flowserve corporation flex health and welfare benefit plan

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Flowserve Corporation Flex Health and Welfare Benefit Plan Summary Plan Description (SPD) Effective January 1, 2005 Medical Plan Dental Plan Vision Plan Flexible Spending Accounts Disability Insurance Life and AD&D Insurance Employee Assistance Program Financial Planning Services General Information

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Flowserve Corporation Flex Health and Welfare Benefit Plan

Summary Plan Description (SPD)

Effective January 1, 2005

Medical Plan Dental Plan Vision Plan

Flexible Spending Accounts Disability Insurance

Life and AD&D Insurance Employee Assistance Program

Financial Planning Services General Information

I

Flowserve Corporation Flex Health and Welfare Benefit Plan

SUMMARY PLAN DESCRIPTION

TABLE OF CONTENTS Page INTRODUCTION.............................................................................................................................................. 1 — Eligibility/Participation .................................................................................................................................. 1 — When Coverage Begins .................................................................................................................................. 2 — Cost ................................................................................................................................................................ 2 — Spouse Surcharge ........................................................................................................................................... 2 — Change in Election of Coverage..................................................................................................................... 2 — Annual Enrollment ......................................................................................................................................... 2 — Change in Status Events ................................................................................................................................. 2 — Change in Status – Requirements................................................................................................................... 2 — Special Enrollment Rights.............................................................................................................................. 3 — Certain Judgments and Orders ....................................................................................................................... 3 — Entitlement to Medicare or Medicaid............................................................................................................. 3 — Change in Cost ............................................................................................................................................... 3 — Change in Coverage ....................................................................................................................................... 3 — When Coverage Ends ..................................................................................................................................... 4 — Labor Dispute................................................................................................................................................. 4 — Coordination of Benefits (COB) .................................................................................................................... 4 — Medicare......................................................................................................................................................... 5 — Leave of Absence ........................................................................................................................................... 6 — Family and Medical Leave Act ...................................................................................................................... 6 — Disability ........................................................................................................................................................ 6 MEDICAL PLAN............................................................................................................................................... 7 — Overview of Medical Plan.............................................................................................................................. 7 — How Your Medical Care Benefits Work ........................................................................................................ 7 — Medical Plan Schedule ................................................................................................................................... 8 — Covered Expenses and Limitations ................................................................................................................ 9 — Medical Care Exclusions and Limitations...................................................................................................... 17 — Claims and Other General Provisions ............................................................................................................ 20 DENTAL PLAN ................................................................................................................................................. 23 — Overview of Dental Plan ................................................................................................................................ 23 — Special Considerations ................................................................................................................................... 23 — Dental Plan Summary..................................................................................................................................... 23 — How the Plan Works ...................................................................................................................................... 25 — Claims Provisions........................................................................................................................................... 26 VISION PLAN.................................................................................................................................................... 27 — Overview of Vision Plan ................................................................................................................................ 27 — Special Considerations ................................................................................................................................... 27 — Vision Plan Summary..................................................................................................................................... 28 — How the Plan Works ...................................................................................................................................... 28 — Claims Provisions........................................................................................................................................... 29 FLEXIBLE SPENDING ACCOUNTS............................................................................................................. 30 — Overview of Flexible Spending Accounts...................................................................................................... 30 — How a Flexible Spending Account Works ..................................................................................................... 30 — Health Care Spending Account (HCSA)........................................................................................................ 31 — Dependent Care Spending Account (DCSA) ................................................................................................. 32 — Special Provisions .......................................................................................................................................... 32 — Reimbursement of FSA Expenses .................................................................................................................. 33 — Availability of FSA Funds ............................................................................................................................. 33 — Claims Provisions........................................................................................................................................... 33 — Termination .................................................................................................................................................... 34

II

DISABILITY INSURANCE.............................................................................................................................. 35 — Overview of Disability Insurance................................................................................................................... 35 — When Coverage Begins .................................................................................................................................. 35 — Tax Option Election ....................................................................................................................................... 35 — Benefit Payments............................................................................................................................................ 36 — Deductible Sources of Income ....................................................................................................................... 36 — Pro-ration of Lump Sum Awards ................................................................................................................... 37 — Work Incentive Benefit .................................................................................................................................. 37 — Minimum Benefit ........................................................................................................................................... 38 — Other Benefit Increases .................................................................................................................................. 38 — Disability Recurrence..................................................................................................................................... 38 — Exclusions and Limitations ............................................................................................................................ 38 — Disability ........................................................................................................................................................ 39 — Disability Benefits.......................................................................................................................................... 39 — Services Available While Disabled ................................................................................................................ 39 — Pre-existing Condition and Other Payment Restrictions on Disability Benefits ............................................ 40 — Termination of Coverage................................................................................................................................ 41 — Contract Replacement .................................................................................................................................... 41 — Assignment of Benefits .................................................................................................................................. 41 — Conversion Options........................................................................................................................................ 41 — Death While on Disability.............................................................................................................................. 41 — Claim Provisions ............................................................................................................................................ 42 — Statements on the Applications ...................................................................................................................... 44 — Legal Actions ................................................................................................................................................. 44 — Conformity with State Statutes....................................................................................................................... 44 — Fraud .............................................................................................................................................................. 44 LIFE AND ACCIDENTAL DEATH and DISMEMBERMENT INSURANCE .......................................... 45 — Overview of Life and Accidental Death and Dismemberment Insurance ...................................................... 45 — Evidence of Insurability ................................................................................................................................. 45 — Conditions and Effective Date ....................................................................................................................... 45 — Changes In Amount of Insurance ................................................................................................................... 46 — Life Insurance Provisions............................................................................................................................... 46 — Accidental Death and Dismemberment Insurance Provisions........................................................................ 48 — Travel Care Benefits....................................................................................................................................... 53 — Claim Provisions ............................................................................................................................................ 54 — Termination of Insurance ............................................................................................................................... 55 EMPLOYEE ASSISTANCE PLAN ................................................................................................................. 56 — Overview of Employee Assistance Plan......................................................................................................... 56 — Eligibility........................................................................................................................................................ 56 — Coverage Cost ................................................................................................................................................ 56 — When Coverage Begins .................................................................................................................................. 56 — How the Plan Works ...................................................................................................................................... 56 FINANCIAL PLANNING SERVICES ............................................................................................................ 57 — Overview of Financial Planning Services ...................................................................................................... 57 GENERAL INFORMATION SECTION......................................................................................................... 59 — General Information ....................................................................................................................................... 59 — Your Rights Under ERISA............................................................................................................................. 60 — Claims Provisions........................................................................................................................................... 61 — Other Important Provisions ............................................................................................................................ 63 GLOSSARY........................................................................................................................................................ 70

INTRODUCTION

1

This handbook is the Summary Plan Description for the health and welfare benefits offered to Flowserve employees and their benefit eligible dependents. For purposes of this Summary Plan Description (“SPD”), “Plan” means the Flowserve Corporation Flex Health and Welfare Benefit Plan and any one or more of the employee welfare programs offered pursuant to the Plan. This SPD summarizes the benefit plans maintained by Flowserve Corporation (hereinafter, "Flowserve" or the "Company" or "Employer”). While this SPD provides the details of how the Plan works, it will not take the place of the official documents for the Plan. If there is any discrepancy between this SPD and a Plan document, the provisions of the particular Plan document will govern to the extent permitted by law. The terms “you” and “your” as used in this SPD refer to employees of the Company covered under this Plan. Please read this document carefully and familiarize yourself with the eligibility requirements to participate in the Plan, the benefits provided under the Plan and the procedures for filing claims for such benefits. If you have questions about your coverage or your eligible dependent’s coverage, please contact the Plan Administrator at 1-877-357-3539 (1-877-FLS-FLEX). In the course of reading this SPD, you will notice that certain words are capitalized. These capitalized words have specific meanings that are defined in the glossary starting on page 70 or within the text. Eligibility/Participation Employees You are eligible for coverage under the Plan if you are classified as a regular full-time employee (not temporary) or a regular part-time employee regularly scheduled to work at least 32 hours per week for Flowserve or one of its U.S. subsidiaries. Eligible union employees may only participate in the Plans in accordance with the terms of their respective union contracts. You must enroll yourself and your eligible dependents by calling the Plan Administrator within sixty (60) days of your date of hire or by the date indicated on your enrollment materials to be covered on your date of hire. If you do not call to enroll, you will be assigned default coverage as described in the enrollment guide.

Employee's Dependents You may also elect to cover your eligible dependents under the Plan:

• Your legal spouse. In the event you reside in a state that recognizes common law marriage, and you are married according to the elements of a common law marriage in that jurisdiction, you must register your marriage with the county (where registration is available) and provide a copy of the signed declaration to the Plan Administrator. Where registration of your common law marriage is not available, you must provide other documentation that substantiates common law marriage satisfactory to the Plan Administrator.

• Your unmarried Child up to his/her nineteenth (19th) birthday or up to his/her twenty-fifth (25th) birthday if the unmarried Child is a Full-Time Student (as defined below) and primarily dependent on you for support. A "Child" means your natural child, stepchild, adopted child, a child for whom you have been appointed the legal guardian by a court of legal jurisdiction, a child who has been placed for adoption with you or a child who is recognized under a Qualified Medical Child Support Order (“QMCSO”) or a national medical support notice deemed to be a QMCSO as having a right to enrollment under the Plan.

• Your unmarried Child who is mentally or physically disabled and incapable of self-support. This dependent is eligible past his/her nineteen (19th) birthday or his/her twenty-fifth (25th) birthday if the unmarried Child is a Full-Time Student and if the Child had a mental or physical disability while covered under the Plan and remains primarily dependent on you for support. To continue the eligible dependent's coverage you must submit satisfactory proof of disability within sixty (60) days from the date your dependent child reaches age nineteen (19) or twenty-five (25) if a Full-Time Student. The Plan Administrator (or its designated Claims Administrator) may periodically require proof of a dependent Child's continued disability.

Special Rules for Dependent Coverage A Full-Time Student is defined as an eligible dependent who is enrolled in an accredited institution on a full-time basis for at least 12 semester hours. Accredited institutions include high schools, vocational schools, technical schools, colleges or universities that have been accredited under the laws of the state where it is located. The Plan Administrator will require annual proof of an eligible dependent's continued enrollment as a Full-Time Student. A Few Reminders

• Only eligible dependents may be covered under the Plan. If you falsely claim a dependent under the Plan you will be subject to disciplinary action up to and including termination. It is a federal crime to receive benefits that you are not entitled to receive by falsely claiming a dependent under the Plan.

• You cannot be covered as both an employee and a dependent under any Plan. • Any statement regarding your health, age, Full-Time Student status, coverage under another health plan or other information

provided to obtain benefits in writing and signed by you, may be used to contest benefits received under the Plan. • The Plan will only pay benefits based on your correct age. If you misstate your age, the Plan Administrator will either adjust any

required contributions, validate or void coverage as necessary.

INTRODUCTION (continued)

2

When Coverage Begins As a regular full-time or part-time employee, you are eligible for coverage on your first day of employment provided you enroll in the Plan within sixty (60) days of your date of hire.

You and your eligible dependents may later enroll in the Plan only during an annual enrollment period offered by Flowserve or during an enrollment period provided due to a change in status (including a special enrollment event). If you or your eligible dependents enroll during initial eligibility (or during a special enrollment period), your and your eligible dependent’s coverage will be retroactive to your date of hire (or change in status, as applicable).

Cost The cost of coverage for you and your eligible dependents will be automatically deducted from your paycheck each pay period.

Under the Plan, certain contributions may be made on a pre-tax basis. Pre-tax means the money you use to pay for benefits under the Plan are not subject to Federal Income or Social Security (FICA) taxes. If you waive coverage for medical and/or dental, you will receive a credit that you can apply toward the cost of any other benefits you elect. Any credits remaining after you elect benefit purchases will be returned to you in the form of taxable cash in your paycheck each pay period.

If both you and your spouse work for Flowserve and one of you waive medical and/or dental coverage, the credit will be 50% of the credit generally available for waiving coverage.

Spouse Surcharge If your spouse is eligible for medical coverage through his/her employer as an active or retired employee, and you choose to cover your spouse under a Flowserve medical plan, you will be charged a Spouse Surcharge each pay period. Change in Election of Coverage Once you and your eligible dependents have enrolled in the Plan, your and your eligible dependents’ benefit choices will remain effective for the entire Plan year. You may only make a change in your Flowserve Flex coverage during the annual enrollment period or if you have a change in status event. Annual Enrollment Flowserve has an annual enrollment period in the fourth (4th) quarter of each year. During annual enrollment, you will make enrollment decisions under the Plan for the coming calendar year. The new coverage will be effective on January 1 of the new calendar year. Change in Status Events If one or more of the following changes in status occurs, you may revoke your old election and make a new coverage election (i.e. single to family coverage), provided that both the revocation and new election are on account of and correspond with the change in status. Those occurrences which qualify as a change in status, include the events described below as well as any other events which the Plan Administrator determines are permitted under subsequent IRS regulations:

• A change in your legal marital status (such as marriage, legal separation, annulment, divorce or the death of your spouse). • A change in the number of your eligible dependents (such as a birth, adoption or placement for adoption, or death of an eligible

dependent). • Any change in employment status of you, your spouse or your eligible dependents that affects benefit eligibility under an

employee benefit plan of yours, your spouse or your eligible dependents. Such events include: termination or commencement of employment, a strike or lockout, a commencement of or return from an unpaid leave of absence, a change in worksite, switching from salaried to hourly-paid, union to non-union or part-time to full-time, incurring a reduction or increase in hours of employment, or any other similar change in which the individual becomes (or ceases to be) eligible for a particular benefit.

• An event that causes your dependent to satisfy or cease to satisfy an eligibility requirement for a particular benefit. • A change in your place of residence that affects the availability of benefits.

Change in Status – Requirements If you wish to change your election based on a change in status, you must establish that the revocation is on account of and corresponds with the change in status. The Plan Administrator (in its sole discretion) will determine whether a requested change is on account of and corresponds with a change in status event and if such event affects your coverage eligibility. In addition, you must also satisfy the following specific requirements in order to change your election based on a change in status:

• Loss of Dependent Eligibility. For accident and health benefits (e.g., health, dental and vision coverage, accidental death and dismemberment coverage and flexible spending account benefits), a special rule governs which types of election changes are consistent with a change in status. For a change in status involving your divorce, annulment or legal separation from your spouse, the death of your spouse or your eligible dependent, or your eligible dependent ceasing to satisfy the eligibility requirements for coverage, you may elect to change coverage only for the affected spouse or eligible dependent.

• Gain of Coverage Eligibility Under Another Employer’s Plan. For a change in status in which you, your spouse, or your eligible dependent gain eligibility for coverage under another employer’s plan as a result of a change in your marital status or a change in

INTRODUCTION (continued)

3

your, your spouse’s, or your eligible dependent’s employment status, your election to cease or decrease coverage for that individual under the Plan would correspond with that change in status only if coverage for that individual becomes effective or is increased under the other employer’s plan.

• Dependent Care Spending Account Benefits. With respect to the dependent care spending account, you may change or terminate your election only if such change or termination is made on account of and corresponds with a change in status that affects eligibility for coverage under the Plan or your election change is on account of and corresponds with a change in status that affects the eligibility of dependent care expenses for the available tax exclusion.

• Group Term Life Insurance Coverage. For group term life insurance benefits and disability income coverage, you may elect to either increase or decrease coverage if you have a change in your marital status or if you, your spouse, or your eligible dependent has a change in employment status.

Special Enrollment Rights The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) states that a special enrollment event evokes special enrollment rights which must be exercised during the special enrollment period.

• A special enrollment event is a mid-year loss of group health coverage or health insurance or the acquisition of an eligible dependent.

• A special enrollment right is the right to enroll in other health coverage outside of regular enrollment periods and without being classified as a late enrollee for purposes of pre-existing condition exclusion periods.

• A special enrollment period is the sixty (60) day window after the event that the special enrollee may enroll in another health plan.

If you, your spouse and/or an eligible dependent are entitled to special enrollment rights under a group health plan, you may change your election to correspond with the special enrollment event. For example, if you declined enrollment in medical coverage for yourself or your eligible dependents because of outside medical coverage and eligibility for such coverage is subsequently lost due to certain reasons (i.e., legal separation, divorce, death, termination of employment, reduction in hours or exhaustion of COBRA period), you may be able to elect medical coverage under the Plan for yourself and your eligible dependents who lost such coverage. Furthermore, if you have a new eligible dependent as a result of marriage, birth, adoption or placement for adoption, you may also be able to enroll yourself, your spouse, and your newly acquired eligible dependent, provided that you request enrollment within sixty (60) days of the marriage, birth, adoption or placement for adoption.

Certain Judgments and Orders If a judgment, decree, or order from a divorce, separation, annulment, or custody change orders coverage of your eligible dependent Child under the Plan, you may change your election to provide coverage for the eligible dependent Child. If the order requires that another individual (such as your former spouse) cover the eligible dependent Child, you may change your election to revoke coverage for the Child. Entitlement to Medicare or Medicaid If you, your spouse, or an eligible dependent becomes entitled to Medicare or Medicaid, you may cancel that person’s health coverage under the Plan. Similarly, if you, your spouse or an eligible dependent who has been entitled to Medicare or Medicaid loses eligibility for such coverage, you may elect to enroll or increase that person’s health coverage under the Plan. Change in Cost If the Plan Administrator notifies you that the cost of your and your eligible dependent’s coverage under the Plan significantly increases during the Plan year, you may choose to either increase your contributions to cover such increase or revoke your election and elect coverage under another Plan option that provides similar coverage. For insignificant increases or decreases in the cost of benefits, the Plan Administrator will automatically adjust your elected contributions to reflect the minor change in cost. (The “change in cost” exception is not applicable to the Health Care Spending Account.)

Change in Coverage If the Plan Administrator notifies you that coverage under the Plan for you and/or your eligible dependent is significantly curtailed, you may revoke your election and elect coverage under another Plan option that provides similar coverage. In addition, if during the Plan year a coverage option is added or eliminated under the Plan, you may elect the newly added option or elect another Plan option by making a corresponding election change under another Plan option that provides similar coverage. Further, you may make an election change that is on account of and corresponds with a change made under the benefit plan of your spouse’s, former spouse’s, or eligible dependent’s employer so long as: (a) his or her employer’s plan permits its participants to make an election change permitted under the IRS regulations or (b) the Plan permits you to make an election for a period of coverage that is different from the period of coverage under his or her employer’s plan. (The change in coverage exception is not applicable to the Health Care Spending Account.)

INTRODUCTION (continued)

4

When Coverage Ends Your coverage under the Plan will end for you and/or your eligible dependents on the earlier of the dates listed below unless you and/or your eligible dependents are eligible for Consolidated Omnibus Budget Reconciliation Act (“COBRA”) continuation coverage and elect such coverage in a timely fashion:

• The date upon which your employment terminates. • The date the Plan is modified, eliminating any benefits for your classification or the date the Plan terminates. • The date the eligible party becomes a full-time active member of the armed forces of any country (excluding temporary service

of thirty-one (31) days or less). See page 67 for additional information regarding military leave of absence. • The first day of the coverage period that you fail to make the required contributions as an active employee or while on approved

leave of absence. • The date your dependent ceases to be eligible under the Plan.

Under COBRA, you may elect to continue your medical, dental, vision and flexible spending account coverage temporarily for yourself or any eligible dependents who were covered on the day before your benefits ended, provided all required coverage premiums for you and your eligible dependents are paid in a timely fashion. See the General Information Section on page 59 for details.

Labor Dispute Coverage under the Plan for you and your eligible dependents may cease if you cease work due to a labor dispute. Flowserve reserves the exclusive discretion to determine whether it will offer employees the opportunity to continue coverage during an absence from work caused by a labor dispute. Coverage may continue for up to the end of the month in which the labor dispute occurs or for one (1) additional month if the labor dispute continues after the end of the first month. The Claims Administrator, who has been delegated authority by the Plan Administrator to determine payment of benefits under the Plan, will be entitled to rely upon the determination of Flowserve as to employees whose coverage continues during a labor dispute under the Plan. In such an instance, Flowserve’s continuing coverage determination will be conclusive and binding upon all persons for the purposes of the Plan. If Flowserve makes a determination to offer ongoing coverage, then such continuing coverage will cease upon the first of these events to occur:

• You fail to make the required premium payments to your collective bargaining unit representative. • Your representative fails to make the required premium payments to Flowserve. • You go to work full-time for any other employer. • When less than 75% of the affected employees have elected to continue their coverage upon any premium due date.

Coordination of Benefits (COB) If you have other medical coverage, the benefits payable under the Plan, and any other group benefit plan, for an Allowable Expense (as defined on page 5) incurred during any benefit determination period (calendar year) will be coordinated so that the combined benefits paid or provided by all plans equal the amount which would be paid under the Plan if the Plan was your only coverage.

You must inform the Claims Administrator if you have other coverage (for example, through your spouse's employer) and give your consent to release such information so that the Claims Administrator may apply the appropriate plan provisions.

You should file your claim with the primary plan first. When the claim is paid, send a copy of the charges and a copy of the Explanation of Benefits statement from the primary plan to the secondary plan. This will accelerate the processing of your claim.

One of your plans will be determined to be your primary plan (using the rules below). The primary plan pays your claim first according to its plan provision. If Flowserve’s Plan is deemed the secondary plan, the benefits paid in addition to the benefits paid under the primary plan will not be an amount more than you would have received had the Plan been your only coverage.

Your primary plan will be determined according to the rules below in the following order:

• A plan that does not have Coordination of Benefits (COB) provisions will be considered primary to the Plan. • A plan which covers a person in his/her own capacity will be primary to the plan that covers the person as a dependent; except

that if the person is also a Medicare beneficiary, and Medicare is secondary to the plan covering the person as a dependent and primary to the plan covering the person as other than an eligible dependent, then the Plan covering the person as a dependent is primary, Medicare is secondary and the Plan covering the person as other than a covered dependent is the third plan to pay.

• The plan covering the person as an employee will be primary to the plan covering the person as an eligible dependent. • The plan covering the person as an active employee will be primary to the plan covering the person as a retired, terminated or

laid-off employee. • The plan covering the person as an eligible dependent of an active employee will be primary to a plan covering the person as the

eligible dependent of a former employee or as a COBRA participant. • If none of the above applies, the plan covering the person for the longest period of time will be primary.

INTRODUCTION (continued)

5

Other Rules For purposes of an eligible dependent covered under a plan of both non-divorced parents, the plan of the parent whose birthday (month and date) falls earlier in the year will be primary. If both parents have the same birthday, the plan covering the parent for the longest period of time will be primary. For eligible dependents whose parents are divorced or legally separated and are covered by the plans of both parents, the plan covering the parent who is responsible for the eligible dependent's health care under the terms of the court decree will be the primary payer. Otherwise, such payment will be made in the order as follows:

• The plan of the natural parent with custody. • The plan of the stepparent with custody. • The plan of the natural parent without custody.

If the Plan is determined to be secondary, benefits payable from the Plan will be calculated such that the combined benefits provided by all plans during a claim determination period will not be more than that amount which would be paid if the Plan were the only benefit plan for the covered person.

Each plan’s benefit provisions determine the actual benefit amounts available. Benefits payable under the Plan will never exceed the amount that would have been paid if there were no other plans involved. If benefit payments under this Plan are limited by COB, only the disbursed amounts will be charged against your plan maximums.

If COB applies and reasonable payments are made in error, all plans will have the right to adjust payments among themselves to satisfy each plan's liability. If the Claims Administrator overpays a claim, they have the right to recover such overpayments from any person for, to whom, or with respect to whom such payments were made, including an insurance company or any other organization.

COB - Definitions An Allowable Expense is the Reasonable and Customary Charge for any Necessary medical or health care service that is covered (at least in part) by one of the plans. If a health plan provides services (rather than cash payments), a dollar value will be assigned to such service in order to use this provision.

When the primary plan penalizes you for not complying with plan provisions (such as failing to pre-certify) the amount of the reduction is not considered an Allowable Expense.

A plan (for the purposes of determining COB) may be any of the following:

• A group or group benefit plan on an insured basis. • Other benefit plans which cover people as a group. • A self-insured or non-insured plan or other benefit plan that is arranged through an employer, trustee, or union. • A pre-payment plan that provides medical, vision, dental or health service. • Government plans. • Group auto insurance, but only to the extent medical benefits are payable under group auto insurance. • No-fault auto insurance on an individual basis, except where not allowed by the state in which the plan is issued. • Single or family subscribed plans issued under a group or blanket type plan; excluding hospital indemnity-type plans and

school accident-type coverage. Medicare This section applies to a covered person who is eligible for Medicare coverage. It provides rules for determining the order of benefit payments between coverage under the Plan and coverage under Medicare. The intent of this section is to conform the Plan to the requirements of the Federal Medicare Secondary Payor law. Accordingly, this section and its stated rules may be adjusted in the future, on the sole discretion of the Plan Administrator, so that the Plan's liability for benefit payments is neither greater nor less than those required under the law.

If, pursuant to the Medicare rules:

• The Plan is determined to be secondary to Medicare, then it will pay secondary and coordinate its benefit payments with Medicare.

• The Plan is determined to be primary to Medicare, then it will pay benefit payments without regard to Medicare. The order of benefit payments rules is outlined on the following page.

Rules applicable to a person covered under the Plan by virtue of that person's current employment status with an employer or as an eligible dependent of such person follows.

INTRODUCTION (continued)

6

Coverage as an Active Employee or Eligible Dependent Basis of Medicare Eligibility: The Plan Will Be: Active employees and their spouses age 65 and over. Primary.

Disability before attaining age 65 (other than End Stage Renal Disease). Primary.

End Stage Renal Disease (ESRD). Primary for the first thirty (30) months of ESRD. Medicare coverage is primary thereafter.

Attaining Age 65 or Disability, preceding or concurrent with ESRD. Primary until the end of the first thirty (30) months of ESRD. Medicare coverage is primary thereafter.

If a covered person elects to have Medicare as primary coverage, such person's medical care coverage under this Plan will terminate. If the employee's medical care coverage terminates in accordance with this provision, then coverage for the employee's covered eligible dependents will cease on the same date.

Rules applicable to a person covered under the Plan on any basis other than those stated above. Coverage other than as an Active Employee or Eligible Dependent

Basis of Medicare Eligibility: The Plan Will Be: Attaining age 65. Secondary.

Disability (other than End Stage Renal Disease). Secondary.

End Stage Renal Disease (ESRD). Primary for the first thirty (30) months of ESRD. Medicare coverage is primary thereafter.

Attaining Age 65 or Disability, preceding ESRD. Secondary. REMEMBER: The Medicare section outlined above applies from the date a covered person is first entitled to Medicare (either part A or part B), whether or not the covered person is enrolled and is receiving Medicare benefits. Leave of Absence If you take a leave of absence approved by your Employer, you may continue certain benefit coverage (including your Flowserve group health coverage) during the leave as specified by Flowserve’s leave of absence policy. In order to continue benefits during leave, you must continue to comply with all applicable leave of absence provisions and pay all applicable contributions for coverage on a timely basis. If you are on unpaid leave or your paid leave does not cover your benefit contributions, you will be billed by the Plan Administrator for your contributions which must be paid on an after tax basis. Family and Medical Leave Act If you have worked for Flowserve at least 1,250 hours over the previous twelve (12) month period and have at least twelve (12) months of service, you may be eligible for up to twelve (12) weeks of unpaid leave within a twelve (12) month period under the Family and Medical Leave Act (“FMLA”).

You may be eligible for FMLA leave due to one of the following reasons:

• Birth and care of your newborn child. • Placement of a child with you for adoption. • Care for your spouse, child or parent who has a serious health condition. • Your own serious health condition (when you are unable to perform your job).

During FMLA leave, your health coverage will continue on the same basis as if you had continued working. In addition, you may be eligible to continue other benefits as determined by Flowserve in accordance with FMLA. You must continue to make all applicable contributions for coverage on a timely basis during your FMLA leave via direct billing. The Employer may designate a disability leave or occupational injury leave as FMLA leave so that the leave periods run concurrently. In certain states, special leave provisions apply and Flowserve will comply with these requirements.

Disability If during your disability leave or occupational injury leave you become eligible for benefits under the Flowserve long-term disability (LTD) plan (usually 26 weeks after the date you became disabled), you must apply for a disability waiver within thirty-one (31) days in order to keep your basic life insurance coverage in place as long as you are disabled. Your benefits will continue for two (2) years while on LTD. After your LTD benefits terminate, you may be eligible to convert your supplemental life and dependent life coverage to an individual policy.

MEDICAL PLAN

7

Overview of Medical Plan Flowserve’s medical plans cover a broad range of Necessary services. The plans available to you and your eligible dependents depend on where you live. A brief description of the types of plans currently available is as follows:

• Plans A and B are managed care plans that pay higher benefits when you and your covered eligible dependents receive care from In-Network Providers, and lower benefits when you go outside the Network for care. No PCP or referrals will be required under these plans.

• Out-of-Area Plan is a traditional indemnity plan, which is typically available when there is not a Managed Care Network available.

Coverage under the Plan is non-occupational. Only accidental Non-Occupational Injuries and Non-Occupational Diseases are covered. Any coverage for charges of services and supplies is provided only if they are furnished to a covered participant. If you choose to waive coverage, you will receive a credit that will be applied toward the cost of the other benefits you elect. (Note: If you and your spouse both work for Flowserve, please see information regarding spousal credits on page 2, in the Cost section). Any credits left over after your benefit purchases have been made will be returned to you each pay period in the form of taxable cash. Regardless of which plan you select, you pay your deductions on a pre-tax basis. Your pre-tax deductions will not be subject to Federal or Social Security tax withholdings.

How Your Medical Care Benefits Work Your medical coverage includes one or more features to help control medical care costs. Some features will affect the amount of Benefits payable for your medical care. The features will be as follows:

Network • The In-Network benefit level will be payable for services rendered by a participating provider in the Network. (This applies to

the Plans A and B.) • The Out-of-Network benefit level will be payable for services rendered by a provider who is not a participating provider in the

Network. (This does not apply to the Out of Area Plan.) • To find a specific provider or a list of In-Network Providers, please contact the Claims Administrator, by telephone or through

their website.

Coinsurance Coinsurance is the percentage of Covered Expenses you will be required to pay. Coinsurance amounts will apply towards your Out-of-Pocket Maximum. The Medical Plan Schedule lists all Coinsurance amounts that apply to each plan.

Deductibles The Deductible requirements for you or your eligible dependent (if applicable) will be met when the Covered Expenses incurred while covered during each calendar year equal the Deductible amount shown in the Medical Plan Schedule below. The total amount of Deductible satisfied by a person in a calendar year will apply towards both his/her In-Network and Out-of-Network annual Deductibles since these two Deductibles will be integrated.

Family Unit Deductible: Once the total amount of Deductibles satisfied by a family equals the total annual Deductible amount, no additional amount need be contributed from any family member towards the Deductible for the remainder of the calendar year. The total amount of Deductible satisfied by a family unit in a calendar year will apply towards both its In-Network and Out-of-Network annual Deductibles since these two Deductibles will be integrated.

Deductibles apply to all plans. The Medical Plan Schedule lists all Deductible amounts that apply to each plan. Lifetime Maximums Lifetime maximum is the maximum Benefit payable under the medical plan for any person in his or her lifetime. Combined Maximums All maximums included in Plan A are combined maximums between the In-Network care and the Out-of-Network care, where applicable, unless specifically stated otherwise. All maximums included in Plan B are combined maximums between the In-Network care and the Out-of-Network care, where applicable, unless specifically stated otherwise.

MEDICAL PLAN (continued)

8

How to Calculate the Amount That Is Considered a Covered Expense When Non-Occupational Injury or illness causes you or your eligible dependent, while covered under the Plan, to incur Covered Expenses, the Plan will determine Benefits according to the Medical Plan Schedule and the Medical Care Exclusions and Limitations section outlined in this SPD. Benefits for each Covered Expense will be calculated as follows:

• The lesser of the actual fee or the Reasonable and Customary Charge or the Negotiated Charge. • The amount will be reduced by any applicable Deductible and/or Coinsurance. • The remaining amount will be multiplied by the appropriate covered percentage, resulting in the Benefits payable. • The Benefits payable will be subject to the maximums shown in the Medical Plan Schedule below.

Medical Plan Schedule (The percentages shown below are the member’s coinsurance.)

Plan Feature Plan A Plan B Out of Area In-Network Out-of-

Network In-Network Out-of-Network Plan

Annual Deductible Employee

Family

$300

$900

$600

$1,800

$1,000

$3,000

$2,000

$6,000

$300

$900

Annual Out-of-Pocket Maximum Employee

Family

$2,000

$6,000

$4,000

$12,000

$3,000

$9,000

$6,000

$18,000

$2,000

$6,000

Lifetime Maximum (per person) $3,000,000 $3,000,000 $3,000,000 Hospital Expenses Emergency Room 3 20% 1 30% 1 20% 1

Hospitalization 20% 1, 2 40% 1, 2 30% 1, 2 50% 1, 2 20% 1, 2 Physician Fees Non-surgical Office Visits; Other Physician Services 20% 1 40% 1 30% 1 50% 1 20% 1

Specialist Visits 20%1 40% 1 30% 1 50% 1 20% 1 Preventive Care 4

(Including physical exams, well care and immunizations; for women, this includes routine OB/GYN visits)

100% coverage, $300 maximum 4 40% 1 100% coverage,

$300 maximum 4 50% 1 100% coverage, $300 maximum 4

Eye/Hearing Exams* 20%* 40% 1 30% 1 50% 1 20% 1 Convalescent Facility Expenses (120 day max)

20% 1 40% 1 30% 1 50%1 20% 1

Home Health Care Expenses (120 visits max.)

20% 1 40% 1 30% 1 50% 1 20% 1

Private Duty Nursing Care Expenses (70 8-hour shifts max.)

20% 1 40% 1 30% 1 50% 1 20% 1

Hospice Care Expenses Inpatient Care (30 day lifetime max.) 20% 1, 2 40% 1, 2 30% 1, 2 50% 1, 2 20% 1, 2

Outpatient Care ($5,000 lifetime max.) 20% 1 40% 1 30% 1 50% 1 20% 1

Other Services Short-Term Rehabilitation Expenses (60 visits max.)

20% 1 40% 1 30% 1 50% 1 20% 1

Subluxation (20 visits max.)

20% 1 40% 1 30% 1 50% 1 20% 1

Ambulance Expenses 20%1 30%1 20%1

Treatment for Mental Health/Substance Abuse (inpatient and outpatient visit maximums are separate) Inpatient (30 day max.)

20% 1, 2

40% 1, 2

30% 1, 2

50% 1, 2

20% 1, 2.

Outpatient (30 visit max.)

20% 1,2 40% 1 30% 1 50% 1 20% 1

All other Covered Medical Expenses for which a payment percentage is not otherwise shown

20% 1 40% 1 30%1 50% 1 20% 1

MEDICAL PLAN (continued)

9

Plan Feature Plan A Plan B Out of Area In-Network Out-of-

Network In-Network Out-of-Network Plan

Prescription Drug Expense Coverage Annual Rx Deductible

$50 Individual/$150 Family

$50 Individual/$150 Family

$50 Individual/$150 Family

Retail Prescription Drugs (Up to 30-day supply) Network pharmacy5 Generic

Brand – Formulary6

Brand – Non Formulary

20%, $15 max 7

30%, $60 max7

40%, $80 max7

Not covered

30%, $20 max7

40%, $60 max7

50%, $80 max7

Not covered

20%, $15 max 7

30%, $60 max7

40%, $80 max7

Mail Order Prescription Drugs (Up to 90-day supply)5

Generic

Brand – Formulary6

Brand – Non Formulary

20%, $30 max7

30%, $120 max7

40%, $160 max7

Not covered

30%, $40 max 7

40%, $120 max7

50%, $160 max7

Not covered

20%/$30 max.7

30%/$120 max.7

40%/$180 max.7

1. After Deductible is met. Plan will not pay charges above the “reasonable and customary” limit. 2. For elective Hospital admission, you or your Physician must obtain advance authorization. If prior authorization is not obtained, you may be subject to a $500 penalty. If emergency

hospitalization is required, you, your Physician, or a member of your family should contact the Claims Administrator. 3. Non-emergency use of emergency room is not covered. 4. Frequency based on schedule. See Preventive Care/Routine Physical Exams on page 10. 5. A list of participating pharmacies can be found on your carrier’s Web site. 6. A list of formulary drugs can be obtained from your carrier. 7. Maximum out-of-pocket expense per prescription.

More detailed information on covered preventive care follows in the table below.

ROUTINE EXAMINATIONS Well Child Care from In-network Provider Routine Exam First year of life 6 exams (2 weeks, 2, 4, 6, 8, and

12 months) 100% coverage

Routine Exam Second year of life 2 exams (18 and 24 months) 100% coverage Routine Exam Ages 3-6 1 exam in 12 consecutive months 100% coverage Preventive Care from In-network Provider Routine Exam, Lab, and X-ray Age 7 to 65 1 exam in 24 consecutive months Routine Exam, Lab, and X-ray Age 65+ 1 exam in 12 consecutive months Routine OB/GYN (including PAP, PCY, and DRE PCY)

1 exam in 12 consecutive months

100%, up to $300 annual max. After max reached, subject to deductible and coinsurance.

Mammograms Women, age 35+ 1 exam in 12 consecutive months 100% coverage. Not applied to max.

Covered Expenses and Limitations Hospital Expenses

• Inpatient Hospital expenses: Charges made by a Hospital for Room and Board and other hospital services and supplies to a person who is confined as a full-time inpatient. Any charges for private room above the Semi-Private Rate will not be covered.

• Outpatient Hospital expenses: Charges made by a Hospital for hospital services and supplies that are given to a person who is not confined as a full-time inpatient.

Newborns' and Mothers' Post-Delivery Coverage Benefits for post-delivery in-patient Hospital care for a mother and her newborn Child, regardless of whether or not the birth occurred in a Hospital will be covered by the Plan. Such inpatient care will be in accordance with the guidelines recommended by the American Medical Association. A group health plan cannot restrict benefits for a Hospital stay in connection with childbirth for the mother or newborn Child to less than forty-eight (48) hours following a normal vaginal delivery or less than ninety-six (96) hours following a caesarean section delivery. A decision to shorten the length of maternity stay may be made by the attending Physician in consultation with the mother.

Benefits for post-delivery coverage will be provided on the same basis as any illness for a covered person eligible for pregnancy benefits described under the Plan. Pre-certification for pregnancy will apply only to hospitalization related to such pregnancy. Any Hospital confinement unrelated to the pregnancy will have to be pre-certified.

MEDICAL PLAN (continued)

10

In order for a newborn Child to be covered for Benefits, enrollment for the Child must be received within sixty (60) days from the date of birth of the Child. If you fail to enroll the Child within the sixty (60) day period, even if you currently have coverage for your other children, your newborn Child will be ineligible for coverage under the Plan until the next open enrollment period.

Emergency Room Treatment Emergency Care: If treatment is received in the emergency room of a Hospital while a person is not a full-time inpatient, the treatment is considered an Emergency Care Covered Expense for charges made by the Hospital for such treatment and will be paid as reflected in the Medical Plan Schedule.

Non-Emergency Care: If treatment is received in the emergency room of a Hospital while a person is not a full-time inpatient and the treatment is not considered Emergency Care Covered Expense, Benefits will not be payable.

Preventive Care/Routine Physical Exams Charges by a Physician for a routine physical exam given to you, your spouse, or your eligible dependent Child may be included as a Covered Expense. If charges by a Physician in connection with a routine physical exam given to an eligible dependent Child are considered a Covered Expense under any other benefit plan, the charges in connection with the physical exam will not be considered a Covered Expense under this section. A routine physical exam is a medical exam given by a Physician for a reason other than to diagnose or treat a suspected or identified injury or disease. Included as a part of the exam will be X-rays, lab, and other tests given in connection with the exam and materials for the administration of immunizations for infectious disease and testing for tuberculosis. For your eligible dependent Child:

• The physical exam must include at least a review and written record of the patient's complete medical history, a check of all body systems, and a review and discussion of the exam results with the patient or with the parent or guardian.

• For all exams given to your eligible dependent Child under age seven (7), Covered Expenses will not include charges for more than six (6) exams performed during the first year of the Child's life; more than two (2) exams performed during the second year of the Child's life; and more than one (1) exam per year during the next five (5) years of the Child's life.

• For all exams given to your eligible dependent Child age seven (7) and over, Covered Expenses will not include charges for more than one (1) exam in twenty-four (24) consecutive months.

For all exams given to you and your spouse, Covered Expenses will not include charges for more than:

• One (1) exam in twenty-four (24) consecutive months, if the person is under age sixty-five (65). • One (1) exam in twelve (12) consecutive months, if the person is age sixty-five (65) or over.

Also included as Covered Expenses, are charges by a Physician for one (1) annual routine gynecological exam and for a female age thirty five (35) or older, one (1) preventive care mammogram each calendar year.

The following charges are not Covered Expenses:

• Services that are covered to any extent under any other group benefit plan of your Employer. • Services that are for diagnosis or treatment of a suspected or identified injury or disease. • Exams given while the person is confined in a Hospital or other facility for medical care. • Services that are not given by a Physician or under his/her direct supervision. • Medicines, drugs, appliances, equipment, or supplies. • Psychiatric, psychological, personality or emotional testing or exams. • Exams in any way related to employment. • Premarital exams. • A Physician’s office visit in connection with immunizations or testing for tuberculosis. • Exam required for a driving, pilot or similar type of license. • Sport physicals.

Post-Mastectomy Coverage Coverage for medical and surgical benefits in connection with a mastectomy and elected breast reconstruction will also include coverage for the following:

• Treatment of physical complications during any stage of the mastectomy, including lymphedemas. • Reconstruction of the breast on which the mastectomy has been performed. • Surgery and reconstruction on the non-diseased breast to attain the appearance of symmetry between the two breasts. • Breast prostheses.

Mastectomy-related benefits will be covered by the Plan on the same basis as for mastectomy services. This coverage will be provided in consultation with the attending Physician and the covered person. Benefits will be subject to the pre-certification requirements of the pre-

MEDICAL PLAN (continued)

11

certification section. Breast reconstruction and related services associated with a mastectomy will be subject to Deductibles, Coinsurance, out-of-pocket expense amounts and utilization review/pre-certification requirements that are consistent with those that apply to other medical benefits under the Plan.

Routine Eye Exam Expenses Charges for a complete eye exam are Covered Expenses in all plans, including refraction, which is furnished by a legally qualified ophthalmologist or optometrist. Covered Expenses will not include charges for more than one (1) eye exam in twenty-four (24) months.

Routine eye exam expenses will not include:

• Any eye exam to diagnose or treat a disease or injury. • Drugs or medicines. • Any services or supplies that are included as Covered Expenses under any other section included in the Plan or under any other

plan of group benefits provided through your Employer. • Any services or supplies for which benefits are provided under any workers' compensation law or any other law of similar

purpose, whether benefits are payable as to all or part of the charges. • Any service or supply that does not meet professionally accepted standards. • Any service or supply received while the person is not covered under the Plan. • Any exams given while the person is confined in a Hospital or other facility for medical care. • Any eye exam required by an employer as a condition of employment or that an employer is required to provide under a labor

agreement or by law.

Routine Hearing Exam Expenses Charges for an audiometric exam are Covered Expenses in all plans. The services must be performed by a Physician certified as an Otolaryngologist or Otologist or an Audiologist who either is legally qualified in audiology or holds a certificate of Clinical Competence in Audiology from the American Speech and Hearing Association (in the absence of any applicable licensing requirements) and who performs the exam at the written direction of a legally qualified Otolaryngologist or Otologist. Covered Expenses will not include charges for more than one (1) hearing exam in twenty-four (24) months.

Routine hearing exam expenses will not include:

• Any ear or hearing exam to diagnose or treat a disease or injury. • Drugs or medicines. • Any hearing care service or supply which is a Covered Expense in whole or in part under any other part of the Plan or under

any other plan of group benefits provided through your Employer. • Any hearing care service or supply for which a benefit is provided under any Workers' Compensation law or any other law of

like purpose, whether benefits are payable as to all or part of the charges. • Any hearing care service or supply that does not meet professionally accepted standards. • Any service or supply received while the person is not covered under the Plan. • Any exams given while the person is confined in a Hospital or other facility for medical care. • Any exam required by an employer as a condition of employment, or that an employer is required to provide under a labor

agreement or by law. • Hearing aids or devices.

Convalescent Facility Expenses Covered Expenses for the services and supplies that must be furnished to a person while confined to a Convalescent Facility from a disease or injury include the following:

• Room and Board, including charges for general nursing care made in connection with room occupancy. Any Charges for daily Room and Board in a private room over the Semi-Private Rate are not included, unless they are medically necessary.

• Use of special treatment rooms. • X-ray and lab work. • Physical, occupational or speech therapy. • Oxygen and other gas therapy. • Other medical services usually provided by a Convalescent Facility; however, this does not include private or special nursing

or Physician services. • Medical supplies.

Benefits will be paid for no more than one hundred-twenty (120) days during any calendar year.

Convalescent Facility expenses will not cover services for treatment of:

• Drug addiction.

MEDICAL PLAN (continued)

12

• Chronic brain syndrome. • Alcoholism. • Senility. • Mental retardation. • Any other Mental Disorder.

Home Health Care Expenses Home health care expenses will be treated as covered Expenses if:

• The charge is made by a Home Health Care Agency, and • The care is provided under a Home Health Care Plan, and • The care is provided to a person in his or her home.

Home health care expenses are charges for:

• Part-time or intermittent care by an R.N. (or by an L.P.N. if an R.N. is not available). • Part-time or intermittent home health aide services for patient care. • Physical, occupational and speech therapy. • The following to the extent they would have been covered under the Plan if the person had been confined in a Hospital or

Convalescent Facility: o Medical supplies. o Drugs and medicines prescribed by a Physician. o Lab services provided by or for a Home Health Care Agency.

• Any services or supplies, which are included as Covered Expenses under any other section included in the Plan or under any other plan of group benefits provided through your Employer.

There is a one hundred-twenty (120) home health care visit maximum per calendar year. One visit is equal to up to four (4) hours of care by a home health aide. Private duty nursing is provided in conjunction with home health care by an R.N. and/or L.P.N.

Home health care expenses will not include:

• Services or supplies that are not a part of the Home Health Care Plan. • Services of a person who usually lives with you or who is a member of your family or a member of your wife's (or husband's)

family. • Services of a social worker. • Transportation. • Custodial care.

Subject to the rules of this section and pre-certification review of care under the Home Health Care Plan, home health care coverage will continue as long as the covered person's Physician continues to certify the need for such care up to the maximum listed in the Medical Plan Schedule.

Private Duty Nursing Care/Skilled Nursing Care Expenses Charges by an R.N. or L.P.N. or a nursing agency for skilled nursing services will be included as Covered Expenses. No other charges made by an R.N. or L.P.N. or a nursing agency will be covered. As used here, skilled nursing services means:

• Visiting nursing care by an R.N. or L.P.N. Visiting nursing care means a visit of not more than four (4) hours for the purpose of performing specific skilled nursing tasks.

• Private duty nursing by an R. N. or L.P.N. if the person's condition requires skilled nursing care and visiting nursing care is not adequate.

Benefits for private duty nursing care/skilled nursing care expenses will be paid for up to seventy (70) eight-hour shifts during a calendar year. Each period of private duty nursing of up to eight-hours will be deemed to be one (1) private duty nursing shift.

Skilled nursing services will not include:

• Part or all of any nursing care that does not require the education, training and technical skills of an R.N. or L.P.N.; such as transportation, meal preparation, charting of vital signs and companionship activities.

• Any private duty nursing care, provided while the person is an inpatient in a Hospital or other health care facility. • Care provided to help a person in the activities of daily life such as bathing, feeding, personal grooming, dressing, getting in

and out of bed or a chair or toileting. • Care provided solely for skilled observation except as follows:

o For no more than one (1) four-hour period per day for a period of no more than ten (10) consecutive days following the occurrence of change in patient medication.

MEDICAL PLAN (continued)

13

o Need for treatment of an Emergency Condition by a Physician, or the onset of symptoms indicating the likely need for such services.

o Surgery. o Release from in-patient confinement.

• Any service provided solely to administer oral medicines; except where applicable law requires that such medicines be administered by an R.N. or L.P.N.

Hospice Care Expenses Covered Expenses will include charges for Hospice Care to a person whose life expectancy is less than six (6) months, for Hospice Care when provided as a part of a Hospice Care Program. Facility Expenses

Covered Expenses will include charges by a Hospital, Hospice Facility, or a Convalescent Facility that are for: • Inpatient care including Room and Board Charges and other services and supplies furnished to a person while a full-time

inpatient for pain control and other acute and chronic symptom management. Not included is any charge for a private room over the Semi-Private Rate. Also not included is any charge for any day of confinement in excess of thirty (30) days for Hospice Care.

• Outpatient care including services and supplies furnished to a person while not confined as a full-time inpatient. Other Expenses for Outpatient Care

Covered Expenses will include charges by a Hospice Care Agency for the following: • Part-time or intermittent nursing care by a R.N. or L.P.N. for up to eight (8) hours in any one (1) day. • Medical social services under the direction of a Physician. These include:

o Assessment of the person's social, emotional and medical needs and the home and family situation. o Identification of the community resources that are available to the person. o Assisting the person to obtain resources needed to meet the person's assessed needs.

• Psychological and dietary counseling. • Consultation or case management services by a Physician. • Physical and occupational therapy. • Part-time or intermittent home health aide services for up to eight (8) hours in any one (1) day. • Medical supplies. • Drugs and medicines prescribed by a Physician.

Charges by the providers below for outpatient care will be Covered Expenses, but only if the provider is not an employee of a Hospice Care Agency and such agency retains responsibility for the care of the person.

• A Physician for consultant or case management services. • A physical or occupational therapist. • A Home Health Care Agency for:

o Physical and occupational therapy. o Part-time or intermittent home health aide services for up to eight (8) hours in any one (1) day; these consisting mainly of

caring for the person. o Medical supplies. o Drugs and medicines prescribed by a Physician. o Psychological and dietary counseling.

A maximum of $5,000 will be paid for all Hospice Care expenses incurred while the person is not confined as a full-time in-patient.

Covered Expenses for Hospice care expenses will not include: • Bereavement counseling. • Funeral arrangements. • Pastoral counseling. • Financial or legal counseling, including estate planning and the drafting of a will. • Homemaker or caretaker services that are not solely related to care of the person. These include sitter or companion services for

either the person who is ill or other members of the family, transportation, housecleaning and maintenance of the house. • Respite care during a period of time when the person's family or usual caretaker cannot or will not attend to the person's needs.

MEDICAL PLAN (continued)

14

Short-Term Rehabilitation Expenses Charges by a Physician or a licensed or certified physical, occupational or speech therapist for services for treatment of acute conditions will be a Covered Expense if the short-term rehabilitation is therapy which is expected to result in the improvement of a body function (including the restoration of the level of an existing speech function), which has been lost or impaired due to an injury, a disease or a congenital defect. Short-term rehabilitation services consist of physical therapy, occupational therapy or speech therapy for a person who is not confined as an inpatient in a Hospital or other facility for medical care. Short-term rehabilitation services will be a Covered Expense for up to sixty (60) visits per calendar year.

Short-term rehabilitation expenses will not cover:

• Services that are covered to any extent under any other part of the Plan. • Any services that are Covered Expenses in whole or part under any other group benefit plan sponsored by an Employer. • Services received while the person is confined in a Hospital or other facility for medical care. • Services not performed by a Physician or under his/her direct supervision. • Services rendered by a physical, occupational or speech therapist who resides in the person's home or who is a part of the family

of either the person or the person's spouse. • Services rendered for the treatment of delays in speech development, unless resulting from disease, injury or congenital defect. • Special education including lessons in sign language, to instruct a person whose ability to speak has been lost or impaired.

Short-Term Rehabilitation services will not be Covered Expenses unless they are provided in accordance with a specific treatment plan which details the treatment to be rendered and the frequency and duration of the treatment and provides for ongoing reviews and is renewed only if therapy is still Necessary.

Subluxation There is a twenty (20) visit per calendar year maximum Benefit which applies to a Covered Expense incurred for manipulative (adjustive) treatment and other physical treatment of any condition caused by or related to biomechanical or nerve conduction disorders of the spine.

The visit maximum will not apply to expenses incurred while the person is a full-time in-patient in a Hospital for treatment of scoliosis, fracture care or surgery. This includes pre and post surgical care provided or ordered by the operating Physician. Ambulance Expenses Professional ambulance service to transport a person from the place where such person is injured or stricken by disease to the first Hospital where treatment is provided as a covered expense when such transport is deemed an Emergency. Mental Health/Substance Abuse The treatment of Mental Disorder/Substance Abuse is a Covered Expense, while patient is confined in a Hospital. In-patient coverage is limited to thirty (30) days in any calendar year.

Covered Expenses for psychiatric/psychological/substance abuse services received from a Physician for the treatment of a Mental Disorder/Substance Abuse condition while confined as a patient in a Hospital however, Benefits will be limited to the number of inpatient Hospital visits per calendar year as shown in the Medical Plan Schedule.

Benefits for psychiatric/psychological/Substance Abuse services received from a Physician for the treatment of a Mental Disorder/Substance Abuse condition received while not confined will be limited to the Covered Expense incurred for the number of treatments per calendar year as shown in the Medical Plan Schedule. Outpatient coverage is limited to thirty (30) days in any calendar year.

The calendar year maximums are separate for in-patient and outpatient visits.

Covered Expenses will include expenses incurred for the following treatments:

Inpatient Treatment

Certain expenses for the Effective Treatment of Alcoholism or Drug Abuse and the treatment of Mental Disorders will be covered if incurred in a Hospital or Treatment Facility by a person. The Covered Expenses will include in-patient treatment, Partial Confinement Treatment and Room and Board Charges (semi-private room) and other Necessary services and supplies. A calendar year maximum benefit of thirty (30) days applies to the Hospital and Treatment Facility expenses described above. As to Partial Confinement Treatment, for the purposes of determining the number of days, two (2) Partial Confinement Treatment sessions will equal one (1) full-time inpatient day.

MEDICAL PLAN (continued)

15

Outpatient Treatment Expenses incurred for the Effective Treatment of Alcoholism or Drug Abuse or the treatment of Mental Disorders while the person is not receiving Partial Confinement Treatment or confined as a full-time inpatient in a Hospital or Treatment Facility will be considered Covered Expenses. Benefits will not be paid for more than the outpatient calendar year maximum of thirty (30) visits per calendar year.

Other Covered Medical Expenses • Physician charges. • Charges for Drugs and medicines, which by law need a Physician’s Prescription and are dispensed by an Out-of-Network

Pharmacy; diagnostic lab work and x-rays; x-rays, radium, and radioactive isotope therapy or anesthetics and oxygen. • Charges for Norplant (levonorgestrel implants) and IUDs. • Rental of Durable Medical and Surgical Equipment. In lieu of rental, the following may be covered:

o The initial purchase of such equipment if the Claims Administrator is shown that long-term care is planned and that such equipment either cannot be rented or is likely to cost less to purchase than to rent.

o Repair of purchased equipment. o Replacement of purchased equipment if the Claims Administrator is shown that it is needed due to a change in the person's

physical condition or it is likely to cost less to purchase a replacement than to repair existing equipment or to rent similar equipment.

• Artificial limbs and eyes. • Sterilization, but not reversal. • National Medical Excellence Program ® (“NME”) (Aetna benefit only): The NME Program coordinates all solid organ and bone

marrow transplants and other specialized care that cannot be provided within an NME patient's local geographic area. When care is directed to a medical facility more than a hundred (100) miles from the person's home, the Plan will pay a benefit for travel and lodging expenses, but only to the extent described below.

• Travel Expenses

Travel expenses are expenses incurred by an NME patient for transportation between his or her home and the medical facility to receive services in connection with a procedure or treatment. Expenses incurred by a Companion for transportation when traveling to and from an NME patient’s home and the medical facility to receive such services, are included.

• Lodging Expenses

Lodging expenses are expenses incurred by an NME patient for lodging away from home, while traveling between his or her home and the medical facility to receive services in connection with a procedure or treatment. The Benefit payable for these expenses will not exceed the lodging expenses maximum of $50 per day. Lodging expenses also include expenses incurred by a Companion for lodging away from home while traveling with an NME Patient between the NME Patient’s home and the medical facility to receive services in connection with an approved NME procedure or treatment or when the Companion’s presence is required to enable an NME patient to receive such services from the medical facility on an inpatient or outpatient basis. The Benefit payable for these expenses will not exceed the lodging expenses maximum per person per night. For the purpose of determining NME travel expenses or lodging expenses, a Hospital or other temporary residence from which an NME patient travels in order to begin a period of treatment at the medical facility, or to which he or she travels after discharge at the end of a period of treatment, will be considered to be the NME patient’s home.

• Travel and Lodging Benefit Maximum

All travel expenses and lodging expenses incurred in connection with any one procedure or treatment type. The total Benefit payable will not exceed the travel and lodging maximum per episode of care of $10,000 per procedure or treatment. Benefits will be payable only for such expenses incurred during a period which begins on the day a covered person becomes an NME patient and ends on the earlier of one year after the day the procedure is performed or the date the NME patient ceases to receive any services from the facility in connection with the procedure. Benefits paid for travel expenses and lodging expenses will not count against any person's maximum benefit.

• Limitations

Travel and lodging expenses will not include, and Benefits will not be payable for, any charges which are included as Covered Expenses under any other part of the Plan. Travel and lodging expenses will not include expenses incurred by more than one Companion who is traveling with the NME patient.

MEDICAL PLAN (continued)

16

Mouth, Jaws and Teeth Expenses for the treatment of the mouth, jaws and teeth will be Covered Expenses, but only those for services rendered and supplies needed for the treatment of or related to conditions of the teeth, mouth, jaws, jaw joints and supporting tissues (including bones, muscles, and nerves). For the purposes of these Covered Expenses, Physician includes a Dentist.

Surgery is a Covered Expense if needed to: • Treat a fracture, dislocation or wound. • Cut out cysts, tumors or other diseased tissues. • Cut into gums and tissues of the mouth (this is only covered when not done in connection with the removal, replacement or

repair of teeth). • Alter the jaw, jaw joints or bite relationships by a cutting procedure when appliance therapy alone cannot result in functional

improvement.

Non-surgical treatment of infections or diseases will be covered. This will not include those of or related to the teeth.

Dental work, surgery, and Orthodontic Treatment needed to remove, repair, replace, restore or reposition natural teeth damaged, lost, or removed or other body tissues of the mouth fractured or cut, due to injury are Covered Expenses. Any such teeth must have been free from decay, in good repair and firmly attached to the jawbone at the time of the injury. The treatment must be done in the same calendar year of the accident (but no later than the year following the accident) if crowns (caps), dentures (false teeth), bridgework or in-mouth appliances are installed due to such injury. Covered Expenses include only charges for the first denture or fixed bridgework to replace lost teeth, the first crown needed to repair each damaged tooth or in-mouth appliance used in the first course of Orthodontic Treatment after the injury.

Treatment of the Mouth, Jaws, and Teeth will not include:

• In-mouth appliances, crowns, bridgework, dentures, tooth restorations, or any related fitting or adjustment service whether or not the purpose of such services or supplies is to relieve pain.

• Root canal therapy. • Routine tooth removal (not requiring the cutting of bone). • Removal, repair, replacement, restoration, or reposition of teeth lost or damaged in the course of biting or chewing. • Repair, replacement or restoration of fillings, crowns, dentures or bridgework. • Non-surgical periodontal treatment. • Dental cleaning, in-mouth scaling, planning or scraping. • Myofunctional therapy, which is muscle training therapy or training to correct or control harmful habits.

Prescription Drug Expenses This Plan pays the Benefits shown in the Medical Plan Schedule for certain Prescription Drugs incurred for the treatment of a disease or injury. These Benefits apply separately to each covered person.

If a Prescription Drug is dispensed by a Network Pharmacy to a person for treatment of a disease or injury, a Benefit will be paid, determined from the Medical Plan Schedule subsection but only if the Network Pharmacy charge for the Drug is more than the co-insurance, after the deductible has been met.

Benefit amounts provided under this section will not be subject to any provision under the Plan for coordination of benefits with other plans, except that the provision for coordinating benefits under the Plan with any Medicare benefits will apply as stated. The Benefit amount for each covered Prescription Drug or refill will be an amount equal to the payment percentage of the total charges. The Network Pharmacy and the Claims Administrator determine the total charge. Any amount so determined will be paid to the Network Pharmacy on your behalf.

Prescription Drug expenses will not include:

• A device of any type unless specifically included as a Prescription Drug. • Any drug entirely consumed at the time and place it is prescribed. • Less than a thirty (30) day supply of any drug dispensed by a Mail Order Pharmacy. • More than a thirty (30) day supply per Prescription or refill. However, this limitation will not apply to a supply of up to ninety

(90) days per Prescription or refill for drugs that are provided by a Mail Order Pharmacy. • The administration or injection of any drug. The following injectable drugs: allergy sera or extracts and Imitrex, if it is more than

the forty-eighth (48th) such kit or ninety-sixth (96th) such vial dispensed to the person in any calendar year.

MEDICAL PLAN (continued)

17

• Any refill of a drug if it is more than the number of refills specified by the Prescriber. Before recognizing charges, the Claims Administrator may require a new Prescription or evidence as to need: if the Prescriber has not specified the number of refills; or if the frequency or number of Prescriptions or refills appears excessive under accepted medical practice standards.

• Any refill of a drug dispensed more than one (1) year after the latest Prescription for it or as permitted by the law of the jurisdiction in which the drug is dispensed.

• Any drug provided by or while the person is an inpatient in any health care facility or for any drug provided on an outpatient basis in any health care facility to the extent benefits are paid for it under any other part of the Plan or under any other medical or Prescription Drug expense benefit plan carried or sponsored by your Employer.

• Any Prescription Drug also obtainable without a Prescription on an "over the counter" basis. • Immunization agents. • Biological sera and blood products. • Nutritional supplements. • Any contraceptive drugs or devices other than diaphragms, oral contraceptives, or contraceptive patches (Ortho-Evra). One

diaphragm is covered per 365 day period. • Any smoking cessation aids or drugs. • Appetite suppressants. • Prescription Drugs dispensed by a Mail Order Pharmacy that is not a Network Pharmacy.

PLEASE READ THIS SECTION CAREFULLY - FAILURE TO COMPLY WITH THE FOLLOWING PROVISIONS MAY COST YOU MONEY OR REDUCE YOUR BENEFITS. Pre-certification The procedures for pre-certification depend upon the Plan in which you are enrolled. There are no pre-certification penalties for Plans A and B when using In-Network Providers. There is a $500 penalty in all plans for not pre-certifying Out-Of-Network care. Plans A and B require pre-certification for:

• Hospital admission. • Convalescent Facility admissions. • Home health care expenses. • Hospice care expenses. • Skilled nursing care. • Certain procedures and treatments.

The Out of Area Plan requires pre-certification for all Hospital admissions. The matrix below summarizes the pre-certification process:

Plans A and B Out of Area Plan

Certification requested and denied No Benefit for Hospital Room and Board.

No Benefit for Hospital Room and Board.

Certification not requested and the treatment or confinement is not Necessary

No Benefit for Hospital Room and Board. All other expenses covered after penalty.

No Benefit for Hospital Room and Board. All other expenses covered after penalty.

Certification not requested and the treatment or confinement is Necessary

Room and Board covered after penalty. All other expenses covered at payment percentage.

Room and Board covered after penalty. All other expenses covered at payment percentage.

Medical Care Exclusions and Limitations Coverage will not be provided for the following charges:

• Charges not included as a Covered Expense. • Blood or plasma when a refund or credit is made for those items. • Cosmetic, plastic or reconstructive surgery and any related cosmetic enhancement services or supplies or anything to enhance the

appearance and related charges, whether or not for psychological or emotional reasons, unless due to: o An accidental injury which occurred while covered by the Flowserve Plan. o A birth defect that interferes with normal function of the body or causes physical pain, which occurred while at least one of

the child’s parents was covered by the Flowserve Plan. o A mastectomy. o Improve the function of a malformed part of the body (that is not a tooth or structure that supports the teeth), as a result of a

severe birth defect including harelip, webbed fingers or toes or as a direct result of disease or injury.

MEDICAL PLAN (continued)

18

o Subsequent repair of an injury. Surgery must be performed in the same calendar year of the accident which causes the injury but no later than the year following the accident.

• Eyeglasses (lenses and frames), contact lenses (except after cataract surgery) and vision aids (see Vision Plan for covered services).

• Keratotomy, Lasik or any other eye surgery to correct refractive errors (near/far sightedness, astigmatism) or similar conditions of the eyes.

• Care or supplies furnished due to an act of war (declared or undeclared), insurrection or riot. • Care or supplies which are furnished by a facility operated for or by the United States Government (or its agency) or by a

Physician employed by that facility unless: o Care and supplies for Emergency Care when you or your dependent must pay for those services. o Care and supplies for non-service connected disabilities in a Veterans Administration Hospital. o Care and supplies incurred by a United States military retiree (covered by the Plan) and his/her covered eligible dependents,

while confined in a military medical facility. o Care and supplies to the extent furnished or payable under a plan or program operated by a National Government or one of

its agencies; a state cash sickness or similar law. o Care and supplies for which no charge is made, there is no legal requirement to pay or you or your eligible dependent what

you would have to pay if you did not have this coverage. • Injury or illness resulting from or taking part in the commission of an assault or felony unless it is due to either a medical or

physical condition. • Injury or illness arising out of employment, whether or not you or your dependents are covered by worker's compensation or

similar laws or a work injury program. • Exercise for the eyes (orthoptics). • Nerve stimulators. • Services or supplies for obesity, weight reduction or dietary control, except when provided for treatment of morbid obesity. • Oral care and supplies which are used to change vertical dimension or closure. These include but are not limited to diagnostic

procedures, balance procedures, restoration, fixed devices and movable devices. • Orthodontic treatment, or any other non-surgical procedure, care or supply to correct a malocclusion of the teeth. • Any service rendered by a close relative or someone having the same legal residence as the patient. • In-vitro fertilization, artificial insemination, infertility treatment, infertility diagnosis and all related expenses and family

planning. • Reversal of an elective sterilization procedure. • Purchase or rental of luxury medical equipment, when standard equipment is appropriate for the patient's condition (e.g.,

motorized wheelchairs or other vehicles, bionic or computerized prosthesis such as artificial limbs). • Education or training of any type for the treatment of learning disabilities and attention deficit disorders, I.Q. testing except in

connection with assessment or treatment of a speech, language or hearing disorder, education testing or training related to learning disabilities or developmental delays.

• Intentionally self-inflicted injuries unless it is due to either a medical or physical condition. • Thermograms, temperature gradient studies. • Any service rendered by a person who is not legally qualified to perform that service. • Sex transformations/changes and any related procedures, services or supplies. • Charges by a Physician for his/her time on "standby" status if he/she performs no actual service. • Services or supplies considered experimental, investigational or under clinical investigation (including drugs, biologicals,

medications, devices, diagnoses and treatments). The determination of whether a service or supply is experimental, investigational or under clinical investigation will be determined by guidelines established by the Claims Administrator. A drug, a device, a procedure or treatment will be determined to be experimental or investigational if: o There is insufficient outcome data available from controlled clinical trials published in the peer reviewed literature to

substantiate its safety and effectiveness for the disease or injury involved; or o If required by the U.S. Food and Drug Administration (FDA), approval has not been granted for marketing; or o A recognized national medical or dental society or regulatory agency as determined, in writing, that it is experimental,

investigational or for research purposes; or o The written protocol or protocols used by the treating facility or the protocol or protocols or any other facility studying

substantially the same drug, device, procedure or treatment or the written informed consent used by the treating facility or by another facility studying the same drug, device, procedure or treatment states that it is experimental, investigational, or for research purposes.

However, the above exclusion will not apply with respect to services or supplies (other than drugs) received in connection with a disease if the Claims Administrator determines that:

• The disease can be expected to cause death within one (1) year, in the absence of effective treatment and

MEDICAL PLAN (continued)

19

• The care or treatment is effective for that disease or shows promise of being effective for that disease as demonstrated by scientific data. In making this determination the Claims Administrator will take into account the results of a review by a panel of independent medical professionals, which they will select. This panel will include professionals who treat the type of disease involved.

The above exclusion will not apply with respect to drugs that:

• Have been granted treatment Investigational New Drug (“IND”) or Group treatment IND status; or • Are being studied at the Phase III level in a national clinical trial sponsored by the National Cancer Institute; if the Claims

Administrator determines that available scientific evidence demonstrates that the drug is effective or shows promise of being effective for the disease.

• Charges above those considered Reasonable and Customary Charge amounts. • Orthopedic shoes, foot orthotics, trusses, corsets and similar items. • Drugs and medicines not approved by the FDA, vitamins, minerals and food supplements or nutritional supplements, formulas

and therapies that are primarily intended for weight control, except formulas necessary for treatment of phenylketonuria or other hereditary diseases may be covered. Diet pills, minoxidil, or Retin-A after age twenty-six (26) unless medically Necessary and non-prescription drugs are also not covered.

• Non-surgical treatment of Temporomandibular Joint Disorders and all other craniomandibular disorders. • Certain types of treatment for Mental Disorders, such as primal therapy, rolfing, psychodrama, recreational, sleep, musical,

religious and other mental health therapies determined by the Claims Administrator not to be efficacious for the treatment of such disorders.

• Speech therapy, unless it is expected to restore speech that was lost due to illness or injury. • Services or supplies for personal comfort or convenience, (i.e. private room, television, telephone, guest trays, etc.). • Routine physical examinations and related charges for which there is no medical diagnosis, except as specifically provided under

the Plan. • Reports, evaluations, examinations or hospitalizations not required for health reasons. • Self-administered services, except for covered Prescription Drugs, allergy and insulin injections. • Charges for federal, state, and/or local taxes. • Air conditioners, air filters, heaters, humidifiers and other equipment that adjusts or regulates the interior environment, even if

ordered by the personal care Physician. • Fees incurred for voluntary blood donation or storage of blood products. • The cost of any service connected with hospitalization when a Plan participant remains in the Hospital after hospitalization is no

longer medically Necessary. • Rehabilitation services primarily intended to improve the level of physical functioning for the purposes of enhanced job, athletic

or recreational performance as determined by the Claims Administrator, including but not limited to work hardening program, back schools and programs of general physical conditioning, or services and supplies in excess of the coverage provided in the Short-term Rehabilitation section.

• Services and costs relating to the biological mother of an adopted child, if the biological mother is not covered by the Plan. • Services and costs related to surrogate parenting. • Soft plate reconstruction (veloplasty) to correct speech impediments except for a dependent Child covered at birth by the Plan. • Sperm preservation. • Foot care that is not medically Necessary for treatment of a covered medical condition, including but not limited to care for

corns, calluses, flat feet, fallen arches, weak feet, bunions, chronic foot strain, symptomatic complaints relating to the feet, toe nail trimming and supportive devices for feet.

• Replacement of external prosthesis due to wear and tear, loss, theft or destruction. • Human growth hormones (except for children with an absolute deficiency in growth hormone production who meet the

appropriate guidelines determined by the Claims Administrator). • Services or supplies where the patient is covered under another plan sponsored by the Employer that covers that service,

treatment or supply. • Amniocentesis, ultrasound or any other procedures requested solely for sex determination of a fetus, unless medically Necessary

to determine the existence of a sex-linked genetic disorder. • Over-the-counter disposable or consumable supplies. • Counseling services such as marriage and family therapy, behavioral therapy, sex therapy, hypnotherapy, assertiveness training,

stress management and other forms of counseling. • Contraceptives, other than oral or contraceptive patches or diaphragms, not listed in the Pharmacy benefit listings, or

contraceptives that are non-prescription or could be purchased over the counter will be not covered. This exclusion does not apply to Norplant (levonorgestrel implants) or IUDs.

MEDICAL PLAN (continued)

20

• Services and supplies not Necessary as determined by the Plan, for the diagnosis, care or treatment of the disease or injury involved. This applies even if they are prescribed, recommended or approved by the person’s attending Physician or Dentist.

• Care, treatment, services or supplies that are not prescribed, recommended or approved by the person’s attending Physician or Dentist.

• Care furnished mainly to prove a surrounding free from exposure that can worsen the person’s disease or injury. • Related to the following types of treatment: primal therapy, rolfing, psychodrama, megavitamin therapy, vision perception

training or carbon dioxide therapy. • Treatment of covered health care providers who specialize in the mental health care field and who receive treatment as a part of

their training in that field. • Services of a resident Physician or intern rendered in that capacity. • Care and services that are made only because there is health coverage. • Services and supplies furnished, paid for or for which benefits are provided or required by reason of the past or present service of

any person in the forces of a government. • Services and supplies furnished, paid for or for which benefits are provided or required under any law of a government. (This

exclusion will not apply to “no fault” auto insurance if it is required by law is provided on other than a group basis and is included in the Coordination of Benefits section as described on page 4. In addition, this exclusion will not apply to a plan established by the government for its own employees or their dependents or Medicaid.)

• Education, special education or job training, whether or not provided in a facility that also provides medical or psychiatric treatment.

• Therapy, supplies or counseling for sexual dysfunctions or inadequacies that do not have a physiological or organic basis. • Any drugs or supplies used for the treatment of erectile dysfunction, impotence or sexual dysfunction or inadequacy but not

limited to: o Sildenafil citrate. o Phentolamine. o Apomorphine. o Aoprostadil or any drug that is in a similar or identical class or has a similar or identical mode of action or exhibits similar or

identical outcomes. This exclusion applies whether or not the drug is delivered in oral, injectable or topical (including but not limited to gels, ointments and patches) forms.

• Acupuncture therapy. However, acupuncture is not excluded when it is performed by a Physician as a form of anesthesia in

connection with surgery that is covered under the Plan. • Services or supplies furnished by an In-Network Provider in excess of such provider’s Negotiated Charge for that service or

supply. This exclusion will not apply to any service or supply for which a benefit is provided under Medicare before the benefits of the group contract will be paid. (Applies to plan with In-Network benefits).

Any exclusion above will not apply to the extent that:

• Coverage is specifically provided by name in this SPD. • Coverage of the charges is required under any law that applies to the coverage.

These excluded charges will not be used when figuring benefits. The law of the jurisdiction where a person lives when a claim occurs may prohibit some benefits. If so, such Benefits will not be paid.

Claims and Other General Provisions

Subrogation Immediately upon paying or providing any benefit under this plan, the plan shall be subrogated to (stand in the place of) all rights of recovery a Covered Person has against any Responsible Party with respect to any payment made by the Responsible Party to a Covered Person due to a Covered Person’s injury, illness or condition to the full extent of benefits provided or to be provided by the plan. Reimbursement In addition, if a Covered Person receives any payment from any Responsible Party or Insurance Coverage as a result of an injury, illness or condition, the plan has the right to recover from, and be reimbursed by, the Covered Person for all amounts this plan has paid and will pay as a result of that injury, illness or condition, up to and including the full amount the Covered Person receives from any Responsible Party. Constructive Trust By accepting benefits (whether the payment of such benefits is made to the Covered Person or made on behalf of the Covered Person to any provider) from the plan, the Covered Person agrees that if he/she receives any payment from any Responsible Party as a result of an

MEDICAL PLAN (continued)

21

injury, illness or condition, he/she will serve as a constructive trustee over the funds that constitute such payment. Failure to hold such funds in trust will be deemed a breach of the Covered Person’s fiduciary duty to the plan. Lien Rights Further, the plan will automatically have a lien to the extent of benefits paid by the plan for the treatment of the illness, injury or condition for which Responsible Party is liable. The lien shall be imposed upon any recovery whether by settlement, judgment or otherwise related to treatment for any illness, injury or condition for which the plan paid benefits. The lien may be enforced against any party who possesses funds or proceeds representing the amount of benefits paid by the plan including, but not limited to, the Covered Person; the Covered Person’s representative or agent; Responsible Party; Responsible Party’s insurer, representative or agent; and/or any other source possessing funds representing the amount of benefits paid by the plan or the plan. First-Priority Claim By accepting benefits (whether the payment of such benefits is made to the Covered Person or made on behalf of the Covered Person to any provider) from the plan, the Covered Person acknowledges that this plan’s recovery rights are a first priority claim against all Responsible Parties and are to be paid to the plan before any other claim for the Covered Person’s damages. This plan shall be entitled to full reimbursement on a first-dollar basis from any Responsible Party’s payments, even if such payment to the plan will result in a recovery to the Covered Person which is insufficient to make the Covered Person whole or to compensate the Covered Person in part or in whole for the damages sustained. The plan is not required to participate in or pay court costs or attorney fees to any attorney hired by the Covered Person to pursue the Covered Person’s damage claim. Applicability to All Settlements and Judgments The terms of this entire subrogation and right of recovery provision shall apply and the plan is entitled to full recovery regardless of whether any liability for payment is admitted by any Responsible Party and regardless of whether the settlement or judgment received by the Covered Person identifies the medical benefits the plan provided or purports to allocate any portion of such settlement or judgment to payment of expenses other than medical expenses. The plan is entitled to recover from any and all settlements or judgments, even those designated as pain and suffering, non-economic damages and/or general damages only. Cooperation The Covered Person shall fully cooperate with the plan’s efforts to recover its benefits paid. It is the duty of the Covered Person to notify the plan within 30 days of the date when any notice is given to any party, including an insurance company or attorney, of the Covered Person’s intention to pursue or investigate a claim to recover damages or obtain compensation due to injury, illness or condition sustained by the Covered Person. The Covered Person and his/her agents shall provide all information requested by the plan, the Claims Administrator or its representative including, but not limited to, completing and submitting any applications or other forms or statements as the plan may reasonably request. Failure to provide this information may result in the termination of health benefits for the Covered Person or the institution of court proceedings against the Covered Person. The Covered Person shall do nothing to prejudice the plan’s subrogation or recovery interest or to prejudice the plan’s ability to enforce the terms of this plan provision. This includes, but is not limited to, refraining from making any settlement or recovery that attempts to reduce or exclude the full cost of all benefits provided by the plan. The Covered Person acknowledges that the plan has the right to conduct an investigation regarding the injury, illness or condition to identify any Responsible Party. The plan reserves the right to notify Responsible Party and his/her agents of its lien. Agents include, but are not limited to, insurance companies and attorneys. Interpretation In the event that any claim is made that any part of this subrogation and right of recovery provision is ambiguous or questions arise concerning the meaning or intent of any of its terms, the Claims Administrator for the plan shall have the sole authority and discretion to resolve all disputes regarding the interpretation of this provision. Jurisdiction By accepting benefits (whether the payment of such benefits is made to the Covered Person or made on behalf of the Covered Person to any provider) from the plan, the Covered Person agrees that any court proceeding with respect to this provision may be brought in any court of competent jurisdiction as the plan may elect. By accepting such benefits, the Covered Person hereby submits to each such jurisdiction, waiving whatever rights may correspond to him/her by reason of his/her present or future domicile.

Reporting of Claims A claim must be submitted to the Claims Administrator in writing. It must provide proof of the nature and extent of the loss. Your Employer has claim forms and you may contact the Claims Administrator to obtain claim forms.

All claims should be reported promptly. The deadline for filing a claim for any Benefits is ninety (90) days after the date of the loss causing the claim. If, through no fault of your own, you will not be able to meet the deadline for filing a claim, your claim will still be

MEDICAL PLAN (continued)

22

accepted if you file as soon as possible. Unless you are legally incapacitated, late claims will not be covered if they are filed more than two (2) years after the deadline.

Pre-Existing Conditions A Pre-existing Condition is an injury or disease for which a person has received treatment or services or been prescribed drugs or medicines during the ninety (90) days preceding the person’s effective date of coverage. For the first three hundred sixty-five (365) days following such date, Covered Expenses incurred for treatment of a Pre-existing Condition include only the first $4,000 of Covered Expenses for which no Benefit is payable under any other part of the Plan or under any other group plan offered by Flowserve.

Special Rules as to a Pre-existing Condition If a person had creditable coverage and such coverage terminated within ninety (90) days prior to the date he or she enrolled (or was enrolled) in the Plan, then any limitations to a Pre-existing Condition under the Plan will not apply to that person.

Also, if a person enrolls (or is enrolled) in this Plan immediately after any applicable probationary period has been served, and that person had creditable coverage which terminated ninety (90) days prior to the first day of such probationary period, then any limitation as to a pre-existing condition will not apply for that person.

As used above, creditable coverage means a person’s prior medical coverage as defined in HIPAA. Such coverage includes: coverage issued on a group or individual basis, Medicare, Medicaid, military-sponsored health care, a program of the Indian Health Service, a state health benefits risk pool, the Federal Employee’s Health Benefit Plan, a public health plan as defined in the regulations and any health benefit plan under Section 5(e) of the Peace Corps Act. Physical Examinations The Claims Administrator may have a Physician of its choice examine you at the Plan’s expense, as often as is reasonably necessary while your claim is pending or while Benefit payments are being paid. This examination will be performed at no cost to you. Legal Action No action may be commenced or maintained against the Plan, the Plan Sponsor, Plan Administrator or Claims Administrator to recover any benefits sooner than sixty (60) days or later than three (3) years from the date written proof of a claim is required.

The Plan Administrator will not reduce or deny a Benefit payment because a condition existed before a person’s coverage went into effect, if the loss occurs more than two (2) years from the date coverage commenced. This does not apply to conditions excluded from coverage on the date of the loss.

Additional Provisions In the event of a misstatement of any fact affecting your and your eligible dependent’s coverage under the Plan, the true facts will be used to determine the coverage in force.

You and your eligible dependent, together with your or your dependent’s Physician are ultimately responsible for determining the appropriate course of medical treatment in any given case, regardless of whether the Plan will pay all or a portion of the cost of such care.

This SPD describes the main features of the Medical Plan. Additional provisions will be described further elsewhere in the Plan document on file with your Employer. If you or your eligible dependents have any questions about the terms of the Plan or about the proper payment of Benefits, you may obtain more information from the Claims Administrator.

Your Employer hopes to continue the Plan indefinitely but, as with all group benefit plans, the Plan may be changed or discontinued to all or any class of employees.

DENTAL PLAN

23

Overview of Dental Plan The Dental Plan is designed to help you and your eligible dependents with the expenses involved in maintaining good dental health. You and your eligible dependents may see any Dentist for dental care. However, if treatment is provided by a network provider, the out-of-pocket costs will generally be lower. If you and your eligible dependents use an Out-Of-Network Dentist, you and your eligible dependents will pay the Dentist at the time dental services are rendered and then submit a claim form for reimbursement from the Claims Administrator. If a Network Dentist is utilized, there will be no claim forms to file and you will not have to wait for reimbursement. The dental provider will file the claim on behalf of you and/or your eligible dependent(s).

Out-Of-Network expenses in excess of Reasonable and Customary Charges will not be considered Covered Expenses. As a result, your reimbursement resulting from an Out-Of-Network provider will be based on the specified Coinsurance percentage of the amount of the expense not in excess of the Reasonable and Customary Charge.

If you choose to waive coverage, you will receive a credit that will be applied toward the cost of the other benefits you elect. (Note: If you and your spouse both work for Flowserve please see information regarding spousal credits on page 2, in the Cost section). Any credits left over after your benefit elections have been made will be returned to you each pay period in the form of taxable cash.

You pay for your deductions on a pre-tax basis. Your pre-tax deductions are not subject to Federal or Social Security tax withholdings.

Special Considerations Please note that if you and your eligible dependents enroll in the Dental Plan, you and your eligible dependents will not be able to drop, cancel coverage or withdraw from the Plan for two (2) Plan years. This rule protects you and Flowserve from individuals joining the Plan for a short period to take care of their immediate dental needs then dropping their coverage and driving up plan costs for everyone else. If you and your eligible dependents are already enrolled in the Plan, and have been enrolled for less than two (2) Plan years, the only change you can make is to increase the number of dependents covered.

Dental Plan Summary The following chart shows the Deductibles and Coinsurance percentage amounts, or covered percentages for your and your eligible dependent’s dental benefit coverage under the Dental Plan. Please note that the Deductibles, the Coinsurance amounts, and the maximum benefit amounts differ based on the type of care you and your eligible dependents receive.

Dental Plan Features Annual Deductible (Waived for diagnostic and preventive services)

Employee Family

$50 Individual $150 Family

Annual Maximum Benefit (per person) $2,000

Preventive & Diagnostic Services (including routine exams, cleanings and X-rays) Plan pays 100%1

Minor Restorative Services (such as fillings) Plan pays 80% 1,2

Major Restorative Services (such as crowns) Plan pays 50% 1,2

Orthodontia Services Deductible Lifetime maximum benefit

Plan pays 50%1,2

$50 per person $1,500 per person

1The plan will not pay in excess of the Reasonable and Customary Charges limit if you use an Out-Of-Network provider. 2After Deductible is met.

Reasonable and Customary Charges for dental expenses will be covered for the services and supplies for the condition being treated, and deemed by the profession to be appropriate. They must meet broadly accepted national standards of dental practice.

Preventive and Diagnostic Services include but are not be limited to:

• Oral exams twice per calendar year. This includes prophylaxis, scaling and cleaning of teeth. • Topical application of sodium or stannous fluoride for persons nineteen (19) years of age and younger once per calendar year. • X-rays for diagnosis. Other x-rays may not exceed one full mouth series in a thirty-six (36) month period and one (1) set of

bitewings twice per calendar year. • The first installation of a space maintainer to replace any baby tooth that is lost prematurely (limited to non-orthodontic). • Sealants for permanent bicuspids and molars for persons age fourteen (14) and younger, but not to exceed one application per

tooth in any three (3) year period.

DENTAL PLAN – (continued)

24

Minor Restorative Services includes but is not limited to: • Emergency palliative treatment. • Oral surgery (if not covered under medical). • Extractions. • Fillings. • General anesthetics given in connection with approved dental services. • Treatment of diseased periodontal structures. • Endodontic treatment, including root canal therapy. • Injection of antibiotic drugs. • Prosthodontic maintenance. • Periodontal cleanings twice per calendar year.

Major Restoratives Services includes but is not limited to:

• Inlays, gold fillings or crowns. Including precision attachments for dentures. • The first installation of fixed bridgework to replace one or more natural teeth extracted while the person is covered under the

Plan. This includes inlays and crowns as abutments. • Replacement of an existing removable denture or fixed bridgework with new fixed bridgework or adding teeth to the existing

fixed bridgework, subject to the Prosthesis Replacement Rule below. • Repair or recementing of crowns, inlays, bridgework or dentures. • Relining of dentures. • The first installation of removable dentures to replace one or more natural teeth extracted while the person is covered. This

includes adjustments for the six (6) month period following the date they were installed. • Replacement of an existing removable denture or fixed bridgework with a new denture or adding teeth to a partial removable

denture subject to the Prosthesis Replacement Rule below.

Prosthesis Replacement Rule Certain replacements or additions to existing dentures or bridgework will be covered under the Plan, but satisfactory proof must be given to the Claims Administrator that:

• The replacement or addition of teeth is required to replace teeth extracted after the present denture or bridgework was installed. • The person must have been covered under the Plan when the tooth was extracted. • The present denture or bridgework cannot be made serviceable and must be at least five (5) years old. • The present denture is an immediate temporary one to replace one or more natural teeth extracted while the person is covered and

cannot be made permanent. Replacement by a permanent denture is needed. It takes place within one (1) year from the date the immediate temporary one was first installed.

Orthodontics Services includes but is not limited to:

• Orthodontic work-up, which includes x-rays, diagnostic casts, treatment plan and the first month of active treatment including all active treatment and retention appliances.

• Active treatment per month after the first month. • Fixed or removable appliances – only one (1) appliance per person for tooth guidance to control harmful habits.

Exclusions include but are not limited to:

• Bruxism. • Claims incurred as the result of an accident that are considered a medical expense. • Implantology. • Services not performed by a Dentist or oral surgeon except for those services of a licensed dental hygienist which are supervised

and billed by a Dentist and which are for cleaning, scaling, fluoride treatments and sealants. • Surgery, treatment, services and supplies that are cosmetic in nature. • Replacement of a lost, missing or stolen crown, bridge or denture within five years of original installation date. • Repair or replacement of an orthodontic appliance. • Services or supplies that are required as a result of a work related injury. • Services or supplies that are deemed experimental in terms of generally accepted dental standards as determined by the Claims

Administrator, in its sole discretion. • Services or supplies received as a result of dental disease, defect, or injury due to an act of war or a warlike act in time of peace. • Adjustment of a denture or bridgework, which is made more than six months after installation. • Instruction for oral care such as hygiene or diet. • Surgical implant of any type including any prosthetic device attached to it. • Periodontal splinting.

DENTAL PLAN – (continued)

25

• Services or supplies to the extent that benefits are otherwise provided under the Medical Plan. • Myofunctional therapy or correction of harmful habits. • Charges for broken appointments. • Charges by the Dentist for completing dental forms. • Services or supplies not specifically listed as covered under the plan. • Services or supplies related to teeth missing but un-replaced at the time coverage becomes effective. • Services or supplies relating to teeth lost or damaged during the commission of an unlawful act, the result of a self-inflicted

injury or while committing an act as the aggressor. • Services or supplies to increase vertical dimension: dentures, crowns, inlays and onlays, bridgework or any other appliance or

service. • Missing tooth exclusion. • Expenses incurred to the extent benefits are paid or payable for those expenses under the mandatory part of any auto insurance

policy written to comply with a no fault insurance law or an uninsured motorist insurance law.

How the Plan Works The Plan pays a benefit for covered dental expenses equal to the payment percentage, which is outlined in the Dental Plan Summary chart. The benefits payable for charges made by a Network provider is an amount equal to the payment percentage of the Negotiated Charge for the service or supply.

The Plan will reimburse the provider directly or you and your eligible dependents may pay the provider directly and then submit a claim for reimbursement for Covered Expenses. You and your eligible dependents are responsible for paying the Deductible.

Predetermination of Benefits If charges for planned dental work are expected to be $200 or more, ask the Claims Administrator for a predetermination of benefits before the work begins. While this predetermination is not required, doing so can help in planning for dental expenses.

To request a predetermination of benefits, complete a claim form and indicate on the form that it is for a pre-treatment estimate. Ask the Dentist to complete the form and send it to the Claims Administrator. On the form, the Dentist should describe the recommended services and estimate the total charges. Supporting diagnostic material, such as x-rays and charts, should be included with the form. The Claims Administrator will then determine which procedures will be eligible for payment, which could be treated by alternate methods and provide an estimate of what benefits will be payable.

Some services may be given before the predetermination of benefits is made. These will be oral exams, including prophylaxis and x-rays and treatment of any traumatic injury or condition, which occurs unexpectedly, requires immediate diagnosis and treatment and is characterized by symptoms such as severe pain and bleeding.

A course of treatment is a planned program of one or more services or supplies to treat a dental condition. The condition must be diagnosed by the attending Dentist as a result of an oral exam. The treatment may be given by one or more Dentists. The course of treatment starts on the date a Dentist first gives a service to correct or treat such dental condition.

As a part of the predetermination of benefits and as part of the proof of any claim:

• The Claims Administrator has the right to require an oral exam at no cost to you or your eligible dependents. • The Claims Administrator has the right to all diagnostic and evaluative material including x-rays, models, charts and written

reports that are requested. The benefits for a course of treatment may be for a lesser amount than would otherwise be paid if a predetermination of benefits is not made or if any required verifying material is not furnished. In this event, benefits will be reduced by the amount of covered dental expenses that the Claims Administrator cannot verify.

Alternate Treatment If alternate services or supplies may be used to treat a dental condition, covered dental expenses will be limited to those services and supplies which:

• Are customarily used nationwide for treatment. • Are deemed by the profession to be appropriate for treatment, and that meet broadly accepted national standards of dental

practice, taking the person’s total current oral condition into account. The following are some examples of how alternate treatment works:

• Fillings, Inlays, Onlays and Crowns – If a tooth can be repaired by a less costly method than an inlay, onlay or crown, your dental expense benefits will be based on the least expensive but adequate method of repair.

DENTAL PLAN – (continued)

26

• Crowns, Pontiacs and Abutments - Veneer materials may be used for the front teeth or bicuspids. However, dental expense benefits will be based on the least expensive but adequate veneer materials.

• Bridgework and Dentures - Dental benefits will be based on the least expensive but adequate method of treating the dental arch. In some cases, removable dentures may serve as well as fixed bridgework. If dentures are replaced by fixed bridgework, the dental benefits will be based on the cost of a replacement denture unless adequate results can only be achieved with fixed bridgework.

Claims Provisions Reporting of Claims If you and/or your eligible dependents receive dental services from a Dentist participating in the dental Network, you and your eligible dependents can direct the participating Network Dentist to file a claim on your behalf. However, if you and your eligible dependents receive dental services from a Dentist who is Out-Of-Network, you and your eligible dependents may have to pay for the dental services out of pocket, then file a claim for reimbursement in order to receive benefits under the Plan. If a claim is filed for reimbursement, a separate form should be submitted for each person. An itemized bill from the person performing the service must be attached to the claim form.

You can obtain claim forms and assistance in completing the claim forms by contacting the Claims Administrator. The Plan Administrator can provide you with the name and address of the dental Claims Administrator.

When filing a claim, be sure to:

• Copy all bills and send originals to the Claims Administrator. • Attach all bills relative to the claim. Balance due bills and statements alone are not acceptable. • Identify the patient, Dentist, date of the treatment, type of service and amount charged for services on the bill. • Attach all payment statements or denial letters from the other carrier, if you or your eligible dependents have other coverage.

All claims should be submitted promptly. The deadline for filing a claim for benefits is ninety (90) days after the date service was rendered.

If, through no fault of your own, you are not be able to meet the deadline for filing a claim, your claim will still be accepted if you file as soon as possible. Unless you are legally incapacitated, late claims will not be covered if they are filed more than two (2) years after the deadline.

Payment of Claims Benefits will be paid as soon as the necessary written proof to support the claim is received.

All benefits are payable to you. However, you may assign dental care benefits directly to the Dentist, Hospital, or an appropriate state agency. You can either sign the necessary forms given to you by the provider of services or sign the designated assignment on your claim form. If you use a Network provider, the Plan will pay benefits, if any, to the provider of service. The Claims Administrator will not be responsible for the validity of any assignment, be liable for any action, payment or other settlement made before the Claims Administrator receives such assignment.

The Plan may pay up to $1,000 of any benefit to any of your relatives to whom it believes is fairly entitled to it. This policy may apply if you are a minor, are not able to give a valid release or if a benefit is payable to your estate. To the extent permitted by law, neither the benefits nor payments under the Plan will be subject to the claim of creditors or to any legal process. Denial of Claim If you and/or your eligible dependent’s claim is denied in whole or in part, you will receive a written notice of the denial from the Claims Administrator. The notice will explain the reason for the denial and the review procedures.

You may request a review of the denied claim. The request must be submitted, in writing, to the Claims Administrator within sixty (60) days after you receive the notice and include your reasons for requesting the review.

Your claim will be reviewed and you will be notified of the final decision within sixty (60) days of receipt of your request. If special circumstances require an extension of time, you will be notified of such extension during the sixty (60) days following receipt of your request.

VISION PLAN

27

Overview of Vision Plan Taking care of your and your eligible dependent’s eyesight is an important part of overall health. That is why Flowserve provides vision coverage. The Claims Administrator offers a network of vision providers; or you can use a non-VSP Provider for care.

The Plan covers eye examinations once every twelve (12) months. Covered services through a VSP Network Doctor will be paid in full, after payment of a Copayment. If you and/or your eligible dependents use a non-VSP Provider, you will be reimbursed for services according to the table on the following page.

Corrective lenses will be covered every twelve (12) months and one frame will be covered every twenty-four (24) months. Polycarbonate lenses will be covered in full from a VSP Network Doctor for most dependent children, beginning this Plan year. The Plan will pay up to $130 toward the purchase of a frame after the $20 Copayment is made. If you and/or your eligible dependents elect contact lenses in lieu of lenses and frame, the Plan will pay up to $125 toward the cost of your contact lens exam (fitting and evaluation) and contacts. The Plan will not pay for both glasses and contacts in the same year for the same person.

If you elect vision coverage, you and Flowserve will share the cost of coverage. The amount of your cost will be deducted from each paycheck on a pre-tax basis. Unlike medical and dental coverage, you will not receive a credit if you decline vision coverage. Special Considerations Please note that if you and your eligible dependents enroll in the Vision Plan, you and your eligible dependents will not be able to drop, cancel coverage or withdraw from the Plan for two (2) Plan years. The two (2) year participation requirement is a cost-containing measure that benefits both you and Flowserve by discouraging individuals from joining the Plan to address their immediate needs then withdrawing from the Plan to avoid contributing their premium dollars to the Plan. If you and your eligible dependents are currently enrolled in the Plan and have been enrolled for less than two (2) Plan years, you may only add additional eligible dependents. Vision Plan Summary Eye Examination The Plan covers your and your eligible dependent’s initial vision examination as well as subsequent regular eye examinations available once every twelve (12) months.

Examination procedures may include:

• Intermediate Examination: brief or limited routine check-up or vision survey. • Vision Analysis: various tests for prescription lenses. • Tonometry: measurement of eye tension for glaucoma. • Biomicroscopy: examination of the living eye tissue. • Central Field Study: the measurement of visual acuity in the central field of vision. • Peripheral Field Study: measurement of visual acuity in the peripheral field of vision.

Corrective Lenses and Frame Corrective lenses will be available once every twelve (12) months and a frame will be available once every twenty-four (24) months. The corrective lenses and frame benefits include professional services such as:

• Prescribing and ordering proper lenses. • Assistance in the selection of a frame. • Verifying the accuracy of finished lenses. • Proper fitting and adjustment of a frame. • Subsequent adjustments to a frame to maintain comfort and efficiency. • Progress or follow-up work as necessary.

Contact Lenses You and your eligible dependents may elect regular or disposable contact lenses up to the Plan allowance, once every twelve (12) months in lieu of lenses and frames. When contact lenses are obtained, you and your eligible dependents will not be eligible for lenses again for twelve (12) months and frames for twenty-four (24) months. A Copayment is not required for the purchase of contact lenses.

Plan Summary Chart The chart on the following page lists the vision services and materials provided under the Plan, including the VSP Network Doctor and Non-VSP Provider benefit rates of coverage.

If you and your eligible dependents use a VSP Network Provider, you pay only a Copayment for the exam and eyewear as stated in the table. If you and your eligible dependents use a non-VSP Provider, you will be reimbursed for such benefits at the Out-Of-Network benefit level shown in the vision table, less applicable Copayment

VISION PLAN – (continued)

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Vision Plan Summary Plan Feature In-Network (VSP Network Doctor) Out-of-Network (non-VSP Provider)

Exam (no more than one exam every 12 months)

$20 Copay Plan reimburses a maximum of $43 after Copay

Eyeglass Lenses $20 Copay1 Plan reimburses a maximum of $40-$80 (amount depends on type of lens) after Copay1

Frame (no more than one every 24 months)

Covered in full up to $130 after $20 Copay, plus 20% off any out-of-pocket costs1 Plan reimburses a maximum of $47 after Copay1

Contact Lenses 2

Plan reimburses a maximum of $125 Plan reimburses a maximum of $125

1. A single Copayment is applied to the combined purchase of eyeglass lenses and frames. 2. You may purchase contact lenses in lieu of lenses and frames.

Extra Discounts and Savings Available from VSP Network Providers

• 20% off on additional prescription glasses and sunglasses. • Up to 20% savings on lens extras such as specialty coatings and progressives. • 15% discount toward the cost of your contact lens exam (fitting and evaluation). • Laser Vision Correction discounts.

Exclusions and Limitations

• Cosmetic needs will not be Covered Expenses. • When you and your eligible dependents select any of the following, the Plan will pay the basic cost of the allowed lenses,

prescription single vision, lined bifocal, and lined trifocal and you and/or your eligible dependents will pay the additional costs for the following options: o Blended lenses. o Contact lenses (except as noted elsewhere herein). o Oversize lenses. o Progressive multifocal lenses. o Photochromic lenses; tinted lenses except Pink 1 and Pink 2. o The coating of the lens or lenses. o The laminating of the lens or lenses. o A frame that exceeds the plan allowance. o The limitations specified on low vision care. o Cosmetic lenses. o Optional cosmetic processes. o UV (ultraviolet) protected lenses.

• Professional services or eyewear connected with the following will not be Covered Expenses:

o Orthoptics or vision training and any associated supplemental testing, plano lenses (less than a +/-.38 diopter power) or two pair of glasses in lieu of bifocals.

o Replacement of lenses and frames furnished under this Plan that are lost or broken, except at the normal intervals when services are otherwise available.

o Medical or surgical treatment of eyes, except through a VSP Network Doctor Provider as described in this summary. o Corrective vision services, treatments or eyewear of an Experimental Nature.

How the Plan Works In-Network Vision Provider Services To use a VSP Network Doctor, follow the steps below:

• When you and your eligible dependents are ready to obtain vision services, call your choice of Vision Provider. If you and your eligible dependents need to locate a VSP Network Provider, call Vision Service Plan (VSP) at 800-877-7195. (Available 6 a.m. to 6 p.m. Pacific Time, Monday through Friday or log on the website at www.vsp.com).

• When making an appointment, identify yourself as a VSP member. The In-Network Vision Provider will need the covered member's identification number (social security number), and the covered member's group name. The In-Network Vision Provider will contact VSP to verify your eligibility, Plan coverage, and to obtain authorization for services and materials. If you or your eligible dependents are not eligible for vision services, the VSP In-Network Vision Provider will notify you directly.

VISION PLAN – (continued)

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• At your or your eligible dependent’s appointment, the In-Network Vision Provider will administer an eye examination and determine if eyewear is Necessary. If so, the In-Network Vision Provider will coordinate the prescription with a VSP approved laboratory. The In-Network Vision Provider will itemize any non-covered charges and will ask you to sign a form acknowledging that you received services. VSP will pay the In-Network Vision Provider directly for covered services and materials. You and your eligible dependents will be responsible for paying the Optometrist a Copayment for the eye examination and lenses and/or frames. You and your eligible dependents will be responsible for any additional costs resulting from cosmetic options, non-standard frames, extra costs for cosmetic visual needs or non-covered services and materials you and your eligible dependents have selected.

VSP Network Doctor (In-Network Vision Provider)/non-VSP provider (Out-Of-Network Vision Provider) Vision services and eyewear may be received from any licensed optometrist, ophthalmologist or dispensing optician, whether In-Network or Out-of-Network Vision Providers. Benefits will be paid at the level of coverage listed in the Vision Plan Summary on the previous page.

You may select any licensed vision provider for services. If you use an Out-of-Network Vision Provider, the reimbursement schedule will not guarantee full payment.

To obtain an exam or materials from an Out-of-Network Vision Provider:

• Pay the provider the full amount of your bill and request a copy of your bill that shows the total charged for the eye examination or materials.

• Send a copy of the itemized bill to the Claims Administrator. The following information must be included in your and/or your eligible dependent’s request for reimbursement:

• The member's name and mailing address. • The member's identification number (usually the member’s social security number). • The member's employer or group name. • The patient's name, relationship to member and date of birth.

You may submit this information on any generic insurance claim form available from your Out-of-Network Vision Provider or attach a letter with the above-mentioned information to the itemized bill and mail the itemized bill and claim form or letter to Vision Service Plan, P.O. Box 997105, Sacramento, California 95899-7105. You may also log on to www.vsp.com, select the “Out of Network Reimbursement Form” and follow the instructions. Claims for reimbursement must be filed within six (6) months of the date services were rendered. Claims Provisions If you disagree about your and/or your eligible dependent’s eligibility for the benefit or the amount of the benefit, you should contact the Claims Administrator. If you and/or your eligible dependents are unsatisfied with the Claims Administrator’s written response, you may file an appeal with the Plan Administrator. For more information regarding the appeal of denied claims, please refer to the General Information section of this SPD.

FLEXIBLE SPENDING ACCOUNTS

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Overview of Flexible Spending Accounts With Flowserve’s Flexible Spending Accounts (“FSAs”), you can reduce your taxable income by paying for certain eligible health care and/or dependent care expenses before taxes are withheld from your pay. There are two types of accounts:

• Health Care Spending Account (“HCSA”) • Dependent Care Spending Account (“DCSA”).

How a Flexible Spending Account Works FSAs give you the opportunity to pay for eligible health care and dependent care expenses on a pre-tax basis. When you choose to participate in one or both spending accounts, you contribute money to a spending account in your name each pay period on a pre-tax basis (i.e. before Federal and Social Security taxes, as well as most state and local taxes are withheld from your pay). This lowers the amount of your taxable income, which, in turn, can lower the income taxes you pay. You can use funds in your FSA to reimburse eligible healthcare or dependent care expense. You will not be taxed on the reimbursement from your FSA account. Therefore, the money is not taxed when it goes into your FSA or when it comes out. In short, you will pay for eligible expenses tax-free.

For example: Assume your gross pay for a pay period is $1,000 and you are having $100 withheld to pay for eligible benefit expenses. Currently, your withholding taxes are calculated based on $1,000. Under the "salary reduction" approach, your benefit costs are deducted first so that your taxes are computed on only $900, less tax is withheld and the savings are all yours!

While reducing your pay for tax purposes, your pay-related benefits like your pension plan benefits, 401(k) and your life insurance will not be reduced. Your benefits from these Flowserve sponsored plans will be based on your full base rate of pay. However, since your Social Security taxes will be based on your reduced pay, your future Social Security benefits may be slightly reduced. (Note: If you are within two (2) or three (3) years of retirement, it is recommended that you seek outside tax advice to determine the effect any pre-tax FSA contributions will have on your Social Security benefit.)

Be careful when making your election. Generally, once you make an election at the beginning of the Plan year you cannot change your mind during that Plan year about whether to participate or the amount of your election.

However, if you have a change in status you may discontinue or change the amount you contribute under the Plan, but only as allowed and defined under the change in status rules in the Introduction section of this SPD. You must call the Claims Administrator to request an election change within sixty (60) days from the date of the change in status event. Any election change must be made on account of and be consistent with the change in status.

An explanation of payment (“EOP”) statement, showing the status of your accounts, will be received each time you submit a claim. An EOP is a statement that shows the amount of the claim, the amount eligible for reimbursement, the amount paid to date on the claim and any eligible amount payable.

Funding your Accounts How much you deposit to your FSA accounts depends on the accounts you choose and your income tax status. Listed below are the eligible amounts:

Account Annual Minimum Annual Maximum

Health Care Spending Account $100 $3,000

Dependent Care Spending Account $100 $5,000*

* If you are married and file separate income tax returns, the most you can deposit annually is $2,500. In no event can your maximum annual deposit be more than the lesser of your earnings or your spouse's earnings. If your spouse also has FSAs through his or her employer, your combined deposit cannot exceed $5,000.

Your annual contributions will be deducted from your paychecks throughout the year in equal installments. Once you decide the amount you will contribute for the year, you cannot change your elections unless you have a change in status.

FSA benefits for key employees or highly compensated employees may be restricted to comply with the non-discrimination requirements. The Plan Administrator will monitor the Plan to verify that the Plan does not allow discrimination in favor of highly compensated participants or key employees concerning the pre-tax benefits and will contact you if your contributions have to be adjusted to comply with these limits.

Deciding to Participate in the Flexible Spending Accounts There are a number of factors that will affect your decision to participate in either or both of the FSAs. Such factors include:

• Forfeitures: The FSAs have a "use it or lose it" provision, which means that if you do not spend all of the money in your account by the end of the Plan year, you lose or forfeit the unspent balance. Since you must decide how much money to deposit in your

FLEXIBLE SPENDING ACCOUNTS – (continued)

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account for the year before each year begins, you should be careful when projecting your expenses for the year. Remember that only expenses incurred during the Plan year for which your account was established can be paid from your account. All reimbursement requests must be filed by March 31 of the following year or any remaining funds will be forfeited.

• Limited Deductions: The HCSA may affect your tax on your federal income tax filing when you file your income tax return, as

the establishment of a spending account may limit your deductions for health care expenses. A deduction against your federal income tax is allowed for health care expenses that are greater than 7.5% of your adjusted gross income. Many taxpayers will be unable to take advantage of this deduction since medical expenses often fail to reach that level for the average family; however, you should review your own tax status and determine which method is most advantageous to you.

• Dependent Care Tax Credit: Currently, the amount of federal income taxes (but not FICA) you owe may be reduced by a

percentage of the money you have spent on eligible dependent care expenses. This is called a tax credit. The percentage varies depending on the combined income of you and your spouse. The total amount of eligible dependent care expenses under the credit is $2,400 for one child and $4,800 for two or more children. Only a percentage of these expenses may be claimed as a tax credit. The credit is between 20% and 30% of your dependent care expenses and depends on your adjusted gross income.

These expenses are also eligible for payment through a DCSA. Since you are not permitted to use both the Dependent Care Tax Credit and the DCSA for the same expenses, you should evaluate both possibilities before choosing the DCSA. Expenses reimbursed through your DCSA reduce dollar-for-dollar the amount of expenses allowable under the federal tax credit.

Depending on your personal situation, one approach may give you a greater tax break than the other. Consult your tax advisor to help you chose the right alternative for you.

• Tax Consequences: Neither your Employer nor the Plan make any commitment or guarantee regarding any specific tax treatment

that will apply to contributions or benefits under the Plan. If you have questions about how the Plan will impact your tax treatment, you should consult your tax advisor.

Health Care Spending Account (HCSA) Although Flowserve’s medical, dental and vision plans reimburse you for most covered health care costs, you may have expenses that will not be covered or payable by Flowserve’s (or any other) plans. The HCSA provides you with a way to pay those out-of-pocket expenses with tax-free dollars. Even if you don't participate in the Flowserve benefit plans, you can participate in the HCSA.

You can use a HCSA to pay for eligible health care expenses that have not been reimbursed from any other source including:

• Medical, dental, vision and Prescription Deductibles and Copayments. • Routine physical exams, immunizations and dental care. • Orthodontia. • Hearing aids and tests. • Special equipment for family members with mental or physical disabilities. • Prescription Drugs. • Prescription glasses, contact lenses and solution. • Over-the-counter nonprescription medicine and drugs.

Eligible Expenses for the HCSA will be governed by the Internal Revenue Service. For a complete list of Eligible Expenses, call Aetna through the Benefits Service Center or visit www.aetna.com/fsa.

Also, keep in mind that the HCSA will reimburse you only for expenses incurred during the Plan year by you or your IRS-eligible dependents (whether or not they are enrolled in Flowserve Flex health care benefits). Ineligible expenses, as defined by the IRS, specifically exclude the following expenses from reimbursement through the HCSA:

• Automobile insurance premiums. • Bottled water. • Cosmetics, toiletries and toothpaste. • Cosmetic surgery. • Funeral and burial expenses. • Health care premiums. • Health club dues. • Household and domestic help. • Licensed practical nurse for the care of a healthy newborn. • Life insurance premiums for policies that repay loss of earnings or accidental loss of life, limb or sight.

FLEXIBLE SPENDING ACCOUNTS – (continued)

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• Maternity clothes and diaper services. • Meals and lodging while away from home for medical treatment. • Social activities, such as dance lessons or classes. • Transportation expenses to and from work. • Uniforms. • Vacation or travel for general health purposes. • Vitamins taken for general health purposes. • Weight loss, smoking cessation, and fitness programs for general health purposes.

If you have any questions regarding an eligible expense or FSAs in general, please call the Claims Administrator. Dependent Care Spending Account (DCSA) The DCSA reimburses you for expenses associated with caring for your eligible dependents so that you (and your spouse, if you are married) can work. In general, you may set aside up to $5,000 per plan year. You can use the DCSA if you are in one of the following categories:

• You and your spouse both work. • You work and your spouse is actively looking for work. • You are a single parent with primary responsibility for childcare. • You work and your spouse is a full-time student for at least five (5) months of the year. • You work and your spouse is physically or mentally incapable of self-care.

An eligible dependent must live in your home and be one or more of the following:

• A child under thirteen (13) who is claimed as a dependent on your federal income tax return. • A dependent parent or other dependent who is disabled, incapable of self-care and lives in your home eight (8) hours a day or

more. • Your disabled spouse.

You may also cover expenses for a qualifying child for whom you have joint custody if you pay over one-half of the child's support and have custody during the year for a longer period than the other parent.

Eligible expenses that you can pay through your DCSA include:

• Wages paid to a baby-sitter in or outside your home. These expenses will not be covered if the person providing care is someone you claim as a dependent or if the baby-sitter does not declare such wages as taxable income.

• Services of a dependent care center, such as an adult or child daycare center, summer day camp or nursery school. In order to claim reimbursement for the cost of the dependent care center, the facility must provide care for more than six (6) individuals (other than those that reside there), receive a fee, payment or grant for providing services and comply with all applicable state and local government laws and regulations.

• Wages paid to a housekeeper for providing care to an eligible dependent. Household services (including the cost to provide the ordinary and usual services needed to maintain your home which will be attributable in part to the care of a qualifying individual) will be covered as long as the person providing the services is not a dependent under the age of nineteen (19) or someone you claim as a dependent for tax purposes.

Ineligible expenses that you may not claim under your DCSA include:

• Under-the-table baby-sitting expenses (that is, payments that a baby-sitter does not declare as taxable income). • Nursing home care expenses. • Respite care expenses. • Private/parochial school expenses or any expenses associated with individual or group instruction (such as art, music, dance or

athletic classes). • Dependent care expenses that exceed $5,000 in a plan year. • Dependent care expenses claimed as a dependent tax credit. • Dependent care expenses for a child over age thirteen (13), who is not handicapped. • Services that enable you or your spouse to participate in leisure time activities. • Services that enable you or your spouse to attend school part-time or to attend educational programs, meetings or seminars. • Services that are primarily medical in nature, such as in-house nursing care. However, these expenses may be covered under the

HCSA. Special Provisions The FSAs work separately. You may not transfer money between the accounts and you may not use money in one account to pay for expenses related to the other account.

FLEXIBLE SPENDING ACCOUNTS – (continued)

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Your participation in the FSAs will not be affected if you are granted a paid leave of absence. Approved deductions will continue and you will continue to be able to reimburse yourself for eligible expenses. If you are on an unpaid leave of absence your contributions will be suspended, but you can still apply for reimbursement. When you return to work, contributions will resume on a pre-tax basis, provided you return to work in the same year in which your leave began. If you return in a subsequent year, you may resume participation in the Plan and make a new election for the remainder of that Plan year.

Reimbursement of FSA Expenses To receive reimbursement from your FSAs, submit a completed FSA claim form along with the acceptable evidence of your expense. Aetna will process all claims and send out reimbursement checks. HCSA reimbursements will be processed semi-monthly on the 15th and 30th, DCSA reimbursements will be processed weekly. Reimbursement checks will be mailed to your home or can be directly deposited.

When submitting claims for reimbursement, you must submit acceptable evidence to support your claim. Acceptable evidence consists of:

• HCSA - the Explanation of Benefits (“EOB”) form you receive from your medical, dental, or vision Claims Administrator (showing your claim was denied or partially paid) or itemized bills from other suppliers for eligible expenses not covered by your health care plans. Balance Due bills are not considered acceptable evidence.

• DCSA - the following information is required on your claim for reimbursement from the DCSA: o Dependent's name. o Provider's name, address and tax identification (or Social Security) number. o The cost and nature of all services performed and a statement as to where they were performed. o Proof of payment. o For services provided outside your home, a statement that your dependent spends at least eight (8) hours a day in your home. o For daycare center services.

You can submit claims at any time, for any amount. In general, claims incurred during one year cannot be submitted for reimbursement during the next year. However, you have a ninety (90) day grace period after the end of the Plan year in which to submit claims incurred during the previous Plan year; provided of course, that you have money remaining in the appropriate account to cover your remaining expenses. You may obtain FSA claim forms by contacting Aetna or through the Aetna website.

A convenient form of reimbursement from the HCSA is the streamlined submission process. If you are covered by the Flowserve Aetna medical or dental plan, you can have many health care expenses reimbursed automatically from your FSA. The reimbursement is automatically processed when you visit a Network medical or dental care provider or fill a Prescription by Mail Order Pharmacy. The provider submits a claim to the Claims Administrator for the services and/or medication you received at which time the Claims Administrator will process the claim and determine your responsibility for any Copay, Deductible, or Coinsurance amount. Then, if you have a sufficient HCSA balance to cover the expense, the Claims Administrator will automatically mail you a check for your out-of-pocket expenses. You must choose this option when you enroll. This option is only available to those who participate in the Aetna medical option. Also, if this option is elected, all claims must be processed through the streamlined submission process.

The Flexible Spending Account AutoDebit feature allows eligible pharmacy expenses to be paid directly out of your FSA. This eliminates the need for you to pay your share of the expenses and wait to be reimbursed from your FSA. At the time your prescription is filled, the pharmacist will submit your claim to Aetna’s pharmacy system. The Aetna system will deduct your copayment or coinsurance from your FSA and pay the pharmacist electronically.

Availability of FSA funds

• HCSA funds can be reimbursed for qualifying health care expenses up to the annual amount you elected at enrollment, even if the full amount of your election has not yet been deducted from your paychecks.

• DCSA funds will be reimbursed only up to the balance available in your DCSA when you file a claim. Any unpaid portion still due you will be processed automatically when (and if) the funds become available in your account. For example, if you file a claim for $150 and you only have $100 in your account, $100 will be paid to you immediately; however, the remaining $50 will be processed when you have contributed an additional $50 to your account.

• You can check your FSA account balance and activity by accessing the HR tab on Flowserve’s Passport, then log on to www.aetnanavigator.com. You will also receive a monthly “Explanation of Benefits” statement when there is activity in your FSA account.

Claims Provisions If a claim is totally or partially denied, you will be given written notice within ninety (90) days after the Claims Administrator receives the claim. The notice will include:

• The specific reason for denial. • Specific reference to the plan provision on which the denial is based.

FLEXIBLE SPENDING ACCOUNTS – (continued)

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• A description of any additional material or information required by the Claims Administrator and an explanation of why such material or information is necessary.

• An explanation of the claims review procedure described below.

You have the right to request a review of a denied claim. The request, including any issues or comments you wish to have considered, must be submitted to the Claims Administrator in writing within sixty (60) days of your receipt of notification of denial. You may also review documents pertinent to your claim. The Claims Administrator, will review the claim and give you a final decision within sixty (60) days (one hundred-twenty (120) days in special circumstances) of receipt of the request for review. The notice of the decision will include specific reasons for the decision and references to the pertinent plan provision(s) on which the decision is based. For more information regarding the appeal of denied claims, please refer to the General Information section of the SPD.

Termination There will be specific rules that apply to FSAs upon termination of employment. These rules are outlined below: Health Care Spending Account You may elect to continue to participate in and make after-tax contributions to your HCSA through COBRA. If you continue to participate in the HCSA through COBRA you may continue to make claims for eligible expenses through the end of the plan year in which you are eligible to participate or your employment ended. Continued participation in the HCSA through COBRA is subject to all terms and conditions of COBRA continuation coverage contained in this SPD. If you do not elect to continue to make contributions to your HCSA through COBRA the amount deposited to your account will stop on the date you are no longer eligible to participate or the date your employment is terminated but no later than March 31st after the Plan year ends.

You may continue to make claims for reimbursements for expenses incurred up to and including the day you are no longer eligible to participate or the date your employment is terminated but not for expenses incurred after that date. Claims for reimbursement of eligible expenses through the end of the Plan year must be submitted for reimbursement by March 31st of the year following the end of the Plan year in which your eligibility to participate or your employment ended.

Funds remaining in your account after all eligible expenses have been claimed for reimbursement will be forfeited according to IRS regulations.

Dependent Care Spending Account The amount deposited to your account will stop the date you are no longer eligible or your employment ends. You may continue to submit claims for reimbursement of eligible Dependent Care expenses incurred at any time prior to the date you are no longer eligible to participate or the date your employment terminates, but not later than March 31st of the following calendar year after the Plan year ends on December 31st. Claims will be reimbursed as long as funds remain in your account. If no claims for reimbursement are submitted by March 31st of the year following the end of the Plan year in which your eligibility to participate or your employment ended your remaining funds will be forfeited according to IRS regulations.

DISABILITY INSURANCE

35

Overview of Disability Insurance An unexpected Sickness or Injury that keeps you out of work can be financially devastating for you and your family. Disability benefits replace part of your income in the event that a non-work-related Injury or Sickness keeps you out of work for an extended period of time. Together, the short-term disability (“STD”) plan and the long-term disability (“LTD”) plan help ensure that you have financial protection when you need it most. Short-Term Disability Benefits STD coverage provides income replacement for up to twenty-six (26) weeks when you are Disabled. Flowserve provides you with company-paid STD insurance coverage equal to 60% of your base pay. All full-time non-union employees, and certain union employees based on their collective bargaining agreement, may purchase additional STD coverage equal to 20% of your base pay, for a total of 80% coverage under STD. Benefits begin on the eighth (8th) continuous day of disability due to Injury or Sickness under the STD plan. The maximum payment period under the STD plan is twenty-six (26) weeks excluding the Elimination Period (Elimination Period of seven (7) calendar days). Long-Term Disability Benefits Flowserve provides you with company-paid coverage for LTD equal to 60% of your base pay to a maximum pay offset by primary social security (if applicable). Coverage is provided as outlined in the chart below:

Age on Date Disability Commences Maximum Period Payable 61 years or Younger 62 years 63 years 64 years 65 years 66 years 67 years 68 years 69 years or older

To your 65th birthday 42 months 36 months 30 months 24 months 21 months 18 months 15 months 12 months

Benefits begin under the LTD Plan after the later of one hundred-eighty (180) days or the date your insured STD benefits end (twenty-six (26) weeks) that is defined as your Elimination Period. Your period of Disability under STD (twenty-six (26) weeks) counts towards the LTD Elimination Period.

When Coverage Begins If you are eligible as of the policy effective date, your insurance will take effect on such date. If you become eligible after the policy effective date, your insurance will be effective on the date you become eligible.

If because of Injury or Sickness, you are not Actively at Work on the date the coverage would otherwise take effect, it will take effect on the day you return to Active Work.

The Elimination Period for STD and LTD begins on the day you become disabled. There is a period of continuous Disability that must be satisfied first before you are eligible to receive benefits. You must be continuously disabled through your Elimination Period.

The Elimination Period for STD is seven (7) calendar days from the date of your Disability.

The Elimination Period for LTD is the later of one hundred-eight (180) days or the date your insured STD benefits end (twenty-six (26) weeks) from the date of your Disability. The period of twenty-six (26) weeks under the STD plan counts toward the LTD Elimination Period.

The Elimination Period can be satisfied if you are working, provided you meet the definition of disability. Tax Option Election It’s important to note that any LTD benefits you receive will be subject to state and/or federal income tax, depending on where you live. Because LTD replaces only a portion of your salary, you should consider whether the additional tax deduction would leave you with too little income on a monthly basis. If so, you can avoid incurring this tax penalty at a time when you can least afford it by paying the income tax on the premium Flowserve pays on your behalf. The income taxes you pay on the premium will vary according to your tax status. This election can only be made during open enrollment and cannot be changed for two years. That means that if you elect in 2005 to pay the income tax on the premium, you are electing to pay the tax for the 2006 and 2007 plan years.

DISABILITY INSURANCE – (continued)

36

Benefit Payments Benefits will not be payable for more than the maximum payment period in any one (1) period of Disability. If the number of days of Disability is not an exact multiple, the amount of benefit for each day will be based on 1/5th of the weekly amount for STD and 1/30th of a month for LTD.

Your STD benefits are based on your basic weekly earnings (base pay or base salary determined on a weekly basis) in effect at the time of your Disability. Your LTD benefits are based on your monthly earnings as of September 30th of the prior year or your Plan entry date for newly eligible employees.

Earnings will equal the wage or salary that a covered employee was receiving from the Employer and includes employee contributions made through a salary reduction agreement with the Employer to an IRC section 401(k), or any other qualified or non-qualified employee retirement plan or deferred compensation agreement and amounts contributed to an employee’s fringe benefits according to a salary reduction arrangement under an IRC Section 125 Plan. Any other compensation such as overtime pay, incentive pay, foreign service allowances for expatriates or inpatriates or the Employer’s contribution on behalf of a covered employee to a Retirement Plan or deferred compensation arrangement or any other extra compensation is not included.

Deductible Sources of Income The Claims Administrator will subtract from your gross Disability payment the following deductible sources of income:

• Any amounts that you receive or will be entitled to receive under: • Workers’ compensation laws. • An occupational disease law. • Any other act or law with similar intent.

Any amounts that you receive or will be entitled to receive as Disability income payments under any:

• State compulsory benefit act or law. • Other group insurance plan. • Governmental retirement system because of your job with your Employer.

Any amounts that you receive or will be entitled to receive as Disability or retirement payments:

• The United States Social Security Act. • The Canada Pension Plan. • The Quebec Pension Plan. • Any similar plan or act.

Any amounts that you:

• Receive as disability payments under your Employer’s Retirement Plan. • Voluntarily elect to receive as retirement payments under your Employer’s Retirement Plan. • Receive as retirement payments when you reach the later of age sixty-two (62) or normal retirement age, as defined in your

Employer’s Retirement Plan. Disability payments under a Retirement Plan are those Benefits, which are paid due to Disability and will not reduce the retirement benefit, which would have been paid if the Disability had not occurred. Retirement payments will be those benefits that will be based on your Employer’s contribution to the Retirement Plan. Disability benefits, which reduce the retirement benefit under the Plan, will also be considered as a retirement benefit. Regardless of how the retirement funds from the Retirement Plan are distributed, the Claims Administrator will consider your and your Employer’s contributions to be distributed simultaneously throughout your lifetime. Amounts received will not include amounts rolled over or transferred to any eligible Retirement Plan. The Claims Administrator will use the definition of eligible Retirement Plan as defined in Section 402 of the Internal Revenue Code including any future amendments, which affect the definition.

• The amount that you receive under Title 46, United States Code Section 688 (The Jones Act). • The amount that you receive under the mandatory portion of any “no-fault” motor vehicle plan. • The amount that you received under a salary continuation or accumulated sick leave plan. • The amount that you receive from a third party (after subtracting attorney’s fees) by judgment, settlement or otherwise.

With the exception of retirement payments, the Claims Administrator will only subtract deductible sources of income which are payable as a result of the same disability, as noted above.

DISABILITY INSURANCE – (continued)

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The Claims Administrator may not reduce your payment by your Social Security retirement income if your Disability begins after age sixty-five (65) and you were already receiving Social Security retirement payments. Income you receive from certain sources will not be subtracted from your gross Disability payments. This includes, but is not limited to, the following:

• 401(k) plans. • Profit sharing plans. • Thrift plans. • Tax sheltered annuities. • Stock ownership plans. • Non-qualified plans of deferred compensation. • Pension plans for partners. • Military pension and disability income plans. • Credit disability insurance. • Franchise disability income plans. • Individual Disability Income Plans. • A Retirement Plan from another employer. • Individual Retirement Accounts (IRA).

Pro-ration of Lump Sum Awards If you receive a lump sum payment from any deductible source of income, the lump sum may be pro-rated on a monthly basis over the time period for which the sum was given. If no time period is stated, the Claims Administrator may use a reasonable one. Work Incentive Benefit A work incentive benefit may be provided if you are Disabled and Gainfully Employed after the end of the Elimination Period, or after a period during which you received benefits under the Disability plans.

The STD work incentive benefit will be equal to 60% or 80% of weekly earnings less 50% of Disability Earnings.

The LTD work incentive benefit will be calculated differently before and after the first twenty-four (24) months of Gainful Employment.

During the first twenty-four (24) months of payments, while working, your monthly payment will not be reduced as long as Disability Earnings plus the gross disability payment will not exceed 100% of Indexed Monthly Earnings. The calculation for your LTD work incentive Benefit for the first twenty-four (24) months is as follows:

1. Add your monthly Disability Earnings to your gross disability payment; and 2. Compare the answer in 1 above to your Indexed Monthly Earnings. If the answer from 1 above is less than or equal to 100% of your Indexed Monthly Earnings, the Claims Administrator will not further reduce your monthly payment. If the answer from 1 above is more than 100% of your Indexed Monthly Earnings, the Claims Administrator will subtract the amount over 100% from your monthly payment.

After twenty-four (24) months of payments, while working, you will receive payments based on the percentage of income you are losing due to your disability. The calculation for your LTD work incentive Benefit after 24 months is as follows:

1. Subtract your Disability Earnings from your Indexed Monthly Earnings. 2. Divide the answer in 1 above by your Indexed Monthly Earnings. This is your percentage of lost earnings. 3. Multiply your monthly payment by the answer in 2 above. This is the amount the Claims Administrator will pay you each month.

The Claims Administrator may require you to send proof of your monthly Disability Earnings at least quarterly. The Claims Administrator will adjust your payment based on your quarterly Disability Earnings. As part of your proof of Disability Earnings, the Claims Administrator can require that you send appropriate financial records which the Claims Administrator believes will be necessary to substantiate your income.

If your Disability Earnings routinely fluctuate widely from month to month, the Claims Administrator may average your Disability Earnings over the most recent three (3) months to determine if your current claim should continue. The Claims Administrator will not terminate your claim unless the average of your Disability Earnings from the last three (3) months exceeds 80% of your Indexed Monthly Earnings.

You are eligible to receive benefits up to the maximum duration as long as your Disability continues according to the terms of the program. Failure to comply with a request to submit to an independent medical examination or failure to show up for scheduled appointments can result in the suspension or cessation of benefits. Further, failure of your Physician to provide necessary medical documentation or to provide proof of Disability may also result in suspension or cessation of benefits.

DISABILITY INSURANCE – (continued)

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Minimum Benefit There is no minimum benefit under the STD plan.

Under the LTD plan, the minimum monthly payment is the greater of $100 or 10% of your gross Disability payment. The Claims Administrator may apply this amount toward an outstanding overpayment.

Other Benefit Increases The Monthly Benefit, after the reductions in the Deductible Sources of Income section as listed on page 36 of this SPD, if any, will not be further reduced for subsequent cost-of-living increases which are paid, payable, or for which there is a right under any deductible source of income.

Disability Recurrence Disability for which benefits were payable ends but recurs due to the same or related causes (less than fourteen (14) days for STD and six (6) months for LTD) after the end of a prior Disability, it will be considered a continuation of the prior Disability. Such recurrent Disability will be subject to the provisions of the program that were in effect at the time the prior Disability began.

A Disability that recurs more than fourteen (14) days for STD and six (6) months for LTD after the end of a prior disability is subject to a new Elimination Period and a maximum period payable as well as any provision changes that are in effect on the date the Disability recurs.

A Disability must recur while your coverage is in force under the program in order to be covered. If you temporarily recover and return to work during your LTD Elimination Period, your Disability will be treated as continuous if you return to work for a period of less than one-half the Elimination Period or ninety (90) days. The days that you are not disabled will not count toward your Elimination Period. If you return to work for a period greater than one-half the Elimination Period, or ninety (90) days, whichever is less, and become disabled again, you will have to begin a new Elimination Period. Any increases you receive in LTD Monthly Earnings during your return to work period will not be taken into consideration when calculating your Monthly Benefit. Exclusions and Limitations The Plan will stop making payments and your claim will end on the earliest of the following:

• During the first twenty-four (24) months of payments, when you are able to work in your regular occupation on a part-time basis but you choose not to.

• After twenty-four (24) months of payments, when you are able to work in any gainful occupation on a part-time basis but you choose not to.

• If you are working and your monthly Disability Earnings exceed 80% of your indexed monthly earnings, the date your earnings exceed 80%.

• The end of the maximum period of payment. • The date you are no longer Disabled under the terms of the Plan, unless you are eligible to receive benefits under the vocational

rehabilitation program. • The date you fail to cooperate or participate in the vocational rehabilitation program. • The date you fail to submit proof of continuing Disability. • After twelve (12) months of payments if you are considered to reside outside the United States or Canada. You will be

considered to reside outside these countries when you have been outside the United States or Canada for a total period of six (6) months or more during any twelve (12) consecutive months of benefits.

• The date you die.

Disabilities due to mental illness have a limited pay period of up twelve (12) months. The Plan will not apply the mental illness limitation to dementia if it is a result of:

• Stroke. • Trauma. • Viral infection. • Alzheimer’s disease. • Other conditions not listed which are not usually treated by a mental health provider or other qualified provider using

psychotherapy, psychotropic drugs, or other similar methods of treatment. • Disabilities, due to a sickness or injury, which are primarily based on self-reported symptoms, and disabilities due to mental

illness have a limited pay period of up to twelve (12) months.

DISABILITY INSURANCE – (continued)

39

The Provider will continue to send payments beyond the 12-month period if you meet one or both of these conditions: 1. If you are confined to a hospital or institution at the end of the 12-month period, the Administrator will send payments during the period of confinement. If you are still disabled upon discharge, payments will be sent for a recovery period of up to 90 days. 2. If reconfinement for at least 14 consecutive days occurs at any time during the recovery period, payments will be sent during that additional confinement and for one additional recovery period up to 90 more days. 3. In addition to item 1, if after the 12 month period for which you have received payments, you continue to be disabled and subsequently become confined to a hospital or institution for at least 14 days in a row, the Administrator will send payments during the period of reconfinement.

The Administrator will not pay beyond the limited pay period as indicated above, or the maximum period of payment, whichever occurs first. The Administrator will not apply the mental illness limitation to dementia if it is a result of stroke, trauma, and/or viral infection.

The Plan will not cover any disabilities caused by, contributed to by, or resulting from your:

• Occupational injury or Sickness. • Cosmetic surgery, except surgery necessary due to an accidental injury incurred while covered under the Plan. • Intentionally self-inflicted injuries. • Active participation in a riot. • Loss of a professional license, occupational license, or certification. • Commission of a crime for which you have been convicted under state or federal law. • Pre-existing condition.

The Plan will not cover a disability due to war, declared, or any act of war.

The Claims Administrator will not pay a benefit for any period of disability during which you are incarcerated.

Disability You are disabled when the Claims Administrator determines that:

• You are limited from performing the material and substantial duties of your regular occupation due to your Injury or Sickness. • You have a 20% or more loss in your indexed monthly earnings due to the same Injury or Sickness. • You are under regular attendance of a Physician.

After the initial twenty-four (24) months of payments, you are thereafter Disabled when the Claims Administrator determines that due to the same Injury or Sickness, you are unable to perform the duties of any gainful occupation for which you are reasonably fitted by education, training or experience.

The loss of a professional or occupational license or certification for legal reasons not due to medical loss of such license or certification will not, in itself, constitute Disability.

The Claims Administrator may require you to be examined by a Physician, other medical practitioner or vocational expert of its choice. The Claims Administrator will pay for this examination. The Claims Administrator can require an examination as often as it is reasonable to do so. The Claims Administrator may also require you to be interviewed by an authorized Claims Administrator representative. Disability Benefits You may be eligible to receive either a Disability or work incentive benefit, while you are Disabled, but you cannot receive more than one of these benefits at the same time.

Benefits are subject to reduction by deductible source of income, and/or other Disability income that an employee may receive.

A benefit is paid for each period of Disability, which continues after the Elimination Period. The benefit will not be payable during the Elimination Period nor beyond the maximum period payable. Failure to comply with a request to submit to an independent medical examination or failure to show up for scheduled appointments can result in the suspension or cessation of benefits. Further failure of your Physician to provide necessary medical documentation for proof of Disability may also result in suspension or cessation of benefits.

If a benefit is payable for less than a normal period, the benefit will be prorated for each day of Disability.

Services Available While Disabled If you are Disabled and eligible to receive Disability benefits under the LTD policy, the Claims Administrator will evaluate you for eligibility to receive any of the other services. The Claims Administrator will make the final determination for any of the following benefits or services.

DISABILITY INSURANCE – (continued)

40

Work Site Modification Benefit A work site modification might be what is needed to allow you to perform the material and substantial duties of your regular occupation with your Employer. One of the Claims Administrator’s designated professionals will assist you and your Employer to identify a modification you and your Employer agree is likely to help you remain at work or return to work. This agreement will be in writing and must be signed by you, your Employer and the Claims Administrator.

When this occurs, the Claims Administrator will reimburse your Employer for the cost of the modification, up to the greater of $1,500 or the equivalent of two (2) months of your Monthly Benefit. This benefit is available to you on a one time only basis

Vocational Rehabilitation Service The Claims Administrator has a vocational rehabilitation program available to assist you to return to work.

In addition to referrals made to the rehabilitation program by our claims paying personnel, you may request to have your claim file reviewed by one of the Claims Administrator’s rehabilitation professionals. As your file is reviewed, medical and vocational information will be analyzed to determine if rehabilitation services might help you return to Gainful Employment. Once the initial review is completed, the Claims Administrator may elect to offer you a return-to-work program. The return-to-work program may include, but is not limited to, the following services:

• Coordination with your Employer to assist you to return to work. • Evaluation of adaptive equipment to allow you to return to work. • Vocational evaluation to determine how your Disability may impact your employment options. • Job placement services. • Resume preparation. • Job seeking skills training. • Retraining for a new occupation.

If the Claims Administrator determines that you are eligible to participate in the Vocational Rehabilitation program, you must participate in order to receive Disability benefits. The Claims Administrator will make the final determination of your eligibility for participation in the program.

Social Security Assistance In order to be eligible for assistance from the Claims Administrator’s Social Security claimant advocacy program, you must be receiving monthly payments from the Claims Administrator. The Claims Administrator can provide expert advice regarding your claim and assist you with your application or appeal.

Receiving Social Security Benefits may enable:

• You to receive Medicare after twenty-four (24) months of Disability payments. • You to protect your retirement benefits. • Your family to be eligible for Social Security Benefits.

We can assist you in obtaining Social Security Disability Benefits by:

• Helping you find appropriate legal representation. • Obtaining medical and vocational evidence. • Reimbursing pre-approved case management expenses.

Pre-existing Condition and Other Payment Restrictions on Long Term Disability Benefits The Claims Administrator will not cover any Disabilities under the Long Term Disability plan caused by a Pre-existing Condition. You have a Pre-existing Condition when you apply for coverage when you first become eligible if you received medical treatment, consultation, care or services including diagnostic measures, or took prescribed drugs or medicines in the three (3) months just prior to your effective date of coverage and the Disability begins in the first twelve (12) months after your effective date of coverage.

Disability benefits are paid for the actual time lost from work each scheduled workday. Disability benefits are not paid for time lost during a scheduled vacation or an authorized leave of absence. In no event will the calculation of the hours to be paid for Disability benefits in excess of the number of hours in your normal work schedule.

You will receive credit toward satisfaction of the Pre-existing Condition time periods under the policy for the time you were covered under the Prior Policy. If, after applying the time covered under the Prior Policy, your Disability is due to a Pre-existing Condition, benefits will be the lesser of the benefits payable under the policy or the benefits that would have been payable under the prior policy if it had remained in force, taking into account the Pre-existing Condition provision, if any, of the Prior Policy.

DISABILITY INSURANCE – (continued)

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Termination of Coverage Your coverage under the policy or a Plan ends on the earliest of:

• The date the policy or Plan is cancelled. • The date you are no longer in an eligible group. • The date your eligible group is no longer covered. • The last day you are in active employment, except as provided under the covered layoff or leave of absence provision. • The last day of the period for which you made any required contributions.

The Claims Administrator will provide coverage for a payable claim, which occurs while you are covered under the Plan. Contract Replacement If you were insured under the prior policy on the day before the effective date of the policy, you may be covered by the policy even if you fail to satisfy the Actively at Work requirement. You will receive credit for time covered under the prior policy. This credit will be applied toward satisfaction of service waiting periods, Elimination Periods or any other periods of the same or similar provisions under the policy. If you do not satisfy the Actively at Work requirement, you may still be eligible for benefits under the policy. The benefits payable under the policy will be the benefit, which would have been payable under the terms of the prior policy if it had remained in force. The benefits payable under the policy will be reduced by any benefits paid under the prior policy for the same disability.

Benefits will end on the earliest of the date that benefits would terminate in accordance with the provisions of the policy or under the prior policy if it had remained in force.

The prior policy is the group disability insurance policy issued to Flowserve, and whose coverage terminated as of the effective date of the policy.

If an employee became disabled before the effective date of this policy, benefits should be filed with the prior carrier.

Assignment of Benefits Your benefits will not be assignable, which means that you may not transfer your benefits to anyone else. Conversion Options If you terminate employment with Flowserve, your coverage under the Plan will end. You may be eligible to purchase insurance under the group conversion policy. To be eligible, you must have been insured under Flowserve’s group plan for at least twelve (12) consecutive months. The Claims Administrator will consider the amount of time you were insured under the Plan and the Plan it replaced, if any.

Upon your termination you will receive conversion information from the Plan Administrator. To apply for insurance under the conversion policy, you must pay the first quarterly premium within thirty-one (31) days after receipt.

The Claims Administrator will determine the coverage you will have under the conversion policy. The conversion policy may not be the same coverage you are offered under this policy. You will not be eligible to apply for coverage under the group conversion policy if:

• You are or become insured under another group LTD plan within thirty-one (31) days after your employment ends. • You are Disabled under the terms of the policy. • You recover from a Disability and do not return to work for Flowserve. • You are on a leave of absence. • Your coverage under the policy ends for any of the following reasons:

o The policy is canceled. o The policy is changed to exclude the group of employees to which you belong. o You are no longer in an eligible group. o You end your working career or retire and receive payment from any Employer’s Retirement Plan. o You fail to pay the required premium under the policy.

Death While on Disability When the Claims Administrator receives proof that you have died while on Disability, the Claims Administrator will pay your eligible survivor or your estate a lump sum benefit equal to three (3) months of your gross Disability payment if, on the date of your death your Disability had continued for one hundred-eighty (180) or more consecutive days, and you were receiving or were entitled to receive payments under the Plan.

DISABILITY INSURANCE – (continued)

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Claim Provisions Short-Term Disability Claim Procedure To receive benefits, you must be Disabled during the seven (7) day Elimination Period and meet any eligibility requirements that may apply. When your Disability is likely to continue beyond the Elimination Period of the STD Plan, follow these steps:

• The employee should provide their Physician with a copy of the signed medical authorization card. This card authorizes the attending Physician to provide the Claims Administrator with information regarding the employee’s disabling medical condition. If the employee is incapacitated, a legally authorized representative can sign the medical authorization card.

• An employee who has misplaced the medical authorization card, may expedite the claim by signing a standard medical release form at the attending Physician’s office rather than waiting for the medical authorization card to be mailed by the Claims Administrator.

• The employee should phone 1-877-FLS-FLEX (1-877-357-3539) between the hours of 8:00 A.M. and 8:00 P.M., Eastern Time, Monday through Friday to file a claim. If the employee is unable to call, a family member can call to report the STD claim.

As indicated on the medical authorization card, the employee is required to provide the Claims Administrator’s claim intake specialist the following information:

• Company’s name and policy number (on your reference card). • Name, address, and telephone number. • Social Security Number. • Date of birth. • Employer, address, and telephone number. • Supervisor’s name and telephone number. • Physician’s name, address, and telephone number. • A description of the employee’s Injury or Sickness. • Your last day worked and your first day absent from work due to this condition. • A description of the employee’s occupation.

ALL CLAIMS MUST BE REPORTED VIA TELEPHONE USING THIS PROCESS.

When the Claims Administrator receives a claim via telephone, the Claims Administrator will assign a claim number and advise the employee of that number. Please use this claim number whenever contacting the Claims Administrator regarding the claim.

Within twenty-four (24) hours after the Claims Administrator’s claim department receives notification of the claim, the claim intake specialist will contact the Physician and the appropriate Flowserve representative to assist in the initial evaluation process. The claim intake specialist will determine the appropriate disability management pathway based on the severity of the claim and the information that is needed to adjudicate the claim.

Upon assignment to the appropriate claim pathway, a decision by the disability specialist to pay, pend or deny the claim is made within five business days of receipt of the claim. If the initial medical information provided does not support the claimed period of Disability, the Claims Administrator may need to obtain additional information before making an initial decision on the claim. You will be afforded twenty-one (21) calendar days to provide the additional medical information to support your initial claim for disability benefits. In an effort to avoid delays, the Claims Administrator will obtain this via telephone or fax whenever possible.

If a claim is approved for payment, the disability specialist will issue a duration advice to pay statement directly to Flowserve and advise the claimant via written correspondence that their claim has been approved and what the initial approval period is.

If the claim is denied for payment, notice will be sent to the claimant stating the specific reason(s) for denial. A notice will also be sent to Flowserve informing them of the denial. Please note that due to Privacy Act laws, the Claims Administrator cannot disclose any medical information to Flowserve that pertains to the claimant.

Flowserve will be notified of all claim closures by copy of correspondence to the employee or by notice of denial.

Continued Claim Processing After benefits begin, additional medical information may be necessary to support continued Disability and to verify that the employee is under the Appropriate and Regular Care and attendance of a Physician. Requests of this nature will only be as often as the Claims Administrator feels reasonably necessary. If so, this will be at your expense and must be received within thirty (30) days of the request from the Claims Administrator.

DISABILITY INSURANCE – (continued)

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The claimant's condition and the Physician's prognosis determine how often additional information is needed and if the Claims Administrator will utilize any additional resources such as nurses, staff Physicians, rehabilitation specialists or independent medical examinations.

LTD Claim Filing Procedures Since the Claims Administrator is both the STD and LTD carrier, whenever possible, the Claims Administrator will try to make the conversion to LTD as seamless as possible. There will be instances where you may be required to provide some additional information.

When you are approaching the end of the twenty-six (26) week period under the STD Plan, the Claims Administrator will be in contact with you regarding the status of your claim continuing to LTD. If for some reason your LTD claim is not a seamless transition, the Claims Administrator will contact you and you will have to furnish the Claims Administrator with written proof of loss within ninety (90) days after the end of your LTD Elimination Period. If it is not possible to give the Claims Administrator written proof within ninety (90) days, it must be given no later than one year after the time proof is otherwise required, except in the absence of legal capacity. Required Authorization and Documentation You will be required to supply proof that you have applied for other deductible income benefits such as workers’ compensation or social security disability benefits, when applicable.

You will be required to notify the Claims Administrator when you receive or will be awarded other deductible income benefits. You must tell the Claims Administrator the nature of the income benefit, the amount received, the period to which the benefit applies, and the duration of the benefit if it is being paid in installments.

Time and Payment of Claim As soon as the Claims Administrator has all necessary substantiating documentation for your Disability claim, your benefit will be paid on a monthly basis, so long as you continue to qualify for it under the LTD Plan. Your benefits for STD will be paid through Flowserve’s payroll.

Claim Overpayment A claim overpayment can occur when you receive a retroactive payment from a deductible source of income, when the Claims Administrator inadvertently makes an error in the calculation of your claim or if fraud occurs.

In an overpayment situation, the Claims Administrator determines the method by which the repayment is made.

Physical Examinations The Claims Administrator may have a Physician of their choice examine you at their expense, as often as is reasonably necessary while your claim is pending or while benefit payments are being paid.

If you do not provide the Claims Administrator with any requested Physician statements, your Disability benefits will be terminated as soon as administratively possible.

Right of Reimbursement and Subrogation When any claim payment is made, Flowserve and the Claims Administrator reserves any and all rights to subrogation and/or reimbursement to the fullest extent allowed by statute and customary practice. Any party to this contract will not perform any act that will prejudice such rights without prior agreement.

Flowserve will bear any expenses associated with the pursuit of subrogation or recovery.

Denial of Claim Any denial of a claim for benefits will be provided by the Claims Administrator and consist of a written explanation which will include the specific reasons for the denial, reference to the pertinent plan provisions upon which the denial is based, a description of any additional information you might be required to provide and an explanation of why it is needed, and an explanation of the plan’s claim review procedure. You, your beneficiary (when an appropriate claimant), or a duly authorized representative may appeal any denial of a claim for benefits by filing a written request for a full and fair review to the Claims Administrator. In connection with such a request, documents pertinent to the administration of the plan may be reviewed, and comments and issues outlining the basis of the appeal may be submitted in writing. You may have representation throughout the review procedure. A request for a review must be filed by one hundred-eighty (180) days after receipt of the written notice of denial of a claim. The full and fair review will be held and a decision rendered by the Claims Administrator no longer than forty-five (45) days after receipt of the request for the review. Failure to pursue this internal claims review process will act as a bar to legal action.

If there are special circumstances, the decision will be made as soon as possible, but not later than ninety (90) days after receipt of the request for the review. If such an extension of time is needed, you will be notified in writing prior to the beginning of the time extension

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period. After the Claims Administrator’s review, their decision will be in writing and will include specific reasons for the decision, as well as specific references to the pertinent plan provisions on which the decision is based. Statements on the Application Any statement made by Flowserve or you, except for fraudulent misstatements, is considered a representation and not a warranty. A copy of the statement will be provided to Flowserve or you, whoever made the statement. No statement of Flowserve will be used to void the policy after it has been in force for two (2) years. No statement of yours will be used in defense of a claim after you have been insured for two (2) years, except for fraudulent misstatements.

Legal Actions No action may be commenced or maintained against the Plan, Plan Sponsor, Plan Administrator or Claims Administrator to recover any benefits within ninety (90) days after the Plan Administrator’s final decision or review or more than three (3) years after proof of disability has been filed, unless the law in the state where you live allows a longer period of time.

The Claims Administrator has the right to inspect all of the Employer's records on the policy at any reasonable time. This right will extend until the later of two (2) years after termination of the policy or all claims under the policy have been settled. The policy is in Flowserve’s possession and may be inspected by you at any time during normal business hours at their office. The policy is not in lieu of and does not affect any requirements for coverage by workers' compensation insurance.

Conformity with State Statutes If any provision of the policy conflicts with the statutes of the state in which the policy was issued or delivered, it is automatically changed to meet the minimum requirements of the statute.

Fraud Any person who knowingly and with intent to defraud any insurance company or other person files an application for insurance or statement of claim containing any material false information or conceals for the purpose of misleading information concerning any fact material thereto, commits a fraudulent insurance act, which is a crime and subject such person to criminal and civil penalties. Such penalties include, but will not be limited to fines, denial or termination of insurance benefits, recovery of any amounts paid, civil damages, criminal prosecution and confinement in state prison.

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Overview of Life and Accidental Death and Dismemberment Insurance Protecting you and your family from the unexpected is an important part of Flowserve Flex. That is why Flowserve provides you with company-paid basic life insurance as of your date of hire. In addition, you have the option of purchasing additional life insurance coverage for yourself as well as life insurance coverage for your spouse and eligible dependent children. Additional life insurance will be deducted from your paycheck on an after tax basis. Accidental Death and Dismemberment (“AD&D”) will be deducted from your paycheck on a pre-tax basis. Employee Life Insurance Flowserve provides you with company-paid life insurance equal to 1½ times your Annual Base Pay. You may also purchase life insurance in amounts of $10,000, $50,000, or in increments equal to two, three, four, five, six, or seven times your Annual Base Pay rounded to the nearest $1,000. Life insurance is subject to a minimum of $10,000 and a total maximum of $1,250,000.

Flowserve provides credits for 1 1/2 times your annual base pay. Any amount in excess of the credits provided by Flowserve will be deemed contributory life insurance.

Executive Life Insurance Certain executives are eligible for executive life insurance benefits. If you are designated by Flowserve as an eligible executive, you will receive company-paid life insurance equal to 2½ times your Annual Base Pay. You may purchase life insurance in amounts equal to three, four, five, six, seven, or eight times your Annual Base Pay, rounded to the next higher $1,000. Life insurance is subject to a minimum of one times Annual Base Pay, and a total combined maximum of $1,500,000. You will not receive a credit if you elect coverage less than 2½ times your Annual Base Pay.

Dependent Life Insurance Flowserve provides you with the opportunity to purchase life insurance for your spouse and/or your eligible dependent children. Spouse coverage is available in amounts of $5,000, $10,000 or in increments equal to 3/4, 1, 1 1/2, 2 or 2 1/2 times your annual base pay subject to a maximum of $500,000. Coverage for eligible dependent children is available in $5,000 and $10,000 increments. Upon the birth of a child, coverage is only payable for 10% of the total amount elected until the child has attained two (2) weeks of age.

Accidental Death and Dismemberment (AD&D) Insurance Flowserve provides you with the opportunity to purchase AD&D insurance coverage for you and your eligible dependent. Coverage is available in amounts of $10,000, $50,000, or in increments equal to two, four, six, eight or ten times your Annual Base Pay. If you elect coverage for yourself, you may also elect coverage for your eligible dependents. The benefit will pay 60% of your Principal Sum for your spouse and 20% of your Principal Sum for each insured child. A person may not be covered as both an employee and a dependent under either plan. If you qualify as both then you may be insured only as an employee and not as a dependent. Evidence of Insurability You and/or your spouse will be required to provide evidence of insurability if any of the following apply:

• You are already participating in the Plan and you want to increase your or your spouse’s life insurance election by more than one (1) level or increment.

• You and/or your spouse have previously waived coverage under the policy. • The amount of coverage you elect for yourself exceeds $350,000 ($500,000 for Executive Life Insurance). • The amount of coverage you elect for your spouse exceeds $50,000. • During a period of initial eligibility, you enroll for an amount greater than the guaranteed issue amount.

In order for a spouse to receive the guaranteed issue amount, he/she must not be: (1) receiving or entitled to receive any disability income due to sickness or injury; or (2) confined to home under the care of a physician for sickness or injury; or (3) receiving inpatient hospital care; or (4) receiving care in a hospice, intermediate care facility, or long-term care facility.

If evidence of insurability is required, the appropriate forms, which you will be required to complete for increased coverage will automatically be sent to you from the Plan Administrator.

Conditions and Effective Date Insurance amounts that do not require evidence of insurability will take effect as follows:

• On the date one becomes eligible, if request is made on or before such date; or • On the date of request, if the request is made within the initial, designated enrollment period: or • January 1 immediately following a request made during a period of annual enrollment. • Amounts of insurance which require evidence of insurability will not become effective until the later of the effective date or the

date such evidence is found satisfactory by the insurance company. The insurance company will require evidence of insurability as stated above.

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If a new hire or newly eligible employee does not enroll for coverage, they will be insured for 1 ½ times their Annual Base Pay (2 ½ times their Annual Base Pay for executives), effective on their eligibility date. If you are absent from work due to Injury or Sickness, on the last workday prior to your effective date, the effective date will be delayed until 12:01 A.M. of the day following your return to Active Work for a period of one (1) day. If an eligible dependent is hospitalized or confined because of illness or disease on the date on which he or she would become insured, his/her effective date will be delayed until 12:01 A.M. of the day after the hospitalization or confinement ends. Changes in Amount of Insurance A change in the amount of your or your eligible dependents’ insurance due to a change in benefits will be effective at 12:01 A.M. of the day following the date of change in benefits. However, if you are absent from work on that date due to Injury or Sickness, the change will be delayed until 12:01 A.M. of the day following your return to Active Work. If an eligible dependent is hospitalized or confined because of illness or disease on that date, the change in insurance for that eligible dependent will be delayed until 12:01 A.M. of the first day after the hospitalization or confinement ends.

Life Insurance Provisions If you should die while insured under the policy, the Claims Administrator will pay the amount of life insurance in force on your life at the time of death reduced by any amount previously released by an accelerated benefit payment. Payment will be made in one lump sum, or any other method found acceptable to the insurance company and the beneficiary (-ies) you designate. Payment will be made upon the Claims Administrator’s receipt of proof of your death.

Benefits upon your death will be payable in accordance with the beneficiary designation in effect at the time of payment. If no such designation is in effect at that time, the benefits will be paid to the surviving person or persons in the first of the following classes of successive preference beneficiaries which survives the insured: (1) The insured’s lawful spouse, (2) children, including legally adopted children, (3) parents, (4) brothers and sisters, or (5) the insured’s estate.

If an insured eligible dependent of yours should die, the amount of life insurance in force on his/her life at the time of death will be payable. Payment will be made to you in one sum. Payment will be made upon the Claims Administrator’s receipt of proof of the eligible dependent’s death.

If you should die before receiving the insurance proceeds from the death of an eligible dependent, the Claims Administrator will pay the proceeds to your estate. Accelerated Benefit Payment (Applicable only to Covered Persons with at least $10,000 of Life Insurance under this Plan) If you or an insured eligible dependent is diagnosed by a Physician as terminally ill with a life expectancy of twelve (12) months or less, you may request an accelerated benefit payment. You may request a partial accelerated benefit or a full-accelerated benefit.

If you request a partial accelerated benefit, the remaining death benefit (the amount of your insurance minus the amount you accelerate) must be at least $25,000. If you request a partial accelerated benefit you may reapply for an accelerated payment of the remaining amount of insurance at any time, though you may have to provide further evidence of your eligibility for the benefit.

The accelerated benefit that will be paid to you will be the death benefit you choose to accelerate times an accelerated death benefit factor. This factor is based on your age, gender and certain assumptions affecting your coverage such as expected future premiums and your life expectancy. In general, up to 85% – 95% of your amount of insurance will be payable as the full benefit (no remaining life insurance will be available), though your specific situation may affect these figures.

To accelerate your death benefit, the following conditions must be met: • Your insurance must be in force and all premiums due must be fully paid. • You must apply on a form satisfactory to the Claims Administrator (forms will be provided). • You must give evidence that the covered person’s life expectancy, because of injury or sickness, is twelve (12) months or less.

This must include certification by a Physician. • You must be the sole owner of your certificate. • Your insurance must not have an irrevocable beneficiary.

The Claims Administrator may require that the covered person be medically examined at the Claims Administrator’s expense to verify the covered person’s medical condition.

If a partial accelerated benefit is chosen, coverage will remain in force and premiums will be reduced accordingly. The remaining amount of insurance will be the full amount of insurance minus the amount of insurance that was accelerated.

If a full accelerated benefit is chosen, coverage will cease for the covered person. If your coverage ceases, any insured eligible dependent you have can convert his/her insurance to an individual policy as described in the Conversion Privilege section on page 47.

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Suicide Exclusion (Applicable to Contributory Life Insurance Only) If you die, or your spouse dies as the result of suicide or any attempt at suicide, while sane or insane, within two (2) years of the effective date of coverage, the benefit payment made by the Claims Administrator will be limited to an amount equal to the premiums actually paid for your contributory life insurance or spouse life insurance. With respect to any increase in the amount of contributory life insurance or spouse life insurance, the Claims Administrator will consider the two (2) year period to begin as of the effective date of such increase, for purposes of that increase only.

The return of life insurance premium (contributory life insurance for employee) will be in lieu of any benefits otherwise payable under the policy for you or your spouse.

This exclusion will not apply to non-contributory life insurance coverage or to child life insurance, which will be paid in full.

Waiver of Premium Life insurance coverage for you and your eligible dependents may be continued without payment of premium if you are under the age of 60 and become totally and permanently disabled for six months or more while insured under the group policy, provided you meet the policy definition for totally and permanently disabled and have provided the insurance company with satisfactory proof of your disability. Coverage may continue until the earlier of your 65th birthday or the date you recover. The amount of insurance continued will be the amount of insurance then available under the policy for an insured of your age and eligible class, or, if less, the amount for which you were insured immediately prior to the date your disability began. The amount of insurance for any of your dependents insured under the plan will be the amount of dependent insurance in force immediately prior to the date your disability began.

The insurer will periodically require additional proof satisfactory to them that you continue to be totally and permanently disabled. The insurer may also require that you submit to one or more medical examinations at the insurer’s expense, but not more often than once every three months. Limitations Insurance will not be continued if your disability results from intentionally self-inflicted injury, participation in or any attempt to commit a felony, or war or act of war, whether declared of undeclared. Rights After the Waiver of Premium Benefit Ends

If you are eligible for coverage under the group policy, your insurance may be continued if required premiums are paid. The first premium payment must be made within 31 days of the date the waiver of premium benefits ends. If you are no longer eligible for coverage under the group policy, you may convert coverage to an individual policy according to the terms of the conversion privilege of the policy as described below. Conversion Privilege

A. If the insurance, or any portion of it, for you and/or your eligible dependent terminates because of your termination of membership in a class eligible for insurance under the policy, this section A will apply. This section A will also apply for eligible dependents who lose coverage due to your death and upon ceasing to be an eligible dependent. You or your eligible dependent is entitled to have an individual policy of life insurance issued to them, subject to the following conditions:

• The individual policy will not contain any supplemental benefits, including disability benefits or accelerated death benefits.

• No evidence of insurability is needed. • The amount of insurance may be the same as or less than the amount terminated, but it cannot exceed the amount

terminated. • The individual policy will be any type of individual policy customarily issued by the insurer for purposes of conversion,

except term insurance. • Written application and the first premium payment made to the Claims Administrator at their home office within thirty-

one (31) days after the termination. • The premium for the individual policy will be based on the plan of insurance, your age, and the class of risk to which the

insured belongs on the date of conversion.

B. If the insurance for you and/or your eligible dependent terminates because the policy terminates, this section B will apply. It will also apply if the policy is amended to reduce or terminate the insurance for you or your insured dependent. If continuously insured under the policy for at least five (5) years before this termination date, you and/or your eligible dependent will be entitled to have an individual policy of life insurance. The same conditions specified in section A above will apply. The only exception is that the amount of the individual policy will not exceed the smaller of:

• The amount terminated under the policy. (This amount will be reduced by the amount of any life insurance for which one is or becomes eligible under any group policy issued or reinstated within thirty-one (31) days.); or

• $10,000.

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C. If a person dies during the 31-day period within which he or she would have been entitled to have an individual policy issued and

before any such policy becomes effective, the amount of life insurance to which he or she would have been entitled under the individual policy will be payable as a claim. The claim will be paid under the group policy, whether or not the application or payment of the first premium for the individual policy has been made.

D. The exercise of this Conversion Privilege will be in lieu of all other benefits under the policy. In the case of a dependent Child,

the privilege may be by the insured employee, an insured dependent of legal capacity, or the insured dependent’s lawful guardian.

Accidental Death and Dismemberment (AD&D) Insurance Provisions If you are eligible for an elect coverage under the AD&D insurance plan, and a covered injury results in any of the following losses to you or your insured eligible dependent, the Claims Administrator will pay in one sum the indicated percentage of the Principal Sum for:

Loss of Life 100% Loss of Entire Sight of One Eye 50% Loss of Both Hands or Both Feet 100% Loss of Speech 50% Loss of Entire Sight of Both Eyes 100% Loss of Hearing in Both Ears 50% Loss of One Arm or One Leg 70% Loss of Thumb and Index Finger of Same Hand 25% Loss of One Hand or One Foot 50% Note: Loss must occur within three hundred sixty-five (365) days of the date of the Accident.

Loss as used above with reference to hand or foot means the actual and complete severance through or above the wrist or ankle joint; as used with reference to arm or leg means the actual and complete severance through or above the elbow or knee; as used with sight, speech, or hearing means the entire and irrevocable loss of sight, speech, or hearing which cannot be corrected by medical or surgical treatment or by artificial means; and as used with respect to thumb and index finger means the actual and complete severance of both the thumb and index finger at or above the metacarpophalangeal joints.

A benefit is not payable for both loss of thumb and index finger of same hand and the loss of one hand for injury to the same hand as the result of any one Accident. A benefit is not payable for both loss of hand or foot and the loss of arm or leg for injury to the same arm or leg as the result of any one Accident.

In no event will the benefits payable under this provision due to the same Accident exceed your applicable Principal Sum.

If more than one loss results from any one Accident, the Claims Administrator will only pay the one largest applicable benefit. Continuation of Medical Coverage Funding Benefit Provision If loss of life benefits are payable as the result of a covered injury to you, the insurer will pay an additional benefit to your family members insured on the date of the Accident, for the continuation of medical coverage funding. The benefit will be paid according to one of the following provisions:

• Benefit will be Paid in Three Equal Annual Payments. The Claims Administrator will pay a benefit for continuation of the insured person's medical coverage pursuant to applicable provision of COBRA. This benefit will be paid in three (3) equal annual payments. Each payment will equal the lesser of 3% of the insured's Principal Sum or $3,000. However, before the Claims Administrator makes the first payment and before the Claims Administrator makes each of the next two (2) payments, the Claims Administrator must receive proof that the payment will be used for continuation of the insured's medical coverage pursuant to COBRA. Payment will be made immediately upon the Claims Administrator’s receipt of such proof. If proof is not provided for a particular payment, the Claims Administrator will make neither that annual payment nor the subsequent annual payment(s). Payments will be made to the insured person who is the insured's spouse on the date of the Accident. If there is no such insured person, payments will be made to or on behalf of the insured's eligible dependent children who will be insured persons on that date.

• Benefit will be Paid in a Single Lump Sum Payment.

If proof for the first payment under the bullet above is not provided, the Claims Administrator will pay to the insured's beneficiary one payment equal to the lesser of 3% of the insured’s Principal Sum or $3,000. Payment will be made at the end of the period permitted by COBRA for election of continuation of medical coverage. No other payments will then be made pursuant to this provision.

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Exposure and Disappearance • Any loss that is due to exposure will be covered as if it were due to injury, provided such loss results from accidental exposure to

the elements occurring while you and/or your eligible dependent are covered under the insurance policy. • The Claims Administrator will presume that an insured suffered loss of life due to an injury, if:

o Such insured is riding in a conveyance that is involved in a covered Accident, and o The conveyance is wrecked, sinks, or disappears as a result of such Accident, and o The insured’s body is not found within one (1) year of the Accident, and o Coverage was in force for the insured at the time of the Accident.

Exclusions The insurance policy will not cover loss caused by, contributed to, or resulting from:

• Suicide or attempted suicide while sane, or self-destruction or attempted self-destruction while insane. • Declared or undeclared war or an act of either. • Sickness or disease, except pyogenic infections caused by an accidental cut or wound.

Nor will the insurance policy cover loss caused by, contributed to, or resulting from injury sustained while:

• Serving in the armed forces of any country. • Riding as a pilot or crewmember in any vehicle or device for aerial navigation. • Riding as a passenger in any aircraft owned, operated or leased by or on behalf of Flowserve unless a specific written agreement

has been obtained from the Claims Administrator to provide such coverage. • Voluntarily using any drug, narcotic or controlled substance unless as prescribed by a Licensed Physician.

Air Travel Coverage The AD&D insurance policy provides air travel coverage while riding as a passenger in any aircraft being used for transportation of passengers. Air travel coverage will not include riding as a pilot or crewmember in any aircraft.

Coverage under the insurance policy will not include riding in an aircraft owned, operated or leased by or on behalf of the policyholder. Newborn Children If a Child is born to a covered person who has not elected dependent AD&D coverage, such Child will be insured from the moment of birth. The newborn Child will be an insured person for sixty (60) days. The newborn Child will then cease to be insured unless you contact the Plan Administrator within sixty (60) days of birth and pay the additional premium for coverage.

The above coverage will also be extended to children placed for adoption, legally adopted children, stepchildren, and children who are recognized under a Qualified Medical Child Support Order (QMSCO) as having a right to enrollment under the plan or a national medical support notice deemed to be a QMSCO, as of the date they become financially dependent on employee for support, provided they are an eligible dependent Child and the employee applies within 60 days after the date the Child becomes financially dependent on the employee and that the employee pays the additional premium for coverage. Newlywed At your marriage, if you are a covered person and had not previously elected AD&D dependent coverage, your new spouse will automatically become insured. Such spouse will be insured for sixty (60) days. The spouse will then cease to be insured unless you contact the Plan Administrator within sixty (60) days from the date of your wedding and pay the additional premium for coverage. Individual Terminations AD&D insurance for you and your eligible dependent will cease on the earliest of the following dates:

• The date the insurance policy is terminated or amended such that the insured is no longer eligible; or • The premium due date that falls on or follows the date you cease to be associated with Flowserve in a capacity that makes you

eligible for this insurance or your dependent ceases to be eligible. • 31 days after the due date of any premium contribution which is not paid. • The last day for which premium contributions have been paid following an employee’s written request to cease participation

under this policy. • The date the insured becomes a full-time member of the armed forces of any country (excluding service of 18 months or less for

a military leave of absence for an employee, or 31 days or less for service of a dependent). • The date a dependent no longer meets the eligibility requirements.

Termination will not affect a covered loss that began before the date of termination.

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Coma Benefit When a covered injury results in an insured lapsing into a Coma (as defined below), the Claims Administrator will pay a monthly AD&D Coma benefit if the Coma occurs within three (3) days of the Accident and continues for six (6) successive months and is diagnosed by a competent medical authority to be permanent, complete and irreversible.

The Coma benefit is equal to 1% of the Principal Sum. The benefit is payable monthly beginning with the seventh (7th) continuous month that the insured remains in a Coma. The Coma benefit ceases after a maximum of one hundred (100) months provided such Coma continues.

However, the maximum benefit payable will not exceed the Principal Sum for the insured whose injury is the basis for the claim.

If the insured dies during a period for which benefits are payable and before an amount equal to the insured's Principal Sum has been paid, the remaining unpaid benefit will be paid in a single lump-sum. In no event will the benefits payable under this provision and any other provision under this policy due to the same Accident exceed the insured’s Principal Sum.

Coma means a state of complete loss of consciousness from which one cannot be aroused and there is no evidence of response to stimulation.

Day Care Benefit If AD&D loss of life benefits are payable as the result of a covered injury to you or your covered spouse and your eligible dependent children are covered under the insurance policy on the date of the accident, one of the following benefits will also be payable:

• The Claims Administrator will pay a day care benefit for each of the insured eligible dependent children who is under age seven (7), and is attending a Day Care Center (as defined below) or will be attending a Day Care Center within one (1) year after you or your insured spouse’s death.

The day care benefit will be payable each year for each eligible dependent Child who continues to be enrolled in a Day Care Center following you or your spouse's death. The benefit payable for each year is the lesser of: $3,000; or 3% of you or your insured spouse’s Principal Sum, whose death is the basis of the claim. It is payable until the earlier of the Child attaining age seven (7) or a maximum of four (4) day care benefit payments have been made.

• If there are no eligible dependent children who qualify above, the Claims Administrator will pay in one lump sum 3% of the

applicable Principal Sum, subject to a maximum of $3,000, to you, if living; otherwise, the benefit is paid to your beneficiary.

Payments will be made in accordance with the payment of claims provision immediately upon the Claims Administrator receiving satisfactory proof that the requirements above have been met.

Day Care Center means a center of child care which:

• Holds a license as a Day Care Center, or is operated by a licensed day care provider, if required. • If licensing is not required, operates primarily for the care of children on a daily basis for twelve (12) months a year. • Is operated in a private home, school or other facility. • A charge is customarily made for the care provided.

Education Benefit The Claims Administrator will pay an education benefit at the time of your death for each of your eligible dependent children if AD&D loss of life benefits are payable under the insurance policy and coverage under your insurance policy is in force for your eligible family members on the date of the Accident.

The Claims Administrator will pay benefits up to four (4) years for the lesser of 3% of your Principal Sum or $5,000 a year for each of your eligible dependent children who:

• Is enrolled as a Full-Time Student in any School For Higher Learning beyond the twelfth (12th) grade on the date of your Accident.

• Is in the 12th grade on the date of your Accident but enrolls as a Full-Time Student in a School For Higher Learning within one (1) year of the date of your death.

• Remains enrolled for the school year. The Claims Administrator will pay the benefit to or on behalf of the eligible dependent Child immediately upon the Claims Administrator’s receipt of satisfactory proof that the requirements above have been met.

The lesser of 3% of your Principal Sum or $5,000 will be paid in one lump sum, to your beneficiary if there are no eligible dependent children who qualify above.

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School For Higher Learning means an educational institution above the twelfth (12th) grade level. It includes, but is not limited to any state university, private college, or trade school. Spouse Education Benefit If AD&D loss of life benefits are payable as the result of a covered injury to you and your eligible Spouse covered under the insurance policy on the date of the Accident, the Claims Administrator will pay a spouse education benefit.

The Claims Administrator will pay this benefit if your spouse enrolls in a School For Higher Learning for the purpose of obtaining a source of support and maintenance and the tuition expense is incurred within thirty (30) months after the date of your death.

The Claims Administrator will pay the cost charged by the School For Higher Learning up to a one-time maximum of $5,000. Paralysis Benefit The Claims Administrator will pay an AD&D benefit equal to 1% of the percentage shown below of the Principal Sum for the person whose injury is the basis for the claim, if:

• As the result of an injury to the central nervous system, you or your insured family member sustains paralysis. • Such paralysis occurs within three hundred sixty-five (365) days of the date of the Accident. • Paralysis continues for twelve (12) consecutive months. • Competent medical authority determines paralysis is permanent, complete and irreversible.

Percentage of Principal Sum

Hemiplegia........................................................................................................50% Paraplegia .........................................................................................................50% Triplegia ...........................................................................................................75% Quadriplegia ...................................................................................................100%

Hemiplegia means the total paralysis of the upper and lower limbs of the same side of the body. Paraplegia means the total paralysis of both lower limbs. Triplegia means the total paralysis of three limbs. Quadriplegia means the total paralysis of both upper and lower limbs. Paralysis means the permanent impairment and loss of the ability to voluntarily move or to have sensation in an entire extremity.

Paralysis must be the result of an injury to the central nervous system. A Licensed Physician must determine that paralysis is the result of an injury and is permanent.

The Claims Administrator will pay this benefit monthly starting with the thirteenth (13th) month for a maximum of a hundred (100) months. Benefit payments will cease on the earliest of the following dates:

• The date the insured is no longer paralyzed. • The date the hundredth (100th) benefit payment is made. • The date the Claims Administrator has paid an amount equal to the insured’s Principal Sum for this benefit plus AD&D benefit

due to the same Accident. If the insured dies during a period for which benefits are payable and before the Claims Administrator has paid an amount equal to the insured’s Principal Sum, the Claims Administrator will pay the remaining unpaid benefit in one lump sum according to the Payment of Claim provision.

The Claims Administrator may require proof of total paralysis on a periodic basis. Reasonable Accommodation Benefit When you suffer a loss under the AD&D insurance policy as the result of a covered injury, the Claims Administrator will reimburse Flowserve for costs incurred for work site changes required in returning you to work. The Claims Administrator will reimburse Flowserve for the cost of pre-approved changes made to the work site for you up to a maximum of $2,000.00 per Accident. Reimbursement to your Employer for the cost of changes to the work site is subject to the following conditions:

• This insurance coverage must be in place for you on the date the Accident occurs. • Changes to the work site must be made within twelve (12) months of the date of the Accident. • There is a reasonable expectation that changes to the work site will result in you being able to return to work. • The Claims Administrator approves in writing the changes to the work site before implementation.

Benefits are not payable if there is no cost involved in making the changes to the work site or the change to the work site does not meet the standards found in Title I, of the Americans with Disabilities Act (ADA).

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Changes to the work site means: • Making existing facilities used by you readily accessible to and usable by you after an injury. • Job restructuring, reassignment to a vacant position, acquisition or modification of equipment or devices, appropriate adjustment

or modification of examinations, training materials or policies, the provision of qualified readers or interpreters, and other similar accommodations for individuals with disabilities resulting from a covered injury.

The Claims Administrator will only reimburse the cost of any changes to the work site under one (1) policy. Rehabilitation Benefit If you have a covered injury that results in payment of an AD&D benefit, other than accidental death, the Claims Administrator will pay the Reasonable and Necessary Expenses (as defined below) you incur for rehabilitative training. The Claims Administrator will pay the Reasonable and Necessary Expenses up to 20% of your Principal Sum subject to a minimum of $1,000 and a maximum of $10,000 provided:

• Training is necessary in order for you to return to work, return to school or to become independent and mobile. • Training is necessary because of the covered injury that resulted in the payment of another benefit under the insurance policy. • You incur such Necessary and Reasonable Expenses within two (2) years from the date of the accident.

Reasonable and Necessary Expenses include but will not be limited to:

• Training in the use of prosthetic devices. • Drivers training under the direction of a licensed rehabilitation center. • Installation of a hand brake and/or accelerator in your motor vehicle. • Training in the use of sign language.

Reasonable and Necessary Expenses will not include:

• Room and board or ordinary living expense. • Travel or clothing expense. • Purchase of a motor vehicle, prosthetic device or wheelchair. • Home modifications.

Seat Belt and Air Bag Benefit Whenever a loss is payable under the AD&D insurance policy, the Claims Administrator will increase your Principal Sum by 10% if:

• Accidental death is the result of an injury sustained while riding in or operating a Four-Wheel Vehicle (as defined below), and • The police report establishes that the insured person was properly strapped in a Seat Belt (as defined below) at the time of the

Accident. The Claims Administrator will pay an additional 5% AD&D benefit if you or your insured family member is driving in or riding in a Four Wheel Vehicle that is equipped with a factory installed Supplemental Restraint System (”air bag”). The insured must be positioned in a seat that is designed to be protected by an air bag and must be properly strapped in the Seat Belt when the air bag inflates. In addition to the above requirements, the police report must establish that the air bag inflated properly upon impact.

No AD&D benefit will be paid for any loss while:

• Driving or riding in any Four-Wheel Vehicle used in a race, speed or endurance test or for acrobatic or stunt driving; • The insured is not wearing a Seat Belt for any reason; • The insured is sharing a Seat Belt; or • The operator of the vehicle is intoxicated or under the influence of drugs, unless taken as prescribed by a Licensed Physician

(The standard for being intoxicated or under the influence of drugs shall be defined in the jurisdiction in which the Accident occurs).

The maximum AD&D benefit payable for loss under this benefit is $50,000 for Seat Belt and Supplemental Restraint System combined. Seat Belt means an unaltered lap or lap and shoulder restraint and includes a government approved child restraint device when used in accordance with the manufacturer's directions. An air bag is not considered a Seat Belt. In the case of small children, the Seat Belt restraint must:

• Meet the standards of the National Safety Council; and • Must be properly secured and utilized in accordance with applicable state law and the recommendations of its manufacturer for

children of similar age and weight.

Supplemental Restraint System means the passive restraint device in a vehicle that inflates upon collision to protect the individual from injury and death.

LIFE AND ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE – (continued)

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Four-Wheel Vehicle means a vehicle listed below that is duly licensed for passenger use and designated primarily for use on public streets and highway; a private passenger automobile, a station wagon, a mini-van, van or truck-type vehicle which has a manufacturer's rated load capacity of 2,000 pounds or less, or a self-propelled motor home. Travel Care Benefits Emergency Medical Evacuation Benefits The AD&D Plan will pay the Reasonable Expenses incurred for the benefits shown below if you or your insured family member requires emergency medical evacuation due to an injury or sickness.

• Immediate movement of the insured person to the nearest suitable medical facility. • Movement of the insured person to a Hospital in the town or city that is the site of their primary home or to their home after

treatment in a local Hospital. • Medical services and supplies required as part of the emergency medical evacuation.

The Claims Administrator will pay these benefits if:

• You or your insured family members are traveling away from your primary home. • The attending Licensed Physician certifies that the severity of the injury or sickness warrants such evacuation and orders

emergency medical evacuation. Movement shall be by the most direct and economical route. Companion Travel Benefit If you and/or your insured family member are hospitalized due to injury or sickness while traveling away from your primary home, the AD&D Plan will pay the economy airfare:

• To return the traveling eligible dependent Child back home if, the Child must forfeit his or her return airfare due to the medical emergency. If necessary, the Claims Administrator will also pay for services of a non-family escort for the Child.

• To return a traveling companion home if the companion must forfeit his or her return airfare due to the medical emergency. • For one (1) round trip of one (1) family member or of one (1) friend to visit you or your insured family member when Hospital

confinement is longer than ten (10) days. Repatriation of Remains The AD&D Plan will pay the Reasonable Expenses incurred for the services shown below if you or your insured family member dies while traveling away from your primary home.

• Documentation and permission from local authorities. • Embalming or cremation of the mortal remains. • A container appropriate for the transport of mortal remains. • Movement of the mortal remains to the funeral director responsible for the insured person’s burial.

Movement shall be by the most direct and economical route. Deletion of Sickness Exclusion The exclusion pertaining to sickness or disease will not apply to the Travel Care Benefits section above.

Coordination of Benefits The Claims Administrator will reduce any payments for travel care benefits by any amounts paid or payable for such benefits under any group insurance plan or Health Maintenance Organization, a Workers’ Compensation or Occupational Disease Act or law, or any government health plan.

Maximum Travel Care Benefit The total amount of benefits payable under these travel care benefits provisions will not exceed $5,000 for any single injury or sickness, including, if applicable, repatriation benefits for death caused by such injury or sickness. Physical Examination and Autopsy At the Claims Administrator’s expense, the Claims Administrator will have the right to examine an insured person as often as reasonably necessary while a claim is pending. In the event of loss of life, the Claims Administrator also has the right to have an autopsy performed unless forbidden by law.

LIFE AND ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE – (continued)

54

Legal Actions No action at law or in equity can be brought until after sixty (60) days following the date written proof of loss is given. No action can be brought after three (3) years (after five (5) years in Kansas and after six (6) years in South Carolina) from the date written proof is required.

GENERAL PROVISIONS (applicable to both Life and AD&D coverage) Claim Provisions If you or your beneficiary needs to file a claim, contact the Plan Administrator at 1-877-357-3539 as soon as possible. To claim death benefits, your beneficiary must provide a certified copy of the death certificate, together with a claim form to the Plan Administrator. Claim Forms After the Plan Administrator receives notice of a claim, claim forms will be promptly furnished. If the Plan Administrator does not, the claimant will be considered to have met the requirements for written proof of loss if the Plan Administrator is given written proof as described below. The proof must describe the occurrence, extent and nature of the loss.

Written Proof of Loss Written proof of loss including a death certificate (if applicable) must be given to the Plan Administrator within ninety (90) days after the date of such loss. If it is not reasonably possible to give the proof within ninety (90) days, the claim is not affected if the proof is given as soon as possible. Unless the insured is legally incapacitated, written proof must be given within one (1) year of the time it is otherwise due. Timing of Claim Payment The Claims Administrator will pay benefits under the insurance policy immediately after receiving written proof of loss. Denial of Claim Any denial of a claim for benefits will be provided by the Claims Administrator and consist of a written explanation which will include (1) the specific reasons for the denial, (2) reference to the pertinent Plan provisions upon which the denial is based, (3) a description of any additional information you might be required to provide and explanation of why it is needed, and (4) an explanation of the Plan’s claim review procedure. You, your beneficiary (when an appropriate claimant), or a duly authorized representative may appeal any denial of a claim for benefits by filing a written request for a full and fair review with the Claims Administrator. In connection with such a request, documents pertinent to the administration of the Plan may be reviewed, and comments and issues outlining the basis of the appeal may be submitted in writing. You are permitted to have legal representation throughout the review procedure. A request for a review must be filed within sixty (60) days after receipt of the written notice of denial of a claim. The full and fair review will be held and a decision rendered by the Claims Administrator, no later than sixty (60) days after receipt of the request for review. If there are special circumstances, the decision will be made as soon as possible, but not later than one hundred-twenty (120) days after receipt of the request for review. If such an extension of time is needed, you will be notified in writing prior to the beginning of the time extension period. The decision after this review will be in writing and will include specific reasons for the decision as well as specific references to the pertinent plan provisions on which the decision is based.

Beneficiary You may specify a new beneficiary (ies) at any time by contacting the Plan Administrator and request a change in beneficiary form and completing and returning the form. When the change in beneficiary form is received by the Plan Administrator, the change will take effect as of the date it was signed. This is the case whether you are alive or not when the request is received. Although the change of beneficiary will relate back to the date it was signed, it will be without prejudice to the Claims Administrator on account of any payment already made.

Payment of Claim Benefits upon your death will be payable in accordance with the beneficiary designation in effect at the time of payment. If no such designation is in effect at that time, the benefits will be paid to the surviving person or persons in the first of the following classes of successive preference beneficiaries of which a member survives the insured. The insured’s (1) spouse; (2) child(ren), including legally adopted child(ren); (3) parents; (4) brothers and sisters; or (5) estate.

In determining who to pay the claim to, the Claims Administrator may rely upon an affidavit by a member of any of the classes of preference beneficiaries. Payment based upon such affidavit will be full aquittance hereunder unless, before such payment is made, the Claims Administrator has received at their home office written notice of valid claim by some other person. If two or more persons become entitled to benefits as preference beneficiaries, they will share equally.

Benefits for other than your death will be payable to you. The Claims Administrator will pay all accrued benefits unpaid at your death in the same manner as above. Any benefits payable to a minor may be paid to the legally appointed guardian of the minor or, if there is no

LIFE AND ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE – (continued)

55

such guardian, to such adult or adults as have, in the Claims Administrator’s opinion, assumed the custody and principal support of such minor.

Any payment made by the Claims Administrator in good faith pursuant to this provision will fully discharge the Claims Administrator to the extent of such payment.

Assignment to Funeral Home The beneficiaries may elect to assign a claim or portion of the claim to the funeral home. To assign a claim, an assignment form should be obtained through the funeral home, filled out by the funeral home and signed by the beneficiary. If there are multiple beneficiaries, the Claims Administrator will reduce the proceeds to all beneficiaries who signed the assignment proportionately by the amount of the assignment.

Settlement Option You or your beneficiary may elect to have the life insurance benefit paid in other than a lump sum payment You or your beneficiary should contact the Claims Administrator for more information on settlement options that may currently be available to you. The Claims Administrator reserves the right to change the settlement options available in the future. Uniform Provisions The group policy is available for inspection at the Plan or Claims Administrator’s office any time during regular business hours.

Termination of Insurance The insurance will terminate on the earliest of:

• The date ending the last period for which you made any required premium contribution. • The date you enter the armed forces of any country; membership in the reserves is not deemed entry into the armed forces

(except for military service of 31 days for an eligible dependent, or a military leave of 18 months or longer for an employee). • The date you are no longer a member of a class eligible for insurance.

Absence from work due to the following will not be treated as a termination of membership until the end of the period shown:

• Lay-off/Reduction in Force for up to three (3) months (if the employee had six (6) months of service) for the lesser of your elected coverage or the company provided coverage. Not applicable to AD&D Insurance.

• Leave of Absence for up to twelve (12) months. • Disability for up to six (6) months, or if disabled, until eligible under the waiver of premium provision, if earlier.

The insurance of all covered persons will terminate immediately with respect to coverage, on the date on which that coverage is cancelled and on the date of termination of the policy.

The insurance of a covered eligible dependent will terminate on the earliest of:

• The date your insurance terminates. • The date they enter the armed forces of any country (Note: membership in the reserves is not deemed entry into the armed

forces); or • The date they cease to be an eligible dependent.

If you or your spouse’s unmarried insured eligible dependent Child is incapable of self-support due to mental retardation or physical handicap and therefore is dependent upon you for support and maintenance, the Child’s insurance will not be terminated due to age. We will require proof of the Child’s incapacity within thirty-one (31) days after he/she reaches the standard termination age for children. Proof of incapacity will not be required more often than annually after the two (2) year period following the Child’s attainment of the limiting age.

The insurance for the Child may be continued for as long as the incapacity and dependency continues and your insurance remains in force.

EMPLOYEE ASSISTANCE PLAN

56

Overview of Employee Assistance Plan The Flowserve Employee Assistance Plan (EAP) is a professional assessment and counseling service that is designed to encourage you and your family to seek assistance for personal concerns before they affect your quality of life and your safety and productivity on the job. The EAP is completely confidential.

The Employee Assistance Plan (EAP) is designed to help with all types of issues such as:

• Stress or Anxiety. • Marital or other relationship issues. • Family problems. • Child or adult care issues. • Alcohol and/or drug abuse. • Balancing work and family. • Depression and grief. • Work-related concerns. • Financial or legal problems. • Career transitions issues. • Personal growth and development.

Eligibility All U.S. Flowserve employees and their eligible dependents are covered. Coverage Cost Flowserve pays for this service so there is no cost to you, regardless of which medical plan (if any) you choose.

When Coverage Begins Your and your eligible dependent’s coverage begins on your date of hire. How the Plan Works You and your eligible dependents can access your EAP Benefits twenty-four (24) hours a day, three hundred sixty-five (365) days a year, by calling the Claims Administrator. When you or your eligible dependents call for EAP assistance, you or your eligible dependent will speak with an experienced licensed counselor who will assist you in getting the help you need.

The EAP phone counselor may refer you to another EAP counselor in your area for face-to-face visits. The plan pays for up to five (5) visits per issue each year.

EAP counseling is goal-oriented and solution-focused. Depending on your situation, the EAP counselor may suggest additional sessions to help you reach your goals. If the EAP counselor finds that you require specialized or longer-term care than the EAP is intended to provide, an effort will be made to expedite a referral to a provider who is covered under your Medical Plan. The important thing is that you decide, along with your EAP counselor, on an action plan that is right for you.

You and your eligible dependents can also access the EAP online through Achieve Solutions, an innovative online EAP and behavioral health information web site that is available to you and your eligible dependents as part of your Flowserve EAP benefit. The site provides additional links to EAP related information, such as tip sheets on topics of your choice and interest and educational materials that can be targeted to your and your family’s individual needs. There are self-assessment tools and interactive quizzes on a variety of health issues as well as a comprehensive EAP library. In addition, information regarding support groups and community resources are available twenty-four (24) hours a day. You may request a callback if you prefer to speak with an EAP professional directly.

To access Achieve Solutions on the Web, enter the following URL: “http://achievesolutions.net/flowserve” and follow the login instructions. Or you may call an Achieve Solutions representative at 877-888-6446.

FINANCIAL PLANNING SERVICES

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Overview of Financial Planning Services To help employees with financial planning, Flowserve provides you with free financial planning services. The following information will tell you how to put those services to work immediately to make good decisions – and how to use them year round to improve your overall financial health. The Plan offers free financial planning support to all U. S. Flowserve non-union employees.

Topics that an Ayco representative can offer assistance for include:

Insurance • How much life insurance will I need? • Should I purchase life insurance for my spouse and children? • What’s the difference between buying insurance through the company and buying it independently? • Will I need other types of insurance (besides what the company offers)? • Should I purchase additional disability insurance for myself?

401(k) Savings Plan • What are the differences between my 401(k) fund options? • How can I assess my tolerance for market risk? • What funds might be right for me, personally, given my savings goals and risk tolerance? • How should I diversify my portfolio? • What should I do if the market takes a downturn? • I need cash. Will it make sense to borrow from my 401(k) savings account?

Flexible Spending Accounts (FSAs) • How do FSAs work? • How much money should I put in a FSA? • I have dependent day care expenses. Will I be better off taking a dependent care tax credit or contributing to a FSA?

Retirement Planning • How much money will I need when I retire? • Am I on track to meet my retirement goals? • What options will I have for taking money from my retirement plans when I retire? Which is right for me? • What are the best types of retirement vehicles for my particular situation?

Budgeting and Cash Flow • Should I refinance my home? • What can I do to reduce my debt?

College Funding • How much money will I need to save for my child’s college education? • What options should I consider for funding my child’s college education? • What are the advantages and disadvantages of investing for education in my child’s name?

Estate Planning • What type of estate planning will I need? • What documents (e.g. will, trust or power of attorney) will I need?

The financial advisors are well versed on Flowserve flex benefits; therefore, they are able to answer general financial questions. Furthermore, they will be able to tailor their advice to your situation based on an understanding of your benefits package.

Surviving a Loss: Financial Help As part of its package of financial planning services, survivor financial counseling is provided. This face-to-face support is designed to guide survivors through the many financial issues they may face in the event of their partner’s death. The advisors can help survivors navigate the estate settlement and administration process, work with third parties (such as insurance companies) and develop a plan to address their new financial situation. Topics commonly covered in the planning process include:

• Using life insurance proceeds. • Investing current assets. • Taking retirement plan distributions. • Collecting Social Security.

• Income tax planning. • Continuing/securing medical and other benefits. • Cash flow and budgeting. • Future estate planning.

FINANCIAL PLANNING SERVICES (continued)

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Advisors specialize in giving survivors objective and responsive support and their services do not stop once a financial plan is put in place. Survivors can expect to receive monthly follow-up calls from their advisor for a period of six (6) months.

Contacting the Financial Help Line To speak with an Ayco advisor, call the Plan Administrator toll-free (1-877-FLS-FLEX OR 1-877-357-3539) between the hours of 9:00 a.m. and 8:00 p.m., Eastern Time, Monday through Friday and select the AYCO Financial Planning option. You may also visit Ayco’s website at www.aycofn.com. All of your discussions are completely confidential.

GENERAL INFORMATION SECTION

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General Information This section of the SPD contains general administrative information about your benefits and an explanation of your and your eligible dependent’s rights under the Employee Retirement Income Security Act of 1974 (ERISA). The following health and welfare benefit programs maintained by Flowserve Corporation will be subject to ERISA:

• Medical Plan. • Dental Plan. • Vision Plan. • Flexible Spending Accounts, including Health Care Spending Accounts and Dependent Care Spending Accounts. • Disability Insurance. • Life and Accidental Death and Dismemberment (AD&D) Insurance. • Employee Assistance Plan (EAP).

The Financial Planning Services benefit program will not be subject to ERISA.

Plan Information Chart The following chart contains important information about the Flowserve benefit Plans described in this SPD. Plan Information for the Flowserve Medical & Dental Plans, Vision Plan, and Flexible Spending Accounts

MEDICAL & DENTAL PLANS VISION PLAN FLEXIBLE SPENDING ACCOUNTS

Official Plan Name Flowserve Flex Health & Welfare Benefit Plan

Flowserve Flex Health & Welfare Benefit Plan

Flowserve Flex Health & Welfare Benefit Plan

Plan Sponsor and Plan Administrator

Flowserve Corporation 5215 N. O’Connor Blvd Irving, TX 75039 (972) 443-6500

Flowserve Corporation 5215 N. O’Connor Blvd Irving TX 75039 (972) 443-6500

Flowserve Corporation 5215 N. O’Connor Blvd Irving TX 75039 (972) 443-6500

Employer Identification Number

31-0267900 31-0267900 31-0267900

Plan Number 501 501 501 Plan Year January 1 through December 31 January 1 through December 31 January 1 through December 31

Type of Plan Welfare plan providing medical and dental benefits.

Welfare plan providing vision benefits. Spending accounts for reimbursement of eligible healthcare and dependent care expenses.

Type of Administration

The Plan is administered by the Plan Administrator. The Plan Administrator has delegated to the Claims Administrator authority to determine payment of benefits under the Plan.

The Plan is administered by the Plan Administrator. The Plan Administrator has delegated to the Claims Administrator authority to determine payment of benefits under the Plan.

The Plan is administered by the Plan Administrator. The Plan Administrator has delegated to the Claims Administrator authority to determine payment of benefits under the Plan.

Claims Administrator

Aetna PO Box 14091 Lexington, KY 40512-4091 (888) 633-1908 CIGNA - Medical P.O. Box 5200 Scranton, PA 18505-5200 HealthScope Benefits P.O. Box 8002 Little Rock, AR 72203

Vision Service Plan 3333 Quality Drive Rancho Cordova, CA 95670 (800) 622-7444

Aetna 151 Farmington Avenue Hartford, CT 06156 (888) 238-6226

Agent for Service of Legal Process

Flowserve Corporation General Counsel 5215 N. O’Connor Blvd Irving TX 75039 (972) 443-6500

Flowserve Corporation General Counsel 5215 N. O’Connor Blvd Irving TX 75039 (972) 443-6500

Flowserve Corporation General Counsel 5215 N. O’Connor Blvd Irving TX 75039 (972) 443-6500

Funding All Plans are funded through the general assets of the Company.

The Plan is funded through the general assets of the Company.

The Plan is funded through the general assets of the Company.

GENERAL INFORMATION SECTION (continued)

60

Plan information for the Flowserve Corporation Disability Insurance, Life and Accidental Death and Dismemberment Insurance, and Employee Assistance Plan.

DISABILITY INSURANCE LIFE AND ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE EMPLOYEE ASSISTANCE PLAN

Official Plan Name Flowserve Flex Health & Welfare Benefit Plan

Flowserve Flex Health & Welfare Benefit Plan

Flowserve Flex Health & Welfare Benefit Plan

Plan Sponsor and Plan Administrator

Flowserve Corporation 5215 N. O’Connor Blvd Irving TX 75039 (972) 443-6500

Flowserve Corporation 5215 N. O’Connor Blvd Irving TX 75039 (972) 443-6500

Flowserve Corporation 5215 N. O’Connor Blvd Irving TX 75039 (972) 443-6500

Employer Identification Number

31-0267900 31-0267900 31-0267900

Plan Number 501 501 501 Plan Year January 1 through December 31 January 1 through December 31 January 1 through December 31

Type of Plan Welfare plan providing disability benefits. Welfare plan, providing life and AD&D insurance.

Welfare plan providing employee assistance program benefits.

Type of Administration

Administered by UnumProvident and/or the Plan Administrator

The Plan is administered by Minnesota Life. The Plan is administered by the Plan Administrator. The Plan Administrator has contracted with an outside firm specializing in an employee assistance program to administer this benefit.

Claims Administrator Unum Life Insurance Company of America One Fountain Square Chattanooga, TN 37402

Minnesota Life Group Division Claims P.O. Box 64114 St. Paul, MN 55164-0114

ValueOptions P.O. Box 142648 Irving, Texas 75014-2648 (877) 888-6446

Agent for Service of Legal Process

Flowserve Corporation General Counsel 5215 N. O’Connor Blvd Irving TX 75039 (972) 443-6500

Flowserve Corporation General Counsel 5215 N. O’Connor Blvd Irving TX 75039 (972) 443-6500

Flowserve Corporation General Counsel 5215 N. O’Connor Blvd Irving TX 75039 (972) 443-6500

Funding Short-Term Disability is funded through the general assets of the Company and Long-Term Disability is funded through insurance.

The Plan is funded through insurance. The Plan is funded through insurance.

Your Rights Under ERISA This SPD summarizes the health and welfare benefit plans offered by Flowserve. It will not attempt to cover all details. As a participant, you will be entitled to certain rights and protections under ERISA, as amended. ERISA provides that all Plan participants will be entitled to:

• Examine, without charge, at the Plan Administrator's office and at other specified locations (work sites and personnel offices) all plan documents, including contracts and copies of all documents filed by the Plan with the U.S. Department of Labor, and available at the Public Disclosure Room at the Pension & Welfare Benefit Administration.

• Obtain copies of all Plan documents and other Plan information including insurance contracts and copies of the latest annual report (Form 5500) upon written request to the Plan Administrator. The Plan Administrator may make a reasonable charge for the cost of each page copied.

• Receive a summary of the Plan's annual financial report. The Plan Administrator is required by law to furnish each Plan participant with a copy of this summary annual report.

You are entitled to continue health coverage for yourself, spouse and eligible dependents if there is a loss of coverage under the Plan as a result of a qualifying event. Under such circumstances, you or your eligible dependents may have to pay for such coverage. If you decide to continue coverage, you should review the COBRA provisions in this SPD and the documents governing the Plan regarding your coverage rights. You are entitled to a reduction or elimination of exclusionary periods of coverage for Pre-existing Conditions under the Plan, if you have creditable coverage from another plan. You should be provided with a certificate of creditable coverage, free of charge, from your group health plan or health insurance issuer when you lose coverage under the Plan, when you become entitled to elect COBRA continuation coverage, when your COBRA continuation coverage ceases, if you request it before losing coverage or if you request it up to twenty-four (24) months after losing coverage. Without evidence of creditable coverage, you may be subject to Pre-existing Condition exclusion for twelve (12) months. In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of these employee benefits plans. The people who operate your Plans, called "fiduciaries" of the Plan, have a duty to operate your Plans prudently and in the best interest of you and other Plan participants and beneficiaries.

GENERAL INFORMATION SECTION (continued)

61

No one, including your Employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a welfare benefit or exercising your rights under ERISA. If your claim for a welfare benefit is denied, in whole or in part, you have a right to know it was denied, to obtain copies of documents relating to the decision with out charge to you and to appeal any denial, all within certain time schedules. Under ERISA, there will be steps you may take to enforce the rights described above. For instance, if you request materials from the Plan and do not receive them within thirty (30) days, you may file suit in a Federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because reasons beyond the control of the Plan Administrator. If you have a claim for benefits that is denied or ignored, in whole or in part, and you have exhausted your administrative remedies under the Plan, you have the right to file suit in a State or Federal court. In addition, if you disagree with the Plan’s decision or lack thereof concerning the qualified status of a medical child support order or a domestic relations order, you may file suit in Federal court. If it should happen that the Plan fiduciaries misuse the Plan's money or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor or file suit in a State or Federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous. If you have any questions about your Plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA or if you need assistance in obtaining a document from the Plan Administrator, you should contact the nearest office of the Pension and Welfare Benefits Administration, U.S. Department of Labor, listed in the telephone directory or the Division of Technical Assistance and Inquiries, Pension and Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Pension and Welfare Benefits Administration. Claims Provisions Each section of this SPD contains information explaining how to file a claim and the time frame for submitting such claim for each relative welfare benefit plan. Unless the description for a welfare benefit specifically provides otherwise, a claim for benefits must be filed no later than twelve (12) months after the date the claim arises (i.e. the date a charge is incurred). In addition, a claim will not be treated as having been filed until all information necessary to process the claim has been submitted. If all information necessary to process a claim is not submitted by the applicable claim-filing deadline, the claim will automatically be considered denied. Failure to pursue the internal claims review process as set forth in this SPD and exhausted administrative remedies will act as a total bar to all legal action. Some benefits described in this SPD are provided by insurance companies and therefore have a special claims appeal processes conducted by the insurer. However, in the absence of such special claims appeal processes or if those special claims appeal processes do not comply with ERISA, the following claims appeal procedures shall apply. You may file claims for Plan benefits, and appeal adverse claim decisions, either yourself or through an authorized representative. If your claim is denied in whole or in part, you will receive a written notice of the denial from Aetna Life Insurance Company. The notice will explain the reason for the denial and the review procedures.

An “authorized representative” means a person you authorize, in writing, to act on your behalf. The Plan will also recognize a court order giving a person authority to submit claims on your behalf, except that in the case of a claim involving urgent care, a health care professional with knowledge of your condition may always act as your authorized representative.

Urgent Care Claims If the Plan requires advance approval of a service, supply or procedure before a benefit will be payable, and if the Plan or your physician determines that it is an urgent care claim, you will be notified of the decision not later than seventy-two (72) hours after the claim is received.

“A claim involving urgent care” is any claim for medical care or treatment with respect to which the application of the time periods for making non-urgent care determinations could seriously jeopardize the life or health of the claimant or the ability of the claimant to regain maximum function, or, in the opinion of a physician with knowledge of the claimant’s medical condition would subject the claimant to severe pain that cannot be adequately managed without the care or treatment that is the subject of the claim.

If there is not sufficient information to decide the claim, you will be notified of the information necessary to complete the claim as soon as possible, but not later than twenty-four (24) hours after receipt of the claim. You will be given a reasonable additional amount of time, but not less than forty-eight (48) hours, to provide the information, and you will be notified of the decision not later than forty-eight (48) hours after the end of that additional time period (or after receipt of the information, if earlier).

GENERAL INFORMATION SECTION (continued)

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Other Claims (Pre-Service and Post-Service) If the Plan requires you to obtain advance approval of a service, supply or procedure before a benefit will be payable, a request for advance approval is considered a pre-service claim. You will be notified of the decision not later than fifteen (15) days after receipt of the pre-service claim.

For other claims (post-service claims), you will be notified of the decision not later than thirty (30) days after receipt of the claim.

For either a pre-service or a post-service claim, these time periods may be extended up to an additional fifteen (15) days due to circumstances outside the Plan’s control. In that case, you will be notified of the extension before the end of the initial fifteen (15) or thirty (30) day period. For example, they may be extended because you have not submitted sufficient information, in which case you will be notified of the specific information necessary and given an additional period of at least forty-five (45) days after receiving the notice to furnish that information. You will be notified of the Plan’s claim decision no later than fifteen (15) days after the end of that additional period (or after receipt of the information, if earlier).

For pre-service claims which name a specific claimant, medical condition, and service or supply for which approval is requested, and which are submitted to a Plan representative responsible for handling benefit matters, but which otherwise fail to follow the Plan’s procedures for filing pre-service claims, you will be notified of the failure within five (5) days (within twenty-four (24) hours in the case of an urgent care claim) and of the proper procedures to be followed. The notice may be oral unless you request written notification.

Ongoing Course of Treatment If you have received pre-authorization for an ongoing course of treatment, you will be notified in advance if the Plan intends to terminate or reduce benefits for the previously authorized course of treatment so that you will have an opportunity to appeal the decision and receive a decision on that appeal before the termination or reduction takes effect. If the course of treatment involves urgent care, and you request an extension of the course of treatment at least 24 hours before its expiration, you will be notified of the decision within 24 hours after receipt of the request. Health Claims – Standard Appeals You will have 180 days following receipt of an adverse benefit decision to appeal the decision to Aetna. You will be notified of the decision not later than 15 days (for pre-service claims) or 30 days (for post-service claims) after the appeal is received. You may submit written comments, documents, records and other information relating to your claim, whether or not the comments, documents, records or other information were submitted in connection with the initial claim. You may also request that the Plan provide you, free of charge, copies of all documents, records and other information relevant to the claim. If your claim involves urgent care, an expedited appeal may be initiated by a telephone call to Member Services. Aetna's Member Services telephone number is on your Identification Card. You or your authorized representative may appeal urgent care claim denials either orally or in writing. All necessary information, including the appeal decision, will be communicated between you or your authorized representative and the Plan by telephone, facsimile, or other similar method. You will be notified of the decision not later than 36 hours after the appeal is received. If you are dissatisfied with an appeal decision that involves urgent care, you may file a second level appeal to Aetna on an expedited basis. The second level appeal will be processed in the same manner as the first level appeal and you will be notified of the decision by Aetna not later than 36 hours after the appeal is received. If you are dissatisfied with the appeal decision other than urgent care, you may file a second level appeal to the Company within 60 days of receipt of the level one appeal decision. Send your appeal request to Aetna and Aetna will forward your appeal request and any additional information you have provided, along with the level one appeal file, to the Company. The Company will notify you of the decision not later than 15 days (for pre-service claims) or 30 days (for post-service claims) after the appeal is received. Exhaustion of Process You must exhaust the applicable Level one and Level two processes of the Appeal Procedure before you:

• contact the Department of Insurance to request an investigation of a complaint or Appeal; or • file a complaint or Appeal with the Department of Insurance; or • establish any litigation, arbitration, or administrative proceeding; regarding an alleged breach of the policy terms by Aetna Life

Insurance Company; or any matter within the scope of the Appeals Procedure.

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Other Important Provisions How the Plans Deal with Fraud It is a crime to knowingly and with intent to injure, defraud or deceive the Plan or the Company or provide any false information, including filing a claim that contains any false, incomplete or misleading information. These actions will result in denial of your claim and you may be subject to criminal and/or civil prosecution and punishment under state and/or federal law. The Company reserves the right to pursue all appropriate legal remedies in the event of fraud.

Right to Recover Overpayment In the event of any overpayment of benefits, the Plan will have the right to recover the overpayment from you or from a provider, in the discretion of the Plan Administrator. If you receive a benefit greater than allowed, in accordance with the provisions of the Plan, you (or the provider) will be requested to refund the overpayment. If the refund is not received, the amount of overpayment will be deducted from future benefits or from your future paychecks.

Rights of the Plan Administrator Flowserve is the Plan Administrator for the Plan. The Plan Administrator will have complete and final discretionary authority to interpret the Plan’s terms and provisions and maintain control over the operation and administration of the Plan, including interpretation of all Plan documents, decisions as to who is eligible for reimbursement and all other related questions that arise under the Plan. Benefits are payable only if the Plan Administrator decides, in its sole discretion, that the applicant is entitled to such benefits. The Plan Administrator's (or the appropriate Claims Administrator's) decision relating to matters arising under the Plan will be final and conclusive, unless the decision is determined to be an abuse of discretion. No Guarantee of Employment This SPD is intended only to summarize Flowserve’s health and welfare benefits. The Plans and this SPD are not intended to form a contract between you and your Employer and in no way guarantee your continued employment with your Employer. If you leave the employment of your Employer, or if you are discharged, the Plan will not provide you with any rights to any benefits, Plan assets or Company assets, except as specifically provided in the Plan. Action for Recovery You may not bring an action at law or in equity to recover under the Plan until all administrative remedies have been exhausted. Under no circumstances may you bring an action at law or an equity for recovery under the Plan after two (2) years (three (3) years with respect to any action brought by the U.S. Department of Health and Human Services or the Health Care Financing Administration to recover on a claim under the Medicare secondary payor statute) from the time a claim is incurred. Insured Benefits Some benefits provided in the Plan are provided by insurance companies pursuant to insurance policies or similar contracts. Any benefits specified in such an insurance policy will be provided solely by the insurance company that issued the policy. Under no circumstances will Flowserve be liable to pay any benefits specified in such insurance policies or contracts.

Plan Amendment and Termination Flowserve hopes to continue the Plan indefinitely but, as with all group benefit plans, the Plan may be amended or terminated by written instrument by Flowserve as Plan Sponsor and Plan Administrator (or any person, committee or group authorized by Flowserve to do so) with respect to all or any class of employees at any time and for any reason, without notice. In the event of an amendment, alteration, discontinuation, or termination of the Plan, the Plan’s only liability will be for claims incurred prior to the Plan amendment or termination and Flowserve and its officers, directors, other fiduciaries and affiliates will not have any liability prior to or following such date.

Summary of Material Modifications The Plan Administrator shall notify all covered participants and beneficiaries of any Plan amendment considered a material reduction in covered services or benefits provided by a group health plan as soon as administratively feasible after its adoption but no later than sixty (60) days after the date of adoption of the modifications of change. This sixty (60) day period for furnishing a summary of material modifications of changes does not apply to any participant covered by a group health plan who would reasonably expect to receive a summary through other means within ninety (90) days of such change. Participants and beneficiaries must be furnished a summary of any other Plan changes no later than two hundred and ten (210) days after the close of the Plan year in which the change is made. Any change made to the Plan shall be binding on each covered person as of the effective date of such change even if a summary of modifications had not yet been provided. Responsibility for Goods and Services Flowserve and its affiliates will not guarantee and are not be responsible for the nature or quality of the goods and services provided through any health care providers or programs, including Physicians, utilization review organizations, Claims Administrators and Hospitals, since these goods and services will be provided by personnel and agencies outside the control of Flowserve and its affiliates.

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The selection of health care providers, Hospitals, or health care programs is solely the responsibility of you and your attending Physician(s).

Governing Law/Jurisdiction and Venue Except as otherwise required by law, the Plan, SPDs, matters of plan interpretation or factual determination made by the Plan Administrator or Claims Administrator and all matters arising there under or hereunder will be governed by the laws of the State of Texas, except where preempted by ERISA.

Exclusive jurisdiction and venue of all disputes arising out of and relating to the Plan, SPD, matters of Plan interpretation or factual determinations made by the Plan Administrator or Claims Administrator, is in any court of appropriate jurisdiction in Dallas, Dallas County, Texas. Subrogation/Reimbursement Each of the plans described in this SPD has a rule regarding subrogation rights and rights of reimbursement with respect to the benefits provided. If a section of this SPD describing benefits under a Plan does not contain a section describing this subrogation/reimbursement rights, then this section will apply.

If any person is paid benefits (or amounts are paid on behalf of such person) under one or more of the Plans for an injury or illness which the person has or may have or asserts any claim or right to recovery against any person, company or organization, the Plan will be subrogated to all rights of recovery that the person for whom benefits are paid may have against that third party. This means that when you accept payment of benefits under the Plan, you assign your rights of recovery from the third party to the Plan and agree to do whatever may be necessary to secure recovery, including execution of all appropriate agreements or other legal documents. In addition, you agree to reimburse the Plan to the extent of any recovery of damages you receive from the person responsible for the injury or illness, before any other monetary obligations (including your attorney's fees) are deducted. However, the reimbursement amount may not exceed the amount originally paid by the Plan plus attorney's fees incurred by the Plan in enforcing its subrogation and reimbursement rights. In the event you fail to assist the Plan with this requirement your benefits with regards to the claim may not be paid.

The Plan's right of recovery under this provision may be made from the following persons, policies or entities: the person, company or organization itself, any liability coverage carrier, other insurance covering the person, company or organization, a Plan participant's, dependent's or beneficiary's own uninsured/underinsured motorist coverage or any medical pay or no fault benefits that are paid or payable, to the extent to which such payments will be reimbursed for the amount of those benefits for which the person, company or organization is liable. Assignment of Benefits Each of the Plans described in this SPD has a rule regarding the assignment of benefits with respect to the benefits provided. If any section of this SPD does not contain a provision describing or limiting assignment of benefits, this section will control the terms of assignment of benefits with respect to such relative portion of the Plan.

Your benefits under the Plan cannot be used as collateral for loans or be assigned in any other way, except as required by federal law. The Plan will not be in any matter liable for or subject to debts, contracts, liabilities or torts claims of any person entitled to benefits under the Plan. To the extent permitted by law, neither the benefits nor payments under the Plan will be subject to the claim of creditors or to any legal process.

Notwithstanding the above statements, you may, with the consent of Flowserve, assign medical benefits directly to a health care provider or facility. Otherwise, benefits will be paid according to the terms of the specific benefit plan. If you or your covered eligible dependent use a participating provider, the Plan will pay benefits, if any, to the provider of the service and the utilization of the participating provider will be considered an automatic assignment. Payment in accordance with such assignments will act as a complete discharge of liability on the part of the Plan. Special Rules Applicable to Health Plans Flowserve complies with several other important laws that affect your participation and coverage in its health care benefit plans. A brief overview of these laws is provided below. Please contact the Plan Administrator if you need additional information about these laws.

Health Insurance Portability and Accountability Act of 1996 This law primarily deals with how an employer can enforce eligibility and enrollment for health care benefits. Examples of some of the requirements of the Health Insurance Portability and Accountability Act (“HIPAA”) include:

• Pre-existing condition exclusion limitations of twelve (12) months, reduced by periods of creditable coverage with prior employers.

• Special enrollment periods are available during the year to you and your eligible dependent (in certain circumstances) who lose other coverage if you enroll within sixty (60) days after losing the other coverage.

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• If you are not enrolled for health care coverage and add an eligible dependent (i.e. marriage, birth or adoption), you can enroll yourself and your eligible dependent within sixty (60) days of the event.

The Medical Plan will not base eligibility rules or waiting periods on any of the following: health status, mental or physical medical condition, genetic information and evidence of insurability or disability. Evidence of insurability will not be required when health care coverage is requested during a special enrollment period or during an annual enrollment except for excess life insurance amounts as determined by the Plan. However, the Plan may continue to provide for the exclusion of specified health conditions and apply lifetime maximums on either specific benefits or all benefits provided under the Plan. These restrictions also will not preclude the Plan from applying differing benefit levels, benefit schedules or premium rates in certain situations as provided under HIPAA.

Beginning April 14, 2003, the Plan will comply with the privacy regulations under HIPAA. These regulations set national standards for the protection of certain health information. This information, referred to as “protected health information,” is information that (i) identifies a participant (or to which there is a reasonable basis to determine the identity of the participant) and (ii) relates to the participant’s past, present, or future physical or mental condition.

As required under these regulations, the Plan will not use or disclose your protected health information for purposes other than treatment, payment or healthcare operations, without your written authorization or as required by law.

Without your written authorization, the Plan may only disclose protected health information to Flowserve as plan sponsor only for Plan administration purposes and enrollment purposes and only if there is adequate separation between the Plan and Flowserve as plan sponsor and employer. Any protected health information disclosed by the Plan to Flowserve as plan sponsor and employer cannot and will not be used for any employment-related actions or decisions.

As a Plan participant, you have certain rights with respect to your protected health information, including the right to inspect and copy your medical records, request amendment or correction to your records, restrict the use or disclosure of your protected health information, and request an accounting of the uses and disclosures of your protected health information.

You should have received a copy of the Plan’s Notice of Privacy Practices. This document contains a description of authorized uses and disclosures of protected health information, your rights, the Plan’s duties and the complaint process should you feel your privacy rights have been violated. The notice is available upon request from the Plan Administrator at 1-877-357-3539 (1-877-FLS-FLEX). For more information regarding your privacy rights, please refer to the Notice of Privacy Practice or contact your Human Resources representative. Mental Health Parity Act The Medical Plan will comply with the Mental Health Parity Act of 1996 ("MHPA"). The annual and lifetime limits on mental health benefits will not be less than the annual and lifetime plan limits on other types of medical and surgical services. The Plan will contain cost containment methods, applicable for mental health benefits, including cost-sharing, limits on the number of visits or days of coverage and other terms and conditions that relate to the amount, duration and scope of mental health benefits. Compliance with Newborn’s and Mothers’ Health Protection Act of 1996 The Medical Plan will comply with all required provisions of the Newborns' and Mothers' Health Protection Act of 1996 ("NMHPA") with respect to health benefits provided under this Plan. The Plan will not restrict benefits for any Hospital length of stay in connection with childbirth for the mother or newborn child to less than forty-eight (48) hours following a normal vaginal delivery, or less than ninety-six (96) hours following a cesarean section delivery. The Plan will not require that a provider obtain authorization from the Plan Administrator or Claims Administrator prescribing a length of stay not in excess of the above periods. Mothers, with their Physician’s consent, are not required to stay the full length of the minimum period specified above. Plan participants only need to pre-certify Hospital maternity stays if the Hospital stay will be longer than the periods specified above. Women's Health and Cancer Rights Act of 1998 The Medical Plan will cover certain breast reconstructive benefits in connection with a mastectomy. If you have a mastectomy, benefits will be available in a manner determined in consultation with you and your Physician for reconstruction of the breast on which the mastectomy was performed, surgery and reconstruction of the other breast to produce a symmetrical appearance and prosthesis and physical complications for all stages of mastectomy, including lymphedemas. Such coverage is subject to all the terms of the Plan, including relevant Deductibles and Coinsurance provisions.

Qualified Medical Child Support Orders/Placement for Adoption The Plan will comply with the rules relating to adopted children, children placed for adoption and Medical Child Support Orders (“QMCSO”).

The Plan will use the following rules related to children placed for adoption and QMCSOs.

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The Plan will provide benefits in accordance with the applicable requirements of any QMCSO. A QMCSO is a medical child support order that creates, recognizes or assigns to a child of a Plan participant the right to receive health benefit coverage under the Plan. To be qualified, a medical child support order must comply with state and federal laws and contain the following:

• The name and last known mailing address (if any) of both the Plan participant and the child covered under the order except that the name and mailing address of an official of a state or a political subdivision thereof may be substituted for the mailing address of any child.

• A reasonable description of the type of coverage to be provided by the Plan for each child (or the manner in which the type of coverage will be determined).

• The period of coverage to which the order applies.

In addition, a Medical Child Support Order will generally not be considered qualified if it requires the Plan to provide certain benefits or options which will not be otherwise provided by the Plan. The Plan Administrator will notify the Plan participant and the child covered under the order (or the state official or political subdivision if applicable) of the receipt of a Medical Child Support Order and the procedures for determining whether it is a QMCSO. The Plan Administrator will then determine within a reasonable period of time, whether the Medical Child Support Order is a QMCSO.

The Plan will provide benefits to eligible dependent children placed for adoption on the same basis as natural children even prior to the adoption becoming final. A child will be considered placed for adoption with you if you have assumed a legal obligation for total or partial support of the child in anticipation of adoption of the child. For this reason, if you have a child placed with you for adoption by an adoption agency or other entity, you must provide to the Plan Administrator documentation (e.g., signed court order) that the adoption agency or other entity had legal custody of the child on the date that the child was placed with you for adoption. The Plan Administrator will determine within a reasonable period of time whether a child has been placed for adoption.

The Plan Administrator has final, discretionary authority to determine whether a Medical Child Support Order qualifies as a QMCSO and whether a child has been placed for adoption.

National Medical Support Notice Deemed to be a Qualified Medical Child Support Order An appropriately completed National Medical Support Notice ("Notice") promulgated pursuant to Section 401(b) of the Child Support Performance and Incentive Act of 1998 will be deemed to be a QMCSO if the Notice does not require the Plan to provide any type of form of benefit or any option not otherwise provided under the Plan, except to the extent necessary to meet the requirements of a law relating to medical child support described in Section 1908 of the Social Security Act. The Notice must clearly specify the following:

• The name and the last known mailing address (if any) of the Plan participant and the name and mailing address of each child or the name of an official of a state or political subdivision that has been substituted for the mailing address of the child if provided for in the Notice.

• A reasonable description of the type of coverage to be provided to each Child, or the manner in which such type of coverage is to be determined.

• The period for which the Notice applies.

If a National Medical Support Notice which satisfies the above provisions, is issued for a Child of a participant under the Plan who is a non-custodial parent of the Child, the Plan Administrator, within forty (40) business days after the date of the notice, will:

• Notify the State agency issuing the notice with respect to such Child whether coverage of the Child is available under the terms of the Plan and, if so, whether such Child is covered under the Plan and either the effective date of the coverage or, if necessary, any steps to be taken by the custodial parent (or such substituted official) to effectuate the coverage.

• Provide to the custodial parent a description of the coverage available and any forms or documents necessary to effectuate such coverage.

Nothing in this section will be construed as requiring the Plan, upon receipt of the Notice, to provide benefits under the Plan or eligibility for such benefits in addition to the Benefits provided under the terms of the Plan in effect immediately before the receipt of such notice.

Family and Medical Leave Act The Plan will comply with the Family and Medical Leave Act of 1993 ("FMLA"). During FMLA leave, your health coverage will be continued on the same basis as if you had continued working. Any contributions for coverage under the Plan not collected prior to a FMLA leave must be paid by you on a timely basis during your leave. FMLA leave is limited to a twelve (12) week period of time. If your leave continues beyond twelve (12) weeks, you will be eligible to elect continuation coverage under COBRA as specified in this SPD. Continuation of benefits coverage for personal medical reasons will be extended for at least twelve (12) weeks. Further extension of coverage will be determined in accordance with the Company's medical leave of absence guidelines.

For more information regarding the FMLA and the medical leave of absence guidelines, please contact your human resource representative.

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Military Leave All regular employees who are called to active duty as a member of U.S. Military Service or National Guard will be eligible for military leave. The military leave will comply with the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). Under USERRA, you will be entitled to continue your health coverage while on military leave. During military leave the maximum period for health coverage for you and your eligible dependent under the group health plans will not be less than the later of the following: (1) the eighteen (18) month period beginning on the date when your absence begins or (2) the day after the date upon which you fail to apply for a return to a position of employment as required under USERRA. You are eligible to continue benefits while on military leave as determined by the Plan Administrator in accordance with USERRA. You must continue to make all applicable contributions for health coverage during your military leave.

For more information regarding plan coverage during or after military leaves of absence, please contact your human resource representative. Continuation of Coverage (COBRA) Under the Consolidated Omnibus Budget Reconciliation Act of 1985, or (COBRA), you may elect to continue your health coverage for yourself and any eligible dependent (covered person) covered on the day your health benefits ceased because of a qualifying event.

To continue coverage under COBRA, you must make your election within sixty (60) days of the date coverage ends, or if later, sixty (60) days from the date of notice from the Company informing you of your and your eligible dependent’s right to continue coverage under COBRA. If you choose to continue benefits for yourself and your eligible dependent before the sixty (60) day election deadline, your coverage will continue uninterrupted. Eligibility for COBRA Continuation Coverage You and your covered eligible dependent may continue coverage for up to eighteen (18) months if your coverage ended due to the following events, called qualifying events:

• Termination of employment for any reason other than gross misconduct. • Loss of eligibility due to a reduction in work hours.

Your covered eligible dependent may continue coverage for up to thirty-six (36) months past the date such coverage would normally end due to the following qualifying events:

• Your death. • Your divorce or legal separation. • You become entitled to Medicare. • Your covered eligible dependent ceases to qualify as a dependent under the terms of the Plan. • You have a Child born to or placed for adoption with you during your period of COBRA. • The event causes you, your spouse, or your eligible dependent to lose coverage under the Plan.

The period of COBRA continuation coverage is measured from the date you or your covered eligible dependent had the first qualifying event specified above. Subsequent Qualifying Event If a subsequent qualifying event (divorce or legal separation, your death or an eligible dependent Child ceasing to be eligible) occurs during an initial eighteen (18) month period of coverage, COBRA continuation coverage may be extended up to a maximum period of thirty-six (36) months measured from the date of the first qualifying event. Notice of a subsequent qualifying event must be given to the Plan Administrator (or its designated COBRA Claims Administrator) with sixty (60) days in order to extend the coverage. Notice Requirements The Plan Administrator will notify you of your right to elect COBRA continuation coverage. However, if your eligible dependent has a qualifying event as a result of your divorce, legal separation, or the loss of their status as a dependent, you or your covered eligible dependent must notify the Plan Administrator within sixty (60) days of the qualifying event. Failure to provide the required notice will result in loss of COBRA continuation rights. In addition, if you have a Child born to or placed for adoption with you during your period of COBRA continuation coverage, you must notify the Plan Administrator within sixty (60) days of the Child's birth or placement for adoption.

A special rule applies if you drop coverage for your spouse and/or eligible dependent Child(ren) because you will be planning to divorce. In such a case, your spouse and/or eligible dependent Child(ren) who had previously been covered would be entitled to elect COBRA coverage for up to thirty-six (36) months from the date the divorce is final, but only if the COBRA Claims Administrator is notified of the divorce within sixty (60) days. No retroactive coverage before the date of divorce is available.

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Electing COBRA Coverage If you wish to elect COBRA continuation coverage, you must then notify the Plan Administrator within sixty (60) days of the qualifying event or the date you received your COBRA notice, if later. You must also keep the Plan Administrator informed of all the information needed to meet its obligation of both providing notice to you of your right to COBRA continuation coverage and providing the actual COBRA continuation coverage. If you (or an eligible dependent) fail to elect continuation coverage within sixty (60) days after you are notified by the COBRA Claims Administrator, you will lose your rights to continue coverage. You or your spouse's election to take COBRA coverage is also an election to cover all the other qualified beneficiaries in the family unless the election is specific as to which qualified beneficiaries are to be covered.

Special Enrollment Events and COBRA If you have a Child born to, adopted or placed for adoption with you during your period of COBRA continuation coverage, you must notify the Plan Administrator and elect coverage within sixty (60) days of the Child's birth, adoption, or placement for adoption. Cost and Payment of COBRA Premiums You must pay the full cost for COBRA continuation coverage (plus a 2% administrative fee). This cost will be determined by the Company, but it generally cannot exceed 102% of the Plan's cost for providing coverage to similarly situated covered active employees and their covered eligible dependent. COBRA premiums will be subject to change, normally once per year. If you and your covered eligible dependent are receiving an additional eleven months of COBRA continuation coverage due to disability, you will be charged 150% of the Plan's cost for providing coverage if the disabled beneficiary is part of the coverage group. However, if the COBRA coverage group includes only non-disabled qualified beneficiaries during the extension period, you will be charged 102% of the applicable premium.

Once an election for COBRA continuation coverage is made, you (or the affected covered person) have forty-five (45) days to pay any premium for the first month and any retroactive premium due for the elected coverage. Although coverage is retroactive to the date of the initial qualifying event, no COBRA benefits will be paid until the first payment is received by the Plan Administrator. All subsequent payments must be received by the Plan Administrator on the first day of the month for coverage during that month. The Plan permits a thirty (30) day grace period for payment of required COBRA premiums. The thirty (30) day grace period commences immediately following the date the premium is due. If payments for coverage are not received by the Plan Administrator by the last day of the grace period, your COBRA continuation coverage will end as of the last day of the month for which a full premium payment was made.

Even if you do not receive a bill, your COBRA payments must still be received within the allowable time period. COBRA premiums can be paid by you or by a third party on your behalf. Here are a few other details about payments you need to be aware of:

• No late or reminder notices will be sent for payments that have not been made. • Once COBRA coverage is terminated, it cannot be reinstated. • You may be eligible for state or local assistance to pay the COBRA premiums. For more information, contact your local

Medicaid office or the office of your state insurance commissioner. Responses to Information Regarding a Qualified Beneficiary's Right to Coverage Upon request, the Plan must inform health care providers regarding the qualified beneficiary's right to coverage during the applicable grace periods. In addition, the Plan is required to respond to inquiries from health care providers regarding the qualified beneficiary's right to coverage during the election period and his right to retroactive coverage if COBRA is elected. Deficient Continuation Coverage Contribution Amount If timely payment of the continuation coverage contribution is made to the Plan in an amount that is not significantly less than the amount the Plan requires to be paid for a period of coverage, then the amount paid is deemed to satisfy the Plan’s requirement for the amount that must be paid for continuation coverage contribution, unless the Plan Administrator notifies the qualified beneficiary of the amount of the deficiency and grants a reasonable period of time thirty (30) days for payment of the deficiency to be made. For purposes of this section an amount, not significantly less than the amount the Plan requires to be paid shall be defined as not more than the lesser of $50 or 10% of the required payment amount.

Changes in Benefits Under COBRA If you or any eligible dependent elect COBRA coverage, benefits will be the same that were in effect at the time you became eligible for COBRA. If group plan benefits to active employees change, benefits will also change for you and/or your eligible dependent on COBRA coverage. Termination of COBRA Continuation Coverage COBRA continuation coverage will not be provided beyond whichever of the following dates is first to occur:

• The date the maximum coverage period expires based upon the qualifying event, which entitled you to receive COBRA continuation coverage.

• The date the Plan is terminated and no other health plan is provided to active employees.

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• The last day of the month preceding the month for which the covered person fails to pay the premium for COBRA continuation coverage by the last day of the grace period.

• The date the covered person first becomes entitled to Medicare after the date the person elects COBRA continuation coverage. • The date the covered person first becomes covered under another group health plan or policy (and is no longer subject to, due to

changes in the law or otherwise, a pre-existing condition exclusion or limitation under the other or new group benefit plan) after the date the person elects COBRA continuation coverage.

• For Disabled persons covered under the Plan who elect to receive COBRA continuation coverage (and their covered family members), the month that begins more than thirty-one (31) days after the date that the Disabled person is determined by the Social Security Administration to no longer be disabled within the meaning of the Social Security Act.

You should be aware that Medicare entitlement, including Medicare entitlement due to end stage renal disease (ESRD), is a terminating event for COBRA continuation coverage under the Plan.

Special COBRA Continuation Coverage for Disabled Persons If you (and your covered eligible dependents) are receiving eighteen (18) months of COBRA continuation coverage, you (and your covered eligible dependents) may have your maximum COBRA continuation coverage period extended from 18 months to up to twenty-nine (29) months in total provided the following requirements are met:

• The Social Security Administration determines that you (or one of your covered eligible dependent) are disabled within the meaning of the Social Security Act.

• This disability exists as of the date of the qualifying event or at any time during the first sixty (60) days of COBRA continuation coverage following the qualifying event (including the date of the qualifying event).

• The disabled covered person provides evidence to the Plan Administrator of the Social Security Administration's disability determination within sixty (60) days after the Social Security determination but not later than the last day of the initial eighteen (18) month period of COBRA continuation coverage.

COBRA Continuation Coverage and Medicare If your eligible dependent is receiving COBRA continuation coverage and you become eligible for Medicare benefits, your coverage will end but your eligible dependent who is on COBRA coverage may continue coverage for thirty-six (36) months measured from the date of the initial qualifying event. In addition, if you become entitled to Medicare within eighteen (18) months of the COBRA qualifying event and then later terminate employment or have a reduction in hours (for reasons other than gross misconduct), your dependent will be eligible for COBRA continuation coverage will be eligible for thirty-six (36) months of COBRA coverage measured from the date you became entitled to Medicare.

Relocation and COBRA Coverage If a qualified beneficiary moves outside the service area of a region-specific benefit package, alternative coverage shall be made available no later than the date the qualified beneficiary relocates, or if later, the first day of the month following the month in which the qualified beneficiary requests the alternative coverage.

GLOSSARY

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General Definitions When these terms are used in this SPD, they will have the following meanings unless otherwise noted:

Accident: A sudden, unexpected, unusual, specific and abrupt event. Such event must occur by chance at an identifiable time and place during the policy term. It will not include any heart, coronary or circulatory malfunction.

Actively at Work or Active Work: When the employee works at the Employer's usual place of business or on assignment for the purpose of furthering the Employer's business and performing the Material and Substantial Duties of the insured employee's regular occupation on a full-time basis or a part time basis working thirty-two (32) hours or more per week.

Ambulatory Surgical Center: A facility (other than a Hospital) whose primary function is the provision of surgical procedures on an ambulatory basis and which is duly licensed by the appropriate state and local authority to provide such services.

Annual Base Pay: Equal to the weekly/monthly wage or salary that a covered employee was receiving from the Employer as of September 30, of the prior year. It includes:

• Employee contributions made through a salary reduction agreement with the Employer to an IRC Section 401(k) or a deferred compensation agreement.

• Amounts contributed to an employee’s fringe benefits according to a salary reduction arrangement under an IRC Section 125 Plan.

It will not include commissions, overtime pay, incentive pay, foreign service allowances for expatriates or inpatriates, or the Employer’s contribution on behalf of a covered employee to a retirement plan or other deferred compensation arrangement or any other extra compensation.

Appropriate and Regular Care: Regularly visiting a Physician as frequently as medically required to meet basic health needs. The effect of the care should be of demonstrable medical value for your disabling condition(s) to effectively attain and/or maintain Maximum Medical Improvement.

Beneficiary: The person or persons named in writing by the insured person to receive benefits under the insurance policy. Such Beneficiary name(s) will be maintained in the Plan Administrator’s files. If the insured person does not name a Beneficiary, the Beneficiary is the person or persons as designated in the payment of claim provision of the insurance policy.

Benefit(s)/Covered Expenses: The amount the Plan will pay for Covered Expenses listed under a benefit description that will be paid under the Plan if it is one of the following listed below after you or your covered eligible dependents have met the Deductible and Copayment requirements, if any.

• Prescribed by a Physician for the therapeutic treatment of injury, illness, or pregnancy. • Medically Necessary. • No more expenses than what the Claims Administrator determines as Reasonable and Customary Charge. • Not excluded under any exclusions of the Plan. • Within the maximum benefit level.

If you use an In-Network Provider, covered expense means the agreed upon rate set between the Claims Administrator and such provider for services which meet all of the above standards. Brand Name Drugs: A Prescription Drug which is protected by trademark registration.

Companion: A person whose presence as a Companion or caregiver is necessary to enable a National Medical Excellence Patient to receive services in connection with a National Medical Excellence procedure or treatment on an inpatient or outpatient basis or to travel to and from the facility where treatment is given.

Convalescent Facility: This is an institution that:

• Is licensed to provide, and will provide, the following on an inpatient basis for persons convalescing from disease or injury: o Professional nursing care by an R.N. or by an L.P.N. directed by a full-time R.N. o Physical restoration services to help patients meet a goal of self-care in daily living activities.

• Provides twenty-four (24) hour a day nursing care by licensed nurses directed by a full-time R.N. • Is supervised full-time by a Physician or R.N. • Keeps a complete medical record on each patient. • Has a utilization review plan. • Is not mainly a place for rest, for the aged, for the drug addicts, for alcoholics, for mentally retarded persons, for custodial or

educational care, or for care of Mental Disorders. • Charges a fee for service.

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Coinsurance: The percentage of Covered Expenses you will be required to pay out-of-pocket. Coinsurance amounts will apply to your Out-of-Pocket Maximum.

Copay or Copayment: The portion of Covered Expenses you will be required to pay out of your pocket before the Plan will pay benefits for any remaining portion. This amount will not be reimbursed and will not apply toward the Deductible or Out-of-Pocket Maximum. Copayments are specified in the Plan schedules.

As to a Prescription Drug dispensed by a Network Pharmacy, this is the fee charged to a person at the time the Prescription Drug is dispensed payable directly to the Pharmacy for each Prescription or refill at the time the Prescription or refill is dispensed. For drugs dispensed as packaged kits, the fee applies to each kit at the time it is dispensed. In no event will the Copayment be greater then the fee for the Prescription, kit or refill.

Custodial Care: Services and supplies furnished to a person mainly to help him or her in the activities of daily life. This includes Room and Board Charges and other institutional care. The person does not have to be disabled. Such services and supplies are Custodial Care without regard to:

• Whom they are prescribed. • Whom they are recommended. • Whom or by whom they are performed.

Date of Disability: The date the Claims Administrator determines the Injury or Sickness impairs the employee’s ability to perform their Regular Occupation.

Day Care Treatment: A Partial Confinement Treatment administered to a person during the day. There is no room charge made by the Hospital or Treatment Facility. A day care program must be available for at least six (6) consecutive hours during the day and five (5) days a week.

Deductible: The amount which must be paid by the participant before the Plan begins to pay benefits (if applicable).

Dentist: A legally qualified Physician. In addition, a Physician who is licensed to do the dental work he or she performs.

Directory: A listing of In-Network Providers in the Service Area covered under the Plan.

Disability Earnings: The wage or salary you earn from Gainful Employment after a disability begins. It will not include Social Security or any other disability payment you receive as a result of your disability.

Doctor: A person legally licensed to practice medicine, psychiatry, psychology or psychotherapy, who is neither you nor a member of your immediate family. A licensed medical practitioner is a Doctor if applicable state law requires that such practitioners be recognized for purposes of certification of Disability, and the treatment provided by the practitioner is within the scope of his or her license.

Durable Medical and Surgical Equipment: No more than one item of equipment for the same or similar purpose and the accessories required for operation that are:

• Made to withstand prolonged use. • Made for and mainly used in the treatment of a disease or injury. • Suited for use in the home. • Not normally of use to persons who do not have a disease or injury. • Not for use in altering air quality or temperature. • Not for exercise or training.

Not included is equipment such as: whirlpools, portable whirlpool pumps, sauna baths, massage devices, over bed tables, elevators, communications aids, vision aids and telephone alert systems. Effective Treatment of Alcoholism or Drug Abuse: A program of alcoholism or drug abuse therapy that is prescribed and supervised by a Physician and either:

• Has a follow-up therapy program directed by a Physician on at least a monthly basis. • Includes meetings at least twice a month with organizations devoted to the treatment of alcoholism or drug abuse.

Effective treatment will not include: • Detoxification: mainly treating the after effects of a specific episode of alcoholism or drug abuse. • Maintenance care: providing an environment free of alcohol or drugs.

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Elimination Period: The number of calendar days at the beginning of a continuous period of disability for which no benefits will be payable.

Emergency Care: The first treatment in a Hospital’s emergency room right after the sudden and unexpected onset of a change in a person’s physical or mental condition which:

• Requires Hospital level care because the care could not safely and adequately have been provided other than in a Hospital or adequate care was not available elsewhere in the area at the time and place it was needed.

• If the Hospital level care was not given the condition could reasonably be expected to result in loss of life or limb, significant impairment to bodily function or permanent dysfunction of a body part.

Emergency Condition: The sudden and unexpected onset of a change in a person's physical or mental condition which, if the procedure or treatment was not performed right away, could reasonably be expected to result in loss of life or limb, significant impairment to bodily function or permanent dysfunction of a body part. Experimental Nature: Procedure or lens that is not used universally or accepted by the vision care profession, as determined by the Claims Administrator.

Gainful Employment or Gainfully Employed: The performance of any occupation for wages, remuneration or profit, for which you are qualified by education, training or experience on a full-time or part-time basis, for the Employer or another employer, and which the Claims Administrator approves and for which the Claims Administrator reserves the right to modify approval in the future. Generally Accepted Medical Practice or Generally Accepted in the Practice of Medicine: The care and treatment that is consistent with relevant guidelines of national medical, research and health care coverage organizations and governmental agencies. Generic Drug: A Prescription Drug, which is not protected by trademark registration, but is produced and sold under the chemical formulation name.

Home Health Care Agency: An agency that:

• Provides skilled nursing and other therapeutic services. • Is associated with a professional group which makes policy; the group must have at least one (1) Physician and one (1) R.N. • Has full-time supervision by a Physician or a R.N. • Keeps complete medical records on each person. • Has a full-time administrator. • Meets licensing standards.

Home Health Care Plan: A plan that provides for care and treatment of a disease or injury. The care and treatment must be prescribed in writing by the attending Physician an alternative to confinement in a Hospital or Convalescent Facility.

Hospice Care: The care given to a Terminally Ill person by or under arrangements with a Hospice Care Agency. This care must be part of a Hospice Care Program

Hospice Care Agency: An agency or organization which: • Has Hospice Care available twenty-four (24) hours a day. • Meets any licensing or certification standards set forth by the jurisdiction where it is located. • Provides skilled nursing services, medical social services and psychological and dietary counseling. • Provides or arranges for other services which will include services of a Physician, physical and occupational therapy, part-time

home health aide services which mainly consist of caring for Terminally Ill persons and inpatient care in a facility when needed for pain control and acute and chronic symptom management.

• Has personnel that include at least one Physician, one R.N. and one licensed or certified social worker employed by the agency. • Establishes policies governing the provision of Hospice Care. • Assesses the patient's medical and social needs. • Develops a Hospice Care Program to meet those needs. • Provides an ongoing quality assurance program. This includes reviews by Physicians, other than those who own or direct the

Agency. • Permits all area medical personnel to utilize its services for their patients. • Keeps a medical record on each patient. • Utilizes volunteers trained in providing services for non-medical needs. • Has a full-time administrator.

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Hospice Care Program: A written plan of Hospice Care, which: • Is established by and reviewed from time to time by a Physician attending the person and the appropriate personnel of a Hospice

Care Agency. • Is designed to provide palliative and supportive care to Terminally Ill persons and supportive care to their families. • Includes an assessment of the person's medical and social needs and a description of the care to be given to meet those needs.

Hospice Facility: A facility, or distinct part of one, which:

• Mainly provides inpatient Hospice Care to Terminally Ill persons. • Charges its patients. • Meets any licensing or certification standards set forth by the jurisdiction where it is located. • Keeps a medical record on each patient. • Provides an ongoing quality assurance program including reviews by Physicians other than those who own or direct the facility. • Is run by a staff of Physicians; at least one such Physician must be on call at all times. • Provides twenty-four (24) hour a day nursing services under the direction of a R.N. • Has a full-time administrator.

Hospital: A place that:

• Mainly provides in-patient facilities for the surgical and medical diagnosis, treatment and care of injured and sick persons. • Is supervised by a staff of Physicians. • Provides twenty-four (24) hour a day R.N. service. • Is not mainly a place for rest, for the aged, for drug addicts, for alcoholics or a nursing home. • Charges its patients.

For Disability purposes Hospital or Health Care Facility is a legally operated, accredited facility licensed to provide full-time care and treatment for a condition causing your Disability and is operated by a full-time staff of licensed Physicians and registered nurses. It will not include facilities, which primarily provide custodial, educational or rehabilitative care.

In-Network: Medical or Pharmacy services performed or authorized by a provider who participates in a Managed Care Network including:

• A person’s Primary Care Physician or an In-Network Provider on the referral of the Primary Care Physician. • An In-Network Provider on the referral of the person’s Primary Care Physician and if approved by the Claims Administrator. • Any health care provider for an Emergency Condition when travel to an In-Network Provider or referral by a person’s Primary

Care Physician prior to treatment is not feasible. • Any mental health services approved by the Claims Administrator.

In-Network Provider: A health care provider that has contracted to furnish services or supplies for a Negotiated Charge, but only if the provider is, with the Claims Administrator’s consent, included in the Directory as an In-Network Provider for:

• The service or supply involved. • The class of employees of which you are a member.

In-Network Vision Provider: An optometrist or ophthalmologist licensed and otherwise qualified to practice vision care and/or provide vision care materials who has contracted with the Claims Administrator to provide vision care services and/or vision care materials on behalf of the covered person of the plan. Insured Employee: An employee whose insurance is in force under the terms of the policy. Indexed Monthly Earnings: Your monthly earnings adjusted on each anniversary of benefit payments by the lesser of 10% of the current annual percentage increase in the Consumer Price Index. Your Indexed Monthly Earnings may increase or remain the same, but will never decrease. Indexing is only used to determine your percentage of lost earnings while you are disabled and working. The Consumer Price Index is published by the U.S. Department of Labor. The Claims Administrator reserve the right to use some other similar measurement if the Department of Labor changes or stops publishing the Consumer Price Index. Injury: Bodily injury caused by an Accident. The disability plan defines Injury as an accident which results directly and independently of all other causes of disability. The accident must occur while coverage is in force.

Licensed Physician: A currently licensed practitioner of the healing arts, acting within the scope of the Physician’s license. A Licensed Physician cannot be the insured person or a member of the insured person’s immediate family. A Licensed Physician cannot be an individual living in the insured person’s house.

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L.P.N.: A licensed practical nurse acting in the scope of his/her license. L.V.N.: A licensed vocational nurse acting in the scope of his/her license. Mail Order Pharmacy: An establishment where Prescription Drugs are legally dispensed by mail.

Managed Care Network: An organized system of health care delivery in which Physicians, Hospitals and other providers agree to provide health care to participants at a predetermined fee.

Material and Substantial Duties: The necessary functions of your Regular Occupation, which cannot be reasonably omitted or altered.

Maximum Medical Improvement: The level at which, based on reasonable medical probability, further material recovery from, or lasting improvement to, an Injury or Sickness can no longer be reasonably anticipated.

Mental Disorder: A disease commonly understood to be a Mental Disorder whether or not it has a physiological or organic basis and for which treatment is generally provided by or under the direction of a mental health professional such as a psychiatrist, a psychologist or a psychiatric social worker. A Mental Disorder includes, but is not limited to:

• Alcoholism and drug abuse. • Schizophrenia. • Bipolar disorder. • Pervasive Mental Developmental Disorder (Autism). • Panic disorder. • Major depressive disorder. • Psychotic depression. • Obsessive-compulsive disorder.

For the purposes of Benefits under the Plan, Mental Disorder will include alcoholism and drug abuse only if any separate benefit for a particular type of treatment does not apply to alcoholism and drug abuse. The Disability Plan defines Mental Disorder as a disorder found in the current diagnostic standards in the American Psychiatric Association.

Medicare: The plan of benefits provided by Title XVIII of the U.S. Social Security Act of 1965 as amended from time to time.

Monthly Benefit and Maximum Period Payable: The benefit and benefit periods that apply to you.

NME Patient: A person who:

• Requires any of the National Medical Excellence (“NME”) procedure and treatment types for which the charges are a Covered Expense.

• Contacts the Claims Administrator and is approved by the Claims Administrator as an NME Patient. • Agrees to have the procedure or treatment performed in a Hospital designated by the Claims Administrator as the most

appropriate facility.

Necessary: A service or supply furnished by a particular provider is Necessary if the Claims Administrator determines that it is appropriate for the diagnosis, the care or the treatment of the disease or injury involved.

To be appropriate, the service or supply must: • Be care or treatment, as likely to produce a significant positive outcome as, and no more likely to produce a negative outcome

than, any alternative service or supply, both as to the disease or injury involved and the person's overall health condition. • Be a diagnostic procedure, indicated by the health status of the person and be as likely to result in information that could affect

the course of treatment as, and no more likely to produce a negative outcome than, any alternative service or supply, both as to the disease or injury involved and the person's overall health condition.

• As to diagnosis, care and treatment be no more costly (taking into account all health expenses incurred in connection with the service or supply) than any alternative service or supply to meet the above tests.

In determining if a service or supply is appropriate under the circumstances, the Claims Administrator will take into consideration: • Information provided on the affected person's health status. • Reports in peer reviewed medical literature. • Reports and guidelines published by nationally recognized healthcare organizations that include supporting scientific data.

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75

• Generally recognized professional standards of safety and effectiveness in the United States for diagnosis, care or treatment. • The opinion of health professionals in the generally recognized health specialty involved. • Any other relevant information brought to the Claims Administrator's attention.

In no event will the following services or supplies be considered to be Necessary: • Those that do not require the technical skills of a medical, a mental health or a dental professional. • Those furnished mainly for the personal comfort or convenience of the person, any person who cares for him or her, any person

who is part of his or her family, any healthcare provider or healthcare facility. • Those furnished solely because the person is an inpatient on any day on which the person's disease or injury could safely and

adequately be diagnosed or treated while not confined. • Those furnished solely because of the setting if the service or supply could safely and adequately be furnished in a Physician’s or

a Dentist's office or other less costly setting.

Negotiated Charge: The maximum charge a Network provider has agreed to make as to any service or supply for the purpose of the benefits under the Plan.

Network: A group of Physicians, hospitals, laboratories and other health care providers who deliver service under the terms of a Managed Care plan.

Network Pharmacy: A Pharmacy, including a Mail Order Pharmacy, which is a party to a contract with the Claims Administrator to dispense drugs to persons covered under this Plan, but only:

• While the contract remains in effect. • While such a Pharmacy dispenses a Prescription Drug under the terms of its contract with the Claims Administrator.

Night Care Treatment: A Partial Confinement Treatment program given to a person who is confined during the night. A room charge is made by the Hospital or Treatment Facility. A night care program must be available at least eight hours in a row five nights a week.

Non-Occupational Disease: A Non-Occupational Disease is a disease that does not arise out of (or in the course of) any work for pay or profit or result in any way from a disease that does. A disease will be deemed to be non-occupational regardless of cause if proof is furnished that the person is covered under any type of Workers' Compensation law and is not covered for that disease under such law.

Non-Occupational Injury: A Non-Occupational Injury is an accidental bodily injury that does not arise out of (or in the course of) any work for pay or profit or result in any way from an injury that does.

Out-of-Network: A health care service or supply furnished by a health care provider that is not an In-Network provider.

Out-of-Network Pharmacy: A Pharmacy that is not party to a contract with the Claims Administrator or a Pharmacy which is party to such a contract, but will not dispense Prescription Drugs in accordance with its terms.

Out-of-Network Provider: Is a health care provider that has not contracted to furnish services or supplies at a Negotiated Charge or an In-Network Provider that is furnishing services or supplies without the referral of a Primary Care Physician.

Out-of-Network Vision Provider: Any optometrist, optician, ophthalmologist or other licensed and qualified vision provider who has not contracted with the Claims Administrator to provide vision care services and/or vision care materials.

Orthodontic Treatment: Any medical service or supply, dental service or supply, furnished to prevent, to diagnose or to correct a misalignment of the teeth, the bite, the jaws or jaw joint relationship whether or not for the purpose of relieving pain. Installation of a space maintainer and a surgical procedure to correct malocclusion are not included under Orthodontic Treatment.

Out-of-Pocket Maximum: The share/portion of any otherwise eligible (Reasonable and Customary) Coinsurance expense that you pay. Copayments/Confinement charges will be not considered eligible out-of-pocket expenses. In addition, Out-of-Network out-of-pocket expenses will not apply toward the satisfaction of the In-Network out-of-pocket expenses, and In-Network out-of-pocket expenses will not apply toward satisfaction of Out-of-Network out-of-pocket expenses.

Partial Confinement Treatment: A plan of service to treat alcoholism or drug abuse. The plan must meet these tests:

• It is carried out in a Hospital or Treatment Facility on less than a full-time inpatient basis. • It is in accord with accepted medical practice for the condition of the person and does not require full-time confinement. • It is supervised by a Physician who reviews and evaluates its effects weekly.

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Permanent Total Disability: A Total Disability that exists continuously for at least six (6) months or to date of death, if sooner. Permanent Total Disability will be deemed to exist, if, as a result of Injury or Sickness, you suffer:

• Complete severance of both hands through or above the wrist joint. • Complete severance of both feet or one hand and one foot through or above the wrist or ankle joint. • The entire and irrecoverable loss of sight in both eyes.

The standards noted above apply whether or not you are able to work. Pharmacy: An establishment where Prescription Drugs are legally dispensed.

Physician: A legally qualified Physician with a license to practice medicine in a specific field.

Pre-existing Condition: A condition for which you received medical treatment, consultation, care or services including diagnostic measures, or took prescribed drugs or medicines for your condition within three (3) months prior to your effective date of insurance. A condition will no longer be considered pre-existing if it causes disability, which begins after you have been insured under the policy for a period of twelve (12) months.

Prescriber: Any person, acting within the scope of his or her license, who has the legal authority to write an order for a Prescription Drug.

Prescription: An order of a Prescriber for a Prescription Drug.

Prescription Drugs: Any of the following:

• A drug, biological or compounded Prescription which, by federal law, may be dispensed only by Prescription and which is required to be labeled "Caution: Federal Law prohibits dispensing without Prescription".

• An injectable drug prescribed to be self-administered or administered by any other person except one who is acting within his or her capacity as a paid healthcare professional. Covered injectable drugs include insulin.

• Disposable needles and syringes that are purchased to administer a covered injectable Prescription Drug. • Disposable diabetic supplies.

Primary Care Physician: An In-Network Provider who is:

• Selected by a person from the list of Primary Care Physicians in the Directory. • Responsible for the person’s on-going health care. • Shown on the Claims Administrator’s records as the Primary Care Physician.

Principal Sum: The applicable amount of insurance that applies to the insured. Reasonable and Customary Charge: Only that part of a charge that is reasonable is covered. The reasonable charge for a service or supply is the lowest of:

• The provider's usual charge for furnishing such services. • The charge the Claims Administrator determines to be appropriate based on factors such as the cost of providing the same or a

similar service or supply and the manner in which charges for the service or supply will be made. • The charge the Claims Administrator determines to be the prevailing charge level made for it in the geographic area where it is

furnished.

In determining the reasonable charge for a service or supply that is unusual, not often provided in the area or provided by only a small number of providers in the area, the Claims Administrator may take into account factors such as the complexity of such service, the degree of skill required, the specialty of the provider, the range of services or supplies provided by a facility and the prevailing charge in other areas.

Reasonable Expense: The Reasonable and Customary fee or charge for the services rendered and the supplies furnished in the area where rendered or furnished. A Physician must recommend and approve the services and supplies.

Regular Occupation: The occupation you are routinely performing when your disability begins. The Claims Administrator will look at your occupation as it is normally performed in the national economy, instead of how the work tasks are performed for a specific employer or at a specific location.

Retirement Plan: A plan, which provides retirement benefits to employees and is not funded wholly by employee contributions. R.N.: A licensed registered nurse acting within the scope of his/her license.

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Room and Board Charges: Charges by an institution for room and board and other Necessary services and supplies made regularly at a daily or weekly rate.

Semi-Private Rate: The charge for room and board that an institution applies to most beds in its semi-private rooms with two or more beds. If there are no such rooms, the Claim Administrator will determine the rate based upon the rate most commonly charged by similar institutions in the same geographic area.

Service Area: The geographic area, as determined by the Claim Administrator, in which In-Network Providers for this Plan are located.

Sickness: A Sickness or disease causing disability which starts and the symptoms of which are first manifested while the insured person’s coverage is in force.

Spouse Surcharge: A Spouse Surcharge is an amount that is deducted on an after-tax basis from each paycheck if you choose to cover a spouse under a Flowserve medical plan who has access to medical coverage as a full-time active or retired employee.

Substance Abuse: The psychological or physiological dependence upon and abuse of drugs, including alcohol, characterized by drug tolerance or withdrawal and impairment of your social or occupational role or functioning or both.

Terminally Ill: A medical prognosis of six (6) months or less to live.

Total Disability or Totally Disabled: An insured Person’s inability to engage in any occupation for wage or profit for which you are reasonably qualified by reason of education, training or experience. The inability must be as a result of Injury or Sickness and must be verified by an attending Physician’s statement. Total Disability means:

• A spouse’s inability to engage in the substantial and material activities engaged in prior to the start of disability. • A child’s confinement to a house or a Hospital.

The inability or confinement must be as a result of Injury or Sickness.

Treatment Facility (Alcoholism or Drug Abuse): An institution that: • Mainly provides a program for diagnosis, evaluation and effective treatment of Alcoholism or Drug Abuse. • Charges its patients • Meets licensing standards. • Prepares and maintains a written plan of treatment for each patient. The plan must be based on medical, psychological and social

needs and must be supervised by a Physician. • Provides on the premises treatment, twenty-four (24) hours a day. • Provides Necessary detoxification services with its effective treatment program. • Provides infirmary-level medical services. In addition, it provides or arranges medical services that may be required with an area

Hospital. • Provides supervision by a staff of Physicians. • Provides skilled nursing care by licensed nurses who are directed by a full-time R.N.

Treatment Facility (Mental Disorder): An institution that:

• Mainly provides a program for the diagnosis, evaluation and effective treatment of Mental Disorders. • Is not mainly a school or a custodial, recreational or training institution. • Provides infirmary-level medical services. In addition, it provides or arranges for any other medical service that may be required

with an area Hospital. • Is supervised full-time by an attending psychiatrist who is responsible for patient care. • Is staffed by psychiatric Physicians involved in care and treatment. • Has a psychiatric Physician present throughout the treatment day. • Provides, at all times, psychiatric, social work and nursing services. • Provides, at all times, skilled nursing care by licensed nurses who are supervised by a full-time R. N. • Prepares and maintains a written plan of treatment for each patient based on medical, psychological and social needs. The plan

must be supervised by a psychiatric Physician. • Charges a fee for service. • Meets licensing standards.

Weekly Benefit and Maximum Period Payable: The benefit and those periods shown in the Summary of Benefits that apply to the employee.