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SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.   )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[ ]  Preliminary Proxy Statement        [ ]  Confidential, for Use of the 
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12.

Flowserve Corporation
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(Name of Registrant as Specified in its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X]  No fee required.
[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 
0-11.

(1)  Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------
(2)  Aggregate number of securities to which transaction applies:

- --------------------------------------------------------------------------------
(3)  Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

- --------------------------------------------------------------------------------
(4)  Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------
(5)  Total fee paid:

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

[ ]  Fee paid previously with preliminary materials.

[ ]  Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

(1)  Amount Previously Paid:

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(2)  Form, Schedule or Registration Statement No.:

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(3)  Filing Party:

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(4)  Date Filed:

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FLOWSERVE CORPORATION
222 WEST LAS COLINAS BOULEVARD
IRVING, TEXAS 75039

NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1998

The 1998 Annual Meeting of Shareholders of Flowserve Corporation (the
"Company") will be held at the Omni Mandalay Hotel, 221 East Las Colinas
Boulevard, Irving, Texas at 9:00 a.m. on Thursday, May 21, 1998, for the
following purposes:

1.    To elect one director to serve a term of one year and three
directors to each serve for a term of three years.

2.    To approve the Flowserve Corporation 1998 Restricted Stock Plan.

3.    To transact such other business as may properly come before the
meeting or any adjournment thereof.

Shareholders of record at the close of business of April 2, 1998, are
entitled to notice of and to vote at this meeting.

By order of the Board of Directors

Ronald F. Shuff
Secretary

Irving, Texas
April 9, 1998

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VOTING YOUR PROXY IS IMPORTANT
PLEASE SIGN AND DATE YOUR PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------

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FLOWSERVE CORPORATION

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PROXY STATEMENT

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Mailing Date
April 9, 1998

GENERAL INFORMATION

PERSONS MAKING THE SOLICITATION

The accompanying Proxy is solicited by the Board of Directors (the
"Board") of Flowserve Corporation (the "Company") and relates to the Company's
1998 Annual Meeting of Shareholders (the "Annual Meeting") to be held at the
Omni Mandalay Hotel, 221 East Las Colinas Boulevard, Irving, Texas at 9:00 a.m.
on Thursday, May 21, 1998.

VOTING SECURITIES

The Company has one class of stock outstanding, namely common stock,
$1.25 par value (the "Common Stock"), of which there were 40,751,669 shares
outstanding as of April 2, 1998. Only holders of Common Stock whose names
appeared of record on the books of the Company at the close of business on April
2, 1998, are entitled to notice of and to vote at the Annual Meeting. Each share
entitles the holder thereof to one vote.

The holders of a majority of the shares of Common Stock outstanding as
of the record date, whether present in person or represented by Proxy,
constitute a quorum at the Annual Meeting. Both shares as to which the holder
abstains from voting on a particular matter, and broker "non-votes" (being
street-name shares which the record holder refrains from voting because of the
absence of required instructions from the beneficial owner), will count towards
the determination of whether a quorum is present at the Annual Meeting.

ACTIONS TO BE TAKEN UNDER THE PROXY

Unless otherwise directed by the giver of the Proxy, all properly
executed Proxies will be voted for the election of Hugh K. Coble, George T.
Haymaker and William C. Rusnack for three year terms as directors of the
Company; in favor of Charles M. Rampacek for a one year term as a director; in
favor of the Flowserve Corporation 1998 Restricted Stock Plan; and, at the
discretion of the persons acting under the Proxy, in the transaction of such
other business as may properly come before the meeting or any adjournment
thereof.

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Should any nominee named herein for the office of director become unable
or unwilling to accept nomination or election, it is intended that the persons
acting under the Proxy will vote for the election, in his or her stead, of such
other person as the Board may designate. The Board has no reason to believe that
any of the nominees will be unable or unwilling to serve if elected to office.

The giving of a Proxy does not preclude the right to vote in person,
should the person giving the Proxy so desire. A person giving a Proxy has the
power to revoke the same, at any time before it has been exercised, by giving
the Company written notice bearing a later date than the Proxy, by submission of
a later dated Proxy, or by voting in person at the Annual Meeting (although
attendance at the Annual Meeting will not in and of itself constitute revocation
of a Proxy). All properly executed Proxies will be voted. The proxy voting will
be tabulated by the Company's transfer agent, National City Bank, which will
also serve as inspector of election at the Annual Meeting.

ELECTION OF DIRECTORS

The Board currently consists of eleven directors who are divided into
three classes, with one full class being elected at each Annual Meeting of
Shareholders. At the Annual Meeting, the term of the directors serving in the
Class of 1998 expires, and three directors will be elected to hold office until
the 2001 Annual Meeting of Shareholders and until their successors are elected
and qualified. One director will also be elected to a one year term to join the
members of the Class of 1999, whose term will expire at the 1999 Annual Meeting
of Shareholders. Under New York law, directors are elected by a plurality of the
votes cast at a meeting of shareholders by the holders of shares entitled to
vote in the election.

Set forth below is information with respect to each nominee for election
as a director and each director whose term of office continues after the Annual
Meeting.

CLASS OF 2001
NOMINEES TO BE ELECTED FOR A THREE YEAR TERM:

HUGH K. COBLE, 63, retired Vice Chairman Emeritus of Fluor Corporation,
a major engineering and construction firm, was elected to the Board in 1994. Mr.
Coble joined Fluor Corporation in 1966, where he held a series of increasingly
responsible management positions and had been a director from 1984 until his
retirement in June 1997. He is also a director of Beckman Instruments, Inc.,
which sells medical instruments and, effective April 16, 1998, a director of ICO
Global Communications, a telecommunications business.

GEORGE T. HAYMAKER, JR., 59, Chairman and Chief Executive officer of
Kaiser Aluminum Corporation, was elected to the Board in December 1997. Before
joining Kaiser in 1993 as its President and Chief Operating Officer, Mr.
Haymaker had worked with a private partner in the acquisition and redirection of
several metal fabricating companies. He had also been Executive Vice President
of Alumax and held various positions at Alcoa, including Vice President and
Treasurer and Group Vice President of International Operations.

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WILLIAM C. RUSNACK, 53, was elected to the Board in July 1997 following
the merger of the Company (formerly known as Durco International Inc. and The
Duriron Company, Inc.), and BW/IP, Inc. ("BW/IP") on July 22, 1997 (the
"Merger"). Mr. Rusnack had served as a director of BW/IP from 1993 to July 1997.
He was Senior Vice President of ARCO (an integrated petroleum company) from July
1990 to January 1998, and was President of ARCO Products Company from 1993 to
January 1998. He was President of ARCO Transportation Company from 1990 to 1993,
Vice President of Atlantic Richfield from 1987 to 1990 and Senior Vice President
of ARCO Oil & Gas Company from 1985 to 1987.

CLASS OF 1999
NOMINEE TO BE ELECTED FOR A ONE YEAR TERM:

CHARLES M. RAMPACEK, 54, was elected to the Board effective April 1,
1998. Mr. Rampacek has been the President and CEO of Lyondell-Citgo Refining
Company Ltd., a manufacturer of petroleum products, since 1996. He previously
was employed by Tenneco, Inc., where he served as President, Tenneco Gas
Transportation Company, from 1992 to 1996. He is a member of the board of
directors of the National Petroleum Refiners Association.

DIRECTORS WHOSE TERM IN OFFICE CONTINUES UNTIL 1999:

MICHAEL F. JOHNSTON, 50, was elected to the Board in July 1997,
following the Merger. Mr. Johnston had served as a director of BW/IP from 1996
to July 1997. Since September 1997, he has been President, Americas Automotive
Group of Johnson Controls, Inc., a company serving the automotive and building
services industries. He was Vice President and General Manager of ASG Interior
Systems Business of Johnson Controls, Inc. from January 1997 to September 1997,
Vice President and General Manager of the Johnson Controls Battery Group from
1993 to January 1997, Vice President and General Manager of SLI Battery Division
from 1991 to 1993 and Vice President and General Manager of the Specialty
Battery Division from 1989 to 1991.

KEVIN E. SHEEHAN, 52, was elected to the Board in 1990. Mr. Sheehan is a
general partner of the CID Equity Partners, a venture capital firm that
concentrates on early stage and high growth entrepreneurial companies. He was a
Vice President with Cummins Engine Company, a manufacturer of diesel engines and
related components, from 1980 until 1993.

R. ELTON WHITE, 55, was elected to the Board in 1993. Mr. White retired
in 1994 as President and a director of NCR Corporation, a computer systems
manufacturer, after 27 years of service to this company in various management
capacities. He is a director of Keithley Instruments, an electronics test and
measurement concern, and Kohl's Corporation, a department store company.

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CLASS OF 2000
DIRECTORS WHOSE TERM IN OFFICE CONTINUES UNTIL 2000:

BERNARD G. RETHORE, 56, became Chairman of the Board and Chief Executive
Officer of the Company in July 1997 following the Merger. Mr. Rethore was
elected Chairman of the Board of BW/IP, in February 1997 and had served as its
President, CEO and a director since 1995. He was Senior Vice President of Phelps
Dodge Corporation and President of Phelps Dodge Industries, its diversified
international manufacturing business, from 1989 to 1995. Previously Mr. Rethore
had been President and CEO of Microdot Industries, the diversified manufacturing
business of Microdot, Inc. Mr. Rethore is also a director of Maytag Corporation,
a manufacturer of appliances and related consumer products, and Belden, Inc., a
manufacturer of wire, cable and cord products for the electronics industry.

WILLIAM M. JORDAN, 54, became President and Chief Operating Officer of
the Company in July 1997 following the Merger. Mr. Jordan has been President and
a director of the Company since 1991. He was Chief Executive Officer from 1993
to July 1997 and Chairman of the Board from 1996 to July 1997. He was elected
Executive Vice President in 1990 and served as Chief Operating Officer from 1990
to 1993. He joined the Company in 1972. He is a director of NIBCO, a
manufacturer of flow control products, and Thomas Industries, Inc., a
manufacturer of lighting fixtures, air compressors and vacuum pumps.

DIANE C. HARRIS, 55, was elected to the Board in 1993. Mrs. Harris is
President of Hypotenuse Enterprises, Inc., a merger and acquisition services 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. She is a director and Immediate Past President of the Association
for Corporate Growth.

JAMES O. ROLLANS, 55, was elected to the Board in July 1997, following
the Merger. Mr. Rollans had served as a director of BW/IP from 1994 to July
1997. He has been Senior Vice President and Chief Administrative Officer of
Fluor Corporation, a major engineering and construction firm, since 1994. He had
served as Fluor's Senior Vice President and Chief Financial Officer and its Vice
President, Corporate Communications, from 1982 to 1994. Mr. Rollans is Chairman
of the Board of Lafayette Pharmaceuticals, Inc. and a member of the Fluor board
of directors.

Any shareholder who intends to nominate a director must, pursuant to
Article III, Section 2 of the By-Laws of the Company as approved by the
Shareholders at the 1986 Annual Meeting of Shareholders, give written notice of
such intention to the Secretary of the Company. The notice must be received at
the principal executive offices of the Company not less than 50 days prior to
the meeting (or if fewer than 60 days notice or prior public disclosure of the
meeting date is given or made to shareholders, not later than the tenth day
following the day on which the notice of the date of the meeting was mailed or
such public disclosure was made) and must include specified information about
the nominee and the shareholder. The proposed nomination will be referred to the
Executive Committee of the Board for further consideration. No shareholder has
to date notified the Company of any intention to nominate a director. 

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BOARD COMMITTEES: MEMBERSHIP AND FUNCTIONS

Nine meetings of the Board were held in 1997. The number of meetings
held by each of the three standing committees of the Board in 1997 was as
follows: Audit/Finance Committee six; Compensation Committee - six; Executive
Committee - five.

The Audit/Finance Committee, of which Mr. Rusnack is chairman and Mrs.
Harris and Messrs. Rollans and White are members, advises the Board on strategic
financial matters, including making recommendations to the Board on
acquisitions, divestitures, major financings, pension fund performance, capital
structure and dividend policy. The Committee meets with the independent
auditors, internal auditors and management personnel to review the scope and
results of the annual audit of the financial statements of the Company and the
recommendations of the independent auditors pertaining to accounting practices,
policies and procedures and overall internal controls. The Committee also
approves major capital expenditures made in the ordinary course of business and
recommends annually the appointment of independent auditors for the Company.

The Compensation Committee, of which Mr. Sheehan is a chairman and
Messrs. Coble, Haymaker and Johnston are members, has the responsibility of
establishing executive compensation through which officers and key management
personnel are compensated in a manner which is internally equitable, externally
competitive and an incentive for effective performance in the best interest of
shareholders. The Committee has the authority of the Board to fix the
compensation of officers, including the Chief Executive Officer, who are elected
by the Board. The Committee also administers the Company's stock option,
restricted stock and incentive compensation plans. It is responsible for
reviewing the management succession plan and for recommending changes in
director compensation to the Board. The report of the Committee on the Company's
executive compensation practices is located on page 15 of this Proxy Statement.

The Executive Committee, of which Mr. Coble is chairman and Messrs.
Rethore, Rusnack and Sheehan are members, is empowered to exercise the full
authority of the Board except as to matters not delegable to a committee under
the New York Business Corporation Law. The Committee makes recommendations to
the Board for the positions of Chairman of the Board, President, Chief Executive
Officer and candidates for director. The Committee also reviews and makes
recommendations on Board self governance matters to the Board.

Each of the directors attended, in the aggregate, 75% or more of the
1997 meetings of the Board and of the standing committees on which he or she
served.

BOARD INTERNAL GOVERNANCE GUIDELINES

In December 1997, the Board adopted internal self governance guidelines
designed to promote superior management of the Company. The guidelines address
the director selection process, composition of Board Committees (including
selection of an outside director as Chairperson of the Executive Committee) and
the formal process for Board review of CEO, 

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individual director and full Board performance. The guidelines establish
requirements for director stock ownership including receipt of one-half of a
director's annual compensation in the form of restricted Common Stock and
ownership of Common Stock with a value of at least $100,000 by the end of
his/her fifth year of Board service. Finally, these guidelines require the offer
of resignation by a non-employee director when the director's principle
occupation has changed during a term of office.

DIRECTOR COMPENSATION

The philosophy of the Board is that a significant component of director
compensation should be paid in the form of Common Stock. Effective July 1, 1997,
non-employee director compensation consists of equivalent components of Common
Stock and a cash retainer with a total target value of $36,000 per year. For
1997 evaluation purposes only, the dollar value of the Common Stock portion is
based upon a grant of 600 restricted shares under the Company's Restricted Stock
Plan at a market price of $30 per share and the annual cash retainer is $18,000.
Committee chairmen receive an additional annual retainer of $2,000, and all
non-employee directors also receive $500 for attendance at any special meeting
requiring travel. Dividend and voting rights attach upon receipt of the
Restricted Stock, and the Restricted Stock vests one year after grant, unless
forfeited back to the Company due to earlier termination of Board service.

Prior to July 1, 1997, non-employee directors were paid retainers at the
rate of $14,100 per year and received a grant of Restricted Stock, when elected
to the Board at the Annual Meeting of Shareholders, that vested at the rate of
300 shares per year. In addition, non-employee directors received a fee of $750
for each Board meeting attended and $600 for each Committee meeting attended (or
one-half of this fee if not a committee member). Committee chairmen received an
additional $500 per committee meeting, and the chairman of the Executive
Committee received an additional retainer of $5,000 per year. To complete the
transition to the new compensation program in December 1997, non-employee
directors received a special one-time grant of 300 shares (or 600 shares to
directors not serving at the time of the 1997 Annual Meeting of Shareholders) so
that all directors received grants of 600 shares of Restricted Stock for service
during the Board one year term expiring at the 1998 Annual Meeting, as prorated
on a quarterly basis for directors who are newly elected during the middle of
the term.

Under the Company's current deferred compensation arrangements for
directors, a director may elect to defer, in the form of Common Stock or cash,
receipt of the annual cash retainer payable for service as a director, until he
or she terminates Board service.

The Company maintains a liability insurance policy with the Chubb Group
of Insurance Companies and Royal Insurance Company of America covering part of
the Company's statutory right and obligation to indemnify directors and officers
and partially covering directors and officers in some instances in which they
might not otherwise be indemnified by the Company. The current policy is for a
three year term (expiring August 30, 2000) at an annual cost of approximately
$230,000.

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SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS

Set forth in the table below is information as of March 15, 1998, with
respect to the number of shares of Common Stock of the Company beneficially
owned by each director and certain executive officers of the Company and by all
directors and officers as a group. For purposes of this table, an individual is
considered to "beneficially own" any shares of Common Stock (i) over which he or
she exercises sole or shared voting or investment power or (ii) of which he or
she has the right to acquire beneficial ownership at any time within 60 days
after March 15, 1998.

(A)                                  (B)

NUMBER OF SHARES, INCLUDING
OPTION SHARES WHICH           OPTION SHARES SHOWN IN COLUMN (A),
MAY                BENEFICIALLY OWNED AS OF MARCH 15, 1998
BE ACQUIRED WITHIN 60                        (A) (B)
DAYS
---------------------        ---------------------------------------

Hugh K. Coble..................                   -                               2,868
Diane C. Harris................                 788                               5,420
George T. Haymaker.............                   -                                 600
Bruce E. Hines (c).............              21,399                              55,293  (d) (e)
William M. Jordan..............              48,279                             228,878  (d) (e)
Michael F. Johnston............               4,703                               6,287
Charles M. Rampacek (f)........                 -                                 1,000
Bernard G. Rethore.............             238,305                             312,970  (d) (e)
James O. Rollans...............               5,991                               7,287
William C. Rusnack.............               9,056                              11,398
George A. Shedlarski...........              22,299                              75,149  (d) (e)
Kevin E. Sheehan...............                   -                               4,864
Mark E. Vernon.................              16,839                              49,450  (d) (e)
R. Elton White.................                 788                              10,982
Howard D. Wynn.................              45,324                              73,654  (d) (e)
18 Directors and Officers as a Group(c)(f)  470,114                             971,606
- -------------------

(a)  Unless otherwise indicated, voting power and investment power are exercised
solely by the named individual or are shared by such individual and his or
her immediate family members.

(b)  No director or officer beneficially owns in excess of 1% of the outstanding
shares of Common Stock of the Company. All directors and officers as a
group own 2.4% of the outstanding shares of Common Stock of the Company.
Percentages are calculated on the basis of the number of shares outstanding
at March 15, 1998, plus the number of shares subject to outstanding options
held by the individual or group which are exercisable within 60 days
thereafter.

(c)  Mr. Hines resigned from his position as Vice President, Finance and Chief
Financial Officer, effective December 1, 1997, but remains an employee. His
shareholdings are not included in the computation of shareholdings of
"Directors and Officers as a Group" in any part of this table or its
footnotes.

(d)  Includes the following shares held as of December 31, 1997, by The Duriron
Company, Inc. Savings and Thrift Plan Trust or by the BW/IP International,
Inc. Capital Accumulation Plan, each sponsored by the Company, for the
following individuals: Mr. Rethore - 174; Mr. Jordan - 23,259; Mr.
Shedlarski - 5,008; Mr. Vernon - 104; Mr. Wynn - 10,065; and Mr. Hines -
2,314; and all directors and executive officers as a group - 51,419.
Participants in these Plans have the right to vote shares held for their
accounts, but disposition of the shares is restricted and may be made only
in accordance with the terms of the plans, which are designed to comply
with Section 401(k) of the Internal Revenue Code.

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(e)  Includes 5,980 shares held for the benefit of Mr. Rethore, 21,500 shares
held for the benefit of Mr. Jordan, 7,500 shares each held for the benefit
of Mr. Shedlarski and Mr. Hines, 15,000 shares held for the benefit of Mr.
Vernon, 245 shares held for the benefit of Mr. Wynn and 81,452 shares held
for the benefit of all directors and executive officers as a group, which
are subject to restrictions on resale and forfeiture back to the Company,
but which have full dividend rights. Receipt of such shares (except for
shares held by Messrs. Rethore and Wynn) has been deferred until
termination of service.

(f)  Mr. Rampacek was elected to the Board effective April 1, 1998. His
shareholdings were acquired after March 15, 1998 and are thus not included
in the computation of shareholdings of "Directors and Officers as a Group"
in any part of this table or its footnotes.

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EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth certain summary information concerning
the compensation provided by the Company to the Chief Executive Officer and its
four other highest compensated officers in 1997 and one additional individual
who was not serving as an executive officer at December 31, 1997, but who
otherwise would have been one of the four other highly compensated officers.

SUMMARY COMPENSATION TABLE (1)

LONG-TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION                         AWARDS          PAYOUTS
------------------------------------------  ------------------------  -------
(a)                         (b)     (c)       (d)           (e)            (f)          (g)       (h)            (i)
OTHER        RESTRICTED  SECURITIES
ANNUAL         STOCK     UNDERLYING    LTIP         ALL OTHER
SALARY    BONUS      COMPENSATION     AWARD(S)  OPTIONS/SARS  PAYOUTS      COMPENSATION
NAME AND PRINCIPAL POSITION         YEAR    ($)       ($)          ($) (5)        ($) (6)       (#)       ($) (7)        ($) (8)
- ---------------------------         ----    ------    -----      -------------  ----------- ------------  -------      -----------

BERNARD G. RETHORE.......           1997   480,930   566,578(9)       0                0       62,300 (3)       0       2,438
Chairman and Chief                 1996   400,000   258,376          0          192,304            0           0       2,375
Executive Officer                  1995    80,512         0          0                0      174,200 (4)       0           0

WILLIAM M. JORDAN........           1997   475,788   450,520          0                0       18,000     303,113      11,740
President and Chief                1996   396,308   484,979(9)       0          546,000       57,000     218,635      11,630
Operating Officer                  1995   298,615   324,873          0                0       12,000           0      11,630

GEORGE A. SHEDLARSKI.....           1997   255,242   124,863          0                0        9,000     143,199      10,042
Vice Pres. and Pres.               1996   228,810   170,513          0                0        7,000      97,478      10,042
Fluid Sealing Div.                 1995   194,363   144,191          0                0        7,000           0      10,042

MARK E. VERNON...........           1997   224,989   146,301      6,344                0        7,500     143,199      18,916
Vice Pres. and Pres..              1996   211,708   168,531          0                0        7,000      95,100      15,399
Flow Control Div.                  1995   178,551   127,948          0                0        7,000           0      18,509

HOWARD D. WYNN (2)(10)...           1997   219,732   176,678          0                0       18,600(3)        0       2,924
Vice Pres. and Pres.               1996   167,000    90,460          0            5,648       15,329(4)        0       3,000
Rotating Equipment Div.            1995   138,000    41,000      2,545                0        3,832(4)        0       2,050

BRUCE E. HINES (11)......           1997   275,675   178,644          0                0            0     190,692      11,597
Former Vice President,             1996   233,265   206,327(9)       0                0        7,000     129,808      11,237
Finance and Chief                  1995   197,617   168,822          0                0        7,000           0      11,237
Financial Officer

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(1)  Salary, annual bonus and long term payouts may be deferred with interest by
the recipient until retirement. Annual bonus and long term payouts may also
be deferred in the form of Common Stock.

(2)  Mr. Rethore became Chairman and Chief Executive Officer and Mr. Wynn became
Vice President and President of the Rotating Equipment Division following
the Merger. Mr. Rethore had been Chairman, President and Chief Executive
Officer of BW/IP and Mr. Wynn had been Vice President of BW/IP and
President of the Pump Division of BW/IP prior to the Merger. Compensation
paid or awarded to Messrs. Rethore and Wynn by BW/IP in 1995, 1996 and in
1997 prior to the Merger is included for informational purposes only.
Information regarding Mr. Rethore's compensation is provided from and after
the date of his joining BW/IP in October 1995. Information provided for
1997 for Messrs. Rethore and Wynn includes salary paid to them by BW/IP in
the amounts of $246,090 and $105,712, respectively, between January 1,
1997, and the Merger.

(3)  Option amounts shown were awarded by the Company after the Merger. In
addition to the amounts shown, pursuant to the BW/IP, Inc. 1996 Long-Term
Incentive Plan, Messrs. Rethore and Wynn received stock options from BW/IP
in February 1997 to acquire 92,000 shares and 32,000 shares, respectively,
of BW/IP common stock. At the time of the Merger, the original number of
shares underlying the awards was 

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multiplied by .6968, which is the rate at which all BW/IP stock, including
that of Messrs. Rethore and Wynn, was exchanged for shares of Common Stock
("Exchange Rate"). The underlying option price per share was simultaneously
changed by dividing it by .6968 (the "Conversion Price").

(4)  Options granted by BW/IP prior to the Merger were converted at the Exchange
Rate into options to acquire Common Stock at the Conversion Price.

(5)  Represents tax adjustment payments on relocation allowances for Mr. Vernon
and an automobile allowance for Mr. Wynn. The only other type of Other
Annual Compensation for each of the named officers was in the form of
perquisites and was less than the level required for reporting.

(6)  Mr. Rethore received an award of restricted BW/IP common stock of 8,206
shares from BW/IP in May 1996. In 1997, pursuant to the BW/IP 1996
Long-Term Incentive Plan, Mr. Rethore and Mr. Wynn received matching
restricted stock awards of 2,019 shares and 353 shares, respectively, of
BW/IP common stock that vest over three years. All BW/IP shares were
exchanged into shares of Common Stock following the Merger at the Exchange
Rate. Mr. Jordan received 21,000 shares of restricted Common Stock upon his
election to the additional position of Chairman of the Board in April 1996
prior to the Merger. At December 31, 1997, previously granted restricted
shares have a value of $167,066 for Mr. Rethore, $600,656 for Mr. Jordan,
$209,531 for Messrs. Shedlarski and Hines, $419,063 for Mr. Vernon, and
$6,845 for Mr. Wynn. The aforementioned restricted shares represent the
only restricted holdings of such officers. Regular dividends are payable on
all such restricted shares, which may be deferred except for shares
previously granted to Messrs. Rethore and Wynn by BW/IP.

(7)  Based on three year performance plan ending in December of noted year but
actually paid in following year. Payment under the plan for performance
ending in 1997 was one-half cash and one-half shares of Common Stock of the
Company at then fair market value. The procedure for determining the number
of shares payable is based on current market value of shares at the time of
award. As a result of the Merger, payouts for the three year performance
cycles ending in December 1998 and December 1999 were accelerated for
payment in February 1998 based upon performance at December 31, 1997
against such three year targets. The payments were in addition to amounts
shown in the Summary Compensation Table for 1997. The individuals to whom
such payments were made, and the respective amounts paid for the three year
cycles scheduled to end in 1998 and 1999, were as follows: Mr. Jordan
$395,033 and $515,371; Mr. Shedlarski $170,437 and $181,271; Mr. Vernon
$170,437 and $181,271; and Mr. Hines $240,046 and $255,450. Messrs. Rethore
and Wynn did not participate in this plan.

(8)  Reflects Company contributions to officer accounts in defined contribution
benefit plans (which are generally available to salaried employees) in the
following amounts: Mr. Rethore - $2,438; Mr. Jordan - $5,510; Mr.
Shedlarski - $5,760; Mr.Vernon - $14,267; Mr. Wynn - $2,924; and Mr. Hines
$5,760 (Mr. Vernon participates in a Company subsidiary's profit sharing
plan in which no other officers participate). Information for Messrs.
Rethore and Wynn includes contributions by BW/IP in the amount of $2,438
and $2,441, respectively, between January 1, 1997, and the Merger. Also
reflects the computation, under SEC rules, of the actuarial value to these
officers of the non-term portion of an executive "split dollar" life
insurance program, in the following amounts: Mr. Jordan - $6,230; Mr.
Shedlarski - $4,642; Mr. Vernon - $4,649 and Mr. Hines - $5,837.

(9)  Mr. Rethore elected to take all his 1997 annual bonus, Mr. Jordan elected
to take all his 1996 annual bonus and Mr. Hines elected to take one-half of
his 1996 bonus, in the form of shares of Common Stock, payable after
retirement, which resulted in such bonuses being increased 5% in value over
its cash equivalent under the applicable executive incentive plan. The
procedure for determining the number of shares payable in lieu of cash is
also fixed under this plan.

(10) The Company provided a bridge loan for purchase of a home to Mr. Wynn in
the amount of $155,000 in January 1998, secured by a promissory note, which
will be repaid by Mr. Wynn in the second quarter of 1998.

(11) Mr. Hines resigned from his position as Vice President, Finance and Chief
Financial Officer, effective December 1, 1997, but remains an employee of
the Company.

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STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

The following table contains information concerning the grant of Stock
Options under the Company's 1989 and 1997 Stock Option Plans to its executives
shown on the Summary Compensation Table. No Stock Appreciation Rights were
granted in 1997 either in tandem with such Stock Options or otherwise, and no
previously outstanding Stock Options were amended in 1997 to change the exercise
price.

OPTION GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS
---------------------------------------------------------
(a)                 (b)             (c)            (d)             (e)           (f)         (g)
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF      % OF TOTAL     EXERCISE                       ANNUAL RATE OF STOCK 
SECURITIES       OPTIONS          OR                         PRICE APPRECIATION FOR
UNDERLYING      GRANTED TO       BASE                           OPTION TERM (3)
OPTIONS       EMPLOYEES IN      PRICE         EXPIRATION    ----------------------
GRANTED (#) (1)   FISCAL YEAR      ($/SH)           DATE         5% ($)      10%($)
---------------   -----------       ----          --------     ---------   ----------

Bernard G. Rethore        62,300(2)        17.5          30.00          10/24/07     1,175,402   2,978,706
William M. Jordan         18,000            5.1          30.00          10/24/07       339,602     860,621
George A.                  9,000            2.5          30.00          10/24/07       169,801     430,311
Shedlarski
Mark E. Vernon             7,500            2.1          30.00          10/24/07       141,501     358,592
Howard D. Wynn            18,600(2)         5.2          30.00          10/24/07       350,922     889,308
Bruce E. Hines                 0             -             -                -             -           -
- ----------------

(1)  All Stock Options granted were for a ten year term. Of these options, the
following were granted as incentive stock options: Mr. Rethore - 9,999; Mr.
Jordan - 4,000; Mr. Shedlarski - 3,770; Mr. Vernon - 7,144 and Mr. Wynn -
9,999.The remaining options granted to each executive were nonqualified.
The exercise price of all these Stock Options was equal to the fair market
value on the date of grant, with pro rata vesting occurring on each grant
anniversary until fully vested on the third anniversary of grant. All these
Stock Options have tandem limited rights which, in general, allow the
optionee to receive the value of the Stock Option in the event of a change
of control of the Company.

(2)  Messrs. Rethore and Wynn also received stock option grants in 1997 from
BW/IP covering 92,000 shares and 32,000 shares, respectively, of BW/IP
common stock. All of these shares became immediately vested at the Merger
and were converted into options covering 64,105 shares for Mr. Rethore and
22,297 shares for Mr. Wynn of Common Stock at a price of $22.8724 per
share.

(3)  All appreciation valuations set forth are for illustration purposes only as
required by SEC rules and are not projections of future stock appreciation
rates.

OPTION/SAR EXERCISES AND HOLDINGS

For the executives named in the Summary Compensation Table, the
following table sets forth information concerning the exercise of Stock Options
and/or SARs during 1997 and the unexercised Stock Options and SARs held by such
executives as of the end of 1997.

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AGGREGATE OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
FISCAL YEAR-END OPTION/SAR VALUES

(a)                  (b)           (c)                   (d)                               (e)
NUMBER OF SECURITIES             VALUE OF UNEXERCISED
SHARES                       UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS/SAR'S
ACQUIRED ON     VALUE         OPTIONS/SAR'S AT FY-END                AT FY-END ($)
(#)
----------------------------------------------------------------
NAME           EXERCISE ($)(1)  REALIZED ($)  EXERCISABLE   UNEXERCISABLE   EXERCISABLE      UNEXERCISABLE (2)
----           --------------   -----------  -------------  -------------  ---------------  -----------------

Bernard G. Rethore           -             -         238,305        62,300          507,232                  0
William M. Jordan          46,620       982,435       33,279        60,001          112,058             71,127
George A. Shedlarski       20,200       427,122       22,299        16,001          191,234              7,584
Mark E. Vernon              7,460       147,780       16,839        23,901          126,400            129,980
Howard D. Wynn                  -          -          45,324        18,600          182,708                  0
Bruce E. Hines             10,200       216,476       35,899         7,001          372,223              7,584

(1)  Officers paid the exercise price for certain shares through the exchange of
previously owned shares of Common Stock, so that the net increase in share
holdings was 20,378 for Mr. Jordan, 8,455 for Mr. Shedlarski, 3,950 for Mr.
Vernon and 5,125 for Mr. Hines.

(2)  Based upon the excess, where applicable, of the market value of $27.94 per
share at December 31, 1997, of the shares covered by Stock Options held by
these officers, over the applicable exercise prices of such Stock Option
shares.

LONG-TERM INCENTIVE PLAN

The following table provides information concerning awards made for 1997
under the Company's Long-Term Incentive Plan to the executives shown on the
Summary Compensation Table.

LONG-TERM INCENTIVE PLANS
AWARDS IN LAST FISCAL YEAR
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS (2)
--------------------------------------
(a)                         (b)                     (c)                     (d)           (e)            (f)

NUMBER OF SHARES,     PERFORMANCE OR OTHER
UNITS OR OTHER      PERIOD UNTIL MATURATION        THRESHOLD       TARGET        MAXIMUM
NAME                   RIGHTS (#) (1)          OR PAYOUT (3)                 ($)           ($)            ($)
----                    -------------          -------------                 ---           ---            ---

Bernard G. Rethore.......               -                       -                       -             -               -
William M. Jordan.......(4)        23.3 Rights        February 2000 Payout            Note 2       257,685         515,370
George A. Shedlarkski...(5)         8.2 Rights        February 2000 Payout            Note 2        90,636         181,272
Mark E. Vernon..........(5)         8.2 Right         February 2000 Payout            Note 2        90,636         181,272
Howard D. Wynn...........               -                       -                       -             -               -
Bruce E. Hines..........(4)        11.5 Rights        February 2000 Payout            Note 2       127,725         255,450
- ------------

(1)  Each Right is a predetermined percentage of total Plan award "pool," if
earned and applicable.

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15

(2)  Payout is based upon EVA* (economic value added) and requires, as a
prerequisite, that the Company earn more than its cost of capital on the
average net assets used to generate its earnings. Payout at threshold
requires a positive cumulative EVA calculation for the three year period.
Specified annual percentages (whether positive or negative) of annual EVA
performance and annual EVA improvement or decline during each year of three
year Plan cycle are used to calculate actual awards, if any.

(3)  As part of the Merger restructuring, the Plan was terminated and payouts
accelerated prior to end of scheduled three year term. These payments are
included in the special February 1998 termination payments noted in
Footnote 7 to the Summary Compensation Table on page 9.

(4)  Target award is 45% of salary reference rate of position held.

(5)  Target award is 35% of salary reference rate of position held.

PENSION PLANS

The following tables show the estimated annual pension benefits payable
to a covered participant at normal retirement of 65 under the Company's
qualified defined benefit pension plans and nonqualified supplemental pension
plans. These nonqualified plans provide certain additional retirement benefits
that would otherwise be denied participants by reason of certain Internal
Revenue Code limitations on qualified plan benefits. All executive officers
listed in the Summary Compensation Table except Mr. Vernon are covered by these
plans.

Table I indicates the maximum annual retirement benefit that persons in
specified compensation and years of service classifications would be entitled to
receive under the former Durco International defined benefit and supplemental
retirement plans. The executive officers noted in the Summary Compensation Table
who are covered by these plans are Messrs. Jordan, Shedlarski and Hines.

TABLE I - PENSION PLAN (1)

YEARS OF SERVICE (2)
---------------------------------------------------------------------------------

REMUNERATION (3)         15              20                 25                 30                   35
----------------         --              --                 --                 --                   --

300,000             $60,363         $80,484           $100,604           $120,725            $140,846
400,000              81,363         108,484            135,604            162,725             189,846
500,000             102,363         136,484            170,604            204,725             238,846
600,000             123,363         164,484            205,604            246,725             287,846
700,000             144,363         192,484            240,604            288,725             336,846
800,000             165,363         220,484            275,604            330,725             385,846
900,000             186,363         248,484            310,604            372,725             434,846
- ----------

(1)  Benefits are calculated as annual straight life annuity amounts beginning
at age 65 and are not reduced by any federal Social Security benefits.
Optional payment forms of actuarial equivalence are also available.

(2)  Current credited years of service for pension benefit calculation: Mr.
Jordan - 26; Mr. Shedlarski - 26; Mr. Hines - 27.

- --------
* EVA(R) is a registered trademark of Stern Stewart & Co.

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16

(3)  Covered compensation for pension benefit calculation includes only base
salary and annual bonus shown on the Summary Compensation Table.

Table II indicates the maximum annual retirement benefit that persons in
specified compensation and years of service classifications would be entitled to
receive under the former BW/IP International, Inc. Retirement Plan and the
former BW/IP, Inc. Supplemental Executive Retirement Plan ("SERP"). The
executive officers noted in the Summary Compensation Table who are covered by
these plans are Messrs. Rethore and Wynn.

TABLE II - PENSION PLAN (1)

YEARS OF SERVICE (2)
-------------------------------------------------------------------------------------------
REMUNERATION (3)           15           20              25             30              35          40
----------------           --           --              --             --              --          --

300,000             $70,022       $93,363        $116,703       $140,044        $147,544     $155,044
400,000              94,022       125,363         156,703        188,044         198,044      208,044
500,000             118,022       157,363         196,703        236,044         248,544      261,044
600,000             142,022       189,363         236,703        284,044         299,044      314,044
700,000             166,022       221,363         276,703        332,044         349,544      367,044
800,000             190,022       253,363         316,703        380,044         400,044      420,044
900,000             214,022       285,363         356,703        428,044         450,544      473,044

- ----------

(1)  Benefits are calculated as annual straight life annuity amounts beginning
at age 65 and are not reduced by any federal Social Security benefits.
Optional payment forms of actuarial equivalence are also available.

(2)  Current credited years of service for pension benefit calculation: Mr.
Rethore - 2; Mr. Wynn - 26.

(3)  Covered compensation for pension benefit calculation includes only base
salary and annual bonus shown on the Summary Compensation Table.

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17

REPORT OF COMPENSATION COMMITTEE
CONCERNING EXECUTIVE COMPENSATION

OVERALL COMPENSATION POLICY AND BENCHMARK EVALUATION PROCESS

The Compensation Committee of the Board consists of four directors, none
of whom is a present or former officer or employee of the Company. The
Board-adopted statement of purposes and responsibilities of the Compensation
Committee states that the Committee is charged with the broad responsibility of
seeing that officers and key management personnel are effectively compensated in
terms of salaries, supplemental compensation and benefits which are internally
equitable and externally competitive. Within that framework, and in order to tie
compensation directly to performance, the Committee has adopted an
"incentive-leveraged" compensation policy which offers the Company's officers,
including the Chief Executive Officer, the opportunity to supplement their base
salaries with substantial cash and stock-based incentives, all as more fully
described below. This policy has the effect of holding base salaries below
prevailing market midpoint rates while offering higher than average incentives
to motivate executives to attain Company objectives. The Committee believes that
this incentive leveraged policy was a contributing factor in motivating
executive management to lead the Company to record annual sales, net earnings
(before extraordinary items) and incoming business in 1997, in comparison to the
consolidated annual results of the Company and BW/IP, both prior to the Merger.

The Committee has established, for all officer personnel, including the
Chief Executive Officer, a compensation policy which would place the officers'
total annual cash compensation (consisting of salary and annual incentive plan
awards) at the sixty-fifth percentile of companies of comparable size, if the
Company attains its target financial goals under its incentive plans described
hereafter. The Committee established this sixty-fifth percentile benchmark base
upon data received by the Committee from Hay Associates and Hewitt Associates.
The Hay database included a cross section of companies in order to allow the
Committee to consider overall executive compensation trends.

MERGER TRANSITIONAL POLICIES AND ACTIONS

As a transitional policy necessitated by the Merger, the Committee
decided, for 1997 only, to maintain separate annual incentive plans for the
officers of the Company prior to the Merger (the "former Durco Officers") and
those who were former officers of BW/IP and joined the Company at the Merger
(the "former BW/IP Officers"). Accordingly, the former Durco Officers, who
include Messrs. Jordan, Shedlarski, Vernon, and Hines, continued to participate
in the Company's Annual Incentive Plan established prior to January 1, 1997,
which contained financial goals which did not contemplate the Merger. Their
incentive awards for 1997 were thus based only upon the 1997 performance of the
Company, excluding the performance of the BW/IP operations added through the
Merger. Similarly, the former BW/IP Officers, including Mr. Rethore and Mr.
Wynn, received incentive awards for 1997 based only upon the former BW/IP annual
incentive plans in place prior to the Merger and the 1997 performance of the
former BW/IP operations which became part of the Company through the Merger.

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18

The application of this transitional policy is further reflected in the
fact that only the former Durco Officers received Long Term Incentive Plan
awards for 1997, since the former BW/IP Officers participated in no similar
BW/IP plan prior to the Merger. The Long Term Incentive Award received by the
former Durco Officers for 1997 reflected the Company's substantially above
target performance against a pre-established "RONA" goal over the three-year
cycle ending December 31, 1997, excluding only the contributions of the former
BW/IP operations subsequent to the Merger. The former Durco Officers also
received a special payment in February, 1998,which constituted their account
balances in the Company's two Long Term Incentive Plans which were scheduled to
end their three year plan cycles on December 31, 1998, and December 31, 1999,
respectively. These balances, which reflected the Company's substantially above
goal performance in generating "economic value added" (or "EVA") returns (again
excluding such BW/IP operations), in 1996 and 1997, were paid to early terminate
these Long Term Incentive Plans as part of restructuring the Company after the
Merger to eliminate compensation programs in which only a portion of the
Officers participated. These special plan termination awards to the former Durco
Officers were not made to the current CEO, but only to the former CEO, Mr.
Jordan. One half of all these early termination payments were made in the form
of Common Stock of equivalent cash value on date of payment.

The Committee also recognized that the former BW/IP Officers received
long term incentive compensation in the form of substantially larger stock
option grants under the former BW/IP program (which automatically converted to
Company stock options by virtue of the Merger) than awarded to the former Durco
Officers by the Company in the past. The Committee noted that the former BW/IP
Officers had received these larger grants in lieu of participation in long term
incentive plans like those established for the former Durco officers by the
Company prior to the Merger. Accordingly, the Committee decided, for 1997 awards
only, to continue the substantially higher stock option grant levels to the
former BW/IP Officers. The size of these grants to the former BW/IP Officers,
including Mr. Rethore, the Company's CEO, were based upon application of the
"Black Scholes" option valuation formula used by BW/IP prior to the Merger.

After completing the above Merger transitional actions for 1997 to wrap
up the pre-existing executive incentive programs on an equitable basis, the
Committee approved both cash and stock-based incentive programs for 1998 and
thereafter in which all Company Officers will participate on the same basis as
their peers.

INCENTIVE PLANS - DESIGN AND STRATEGY FOR 1998

The Company's 1998 Annual and Long Term Incentive Plans will allow
opportunities, through effective performance against goals, for significant
additional cash and stock compensation for the Chief Executive Officer and other
officers. Performance goals, which must be met in order to earn payment of
incentive compensation target awards, have been set to reward superior
performance. Incentive awards are payable only if the Company achieves or
exceeds predetermined results against quantitative financial performance
measures designed to benefit shareholders, such as return on shareholders'
equity ("ROE"), economic value added ("EVA"), and/or return on net assets
("RONA"). For 1998, the Company's Chief Executive Officer's annual and long term
incentives, when combined, have been set, to be 125% of his individual 

16

19

salary range reference rate if all goals were met. In comparison, the total
combined annual and long term incentives were set within a band of 95% to 120%
of salary range reference rate for other officers listed in the Summary
Compensation Table on page 9.

The specific performance goals under these incentive plans were
established by the Compensation Committee at beginning of 1998. The 1998 Annual
Plan includes only 1998 goals, while the 1998 Long Term Plan contains goals
covering the three-year period ending December 31, 2000. The 1998 Annual Plan
contains general quantitative financial goals, including RONA and EVA for the
participating executives, including the CEO, plus diversity improvement and
information technology implementation goals. The 1998 Long Term Plan is
EVA-based for all participates, including the CEO, with awards earned by
participants only when the Company earns more than its cost of capital (i.e.,
weighted equity and debt capitalization) over the three year period.

INCENTIVE PLANS - 1997 RESULTS

Consistent with the Company's record net earnings (before extraordinary
items) on the aforementioned consolidated basis in 1997, Mr. Rethore and other
officers received above target awards under their respective 1997 Annual
Incentive Plans. Mr. Rethore's award was equivalent to 112.2% of his 1997 salary
(including salary earned at BW/IP prior to the Merger) and reflected the
substantially above goal performance of the former BW/IP operations during 1997.
The counterpart range of awards for the other officers noted in the Summary
Compensation Table extended from 94.7% to 48.9%. Pursuant to an Annual Plan
provision adopted by the Committee to incent officers to invest their Annual
Plan awards in Common Stock, Mr. Rethore received a 5% increase of his award by
electing that his award be paid in the form of Common Stock of equivalent market
value at time of payment. (For 1998, the Committee approved an increase to 15%
in this stock election incentive.)

Under the 1995-1997 Long Term Plan, the former Durco Officers listed in
the Summary Compensation Table received awards ranging from 63.7% for Mr.
Jordan, the Company's CEO prior to the Merger, to 56.1% for other former Durco
Officers. These awards were based in large part upon the Company's attainment of
record annual net earnings in 1995, 1996 and 1997 (excluding extraordinary items
and the BW/IP contributions arising from the Merger). One-half of this award was
made in the form of Common Stock to all noted former Durco Officers.

STOCK-BASED COMPENSATION

Stock-based forms of incentive compensation utilized by the Company
include stock options and restricted stock awards.

With regard to stock options, the Committee has adopted a stock option
plan administration policy under which options are granted annually to officers
and selected other key employees. The number of options granted in 1997 to Mr.
Rethore and other officers was based, in general, upon their job performance,
their respective salary range reference rates, the market price of a share of
Common Stock at date of grant, their past receipt of stock option grants,
application of the "Black Scholes" option valuation formula and, as previously
explained, whether 

17

20

they are former BW/IP or former Durco Officers. The Committee believes that
these grants help link the objectives of management and shareholders. The
Committee thus intends to continue the annual grants, but under a policy that
does not distinguish in any way between former BW/IP and former Durco Officers.

While the Committee authorized no grants of restricted stock to any of
its Officers in 1997, the Committee believes that restricted stock may be used
as a valuable compensation tool and thus may do so under appropriate
circumstances in the future.

TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION

The Committee has not formally adopted a policy with regard to
qualifying executive compensation plans for tax deductibility under Internal
Revenue Code Section 162(m), which generally limits the corporate tax deduction
for compensation paid to certain executive officers named in the Proxy Statement
to $1 million per year. Non-deferred executive compensation is below the level
at which this tax limitation would apply.

K. E. Sheehan, Chairman
H. K. Coble
G.T. Haymaker
M. F. Johnston

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COMPANY STOCK
PERFORMANCE GRAPH

The following chart compares the cumulative total return, assuming
monthly reinvestment of dividends, of the Company's Common Stock for the five
year period beginning December 31, 1992 against (i) the Standard & Poor's
Machinery-Diversified Index (which is comprised of companies also in the heavy
duty capital equipment industry but outside the Company's flow control industry)
and (ii) the Standard & Poor's 500 Index (which is broad equity market index).

[TOTAL RETURN TO SHAREHOLDERS CHART]

YEARS
-----

1992      1993      1994      1995      1996      1997
----      ----      ----      ----      ----      ----

Flowserve Corporation           $100.00   $ 97.31   $113.02   $151.85   $179.58   $188.76
S & P Machinery Diversified     $100.00   $148.07   $144.14   $177.87   $221.71   $293.27
S & P 500                       $100.00   $110.08   $111.53   $153.45   $188.68   $251.63

The foregoing table is based on the Company's closing price per share of $27.94
on December 31, 1997. On March 31, 1998, the closing price of a share was
$32.63.

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22

EMPLOYMENT AGREEMENTS

Effective with the Merger, the Company entered into an agreement with
Bernard G. Rethore to serve as Chairman and Chief Executive Officer for a period
ending on the earlier of (i) the Board's acceptance of Mr. Rethore's resignation
after serving for three years or (ii) five years after the Merger. The agreement
includes an annual base salary of no less than $550,000, but subject to increase
based on annual reviews, with an annual bonus opportunity of no less than 50% of
base salary and participation in long-term incentive plans. If the Board accepts
Mr. Rethore's resignation after such three year period, Mr. Rethore's employment
may continue as a consultant for two years at the same base salary, with an
annual bonus opportunity of no less than 50% of base salary, but no additional
participation in long-term incentive plans. Mr. Rethore's employment agreement
also provides for the continued payment of compensation for five years after the
Merger if the Company terminates his employment without cause or if Mr. Rethore
terminates his employment for "good reason" (which includes any action by the
Company resulting in a material diminution in his position or a material breach
of the agreement by the Company). Mr. Rethore also has the right to an
additional retirement benefit equal to the excess of (i) his retirement benefit
payable under the SERP assuming one additional year of service for each actual
year of service over (ii) his retirement benefit actually payable under the
SERP.

Effective with the Merger, the Company entered into an agreement with
William M. Jordan to serve as President and Chief Operating Officer until the
resignation of Mr. Rethore and then to serve as Chairman and Chief Executive
Officer for the balance of his five year employment term. This agreement
establishes an annual base salary of no less than $500,000, but subject to
increase based on annual reviews, with an annual bonus opportunity of no less
than 50% of base salary and participation in long-term incentive plans. Mr.
Jordan's employment agreement also provides for the continued payment of
compensation during his employment term if the Company terminates his employment
without cause or if Mr. Jordan terminates his employment for "good reason"
(which includes any action by the Company resulting in a material diminution in
his position or a material breach of the agreement by the Company, including the
Company's failure to elect him Chairman and CEO on the third anniversary of the
Merger).

Prior to the Merger, the Company also entered into a supplemental
pension agreement with Mr. Jordan under which Mr. Jordan is entitled to a
nonqualified pension supplement upon retirement. The supplement is computed by
calculating the amount necessary for Mr. Jordan to receive the same total
pension benefit at attainment of age 60 that he would receive under the
Company's existing qualified and nonqualified pension plans at age 65.

Effective shortly after the Merger, the Company entered into employment
agreements with other executive officers, including Messrs. Shedlarski, Vernon
and Wynn, providing for, among other things, the payment of termination benefits
in the event that the individual's employment is terminated by the Company
without cause or by the officer for "good reason" (which includes a substantial,
detrimental change in position, duties or status or a material breach of the
agreement by the Company). The termination benefits under these agreements
include, among other things, a payment equal to the sum of annual base salary
plus the average annual bonus paid in the last two calendar years, with such sum
then multiplied by three if termination occurs before August 1, 1998, 

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23

two if termination occurs after July 31, 1998, but before August 1, 1999, or one
if termination occurs after July 31, 1999, but before July 31, 2001. The
agreements terminate on July 31, 2001.

The Company is a party to contracts with Messrs. Rethore, Jordan,
Shedlarski, Vernon and Wynn and certain other officers and key employees of the
Company providing for, among other things, the payment of severance benefits in
the event that the individual's employment with the Company is terminated under
specified circumstances within two years after a change in control of the
Company. The severance benefits under the contracts with the named individuals
include, among other things, payment of the following: (i) three times the sum
of the individual's base annual salary and the average amount awarded to the
individual under any incentive compensation plan or arrangement for the two
years preceding employment termination; (ii) the value of any outstanding Stock
Options held by the individual under any Stock Option plan of the Company,
determined in accordance with a formula set forth in the contract; (iii) a
supplemental pension payment equivalent to the additional benefit which would be
earned for two additional years of service; (iv) all legal fees and expenses
incurred by the individual as a result of his termination of employment; and (v)
full reimbursement (on a "grossed-up" basis") of certain excise tax liabilities
arising from the benefit payments and any such reimbursement, if applicable. The
term of each such contract continues until December 31, 2001, subject to
extension beyond that date by agreement of the parties.

APPROVAL OF 1998 RESTRICTED STOCK PLAN

The Board of Directors recommends that shareholders approve the
Flowserve Corporation 1998 Restricted Stock Plan (the "Plan"). The purpose of
the Plan is to encourage a high level of performance by directors and employees
by providing a form of stock ownership which is closely aligned with the best
interests of shareholders of the Company.

Participation in the Plan is limited to non-employee directors and to
key employees selected by the Compensation Committee.

During the restricted period, recipients of Restricted Shares may not
transfer or dispose of such shares and will forfeit the Restricted Shares if
they fail to meet requirements of the applicable restrictions. However,
recipients have shareholder voting and dividend rights in Restricted Shares
immediately upon issuance.

With regard to non-employee directors, the Plan requires at least
one-half of a director's compensation, otherwise payable in cash, to be paid
through grants of Restricted Shares. Grants may only be authorized by the Board
on the date of an Annual Meeting of Shareholders. The number of Restricted
Shares granted is based upon the Market Value of a Share (as defined in the
Plan), rounded to next closest multiple of twenty-five shares. Grants of
Restricted Stock to directors elected after the Annual Meeting are prorated on a
quarterly basis from the date first elected until the date of the next Annual
Meeting.

Under this Plan, the Compensation Committee has discretion to determine
that a portion of compensation payable to key employees pursuant to the
Company's compensation plans may 

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be paid in a number of Restricted Shares. The number is determined by dividing
the amount to be paid by the Market Value of a Share into the cash compensation
otherwise payable on the date compensation was awarded. The Committee may
delegate authority to make Restricted Stock awards to the Company's Chief
Executive Officer in an amount not to exceed 15,000 shares per calendar year.
CEO awards may only be made to non-officers and may not exceed 1,000 share
grants per recipient.

Subject to adjustment, as set forth in the Plan, the aggregate maximum
number of shares granted under the Plan will be 800,000 shares. The maximum
aggregate number of shares which may be granted to any one individual during the
term of the Plan is 40,000 shares.

The Plan permits the deferral of the receipt of Restricted Shares upon
the election of the recipient. The Company will establish a separate account in
a rabbi trust for each participant who has deferred shares. Dividends on
deferred shares will be credited to a deferred cash account in the rabbi trust,
with interest credited on such dividends. Distribution of the deferred shares
occurs in either a lump sum or installments at the recipient's election when the
recipient terminates employment or services as a director. The participant then
incurs taxable income at the time of actual post termination distribution in an
amount equal to the market value of the Restricted Stock then applicable, with
the Company then receiving a corresponding deduction.

In the absence of such deferral, the award of Restricted Shares has the
following tax ramifications for the recipient and the Company. The granting of
an award of Restricted Shares that are subject to forfeiture does not result in
taxable income to the recipient unless the recipient then makes a special
election to report the award as taxable income. If this special election is
made, the recipient recognizes ordinary income in the amount of the total market
value of the underlying shares on the date of grant, and the Company receives a
corresponding tax deduction. Any gain or loss subsequently experienced will be a
capital gain or loss to the recipient, and the Company does not receive any
additional tax deduction. Absent such as an election, the value of the award is
considered taxable income to the recipient once it is vested. The Company then
receives a corresponding tax deduction equivalent to the market value of the
shares, underlying award on the date of vesting. Dividends are paid concurrent
with, and in an amount equal to, ordinary dividends and are taxable as paid.

The Compensation Committee has discretion to grant to eligible employees
awards of Restricted Stock which require attainment of objective
performance-based goals for vesting. The Company intends that any Shares issued
as a result of attaining performance-based goals shall satisfy the applicable
provisions of Section 162 (m) of the Internal Revenue Code of 1986.

The foregoing is a summary only, and the actual tax consequences of the
award and vesting of Restricted Shares are more complex than the summary stated
above.

The Plan shall be effective as of June 1, 1998, if approved by
shareholders at the 1998 Annual Meeting of Shareholders. The Plan will expire at
the earlier of its ten year term, unless extended by the Board for an additional
ten year term, or when no further shares are available for issuance.

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For non-employee directors, the Plan is administered by the Board, and,
for employees, by the Compensation Committee. This Committee has authority to
construe and interpret the Plan and to amend, rescind or prescribe rules
relating to the Plan. However, any matters which impact non-employee directors
must also be approved by the full Board.

The Board and the Committee are not permitted under the Plan to
authorize any amendments to the Plan which would increase the number of shares
which can be issued under the Plan, unless prior shareholder approval is
obtained.

For further information about the terms and conditions of the Plan,
please review the copy of the Plan's text which is attached to this Proxy
Statement as Appendix A.

Approval of the Plan requires an affirmative vote of the holders of a
majority of Common Stock represented at the Annual Meeting when a quorum is
present. Abstentions and non-votes have neither the effect of a vote for nor the
effect of a vote against the Plan.

THE BOARD URGES SHAREHOLDERS TO VOTE "FOR" THE APPROVAL OF THE FLOWSERVE
CORPORATION 1998 RESTRICTED STOCK PLAN.

INDEPENDENT AUDITORS

The Company has eliminated the formality of seeking ratification of the
appointment of Ernst & Young LLP as the Company's independent auditors for 1998.
Ernst & Young LLP has served as the Company's independent auditors since 1956.
Representatives of Ernst & Young will attend the meeting and respond to any
questions or make a statement if they so desire.

OTHER BUSINESS

The Board of Directors does not know of any other matters of business
which may be brought before the Annual Meeting. However, it is intended that, as
to any such other matters or business, a vote may be cast pursuant to the
accompanying Proxy in accordance with the judgment of the person or persons
voting such Proxy.

SHAREHOLDERS' PROPOSALS

A proposal by a shareholder intended for inclusion in the Company's
Proxy Statement and form of Proxy for the 1999 Annual Meeting of Shareholders
must be received by the Company at 222 West Las Colinas Boulevard, Irving,
Texas, 75039, Attention: Secretary, on or before December 10, 1998 in order to
be eligible for such inclusion. The 1999 Annual Meeting of Shareholders is
tentatively scheduled to be held on April 24, 1999, with such date being subject
to change.

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SOLICITATION OF PROXIES

The cost of preparing, assembling and mailing this Proxy Statement and
the accompanying form of Proxy will be borne by the Company. Banks, brokerage
houses and other custodians, nominees and fiduciaries will be requested to
forward Proxy materials to their principals and to obtain authorization for the
execution of Proxies. Directors, officers and regular employees of the Company
may solicit Proxies personally from some shareholders if proxies are not
received promptly. The Company will reimburse banks, brokerage houses and other
custodians, nominees and fiduciaries for their out-of-pocket expenses in
handling Proxy materials.

FLOWSERVE CORPORATION

By: RONALD F. SHUFF

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APPENDIX A

FLOWSERVE CORPORATION

1998 RESTRICTED STOCK PLAN

ARTICLE 1.      GENERAL PROVISIONS

SECTION 1.  PURPOSE

The purpose of the Flowserve Corporation 1998 Restricted Stock Plan (the "Plan")
is to provide certain compensation to eligible directors and employees in the
form of Shares which are restricted for a period of time in accordance with the
terms and conditions set forth below. The Plan is designed to encourage the
continued high level of performance of such directors and employees by
increasing the identity of interest of such directors and employees with the
shareholders of the Company. The Plan is intended to be an unfunded program
established for the purpose of providing compensation for eligible directors and
a select group of management employees.

SECTION 2.  DEFINITIONS

For purposes of the Plan, the following terms shall have the following meanings:

(a)     "Board of Directors" means the board of directors of the Company.

(b)     "Change in Control" means the occurrence of any of the following: (i)
any "person" or "group" within the meaning of Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Act"), becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act) of 20% or
more of the then outstanding voting Shares of the Company, or (ii)
during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors (and any new
director whose election by the Board of Directors or whose nomination
for election by the Company's shareholders was approved by a vote for at
least two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority thereof, or (iii) any merger or consolidation
of the Company into or with another corporation (other than a
corporation controlled by the Company immediately prior to such merger
or consolidation), if the Company will not be the surviving corporation
or will become a subsidiary of another corporation, or any sale of all
or substantially all the assets of the Company.

(c)     "Committee" means the Compensation Committee of the Board of Directors.

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(d)     "Company" means Flowserve Corporation, a New York corporation and its
successors in interest. When used with reference to employment,
"Company" also includes any business organization, 50% or more of the
voting control of which is owned or controlled directly or indirectly,
by the Company.

(e)     "Eligible Director" means any director of the Company who is not also an
employee of the Company.

(f)     "Eligible Employee" means any key employee of the Company selected by
the Committee.

(g)     "Market Value" means the average of the closing prices for a Share as
reported on the New York Stock Exchange or other national exchange or
the mean between the closing bid and asked prices for a Share as
reported on a nationally recognized system of price quotation beginning
twenty-one days prior to and ending on the date the value of a Share is
to be determined.

(h)     "Participant" means any individual to whom Shares are issued or issuable
under the Plan.

(i)     "Restriction Period" means a period of time not more than ten (10)
years, as determined by the Committee at the time of grant, from the
date the Restricted Shares are granted.

(j)     "Restricted Shares" means Shares granted under the Plan subject to a
Restriction Period.

(k)     "Share" or "Shares" means the shares of Common Stock, $1.25 par value of
the Company.

(l)     "Tax Date" means the date as of which Shares are taxed (for federal
income tax purposes) to the Participant.

SECTION 3.  ADMINISTRATION

(a)     For Eligible Directors, the Plan shall be administered by the Board of
Directors and for Eligible Employees the Plan shall be administered by
the Committee. Subject to the express provisions of the Plan, the Board
of Directors and the Committee shall have authority to construe and
interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan (including performance-related
conditions for the issuance and vesting of Restricted Shares), and to
make all other determinations necessary or advisable for administering
the Plan. The Board of Directors and the Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan
in the manner and to the extent it shall deem expedient to carry the
Plan into effect. The Committee is authorized to establish performance
conditions related to the issuance and vesting of Shares under the Plan
and to certify whether such conditions have been satisfied. The
determination of the Committee on any matters within the scope of this
section shall be conclusive.

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(b)    Except as provided in paragraph (c) below, the Board of Directors or the
Committee may waive or lessen at any time any condition or restriction
with respect to Restricted Shares issued pursuant to the Plan; provided,
however, that if such Restricted Shares are granted to a member of the
Board of Directors, such member shall not participate in the decision by
the Board of Directors.

(c)    To the extent that the issuance of Restricted Shares subject to
performance-related conditions is intended to qualify as
"performance-based compensation" within the meaning of Section
162(m)(4)(C) of the Internal Revenue Code of 1986, as amended, the Plan
shall be interpreted and administered to carry out such intention, and
any provision of the Plan that cannot be so interpreted and administered
shall to that extent be disregarded.

SECTION 4.  SHARES SUBJECT TO THE PLAN

Subject to adjustment as provided in Section 1 of Article IV, the maximum number
of Shares which may be granted as Restricted Shares under the Plan shall be
800,000 shares. Shares granted as Restricted Shares under the Plan may be
authorized and unissued Shares or Shares held in the Company's treasury, if any.
Any Shares which are granted as Restricted Shares under the Plan and which are
thereafter forfeited by the Participant may again be granted under the Plan as
Restricted Shares. The maximum aggregate number of Shares that may be issued
under the Plan to any individual shall be 40,000 shares.

SECTION 5.  TERMS AND CONDITIONS OF RESTRICTED SHARES

(a)    Subject to the other provisions of this Section 5, Restricted Shares
issued pursuant to the Plan shall be subject to the following
restrictions:

i.     the Participant shall not be entitled to receive delivery of the
certificate for such Restricted Shares until the expiration of the
Restriction Period;

ii.    such Restricted Shares shall not be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of during the
Restriction Period;

iii.   all such Restricted Shares shall be forfeited and all right of the
Participant to such Restricted Shares shall terminate without
further obligations on the part of the Company if the Participant
ceases to be an employee of the Company (in the case of a
participant who receives Restricted Shares as an Eligible
Employee) or as a director (in the case of a Participant who
receives Shares as an Eligible Director) prior to the end of the
Restriction Period; and

iv.    such other lawful restrictions as the Board of Directors or the
Committee, in its discretion, imposes at the time of the grant.

Upon the forfeiture of Restricted Shares, such Shares shall be returned
to the status of authorized and unissued Shares.

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(b)     Notwithstanding the provisions of paragraph (a) of this Section 5, in
the event a Participant ceases to be an employee of the Company (in the
case of a Participant who receives Restricted Shares as an Eligible
Employee) or as a director (in the case of a Participant who receives
Restricted Shares as an Eligible Director) prior to the end of a
Restriction Period as a result of such Participant's death, disability
or normal retirement in accordance with the Company's policies, then the
restrictions set forth in paragraph (a) of this Section 5 shall
immediately cease to apply.

(c)     In the event a Participant who receives Restricted Shares as an Eligible
Employee ceases to be an employee prior to the end of a Restriction
Period as a result of such Participant's early retirement in accordance
with the Company's policies, such Restricted Shares shall be forfeited,
unless the early retirement of the Participant shall have been approved
in advance by the Committee. If the Committee grants such approval,
however, the restrictions set forth in paragraphs (a) (i) and (a) (ii)
of this Section 5 shall continue until the earlier of the end of the
Restriction Period or the date of such Participant's attainment of
normal retirement age in accordance with the Company's policies;
provided that, in any event, all such Restricted Shares shall be
forfeited and all rights of the Participant to such Restricted Shares
shall terminate without further obligations on the part of the Company
if the Participant, directly or indirectly, individually or as an agent,
officer, director, employee, shareholder (excluding being the holder of
any stock which represents less than 1% interest in a corporation),
partner or in any other capacity whatsoever engages, prior to the time
such restrictions cease to apply, in any activity competitive with or
adverse to the Company's business or in the sale, distribution,
production or attempted sale or distribution of any goods, products or
services then sold or being developed by the Company.

(d)     Upon the occurrence of a Change in Control, all of the restrictions set
forth in this Section 5 shall immediately cease to apply to all
Restricted Shares issued pursuant to the Plan.

(e)     At the end of the Restriction Period, or at such earlier time as is
provided for in this Section 5, and if all other conditions including
performance-related conditions have been satisfied, the restrictions
applicable to the Restricted Shares pursuant to this Section 5 shall
cease, a share certificate for the number of Restricted Shares with
respect to which the restrictions have ceased shall be delivered, free
of all such restrictions and all restrictive legends, to the Participant
or the Participant's beneficiary or estate, as the case may be.

(f)     If required by the Board of Directors or the Committee, each grant of
Restricted Shares shall be evidenced by a written agreement between the
Company and the Participant. Such agreement may include a commitment by
the Participant to perform services. In addition, the Board of Directors
or the Committee may, in connection with and as a condition to a grant
of Restricted Shares, require the Participant to execute and deliver to
the Company share assignment forms, endorsed in favor of the Company, to
be used by the Company in connection with any forfeiture or other
transfer of Restricted Shares to the Company.

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SECTION 6.  SHARE CERTIFICATES; RIGHTS AS A SHAREHOLDER

(a)     Following the grant of Restricted Shares, the Company shall issue a
share certificate registered in the name of the Participant bearing the
following legend and any other legend required by any federal or state
securities laws:

"The transferability of this certificate and the Common Stock
represented hereby are subject to the restrictions, terms and conditions
(including forfeiture and restrictions against sale, assignment,
transfer, pledge, hypothecation and other disposition) set forth in the
Flowserve Corporation 1998 Restricted Stock Plan. Copies of such Plan
will be mailed to any shareholder without charge within five days after
receipt of written request therefore addressed to Secretary, Flowserve
Corporation, 222 W. Las Colinas Boulevard, Suite 1500, Irving, Texas,
75039."

Each such Share certificate shall be retained by the Company until the
restrictions set forth in Article I, Section 5(a) cease to apply to the
Shares represented by such certificate.

(b)     Upon the issuance of a Share certificate with respect to Restricted
Shares, the Participant shall, subject to all of the terms, conditions
and restrictions set forth in the Plan, have all of the rights of a
holder of Shares, including the right to vote and to receive dividends
and other distributions with respect thereto.

ARTICLE II.       RESTRICTED SHARES FOR ELIGIBLE DIRECTORS

SECTION 1.  GRANT OF RESTRICTED SHARES TO ELIGIBLE DIRECTORS

During the term of the Plan, a portion of the annual cash compensation payable
to Eligible Directors shall be payable in Restricted Shares. The number of
Restricted Shares to be issued shall be based on the Market Value of a Share on
the date the compensation is awarded (rounded to the next closest multiple of
twenty-five shares). Such grant shall offset the liability of the Company to pay
the designated portion (not less than one-half) of the annual cash retainer so
covered by the grant. For an Eligible Director elected to the Board after the
Annual Meeting, the Board of Directors shall authorize a grant of Restricted
Shares prorated on a quarterly basis from the date that the Eligible Director
was first elected to the Board until the date of the next Annual Meeting.

ARTICLE III.      SHARES FOR ELIGIBLE EMPLOYEES

SECTION 1.  GRANT OF RESTRICTED SHARES TO ELIGIBLE EMPLOYEES

From time to time during the term of the Plan, the Committee at its discretion
may otherwise authorize grants of Restricted Shares to Eligible Employees for
prior and future service, subject to other applicable provisions of the Plan.
The duration of the Restriction Period, and other terms and conditions, if any,
relating to issuance, delivery, vesting, forfeiture and performance-based goals
shall be as may be determined by the Committee. Performance-based goals shall
relate to a specified performance period and may include one or more of the
following 

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performance measures: earnings, net cash flows, total shareholder return or
economic value added. The Committee shall establish the specific targets for
such selected goals. The Committee may also determine that a portion of the
total compensation for prior and future service to be paid to an Eligible
Employee, pursuant to the Company's incentive compensation programs, shall be
paid by granting to such Eligible Employee on the approximate date the
compensation was to be awarded, a number of Restricted Shares determined by
dividing the amount of such compensation to be so paid by the Market Value of a
Share on the date the compensation was to be awarded (rounded to the nearest
whole share).

The Committee at its discretion, may delegate its authority to the Company's
Chief Executive Officer to so award Restricted Shares in an amount not to exceed
15,000 shares per calendar year to Eligible Employees, provided that any such
grant shall be limited to 1,000 shares per Eligible Employee per calendar year,
and further provided that the Chief Executive Officer shall not be authorized to
award any grants to any officers of the Company. The Chief Executive Officer
shall, on an annual basis, report all such awards to the Committee, and the
Committee's ratification and approval of such awards shall be presumed in the
absence of express action by the Committee to the contrary.

SECTION 2.  RETURN OF SHARES TO SATISFY WITHHOLDING OBLIGATIONS

Unless restricted by the Committee, any employee of the Company who holds or has
the right to receive Shares may elect to return to the Company or have the
Company retain, a number of such Shares (with respect to which the restrictions
have lapsed or performance goals have been satisfied) having a Market Value on
the Tax Date equal to all or any part of the federal, state and local
withholding tax (whether mandatory or permissive) applicable to the lapse of
restrictions on such employee's Restricted Shares (up to a maximum amount
determined by the employee's top marginal tax rate) in lieu of the Company
withholding such amounts in cash. The Committee may establish from time to time
rules or limitations with respect to the right of a holder to elect to return or
have the Company retain Restricted Shares with respect to which the restrictions
have lapsed in satisfaction of withholding payments.

ARTICLE IV.       MISCELLANEOUS

SECTION 1.  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

Upon any change in the outstanding Shares by virtue of a share dividend or
split, recapitalization, merger, consolidation, combination or exchange of
Shares or other similar change, the number of Shares which may be issued under
the Plan (or the class of shares which may be issued) shall be adjusted
appropriately by the Company, whose determination with respect to such
adjustment shall be conclusive, subject to the provisions concerning a Change of
Control stated in Article I, Section 5(d). Unless the Committee shall otherwise
determine, any securities and other property received by a Participant in
connection with or as a result of any such change with respect to Restricted
Shares (excluding dividends paid in cash) shall be deposited promptly with the
Company to be held in custody until the restrictions cease to apply to the
Restricted Shares. Notwithstanding the foregoing, however, in the event any
rights to purchase Shares are issued pursuant to the Company's Shareholder
Rights Plan (or any successor plan) with respect to 

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Restricted Shares, such rights shall cease to be subject to the restrictions
applicable to the underlying Restricted Shares at such time, if any, as such
rights become exercisable.

SECTION 2.  COMPLIANCE WITH LAWS

The issuance or delivery of Shares pursuant to the Plan shall be subject to, and
shall comply with, any applicable requirements of federal and state securities
laws, rules and regulations (including, without limitation, the provisions of
the Securities Act of 1933, the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder), any securities exchange upon which the
Shares may be listed and any other law or regulation applicable thereto. The
Company shall not be obligated to issue or deliver any Shares pursuant to the
Plan if such issuance or delivery would, in the opinion of the Committee,
violate any such requirements. The foregoing shall not, however, be deemed to
require the Company to effect any registration of Shares under any such law or
regulation, although the Company may elect to do so.

SECTION 3.  AMENDMENT AND TERMINATION

(a)     Subject to the limitations hereinafter set forth, the Committee may from
time to time amend the Plan, or any provision thereof, in such respects
as the Committee may deem in the best interests of the Company;
provided, however, that any such amendment must be approved by
shareholders of the Company if such amendment would:

(i)     increase the aggregate number of Shares which may issued and/or
delivered;

(ii)    materially modify the requirements as to eligibility for
participation in the Plan.

Any amendment to a grant of Restricted Shares to an Eligible Director
shall be made or ratified by the Board of Directors.

(b)     The Plan shall terminate and no additional Shares shall be granted under
the Plan after the 2008 Annual Meeting, unless extended by the Board for
an additional ten year term. However, the Board may also earlier
terminate, in either case, if and when no further Shares are available
for issuance.

(c)     No amendment to or termination or expiration of the Plan shall adversely
affect the ultimate forfeiture, vesting, issuance or delivery of any
Restricted Shares previously granted or awarded under the Plan without
the consent of the holder thereof.

SECTION 4.  NOTICES

Each notice relating to the Plan shall be in writing and delivered in person or
by mail to the proper address. Each notice shall be deemed to have been given on
the date it is delivered or mailed. Each notice to the Company, the Board of
Directors or the Committee shall be addressed as follows: Flowserve Corporation
222 W. Las Colinas Boulevard, Suite 1500, Irving, Texas 75039. Attention:
Secretary. Each notice to a Participant shall be addressed to the 

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Participant's address as set forth in the records of the Company. Anyone to whom
a notice may given under this Plan may designate a new address by written notice
to the Company or to the Participants, as the case may be.

SECTION 5.  BENEFITS OF PLAN

The Plan shall inure to the benefit of, and shall be binding upon, each
successor and assign of the Company. Rights under the Plan may not be assigned
or alienated by any Participant. Nothing in the Plan shall be deemed to create
any obligation on the part of the Company to nominate any director for
re-election or to continue the employment of any employee, nor shall anything in
the Plan be construed to give any Eligible Employee any contract or other right
to participate in this Plan in any way which is not approved in advance by the
Committee.

SECTION 6.  TAXES

The Company shall have the right to require, prior to the issuance, delivery or
vesting of any Shares, payment by the Participant of any taxes required by law
with respect to such issuance, delivery or vesting.

SECTION 7.  GOVERNING LAW

The laws of the State of Texas shall control the interpretation and performance
of the provisions of the Plan; provided, however, that the laws of the State of
New York shall govern the issuance of Shares pursuant to the Plan.

SECTION 8.  EFFECTIVE DATE OF THE PLAN

The effective date of the Plan is June 1, 1998, subject to approval by the
shareholders of the Company at the Annual Meeting of Shareholders to be held May
21, 1998.

ARTICLE V.      PARTICIPANT DEFERRAL OF RESTRICTED SHARES

SECTION 1.  FORMS OF DEFERRAL

(a)     Participants who are either Eligible Directors or who are Eligible
Employees (each an "Eligible Participant") shall be eligible to defer
receipt of Restricted Shares under the Plan.

(b)     An Eligible Participant may defer the receipt of Restricted Shares
issuable pursuant to the Plan by filing an appropriate notice with the
Secretary of the Company. An election to defer Shares shall be effective
upon such acceptance and shall apply only to Shares which either (i)
have not yet been granted or awarded or (ii) which vest in the following
calendar year or thereafter, provided, in the case of this clause (ii),
such election is made and accepted prior to July 1 of the year preceding
such vesting or issuance. This election to defer to Restricted Shares
(which shall be called "Deferred Shares" hereafter upon such election)
shall remain in effect until terminated or changed as provided in this
Plan.

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(c)     A Participant may terminate any on-going agreement to accept receipt of
Deferred Shares relating to future grants or awards by giving notice of
termination to the Company. Any such termination shall be effective only
with respect to in the case of Restricted Shares grants or issuance
which occur on or after the date of the termination notice.

SECTION 2.  ACCOUNTS FOR DEFERRED SHARES

(a)     The Company will establish a separate account for each Participant who
has Deferred Shares in which the Deferred Shares will be maintained. The
Company will create this account through a trust (the "Trust")
established by the Company, with the applicable trustee (the "Trustee")
maintaining the Deferred Shares pursuant to the Trust.

(b)     Notwithstanding other provisions of the Plan, the Company shall fund
such account, in the case of Deferred Shares where the deferral election
is made prior to issuance of the Deferred Shares, either (i) by
providing appropriate instructions and sufficient cash to the Trustee,
on or about the date of issuance, to purchase such Deferred Shares for
this account on the open market, or (ii) by issuing the Deferred Shares
to the Trustee. If the Deferred Shares are purchased by the Trustee, the
Company shall reimburse the Trustee for any associated brokerage or
other transaction fees in making the purchase.

(c)     In the case of Deferred Shares in which the deferral election is
properly made after the date of issuance but prior to the date of
vesting, the Company shall fund such account by transferring (and
causing the Participant to assign) such Deferred Shares to the Trustee
for holding pursuant to the terms of the Trust, with the provisions of
Article I, Section 6(a) and 6(b) being inapplicable to these Deferred
Shares.

(d)     Any dividends paid on the Deferred Shares in this account ("Dividends")
will be credited to a deferred cash account to be established under the
Trust in which the amount of the Dividends will be recorded for the
benefit of the Participant, with interest to be credited to the
Dividends in the following manner. The Company will credit to each such
cash account, as of the first day of each calendar quarter, interest on
the amount then credited to such account, including all previous credits
to such account by operation of this Section, computed at an annual rate
equal to 120% of the long-term applicable federal rate compounded
quarterly as published by the Internal Revenue Service for the beginning
month of each calendar quarter to determine imputed interest income for
tax purposes.

(e)     Any Deferred Shares hereunder and any amount credited to either the cash
or Deferred Shares Trust accounts of a Participant, or as any interest
or any Dividends paid on such Deferred Shares, will represent only an
unsecured promise of the Company to pay or deliver the amount so
credited in accordance with the terms of this Article of the Plan.
Neither a Participant nor any beneficiary of a Participant will acquire
any right, title, or interest in any asset of the Company as a result of
any amount of cash or Deferred Shares credited to a Participant's
account or accounts. At all times, a Participant's rights with respect
to the amount credited to his/her account or accounts will be only those
of an 

A-9

36

unsecured creditor of the Company. The Company will not be obligated or
required in any manner to restrict the use of any of its assets as a
result of any amount credited to a Participant's account or accounts. No
right or benefit under the Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, lien, encumbrance or charge, and
any attempt to take any such action shall be void.

(f)     The Trustee will have voting rights on all Deferred Shares prior to
their distribution.

SECTION 3.  DISTRIBUTION OF DEFERRED SHARES

(a)     Deferred Shares will be distributed only in accordance with the
following sections, pursuant to the election specified by the
Participant.

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

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

(iii)   If the election is a lump sum, then interest and Dividends will
be credited to the account through the date of distribution, and
the entire amount of Dividends, with applicable interest, will
be paid, and the entire Deferred Shares account balance will be
transferred in kind, to the Participant within 60 days of
his/her termination.

(iv)    If installments have been elected, any Dividends, with
applicable interest, will be calculated through the date of
termination and added to the account. The resulting deferred
cash total shall be divided equally by the number of
installments elected and the first payment made within 60 days
of termination. The second and all subsequent installment
payments shall be made between January 1 and 30 of each
following year. Interest will continue to accrue to the account
on the balance remaining in the Participant's Dividend account
until all installments have been paid. Interest will be paid
annually with each installment payment. With regard to the
Deferred Shares, the aggregate number of Deferred Shares held in
the separate account for Deferred Shares will be divided by the
number of installments elected and allocated in equal whole
number proportions to be distributed with each such installment
payment (with any remainder after such equal division to be
included in the first installment). All Deferred Shares so
allocated will be distributed in kind with each applicable
installment, which shall be paid simultaneously with any
deferred cash distribution installments. Certificates
representing the applicable amount of Deferred Shares held for
the then longest time in the Deferred Shares account of the
Trust will be delivered 

A-10

37

with each installment, where applicable. Dividends from any
undistributed Deferred Shares will continue to accrue to the
Participant's Dividend account, receive applicable interest
credit and will be paid with the next applicable installment
payment of deferred cash.

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

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

(b)     Upon the request of a Participant, the Committee may, but shall not be
required to, consent to the sale, following the termination of the
Participant's employment with the Company or service on the Board of
Directors, as the case may be, of any or all Deferred Shares held for
the account of the Participant, with the net cash proceeds of such sale,
together with the interest thereon, then to be held for the account of
the Participant and distributed in the same manner as the Deferred
Shares would have been distributed.

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38
DETACH HERE

FLOWSERVE CORPORATION

PROXY FOR ANNUAL SHAREHOLDERS' MEETING - MAY 21, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY

The undersigned hereby appoints BERNARD G. RETHORE and WILLIAM M. JORDAN, and
each of them, with full power to act without the other, as proxies with full
power of substitution, to represent and to vote on behalf of the undersigned
all of the shares of common stock of Flowserve Corporation which the
undersigned is entitled in any capacity to vote if personally present at the
1998 Annual Meeting of Shareholders of Flowserve Corporation to be held at 9:00
a.m. on Thursday, May 21, 1998 at the Omni Mandalay Hotel, 221 East Las Colinas
Boulevard, Irving, Texas, and at any adjournment thereof upon the proposals
listed on the reverse side of this Proxy and more fully described in the Notice
of Annual Meeting of Shareholders dated April 9, 1998, and upon all matters
presented at the Annual Meeting but not known to the Board of Directors at a
reasonable time before the solicitation of this proxy.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.

(CONTINUED, AND TO BE DATED AND SIGNED, ON OTHER SIDE)

39
DETACH HERE

PROXY NO.                                                                 SHARES

1.  Election of three directors each for a three year term and one 
director for a one year term:
[ ] FOR all nominees listed below        [ ] WITHHOLD AUTHORITY
(except as marked to the contrary        to vote for all nominees
below)                                   listed below

INSTRUCTION:  To withhold authority to vote for any individual nominee,
strike a line through the nominee's name below:
THREE YEAR TERM:  Hugh K. Coble, George T. Haymaker and 
William C. Rusnack
ONE YEAR TERM:  Charles M. Rampacek

2.  Approval of the 1998 Flowserve Corporation Restricted Stock Plan
[ ] FOR   [ ] AGAINST   [ ] ABSTAIN

Date:
-----------------------, 1998

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

----------------------------------
Signature(s) of Shareholder(s)
Please sign as name(s) appear at left.
Executors, administrators, trustees, 
guardians and others signing in a 
representative capacity, should 
indicate the capacity in which they 
sign. An authorized officer may sign 
on behalf of a corporation and should
indicate the name of the corporation 
and his or her capacity.