersoll-                METHOD FOR                   5964028                 10/12/1999
Dresser Pump              MAKING AN
Company                   ENCAPSULATED
MAGNET CARRIER

Ingersoll-                BEARING AND                  5667357                 9/16/1997
Dresser Pump Company      SEAL PERCOLATOR FOR A
CENTRIFUGAL
PUMP

Ingersoll-                CENTRIFUGAL
Dresser Pump              PUMP
Company

Ingersoll-                PUMP IMPELLER                5605444                 2/25/1997
Dresser Pump              HAVING SEPARATE
Company                   OFFSET INLET

26

98

GRANTOR                   PATENT                       PATENT NUMBER           ISSUE DATE
-------                   ------                       -------------           ----------

VANES

Ingersoll-                CENTRIFUGAL                  6012909                 1/11/2000
Dresser Pump              PUMP WITH AN
Company                   AXIAL-FIELD
INTEGRAL MOTOR
COOLED BY
WORKING FLUID

Ingersoll-                SYSTEM FOR                   5641011                 6/24/1999
Dresser                   TRANSPORTING
Pump                      AND DISPENSING
COMPANY                   GRANULAR
MATERIALS (2385-
ID-IP and 2450-
ID0IP WERE
COMBINED INTO
THIS DOCKET)

Ingersoll-                DIAPHRAGM FOR                5951267                 9/14/1999
Dresser Pump              SEAL-LESS
Company                   INTEGRAL-MOTOR
PUMP (PIERCEY
FROM KAMAN
ELECTRO-MAGNETICS
HUSON, MA)

Ingersoll-                POLYMER-BACKED               6024494
Dresser Pump Company      THRUST BEARINGS

Ingersoll-                TRANSFER VALVE               5687782                 11/18/1997
Dresser Pump              FOR A GRANULAR
Company                   MATERIALS
DISPENSING
SYSTEM

Ingersoll-                INTEGRAL CLOSE               5788473                 8/4/1998
Dresser Pump              COUPLING FOR A
Company                   ROTARY GEAR
PUMP

Ingersoll-                BUTTONS FOR                  5927860                 7/27/1999
Dresser Pump              PRODUCT
Company                   LUBRICATED
THRUST
BEARINGS

Ingersoll-                COLUMN INSERT                4391475                 7/15/1983
Dresser Pump Company      BEARING HOUSING

Ingersoll-                FIBER-FILLED                 4767277                 8/30/1998
Dresser Pump Company      POLYMER IMPELLER

Ingersoll-                LUBRICATION                  4466508                 8/21/1984
Dresser Pump Company      DEVICE

Ingersoll-                HIGH SPEED                   4389160                 6/21/1983
Dresser Pump              CENTRIFUGAL PUMP

27

99

GRANTOR                   PATENT                       PATENT NUMBER           ISSUE DATE
-------                   ------                       -------------           ----------

Company                   AND METHOD FOR 
OPERATING SAMEAT AT
REDUCED NOISE LEVELS

Ingersoll-                DECOKING TOOL                4738399                 4/19/1988
Dresser Pump
Company

Ingersoll- Dresser Pump   SINGLE ACTING PUMP WITH      4762051                 8/9/1998
Company                   DOUBLE ACTING
DRIVE

Ingersoll-                CENTRIFUGAL                  4818177                 4/4/1989
Dresser Pump Company      PUMP WITH INTEGRAL SUCTION
VALVE

Ingersoll-                CENTRIFUGAL                  6012909                 1/11/2000
Dresser Pump              PUMP WITH AN
Company                   AXIAL-FIELD
INTEGRAL MOTOR
COOLED BY
WORKING FLUID

IDP Alternate Energy      NONE
Company

Energy Hydro, Inc.        NONE

Pump Investments, Inc.    NONE

28

100

C. IDP PATENTS

2. U.S. PATENT APPLICATIONS

(All Ingersoll-Dresser Pump Company Intellectual Property to be assigned
to Flowserve Management Company immediately after Closing).

PATENT APPLICATION      
GRANTOR                   PATENT                       NUMBER                  FILING DATE
-------                   ------                       ------------------      -----------

Ingersoll-                FORCED CLOSED-LOOP           PENDING
Dresser Pump              COOLING FOR A SUBMERSIBLE
Company                   PUMP MOTOR

Ingersoll-                SEAL LESS                    PENDING
Dresser Pump              INTEGRAL-MOTOR
Company                   PUMP WITH
REGENERATIVE
IMPELLER DISK

Ingersoll-                COMPACT SEAL-                PENDING
Dresser Pump Company      LESS SCREW PUMP

Ingersoll-                SEALLESS                     PENDING
Dresser Pump              MULTIPHASE
Company                   SCREW PUMP-AND-
MOTOR PACKAGE

IDP Alternate Energy      NONE
Company

Energy Hydro, Inc.        NONE

Pump Investments, Inc.    NONE

29

101

C. IDP PATENTS

3. NON- U.S. PATENT REGISTRATIONS

(AllIngersoll-Dresser Pump Company Intellectual Property assigned
to Flowserve Management Company immediately after Closing).

PATENT                                               PATENT                
GRANTOR               TITLE                        COUNTRY                 NUMBER                ISSUE DATE
-------               ------                       -------                 ------                ----------

Ingersoll-            CENTRIFUGAL                  AU                      617505
Dresser Pump          PUMP                         CA                      1308959
Company                                            DE                      3925890
FR                      89/10674
GB                      2222207
IT                      1231299
JP                      2097093

Ingersoll-            INTEGRAL MOTOR-              AU                      651399
Dresser Pump          PUMP                         DE                      69105211.5
Company                                            EP                      0551435
FR                      0551435
GB                      0551435
IT                      0551435
JP                      2546943
KR                      171871
WO                      NATIONAL

Ingersoll-            IMPELLAR FOR                 CN                      92104767.3
Dresser Pump          CENTRIFUGAL                  GB                      2256901
Company               PUMPS                        KR                      114513

Ingersoll-            CENTRIFUGAL                  CH                      689400
Dresser Pump          PUMP WITH                    GB                      2283059
Company               MONOLITHIC
DIFFUSER AND
RETURN VANE
CHANNEL RING
MEMBER

Ingersoll-            CAVITATION                   AU                      683389
Dresser Pump          RESISTANT FLUID              CN                      95193829.0
Company               IMPELLERS AND                DE                      69502609.7
METHOD FOR                   EP                      0769077
MAKING SAME                  ES                      0769077
FR                      0769077
GB                      0769077
IT                      0769077
MX                      190354
NL                      0769077
'IW                     NI-077754
WO                      NATIONAL
ZA                      95/5296

Ingersoll-            CENTRIFUGAL                  GB                      2290113
Dresser Pump          PUMP                         IT                      1275286
Company

30

102

PATENT                                               PATENT                           
GRANTOR               TITLE                        COUNTRY                 NUMBER                ISSUE DATE
-------               ------                       -------                 ------                ----------

Ingersoll-            FLUID JET                    WO                      NATIONAL
Dresser Pump          DECOKING TOOL
Company
QUICK AND DRY                JP                      2701088
COUPLING

Ingersoll-            TAMPER EVIDENT VENT SYSTEM   JP WO                   2811370 NATIONAL
Dresser Pump          FOR CONTAINERS
Company

Ingersoll-            BEARING AND SEAL             GB                      2310690
Dresser Pump          PERCOLATOR FOR A
Company               CENTRIFUGAL
PUMP

Ingersoll-            PUMP IMPELLER                AU                      712130
Dresser Pump          HAVING SEPARATE              TW                      NI-097639
Company               OFFSET INLET                 WO                      NATIONAL
VANES

Ingersoll-            SYSTEM FOR                   WO                      NATIONAL
Dresser Pump          TRANSPORTING
Company               AND DISPENSING
GRANULAR
MATERIALS (2385-
ID-IP AND 2450-
ID0IP WERE
COMBINED INTO
THIS DOCKET)

Ingersoll-            LUBE OIL RING                CA                      1237679
Dresser Pump          PUMP
Company

Ingersoll-            HIGH PRESSURE                EP                      0378645
Dresser Pump          RECIPROCATING                WO                      NATIONAL
Company               PUMP

IDP Alternate         NONE
Energy Company

Energy Hydro, Inc.    NONE

Pump Investments,     NONE
Inc.

31

103

C. IDP PATENTS

4. NON- U.S. PATENT APPLICATIONS

(All Ingersoll-Dresser Pump Company Intellectual Property to be assigned
to Flowserve Management Company immediately after Closing).

PATENT APPLICATION
GRANTOR               PATENT TITLE                 COUNTRY                 NUMBER                FILING DATE
-------               ------------                 -------                 ------------------    -----------

Ingersoll-            CENTRIFUGAL                  DE                      PENDING
Dresser Pump          PUMP WITH                    JP                      PENDING
Company               MONOLITHIC
DIFFUSER AND
RETURN VANE
CHANNEL RING
MEMBER

Ingersoll-            CAVITATION                   CA                      PENDING
Dresser Pump          RESISTANT FLUID              IN                      PENDING
Company               IMPELLERS AND                KR                      PENDING
METHOD FOR
MAKING SAME

Ingersoll-            CENTRIFUGAL                  CA                      PENDING
Dresser Pump          PUMP                         DE                      PENDING
Company                                            JP                      PENDING

Ingersoll-            FLUID JET                    CA                      PENDING
Dresser Pump          DECOKING TOOL                EP                      PUBLISHED
Company                                            IN                      PENDING
JP                      PENDING
MX                      PENDING
TW                      PENDING
VE                      PENDING

Ingersoll-            DIVERTER VALVE               JP                      PENDING
Dresser Pump          WITEI CUT-OFF                MX                      PENDING
Company               AND BLEED                    NL                      PENDING
FUNCTIONS

Ingersoll-            OPEN BOWL FOR A VERTICAL     JP                      PENDING
Dresser Pump          TURBINE PUMP                 MS                      PENDING
Company                                            NL                      PENDING
CA                      PENDING
EG                      PENDING
TH                      PENDING

Ingersoll-            CONSTANT FLOW CASCADE        BR                      PENDING
Dresser Pump          LUBRICATION                  CA                      PENDING
Company                                            CN                      PENDING
EP                      PUBLISHED
IN                      PENDING

Ingersoll-            FRONT- REMOVABLE BEARING     CA                      PENDING
Dresser Pump          HOUSING FOR VERTICAL         EG                      PENDING
Company               TURBINE PUMP                 TH                      PENDING

32

104

PATENT APPLICATION    
GRANTOR               PATENT TITLE                 COUNTRY                 NUMBER                FILING DATE
-------               ------------                 -------                 ------------------    -----------

Ingersoll-            FORCED CLOSED-               BR                      PENDING
Dresser Pump          LOOP COOLING                 CA                      PENDING
Company               FOR A                        EP                      PENDING
SUBMERSIBLE                  JP                      PENDING
PUMP MOTOR

Ingersoll-            COMPACT                      CA                      PENDING
Dresser Pump          INTERBOWL
Company               ASSEMBLY
COUPLED FOR
VERTICAL TURBINE PUMPS

Ingersoll-            MAGNETICALLY COUPLED         DE                      PENDING
Dresser Pump          CENTRIFUGAL                  JP                      PENDING
Company               PUMP

Ingersoll-            MATERIAL                     CA                      PENDING
Dresser Pump          DISPENSING SYSTEM
Company

Ingersoll-            POWER                        CA                      PENDING
Dresser Pump          SEQUENCING
Company               METHOD FOR
ELECTRO-
MECHANICAL DEVICE

Ingersoll-            ENCAPSULATED MAGNET CARRIER  CA                      PENDING PENDING
Dresser Pump                                       GB
Company

Ingersoll-            BEARING AND                  CA                      PENDING
Dresser Pump          SEAL PERCOLATOR
Company               FOR A
CENTRIFUGAL PUMP

Ingersoll-            PUMP IMPELLER
Dresser Pump          HAVING SEPARATE              CA                      PENDING
Company               OFFSET INLET                 CN                      PUBLISHED
VANES                        EP                      PENDING

Ingersoll-            CENTRIFUGAL                  DE                      PENDING
Dresser Pump          PUMP WITH AN                 GB                      PUBLISHED
Company               AXIAL-FIELD                  JP                      PENDING
INTEGRAL MOTOR
COOLED

Ingersoll-            SYSTEM FOR                   JP                      PENDING
Dresser Pump          TRANSPORTING                 MX                      PENDING
Company               AND DISPENSING               WO                      NATIONAL
GRANULAR
MATERIALS (2385-
ID-IP AND 2450-
ID0IP WERE
COMBINED INTO
THIS DOCKET)

33

105

PATENT APPLICATION    
GRANTOR               PATENT TITLE                 COUNTRY                 NUMBER                FILING DATE
-------               ------------                 -------                 ------------------    -----------

Ingersoll-            DIAPHRAGM FOR                GB                      PUBLISHED
Dresser Pump          SEAL-LESS
Company               INTEGRAL-MOTOR
PUMP (PIERCEY
FROM KAMAN
ELECTRO-MAGNETICS
HUSON, MA)

Ingersoll-            TRANSFER VALVE               CA                      PENDING
Dresser Pump          FOR A GRANULAR
Company               MATERIALS
DISPENSING
SYSTEM

Ingersoll-            INTEGRAL CLOSE               CA                      PENDING
Dresser Pump          COUPLING FOR A
Company               ROTARY GEAR
PUMP

Ingersoll-            BUTTONS FOR                  GB                      PUBLISHED
Dresser Pump          PRODUCT
Company               LUBRICATED
THRUST BEARINGS

Ingersoll-            COMPACT SEAL-                CA                      PENDING
Dresser Pump          LESS SCREW PUMP              EP                      PUBLISHED
Company                                            VE                      PENDING

Ingersoll-            CENTRIFUGAL                  DE                      PENDING
Dresser Pump          PUMP WITH AN                 GB                      PUBLISHED
Company               AXIAL-FIELD                  JP                      PENDING
INTEGRAL MOTOR
COOLED BY
WORKING FLUID

IDP Alternate         NONE
Energy Company

Energy Hydro, Inc.    NONE

Pump Investments,     NONE
Inc.

34

1
EXHIBIT 12.1

FLOWSERVE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions, except ratios)

YEAR ENDED DECEMBER 31,                           
---------------------------------------------------                
1995        1996      1997       1998       1999                 
--------   --------   --------   --------   --------                   

Earnings to Fixed Charges:                                                                                                          

Pretax earnings (loss) before taxes on income                $   88.4   $  108.4   $   89.8   $   73.2   $   18.2                   

Adjustments:                                                                                                                        

Fixed Charges                                               16.7       17.1       18.3       17.3       20.4                   
Capitalized interest                                                                          0.2        0.9                   
--------   --------   --------   --------   --------                   

Earnings before taxes and fixed charges as adjusted             105.1      125.5      108.1       90.3       37.7                   

Fixed Charges:                                                                                                                      
Interest Expense                                            12.3       12.1       13.3       13.2       15.5                   
Capitalized interest                                                                          0.2        0.9                   
Amortization of debt discount                                                                                                  
Amortization of capitalized expenses related to debt                                                     0.2                   
Interest portion of rent                                     4.4        5.0        5.0        3.9        3.8                   
--------   --------   --------   --------   --------                   
Total Fixed Charges                                          $   16.7   $   17.1   $   18.3   $   17.3   $   20.4                   

Earnings to Fixed Charges                                         6.3        7.3        5.9        5.2        1.8                   
========   ========   ========   ========   ========                   

PRO FORMA
SIX MONTHS        SIX MONTHS                            SIX MONTHS
ENDED             ENDED          PRO FORMA             ENDED
JUNE 30, 1999     JUNE 30, 2000   DECEMBER 31, 1999     JUNE 30,2000
-------------     -------------   -----------------     ------------

Earnings to Fixed Charges:

Pretax earnings (loss) before taxes on income                $   28.6            $    37.4          $  (35.4)        $   (7.4)

Adjustments:                                                                                                         

Fixed Charges                                               10.9                 17.3              50.6             10.6 
Capitalized interest                                          .5                  0.5                .9               .5
--------            ---------          --------         --------

Earnings before taxes and fixed charges as adjusted              40.0                 54.2              16.1              2.7

Fixed Charges:                                                                                                               
Interest Expense                                             7.2                 13.6              41.1              5.8
Capitalized interest                                          .5                  0.5                .9               .5
Amortization of debt discount                                 --                   --                .5               .3
Amortization of capitalized

expenses related to debt          .1                   .1               1.9               .9
Interest portion of rent                                     3.1                  3.1               6.2              3.1
--------            ---------          --------         --------
Total Fixed Charges                                          $   10.9            $    17.3          $   50.6         $   10.6

Earnings to Fixed Charges                                         3.6                  3.1                .4               .3
========            =========          ========         ========

1
EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

STATE OF     
INCORPORATION  
NAME                                                          OR ORGANIZATION 
----                                                          --------------- 

Flowserve RED Corporation...................................  Delaware        
Flowserve FSD Corporation...................................  Delaware        
Flowserve FCD Corporation...................................  Delaware        
Flowserve International, Inc. ..............................  Delaware        
Flowserve Management Company................................  Delaware        
BW/IP-New Mexico, Inc. .....................................  Delaware        
Flowserve International, LLC................................  Delaware        
Flowserve Holdings, Inc.....................................  Delaware        
Durametallic Australia Holding Company......................  Michigan        
Flowserve International Limited.............................  United Kingdom  
Innovative Valve Technologies, Inc. ........................  Delaware        
Plant Maintenance, Inc. ....................................  Delaware        
Varco Valve, Inc. ..........................................  Delaware        
Colonial Equipment & Service Co., Inc. .....................  Delaware        
CECORP, Inc. ...............................................  Delaware        
DIVT Acquisition, LLC.......................................  Delaware        
DIVT Subsidiary, LLC........................................  Delaware        
IPSCO Holding, Inc. ........................................  Delaware        
Southern Valve Service, Inc. ...............................  Alabama         
L.T. Koppl Industries, Inc. ................................  California      
Koppl Company...............................................  California      
Koppl Industrial Systems, Inc. .............................  California      
Harley Industries, Inc. ....................................  California      
Koppl Company of Arizona....................................  Arizona         
Seeley & Jones, Incorporated................................  Connecticut     
GSV, Inc. ..................................................  Florida         
IPSCO-Florida, Inc. ........................................  Florida         
International Piping Services Company.......................  Illinois        
Cypress Industries, Inc. ...................................  Illinois        
DALCO, LLC..................................................  Kentucky        
Plant Specialties, Inc. ....................................  Louisiana       
Energy

Maintenance, Inc. ...................................  Missouri        
Preventive Maintenance, Inc. ...............................  North Carolina  
Production Machine Incorporated.............................  Oklahoma        
ICE Liquidating, Inc. ......................................  Pennsylvania    
Valve Repair of South Carolina, Inc. .......................  South Carolina  
The Safe Seal Company, Inc. ................................  Texas           
Flickinger-Benicia Inc. ....................................  Washington      
Puget Investments, Inc. ....................................  Washington      
Steam Supply & Rubber Co., Inc. ............................  Washington      
Flickinger Company..........................................  Washington      
Boyden Inc. ................................................  West Virginia   
Valve Actuation & Repair Co. ...............................  West Virginia   
Ingersoll-Dresser Pump Company..............................  Delaware        
IDP Alternate Energy Company................................  Delaware        
Energy Hydro, Inc. .........................................  Delaware        
Pump Investments, Inc. .....................................  Delaware        

The address, including zip code, and telephone number, including area code,
of the principal offices of the subsidiaries of the registrants listed above is:
222 W. Las Colinas Blvd., Suite 1500, Irving, Texas 75039; the telephone number
at that address is (972) 443-6500.

1
EXHIBIT 23.1

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 10, 2000 (except Note 15, as to which the date
is August 9, 2000, and Note 16, as to which the date is July 14, 2000) in the
Registration Statement (Form S-4 No. 33-00000) of Flowserve Corporation for the
registration of $290,000,000 of 12-1/4% Senior Subordinated Notes due 2010 of
Flowserve Corporation and Euro 100,000,000 of 12-1/4% Senior Subordinated Notes
due 2010 of Flowserve Finance B.V.

/s/ Ernst & Young LLP

Dallas, Texas
September 22, 2000

1
EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form S-4 of
Flowserve Corporation of our report dated February 18, 2000 except for Note 1
"Acquisition of Halliburton's Interest" and Note 16 for which the dates are
September 12, 2000 and June 22, 2000, respectively, relating to the financial
statements of Ingersoll-Dresser Pump Company, which appears in such Registration
Statement. We also consent to the references to us under the heading "Experts"
in such Registration Statement.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP

Florham Park, NJ
September 25, 2000

1
EXHIBIT 23.3

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation of our report on Innovative Valve Technologies, Inc. for the year
ended December 31, 1999, dated March 3, 2000 included in Flowserve Corporation's
Form 8-K, and to all references to our firm included in Flowserve Corporation's
S-4 Registration Statement.    

/s/ ARTHUR ANDERSEN LLP

ARTHUR ANDERSEN LLP

Houston, Texas
September 22, 2000