-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LKx6ZUECBDLCuAAePozra7GBTzTeRd2A2PjrSdmeq0mjOojpR9G5AmYboeqSf+nL 7sdwNrK0HpCDt2an5f4FOg== 0000950129-04-009672.txt : 20041210 0000950129-04-009672.hdr.sgml : 20041210 20041210165311 ACCESSION NUMBER: 0000950129-04-009672 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041207 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041210 DATE AS OF CHANGE: 20041210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATCO GROUP INC CENTRAL INDEX KEY: 0001057693 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED PLATE WORK (BOILER SHOPS) [3443] IRS NUMBER: 222906892 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15603 FILM NUMBER: 041196934 BUSINESS ADDRESS: STREET 1: BROOKHOLLOW CENTRAL III STREET 2: 2950 NORTH LOOP WEST STE 750 CITY: HOUSTON STATE: TX ZIP: 77092 BUSINESS PHONE: 7136839292 MAIL ADDRESS: STREET 1: BROOKHOLLOW CENTERL III STREET 2: 2950 NORTH LOOP WEST STE 750 CITY: HOUSTON STATE: TX ZIP: 77092 8-K 1 h20871e8vk.txt NATCO GROUP, INC.- DECEMBER 7, 2004 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported): December 7, 2004 NATCO Group Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 001-15603 22-2906892 (State of Incorporation) (Commission File Number) (IRS Employer Identification No.) 2950 North Loop West, 7th Floor Houston, Texas 77092 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (713) 683-9292 SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT Effective December 7, 2004, we entered into an employment agreement with John U. Clarke pursuant to which he will serve as our Chief Executive Officer. A copy of this employment agreement is included as Exhibit 10.1 and is incorporated by reference into this report. The material terms of the agreement are summarized in Item 5.02 below. SECTION 5 - CORPORATE GOVERNANCE AND MANAGEMENT ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS. (c) Appointment of New Principal Executive Officer. On December 7, 2004, our Board of Directors elected John U. Clarke, then interim Chief Executive Officer and Chairman of the Board, as NATCO's Chief Executive Officer. Mr. Clarke will continue as Chairman of the Board, a position he has held since July 2004. Mr. Clarke, 52, has been a director of the Company since February 2000, and served as the Chairman of the Board's Governance, Nominating & Compensation (GNC) Committee from December 2002 to September 7, 2004, when he was appointed interim Chief Executive Officer. From May 2001 to December 2004, he was President of Concept Capital Group, a financial and strategic advisory firm he founded in 1995. Prior to reestablishing the firm, Mr. Clarke was a Managing Director of SCF Partners, a private equity investment firm. From 1999 to June 2000, he was Executive Vice President of Dynegy, Inc. where he was also an Advisory Director and member of the Office of the Chairman. Mr. Clarke joined Dynegy in April 1997 as Senior Vice President and Chief Financial Officer. Prior to joining Dynegy, he was a managing director of Simmons & Company International. From 1995 to 1997, he served as president of Concept Capital Group. Mr. Clarke was Executive Vice President and Chief Financial and Administrative Officer with Cabot Oil and Gas from 1993 to 1995. He was with Transco Energy from 1981 to 1993, last serving as Senior Vice President and Chief Financial Officer. Mr. Clarke is a director and member of the audit and human resources committees of Harvest Natural Resources, Inc., a publicly traded international oil and gas company, a director, member of the compensation committee and chairman of the audit committee of The Houston Exploration Company, a publicly traded domestic oil and gas exploration and production company, and chairman and director of FuelQuest.com, a market service provider to petroleum marketers. Since the beginning of our last fiscal year, Mr. Clarke has received compensation from NATCO for his services as a director, GNC Committee Chairman and interim CEO. In 2003, Mr. Clarke received $45,000 for his service as a director and as GNC Committee Chairman, and was awarded options to acquire common stock of the Company and restricted stock of the Company valued at $25,700 on the dates of grant. In 2004, Mr. Clarke received $60,750 for his service as a director and as GNC Committee Chairman, and prior to his election as interim Chief Executive Officer was awarded options to acquire common stock of the Company and restricted stock of the Company valued at $12,500 on the dates of grant. Commencing September 7, 2004, on becoming the Company's interim CEO, Mr. Clarke received a fee of $25,000 per month and was awarded 33,440 shares of restricted stock of the Company(valued at $89,000 on the date of grant), with restrictions to lapse in equal installments on the first, second and third anniversaries of the date of grant, so long as Mr. Clarke either is continuing his service as interim or permanent CEO or has completed his service as interim CEO or earlier, upon the earliest of (a) Mr. Clarke's death, disability or retirement from the Board following his completion of his service as interim CEO, (b) the Board's election of a Chairman other than Mr. Clarke, or (c) on the occurrence of a Corporate Change as defined in the 2004 Stock Incentive Plan. While serving as interim CEO, Mr. Clarke continued to receive fees for service as a director. Effective December 7, 2004, we entered into an employment agreement with Mr. Clarke pursuant to which he will serve as our Chief Executive Officer. The agreement is for a term expiring December 31, 2007 unless sooner terminated in accordance with its terms. Under the agreement, Mr. Clarke is entitled to receive an annual salary of at least $396,000, and, commencing in 2005, is eligible to receive an annual bonus with a target award of 75% of his base salary, based on our financial performance and other criteria to be determined annually by our Board. He also will receive an additional bonus payment of $100,000, payable in January 2005. Under the agreement, Mr. Clarke was awarded nonqualified stock options to acquire 39,500 shares of our common stock under the 2004 Stock Incentive Plan having an exercise price equal to the fair market value of our common stock on the date of grant, vesting in three installments on the first, second and third anniversaries of the date of grant and having a term of 10 years. Mr. Clarke must continue to hold at least one-third of the stock issued following exercise of such options for at least three years after exercise, unless he sooner leaves the Company, a Corporate Change occurs or the committee responsible for administration of the plan otherwise approves. He also was awarded 22,000 performance-based restricted shares under our 2004 Stock Incentive Plan, with the restrictions to lapse (a) on the date that we have achieved an earnings per share of at least $1.00 calculated on a trailing 12-months basis as of the last day of a quarter, for three consecutive quarters, subject to certain adjustments and conditions, or, (b) if earlier, pursuant to Section VIII of the Plan or upon occurrence of a Corporate Change, subject to Mr. Clarke's continued employment on the date of the applicable event. Mr. Clarke must continue to hold at least one-third of this restricted stock for a period of three years after the restrictions lapse, unless he sooner leaves the Company, a Corporate Change occurs or the committee responsible for administration of the plan otherwise approves. This restricted stock will be forfeited if the restrictions have not lapsed by December 31, 2007. In addition, in January 2005, Mr. Clarke will be awarded 57,000 restricted shares, with the restrictions to lapse after three years of service, subject to earlier lapse on occurrence of a Corporate Change or in the event of Mr. Clarke's death or disability, and 43,000 performance-based restricted shares, with restrictions to lapse if our common stock trades at a price of $12.00 per share or more for 30 consecutive trading days. The performance-based restricted stock will be forfeited if the restrictions have not lapsed by the fifth anniversary of the date of grant. Under the agreement, Mr. Clarke also is entitled to participate in our fringe benefit and insurance plans and to reimbursement of business expenses. Upon any involuntary termination of the employment relationship by us or Mr. Clarke prior to expiration of the term, Mr. Clarke shall be entitled to receive his pro rata base salary and benefits (including payment for accrued, but unused, vacation) through the date of termination. Depending upon the type of involuntary termination, Mr. Clarke or his estate may be entitled to additional compensation and/or benefits, as described below. o Upon an involuntary termination by our independent directors for any reason or by Mr. Clarke by reason of a material breach by us of the terms of the agreement or for certain other reasons specified in the agreement, after execution of a release and in consideration of his continuing obligations under the agreement after termination (including his non-competition obligations), Mr. Clarke shall be entitled to (1) an amount equal to one year's annual base salary; (2) a pro rata share of the amount of the target bonus compensation earned by him under any applicable bonus plan then in effect through the date of termination; (3) continuation of health insurance, dental insurance and life insurance benefits for Mr. Clarke and eligible dependents for up to one year following the termination date; and (4) any deferred compensation previously earned under any of our plans. If a Change in Control (as defined below) occurs within 6 months following such an involuntary termination, Mr. Clarke shall be entitled to (1) an amount equal to 1.5 times one year's annual base salary, with the amount of such payment to be offset by any payment he has previously received under the foregoing provision; (2) an amount equal to 1.5 times the target bonus compensation at the greater of (A) the target bonus compensation in effect at the time notice of termination is given or (B) the target bonus compensation in effect immediately preceding the Change of Control Date (as defined below), offset by any payment he has previously received under the foregoing provision; (3) continuation of health insurance, dental insurance and life insurance benefits for Mr. Clarke and eligible dependents for 18 months following the termination date; and (4) any deferred compensation previously earned under any of our plans to the extent not previously paid. In addition, Mr. Clarke shall receive a cash payment (a) with respect to any stock option that was forfeited as of the date of his termination of employment, equal to the difference between the closing price of our common stock as of the Change of Control Date and such option's exercise price (or, if the term of such option would have expired before the Change of Control Date, the difference between the closing price of our common stock as of the date of such option's expiration date and such option's exercise price) and (b) with respect to any restricted stock that is forfeited as of the date of his termination of employment, equal to the closing price of such stock as of the Change of Control Date, with such payment to be made within 30 days of the Change of Control Date. o Upon an involuntary termination by reason of Mr. Clarke's death or disability, Mr. Clarke or his beneficiaries shall be entitled to (1) a pro rata share of the amount of the target bonus compensation earned by him under any applicable bonus plan then in effect through the date of termination; and (2) any deferred compensation previously earned under any of our plans. 2 o Upon an involuntary termination by our independent directors for any reason or by Mr. Clarke by reason of a material breach by us of the terms of the agreement or for certain other reasons specified in the agreement within 12 months following a Change of Control, after execution of a release and in consideration of his continuing obligations under the agreement after such termination, Mr. Clarke shall be entitled to (1) an amount equal to 1.5 times one year's annual base salary; (2) an amount equal to the product of 1.5 times the target bonus compensation at the greater of (A) the target bonus compensation in effect at the time notice of termination is given or (B) the target bonus compensation in effect immediately preceding the Change of Control Date; (3) continuation of health insurance, dental insurance and life insurance benefits for Mr. Clarke and his eligible dependents for 18 months following the date of termination; and (4) any deferred compensation previously earned under any of our plans. In addition, notwithstanding the terms of the any related incentive plan or agreement, or any award agreement evidencing awards of stock options or restricted stock to purchase our common stock, in the event of a Change of Control while Mr. Clarke is employed by us, (a) all outstanding stock options held by him shall fully vest as of the Change of Control Date and become immediately exercisable in accordance with their terms, (b) all restrictions on any of our restricted stock held by him shall lapse as of the Change of Control Date and (c) any such stock options shall be exercisable for 12 months after the date of termination, unless the term of the stock options expires before the end of such period, in which case the stock option shall be exercisable until the expiration of its term. A "Change of Control" shall occur if: (1) we merge or consolidate with any other entity (other than one of our majority owned subsidiaries) and our shareholders own less than 50% of the surviving entity; (2) we sell all or substantially all of our assets to any other person or entity (other than (a) a sale of our equity interests or (b) a sale of assets to one of our majority owned subsidiaries and in connection therewith Mr. Clarke becomes employed by such subsidiary, us or a partnership in which we are the general partner); (3) we are dissolved or liquidated; (4) any third person or entity together with its affiliates (including a "group" as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) shall become, directly or indirectly, the beneficial owner of greater than 50% of our voting stock, based upon voting power (except as the result of a distribution of our voting securities to our shareholders); or (5) during such time as we have a class of voting securities registered under the Securities Exchange Act, the members of our Board of Directors ("Incumbent Board") on the effective date of such registration cease to constitute at least a majority of the Board, provided that any person becoming a director whose election or nomination for election was approved by a vote of at least two-thirds of the directors comprising the Incumbent Board, for purposes of this clause, shall be considered to be a member of the Incumbent Board. "Change of Control Date" shall mean the day on which a Change of Control becomes effective. In all cases, the payments payable to Mr. Clarke under the employment agreement on termination of the employment relationship shall be offset against any amounts to which he may otherwise be entitled under any and all of our severance plans and policies. If it is determined that any benefit, payment or distribution by us to or for the benefit of Mr. Clarke (whether payable or distributable pursuant to the terms of the agreement or otherwise) would, if paid, be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, then the payment shall be reduced to the extent necessary to avoid the imposition of the excise tax. Upon his termination of employment, Mr. Clarke will be subject to a one-year non-competition and non-solicitation provision under the employment agreement. (d) Appointment of New Director. On December 7, 2004, the Board of Directors elected Julie H. Edwards, executive vice president-finance and administration and chief financial officer for Frontier Oil Corp., as a member of the Board of Directors and a member of the Audit Committee. Ms. Edwards has been appointed as a Class III director, filling the vacancy created by the departure of our former CEO. The Board also determined, in its business judgment, that Ms. Edwards is both financially literate and has the accounting and financial management expertise required for service on NYSE listed company audit committees. Ms. Edwards, 45, joined Frontier in March 1991 as vice president, secretary and treasurer. She was named senior vice president and chief financial officer in August 1994 and, in April 2000, was named to her current position. From mid-1985 until 1991, she worked at Smith Barney, Harris Upham & Co., Inc., in New York and Houston, as an associate in corporate finance, then as vice president-corporate finance. Prior to that, she was an exploration geologist at Amerada Hess Corp. in Tulsa, Okla. She earned a master's degree in business administration with 3 concentration in finance in 1985 from the Wharton Graduate School and a bachelor's of science degree in geology and geophysics in 1980 from Yale College, Yale University. Ms. Edwards is a member of the board of directors of ONEOK, Inc., a diversified energy company involved primarily in oil and gas production, natural gas processing, gathering, storage and transmission in the US mid-continent area. Ms. Edwards was not elected pursuant to any arrangement or understanding between her and any other person. There are no transactions between Ms. Edwards and us since the beginning of our last fiscal year or that are currently proposed in which the amount involved exceeds $60,000 and in which Ms. Edwards has an interest. Ms. Edwards will receive compensation for her service as a director comparable to that received by our other non-employee directors, including an award of 2,500 restricted shares of our common stock, with the restrictions to lapse following one year of service as a director, and options to acquire 2,500 shares of our common stock at an exercise price equal to the fair market value of the stock on the date of grant, which options will vest December 7, 2005, subject to continued service as a director on that date. SECTION 8 - OTHER EVENTS ITEM 8.01 OTHER EVENTS. As previously reported, on September 7, 2004, NATCO Group Inc. advised the New York Stock Exchange (NYSE) that, due to the departure of NATCO's former Chief Executive Officer and the interim assumption of his duties by the Chairman of the Board, John U. Clarke, our Audit Committee had only two members, was without an "audit committee financial expert" and thus was out of compliance with NYSE listing standards 303.01, 303A.06 and 303A.07 and SEC requirements. On December 7, 2004, the Board elected Mr. Clarke as Chief Executive Officer and named Julie H. Edwards, executive vice president-finance and administration and chief financial officer for Frontier Oil Corp., to the Board of Directors and its Audit Committee. The Board determined that Ms. Edwards is independent pursuant to the requirements of the NYSE listing standards, and has the requisite background and experience to meet the requirements of such standards with regard to accounting and financial management expertise. We have advised the NYSE that we are now in compliance with the listing standards. SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits. EXHIBIT NO. DESCRIPTION 10.1 Executive Employment Agreement between NATCO Group Inc. and John U. Clarke dated as of December 7, 2004 99.1 Press release dated December 8, 2004, announcing election of John U. Clarke as NATCO Group Inc. Chief Executive Officer 99.2 Press release dated December 9, 2004, announcing election of new director 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: December 10, 2004 NATCO Group Inc. By: /s/ JOHN U. CLARKE ------------------------------------ John U. Clarke Chairman and Chief Executive Officer 5 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.1 Executive Employment Agreement between NATCO Group Inc. and John U. Clarke dated as of December 7, 2004 99.1 Press release dated December 8, 2004, announcing election of John U. Clarke as NATCO Group Inc. Chief Executive Officer 99.2 Press release dated December 9, 2004, announcing election of new director 6 EX-10.1 2 h20871exv10w1.txt EXECUTIVE EMPLOYMENT AGMT - JOHN U. CLARKE EXHIBIT 10.1 EXECUTIVE EMPLOYMENT AGREEMENT This Executive Employment Agreement ("Agreement"), including the attached Exhibit A, is entered into between NATCO Group Inc., a Delaware corporation, having offices at 2950 N. Loop West, Suite 700, Houston, Texas 77092 ("Company"), and John U. Clarke, an individual residing in Houston, Texas ("Employee"), to be effective as of December 7, 2004 (the "Effective Date"). Company is desirous of securing the services of Employee pursuant to the terms and conditions and for the consideration set forth in this Agreement, and Employee is desirous of entering employment with the Company or a subsidiary thereof pursuant to such terms and conditions and for such consideration. Therefore, for and in consideration of the mutual promises, covenants, and obligations contained herein, Company and Employee agree as follows: ARTICLE 1: EMPLOYMENT AND DUTIES 1.1. Company shall employ, or shall cause a subsidiary to employ, Employee, and Employee shall be employed by Company or such subsidiary, beginning as of the Effective Date of this Agreement and continuing until the date set forth on Exhibit A (the "Term"), subject to the terms and conditions of this Agreement. This Agreement will expire by its own terms and the Employee will automatically become an employee at will and be included in all general employment and benefit arrangements at the end of the Term unless the Company notifies Employee of its intention to extend the Term (such notice to include the length of the intended extension) at least 60 days prior to the expiration of the Term and Employee accepts such extension within 10 days of receipt of such notice. 1.2. Employee shall be employed in the position(s) set forth on Exhibit A. Employee agrees to serve in the assigned position(s) and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position as determined by Company, as well as such additional or different duties and services appropriate to such position which Employee from time to time may be reasonably directed to perform by Company. Employee shall at all times comply with and be subject to such policies and procedures as Company may establish from time to time. 1.3. Employee shall, during the period of Employee's employment by Company or a subsidiary, devote Employee's full business time, energy, and best efforts to the business and affairs of Company and its subsidiaries and affiliated entities. Employee may not engage, directly or indirectly, in any other business, investment, or activity that interferes with Employee's performance of Employee's duties hereunder, is contrary to the interests of Company, or requires any significant portion of Employee's business time. The activities described as "permitted activities" on Exhibit A shall not be deemed a violation of this Section 1.3. 1.4. Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of Company and its subsidiaries and to do no act which would injure Company's business, its interests or its reputation. Employee agrees to comply with the policies and procedures as described and contained in Company's Business Ethics Policies and related policies, copies of which have been provided to Employee. ARTICLE 2: COMPENSATION AND BENEFITS 2.1. Employee shall be paid base salary and bonus and shall accrue vacation as set forth on Exhibit A. Employee's base salary shall be paid in bi-weekly installments in accordance with Company's or the employing subsidiary's standard payroll practice, and (as with all other payments made to Employee by Company or such subsidiary) is subject to withholding of all federal, state, city or other taxes as may be required by law. 2.2. While employed by Company or a subsidiary (both during the Term and thereafter), Employee shall be allowed to participate, on the same basis generally as other employees of Company or such subsidiary, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the effective date or thereafter are made available by Company or such subsidiary to all or substantially all of its or their employees. Such benefits, plans and programs may include, without limitation, medical, dental care, life insurance, disability protection and qualified plans. Nothing in this Agreement is to be construed or interpreted to provide greater rights, participation, coverage or benefits under such benefit plans or programs than provided to similarly situated employees pursuant to the terms and conditions of such benefit plans and programs, except as may be approved by Company's Governance, Nominating & Compensation Committee (or successor committee with responsibility for the compensation function) and/or Board of Directors. 2.3. Employee shall receive the grants and awards of restricted stock and options as, and on the dates specified in Exhibit A, subject to his continued employment on the date of grant. Employee shall be eligible to participate in the Company's long-term incentive plans and Company's annual incentive plan currently maintained or hereafter maintained by Company or a subsidiary for its officers as a group. Any such grants, awards or participation shall be subject to separate agreements containing the terms and provisions applicable to each such grant, award or participation as provided in the applicable incentive plan and by the committee administering such plan. 2.4. Company shall not by reason of this Article 2 be obligated to institute, maintain or refrain from changing, amending or discontinuing, any such incentive compensation or employee benefit program or plan, so long as such actions or inactions are similarly applicable to covered employees generally. Moreover, unless specifically provided for in a written plan document adopted by the Board of Directors of Company, none of the benefits or arrangements described in this Article 2 shall be secured or funded in any way, and each shall instead constitute an unfunded and unsecured promise to pay money in the future exclusively from the general assets of Company. 2.5. Company may withhold from any compensation, benefits or amounts payable under this Agreement all federal, state, city or other taxes as may be required by law. 2.6. Company shall pay up to $2,500 in moving expenses to move Employee's office furniture and effects to the Company's headquarters. Such personal items shall remain the property of Employee. ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION 3.1. Notwithstanding any other provisions of this Agreement, Company shall have the right to terminate Employee's employment under this Agreement at any time prior to the expiration of the Term for any of the following reasons: (a) For "cause" upon the determination by the Company's independent directors of the Board who are neither employees of nor Affiliated with Company or any subsidiary of Company apart from his or her capacity as a member of the Board and any Board committee and who otherwise have no interest in such determination ("Independent Directors") that "cause" exists for the termination of the employment relationship. As used in this Section 3.1(a), the term "cause" shall mean (i) Employee's gross negligence or willful misconduct in the performance of the duties and services required of Employee pursuant to this Agreement; or (ii) Employee's final conviction of a felony or of a misdemeanor involving moral turpitude; (iii) Employee's involvement in a conflict of interest as referenced in Sections 1.3 and 1.4 with respect to which Company makes a good faith determination to terminate the employment of Employee; or (iv) Employee's material breach of any material provision of this Agreement which remains uncorrected for 30 days following written notice to Employee by Company of such breach. It is expressly acknowledged and agreed that the decision as to whether "cause" exists for termination of the employment relationship by Company is delegated to the Independent Directors of the Board of Company for determination; (b) For any other reason whatsoever, with or without cause, in the sole discretion of the Company's Independent Directors of the Board; (c) Upon Employee's death; or (d) To the extent allowed by law, upon Employee's becoming incapacitated by accident, sickness or other circumstance which renders him or her mentally or physically incapable of performing the duties and services required of Employee, as determined in good faith by Company. 2 The termination of Employee's employment by Company prior to the expiration of the Term shall constitute a "Termination for Cause" if made pursuant to Section 3.1(a); the effect of such termination is specified in Section 3.4. The termination of Employee's employment by Company prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.1(b); the effect of such termination is specified in Section 3.6(a). The effect of the employment relationship being terminated pursuant to Section 3.1(c) or (d) as a result of Employee's death or disability is specified in Section 3.6(b). 3.2. Notwithstanding any other provisions of this Agreement except Section 8.5, Employee shall have the right to terminate the employment relationship under this Agreement at any time prior to the expiration of the Term of employment for any of the following reasons: (a) A material breach by Company of any material provision of this Agreement or the occurrence of an Involuntary Termination as defined in Section 3.5 which remains uncorrected for 30 days following written notice of such breach by Employee to Company; or (b) For any other reason whatsoever, in the sole discretion of Employee. The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.2(a); the effect of such termination is specified in Section 3.6(a). The termination of Employee's employment by Employee prior to the expiration of the Term shall constitute a "Voluntary Termination" if made pursuant to Section 3.2(b); the effect of such termination is specified in Section 3.3. 3.3. Upon a "Voluntary Termination" of the employment relationship by Employee prior to expiration of the Term, all future compensation to which Employee would have been entitled and all future benefits for which Employee would have been eligible shall cease and terminate as of the date of termination. Employee shall be entitled to pro rata salary and accrued benefits through the date of such termination, but Employee shall not be entitled to any bonuses or incentive compensation not yet paid at the date of such termination. 3.4. If Employee's employment hereunder shall be terminated by Company for Cause prior to expiration of the Term, all future compensation to which Employee would have been entitled and all future benefits for which Employee would have been eligible shall cease and terminate as of the date of termination. Employee shall be entitled to pro rata salary and accrued benefits through the date of such termination, but Employee shall not be entitled to any bonuses or incentive compensation not yet paid at the date of such termination. 3.5. As used in this Agreement, "Involuntary Termination" shall also mean termination of Employee's employment with Company if such termination results from termination by Employee within 90 days of and in connection with or based upon any of the following: (a) A substantial and/or material reduction in the nature or scope of Employee's duties and/or responsibilities as such duties are constituted as of the effective date of this Agreement or later agreed to by Employee and Company, or if Employee is no longer an executive officer of the Company as defined as Section 16b in SEC regulations, which reduction remains in place and uncorrected for 30 days following written notice of such breach to Company by Employee; (b) A reduction in Employee's base pay (except as part of a general cutback for all employees or officers); (c) A change in the location for the primary performance of Employee's services under this Agreement from the city in which Employee was serving at the time of notification to a city which is more than 100 miles away from such location, which change is not approved by Employee. 3.6. Upon any Involuntary Termination of the employment relationship by either Company or Employee prior to expiration of the Term, Employee shall be entitled to receive pro rata base salary and benefits (including payment for accrued, but unused, vacation) through the date of termination. Depending upon the type of Involuntary Termination, Employee or his estate may be entitled to additional compensation and/or benefits, as described below. 3 (a) Upon an Involuntary Termination of the employment relationship by either Company or Employee prior to expiration of the Term pursuant to Section 3.1(b), 3.2(a) or 3.5, Employee shall be entitled, after execution of a Waiver and Release Agreement in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), to (i) the sum of one year's annual base salary payable as follows: half of the base salary shall be paid within 30 days of the termination date; the remaining half shall be paid at the end of the 6-month period following the termination date; (ii) the amount of the target bonus compensation earned by Employee under any applicable bonus plan then in effect in accordance with its terms through the date of termination, based on Company performance through such date and prorated by multiplying such bonus compensation by the fraction obtained by dividing the number of days in the year through the date of termination by 365, payable as follows: half of target bonus amount shall be paid within 30 days of the termination date; the remaining half shall be paid at the end of the 6-month period following the termination date; (iii) the continuation of the provision of health insurance, dental insurance and life insurance benefits for a period of one year following the date of termination to Employee and Employee's family at least equivalent to and to the same extent as those which would have been provided to them in accordance with this Employment Agreement and the plans, programs, practices and policies of Company as in effect and applicable generally to other peer executives and their families at the date of termination, at the election of Employee; provided, however, that if the Employee becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein will be secondary to those provided under such other plan during such applicable period of eligibility; and (iv) any bonus compensation that has been earned under the bonus plan, the payment of which has been deferred under the terms of the bonus plan, will be paid to Employee in accordance with the terms of the bonus plan. (b) Upon an Involuntary Termination of the employment relationship by either Company or Employee prior to expiration of the Term pursuant to Section 3.1(c) or (d), Employee or his beneficiary's shall be entitled to (i) cash in the amount of the target bonus compensation earned by Employee under any applicable bonus plan then in effect in accordance with its terms through the date of termination, based on Company performance through such date and prorated by multiplying such bonus compensation by the fraction obtained by dividing the number of days in the year through the date of termination by 365, payable no later than 90 days following the date of termination; and (ii) any bonus compensation that has been earned under the bonus plan, the payment of which has been deferred under the terms of the bonus plan, will be paid to Employee in accordance with the terms of the bonus plan. (c) Upon an Involuntary Termination of the employment relationship by either Company or Employee prior to expiration of the Term pursuant to Section 3.1(b), 3.2(a) or 3.5 within 12 months following a Change of Control, Employee shall be entitled, after execution of a Waiver and Release Agreement in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), (i) to the sum of 1.5 times one year's annual base salary payable as follows: half of the base salary shall be paid within 30 days of the termination date; the remaining half shall be paid at the end of the 6-month period following the termination date; (ii) a lump sum cash amount equal to the product of 1.5 times the target bonus compensation at the greater of (A) the target bonus compensation in effect at the time notice of termination is given or (B) the target bonus compensation in effect immediately preceding the Change of Control Date, payable as follows: half of target bonus amount shall be paid within 30 days of the termination date; the remaining half shall be paid at the end of the 6-month period following the termination date; (iii) the continuation of the provision of health insurance, dental insurance and life insurance benefits for a period of 18 months following the date of termination to Employee and Employee's family at least equivalent to and to the same extent as those which would have been provided to them in accordance with this Employment Agreement and the plans, programs, practices and policies of Company as in effect and applicable generally to other peer executives and their families at the date of termination, at the election of Employee, or the cash-equivalent thereof; provided, however, that if the Employee becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein will be secondary to those provided under such other plan during such applicable period of eligibility; and (iv) any bonus compensation 4 that has been earned under the bonus plan, the payment of which has been deferred under the terms of the bonus plan, will be paid to Employee in accordance with the terms of the bonus plan. In addition, notwithstanding the terms of the any related incentive plan or agreement, or any award agreement evidencing awards of stock options or restricted stock to purchase stock of Company, in the event of a Change of Control while Employee is employed by Company, all outstanding stock options held by Employee shall fully vest as of the Change of Control Date and become immediately exercisable in accordance with their terms and all restrictions on any restricted stock of Company held by Employee shall lapse as of the Change of Control Date, and any such stock options shall be exercisable for 12 months after the date of termination, unless the term of the stock options expires before the end of such longer period, in which case the stock option shall be exercisable until the expiration of its term. (d) Upon an Involuntary Termination of the employment relationship by either Company or Employee prior to expiration of the Term pursuant to Section 3.1(b), 3.2(a) or 3.5 within 6 months prior to a Change of Control, Employee shall be entitled, after execution of a Waiver and Release Agreement in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), (i) to the sum of 1.5 times one year's annual base salary payable as follows: the full amount of such payment shall be paid at the end of the 6-month period following the termination date, with the amount of such payment to be offset by any payment Employee has previously received under Section 3.6(a)(i); (ii) a lump sum cash amount equal to the product of 1.5 times the target bonus compensation at the greater of (A) the target bonus compensation in effect at the time notice of termination is given or (B) the target bonus compensation in effect immediately preceding the Change of Control Date, payable as follows: the full amount of such payment shall be paid at the end of the 6-month period following the termination date, with the amount of such payment to be offset by any payment Employee has previously received under Section 3.6(a)(ii); (iii) the continuation of the provision of health insurance, dental insurance and life insurance benefits for a period of 18 months following the date of termination to Employee and Employee's family at least equivalent to and to the same extent as those which would have been provided to them in accordance with this Employment Agreement and the plans, programs, practices and policies of Company as in effect and applicable generally to other peer executives and their families at the date of termination, at the election of Employee, or the cash-equivalent thereof; provided, however, that if the Employee becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein will be secondary to those provided under such other plan during such applicable period of eligibility; and (iv) any bonus compensation that has been earned under the bonus plan, the payment of which has been deferred under the terms of the bonus plan, will be paid to Employee in accordance with the terms of the bonus plan. In addition, Employee shall receive a cash payment, (x) with respect to any stock option that is forfeited as of the date of his termination of employment, equal to the difference between the closing price of the Company stock as of the Change of Control Date and such option's exercise price (or, if the term of such option would have expired before the Change of Control Date, the difference between the closing price of the Company stock as of the date of such option's expiration date and such option's exercise price) and (y) with respect to any restricted stock that is forfeited as of the date of his termination of employment, equal to the closing price of such stock as of the Change of Control Date, with such payment to be made within 30 days of the Change of Control Date. (e) "Change of Control" of Company shall occur if: (1) Company merges or consolidates with any other entity (other than one of NATCO Group Inc.'s majority owned subsidiaries) and the shareholders of NATCO Group Inc. own less than 50% of the surviving entity; (2) Company sells all or substantially all of its assets to any other person or entity (other than (i) a sale of equity interests in NATCO Group Inc. or (ii) a sale of assets to another majority owned subsidiary of NATCO Group Inc. and in connection therewith Employee becomes employed by such subsidiary, NATCO Group Inc. or a partnership in which NATCO Group Inc. is the general partner); (3) Company is dissolved or liquidated; (4) any third person or entity together with its Affiliates (including a "group" as contemplated by Paragraph 13(d)(3) of the Securities Exchange Act of 1934, as amended) shall become, directly or indirectly, the Beneficial Owner of greater than 50% of the voting stock of Company, based upon voting power (except as the result of a distribution of the voting securities of the Company to the shareholders); or (5) during such time as Company has a class of Voting Securities registered under the Securities Exchange Act of 1934, the individuals who constituted the members of the Company's Board of Directors ("Incumbent Board") upon the effective date of such registration cease for any reason to 5 constitute at least a majority thereof, provided that any person becoming a director whose election or nomination for election by Company stockholders was approved by a vote of at least two-thirds of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this subclause (5), considered as though such person were a member of the Incumbent Board. (f) "Change of Control Date" shall mean the day on which a Change of Control becomes effective. (g) Employee shall not be under any duty or obligation to seek or accept other employment following Involuntary Termination and, except as provided in Section 6.2, the amounts due Employee hereunder shall not be reduced or suspended if Employee accepts subsequent employment. Employee's rights under this Section 3.6 are Employee's sole and exclusive rights against Company, or its Affiliates, and Company's sole and exclusive liability to Employee under this Agreement, in contract, tort, or otherwise, for any Involuntary Termination of the employment relationship. Employee, to the extent permitted by law, covenants not to sue or lodge any claim, demand or cause of action against Company for any sums for Involuntary Termination other than those sums specified in this Section 3.6. 3.7. In all cases, the payments payable to Employee under Section 3.6 of this Agreement upon termination of the employment relationship shall be offset against any amounts to which Employee may otherwise be entitled under any and all severance plans and policies of Company, or its Affiliates. 3.8. Termination (including expiration of the Term) of the employment relationship does not terminate those obligations imposed by this Agreement, which are continuing obligations, including, without limitation, Employee's obligations under Articles 5 and 6. Upon termination, Employee shall promptly return all property of the Company and its Affiliates to the Company, including books, records, computer files, etc. 3.9. Limitation of Benefits. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any benefit, payment or distribution by Company to or for the benefit of Employee (whether payable or distributable pursuant to the terms of this Agreement or otherwise) (a "Payment") would, if paid, be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then the Payment shall be reduced to the extent necessary to avoid the imposition of the Excise Tax. Company may select the Payments to be limited or reduced. (b) All determinations required to be made under this Section 3.9, including whether an Excise Tax would otherwise be imposed and the assumptions to be utilized in arriving at such determination, shall be made by Independent Tax Counsel which shall provide detailed supporting calculations both to Company and Employee within 15 business days of the receipt of notice from Employee that a Payment is due to be made, or such earlier time as is requested by Company. For purposes of this paragraph, "Independent Tax Counsel" will mean a lawyer, a certified public accountant with a nationally recognized accounting firm, or a compensation consultant with a nationally recognized actuarial and benefits consulting firm with expertise in the area of executive compensation, who will be selected by Company and will be reasonably acceptable to Employee, and whose fees and disbursements will be paid by Company. Any determination by the Independent Tax Counsel shall be binding upon Company and Employee. If, as a result of any uncertainty in the application of Section 4999 of the Code at the time the initial determination is made by the Independent Tax Counsel hereunder, Payments hereunder have been unnecessarily limited by this Section 3.9 ("Underpayment"), consistent with the calculations required to be made hereunder, then the Independent Tax Counsel shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be properly paid by Company to or for the benefit of Employee. If, however, Payments hereunder have not been sufficiently limited by this Section 3.9, consistent with the calculations required to be made hereunder, to prevent the imposition of an Excise Tax upon Employee (the "Overpayment"), then Employee shall notify Company in writing within 15 days of any claim by the Internal Revenue Service, that, if successful, would require the payment by Employee of any Excise Tax, 6 and the Independent Tax Counsel shall determine the amount of Overpayment that has occurred and any such Overpayment shall be properly refunded by Employee by or for the benefit of Company so as to properly prevent the imposition of the Excise Tax. ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM; TERMINATION AND EFFECTS OF TERMINATION 4.1. Should Employee remain employed by Company or a subsidiary beyond the expiration of the Term of this Agreement, and this Agreement has not been extended by Company, the employer-employee relationship shall be employment at will, terminable at any time by either Company, its employing subsidiary or Employee for any reason whatsoever, with or without cause. ARTICLE 5: OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS 5.1. All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee's employment by Company or a subsidiary (whether during business hours or otherwise and whether on Company's premises or otherwise) which relate to Company's or such subsidiary's business, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Company and are and shall be the sole and exclusive property of Company or its subsidiary. Moreover, all drawings, memoranda, notes, records, files, correspondence, drawings, manuals, models, specifications, computer programs, maps and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries and inventions are and shall be the sole and exclusive property of Company or its subsidiary. 5.2. Employee acknowledges that the business of Company and its Affiliates is highly competitive and that its strategies, methods, books, records and documents, its technical information concerning its products, equipment, services, and processes, procurement procedures and pricing techniques, the names of and other information (such as credit and financial data) concerning its customers and business affiliates, all comprise confidential business information and trade secrets which are valuable, special and unique assets which Company or its Affiliates use in its or their business to obtain a competitive advantage over its or their competitors. Employee further acknowledges that protection of such confidential business information and trade secrets against unauthorized disclosure and use is of critical importance to Company and its Affiliates in maintaining its and their competitive position. Employee acknowledges that under this Agreement, Employee is being given access to confidential business information and trade secrets of Company and its Affiliates, and Employee hereby agrees that Employee will not, at any time during or after his or her employment by Company, make any unauthorized disclosure of any confidential business information or trade secrets of Company or its Affiliates, or make any use thereof, except in the carrying out of his or her employment responsibilities hereunder, or as may be required by law. NATCO Group Inc. and its Affiliates shall be third party beneficiaries of Employee's obligations under this Section. As a result of Employee's employment by Company or a subsidiary, Employee may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint-venturers and the like, of Company and its Affiliates. Employee also agrees to preserve and protect the confidentiality of such third-party confidential information and trade secrets to the same extent, and on the same basis, as confidential business information and trade secrets of the Company and its Affiliates. Employee acknowledges that money damages would not be a sufficient remedy for any breach of this Article 5 by Employee, and Company shall be entitled to enforce the provisions of this Article 5 to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 5, but shall be in addition to all remedies available at law or in equity to Company, including the recovery of damages from Employee and his or her agents involved in such breach. ARTICLE 6: POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS 6.1. As part of the consideration for the compensation and benefits to be paid to Employee hereunder, and as an additional incentive for Company to enter into this Agreement, and in particular Company's agreement to the protections contained in Section 3.6, Company and Employee agree to the non-competition provisions of this Article 6 7 during the term of this Agreement. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Company or any of its Affiliated companies are conducting any business as of the date of termination of the employment relationship or have during the previous 12 months conducted any business: (a) engage in any business competitive with the business conducted by Company or its Affiliates; (b) render advice or services to, or otherwise assist, any other person, association or entity who is engaged, directly or indirectly, in any business competitive with the business conducted by Company or its Affiliates; or (c) induce any employee of Company or any of its Affiliates to terminate his or her employment with Company or its Affiliates, or hire or assist in the hiring of any such employee by person, association, or entity not Affiliated with Company or its Affiliates. These non-competition obligations shall continue for a period of one year after termination of this employment relationship. 6.2. Employee understands that the foregoing restrictions may limit his or her ability to engage in certain businesses during the 12-month period provided for above, but acknowledges that Employee will receive sufficiently high remuneration and other benefits under this Agreement to justify such restriction. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 6 by Employee, and Company shall be entitled to enforce the provisions of this Article 6 by terminating any payments then owed to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 6, but shall be in addition to all remedies available at law or in equity to Company, including, without limitation, the recovery of damages from Employee and his or her agents involved in such breach. 6.3. It is expressly understood and agreed that Company and Employee consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the proprietary information of Company. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced. ARTICLE 7: INDEMNIFICATION 7.1 If, at any time during or after the Term of this Agreement, Employee is made a party to, or is threatened to be made a party in, any civil, criminal or administrative action, suit or proceeding by reason of the fact that Employee is or was a director, officer, employee or agent of Company, or of any other corporation or any partnership, joint venture, trust or other enterprise for which Employee served as such at the request of Company, then Employee shall be indemnified by Company, to the fullest extent permitted under applicable law, against expenses actually and reasonably incurred by Employee or imposed on Employee in connection with, or resulting from, the defense of such action, suit or proceeding, or in connection with, or resulting from, any appeal therein if Employee acted in good faith and in a manner Employee reasonably believed to be in or not opposed to the best interest of Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Employee's conduct was unlawful, except with respect to matters as to which it is adjudged that Employee is liable to Company or to such other corporation, partnership, joint venture, trust or other enterprise for gross negligence or willful misconduct in the performance of the Employee's duties. As used herein, the term "expenses" shall include all obligations actually and reasonably incurred by the Employee for the payment of money, including, without limitation, attorney's fees, judgments, awards, fines, penalties and amounts paid in satisfaction of a judgment or in settlement of any such action, suit or proceeding, except amounts paid to Company or such other corporation, partnership, joint venture, trust or other enterprise by Employee. The foregoing indemnification provisions shall be in addition to any other rights to indemnification to which Employee may be entitled under any officers' and directors' liability insurance maintained by Company or pursuant to any separate agreement between Employee and Company with respect to indemnification. 8 ARTICLE 8: MISCELLANEOUS 8.1. The following terms shall have the meanings ascribed to them below for purposes of this Agreement: (a) "Affiliates" or "Affiliated" means an entity who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with Company. (b) "Involuntary Termination Date" shall mean Employee's last date of employment by reason of an Involuntary Termination. 8.2. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Company, to: NATCO Group Inc. 2950 N. Loop West Houston, Texas 77092 Attention: Chairman of the Governance, Nominating & Compensation Committee If to Employee, to: John U. Clarke 3850 Del Monte Houston, Texas 77019 Either Company or Employee may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 8.3. This Agreement shall be governed in all respects by the laws of the State of Texas, excluding any conflict-of-law rule or principle that might refer the construction of the Agreement to the laws of another state or country. 8.4. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 8.5. If a dispute arises out of or related to this Agreement, other than a dispute regarding Employee's obligations under Article 5, Section 5.2, or Article 6, Section 6.1, and if the dispute cannot be settled through direct discussions, then Company and Employee agree to first endeavor to settle the dispute in an amicable manner by mediation, before having recourse to any other proceeding or forum. Thereafter, the matter shall be submitted to binding arbitration as follows: ANY DISPUTE, CLAIM, OR CONTROVERSY ARISING OUT OF OR RELATED IN ANY WAY TO THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO ITS ENFORCEABILITY, VALIDITY, OR INTERPRETATION, OR RELATED IN ANY WAY TO EMPLOYEE'S EMPLOYMENT WITH COMPANY OR A SUBSIDIARY THAT IS NOT FIRST RESOLVED BY AGREEMENT OR MEDIATION AS PROVIDED ABOVE, SHALL BE SUBMITTED TO AND RESOLVED BY BINDING ARBITRATION WITH THE AMERICAN ARBITRATION ASSOCIATION ("AAA") IN HOUSTON, TEXAS, IN ACCORDANCE WITH THE AAA'S APPLICABLE RULES TO THE RESOLUTION OF EMPLOYMENT DISPUTES. JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATOR(S) MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. IT IS SPECIFICALLY AGREED THAT THE ARBITRATION PROVISION SHALL BE BINDING ON EMPLOYEE'S HEIRS, ADMINISTRATORS, AND PERSONAL REPRESENTATIVES. THE PARAGRAPH SHALL BE GOVERNED BY THE FEDERAL ARBITRATION ACT. NOTHING CONTAINED IN THE AGREEMENT SHALL PREVENT COMPANY FROM SEEKING INJUNCTIVE RELIEF AGAINST EMPLOYEE FOR VIOLATION OF ANY AGREEMENT PERTAINING TO NON-COMPETITION, TRADE SECRETS OR CONFIDENTIALITY. Company shall pay all costs of such mediation and binding arbitration, exclusive of Employee's legal fees. 8.6. It is a desire and intent of the parties that the terms, provisions, covenants and remedies contained in 9 this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect. 8.7. This Agreement shall be binding upon and inure to the benefit of Company and any other person, association or entity which may hereafter acquire or succeed to all or substantially all of the business or assets of Company by any means whether direct or indirect, by purchase, merger, consolidation or otherwise. Company may assign this Agreement to any Affiliate or any other entity of NATCO Group Inc. Employee's rights and obligations under this Agreement hereof are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, without the prior written consent of Company. 8.8. There exist other agreements between Company and Employee relating to the employment relationship between them, e.g., the agreement with respect to Company policies contained in Company's Business Ethics Policies and agreements with respect to indemnification and incentive matters. This Agreement replaces and merges previous agreements and discussions pertaining to the following subject matters covered herein: the nature of Employee's employment relationship with Company and the term and termination of such relationship. This Agreement constitutes the entire agreement of the parties with regard to such subject matters, and contains all of the covenants, promises, representations, warranties and agreements between the parties with respect such subject matters. Each party to this Agreement acknowledges that no representation, inducement, promise or agreement, oral or written, has been made by either party with respect to such subject matters, which is not embodied herein, and that no agreement, statement or promise relating to the employment of Employee by Company that is not contained in this Agreement shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing and signed by each party whose rights hereunder are affected thereby, provided that any such modification must be authorized or approved by the Board of Directors of Company. IN WITNESS WHEREOF, Company and Employee have duly executed this Agreement in multiple originals to be effective on the date first stated above. NATCO GROUP INC. By: ------------------------------------------ George K. Hickox, Jr. Chairman of the Governance, Nominating & Compensation Committee of the NATCO Group Inc. Board of Directors This 10th day of December 2004 JOHN U. CLARKE - --------------------------------------------- This 10th day of December 2004 10 EXHIBIT A TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN NATCO GROUP INC. AND JOHN U. CLARKE Employee Name: John U. Clarke Term: Approximately three years (expires December 31, 2007) Position: Chairman of the Board of Directors and Chief Executive Officer of NATCO Group Inc.; Chief Executive Officer of National Tank Company Reporting Relationship: NATCO Group Inc. Board of Directors Location: Houston, Texas Annual Base Salary: Employee's annual base salary shall not be less than $396,000. Bonus: Employee will be eligible to participate in the 2005 NATCO Group Inc. Annual Bonus Plan or any appropriate replacement bonus plan of Company or National Tank Company. All bonuses are discretionary and shall be paid in accordance with the terms and provisions of the applicable plan. The annual targeted incentive is 75% of the annual base salary. In consideration of Employee's service as interim CEO and acceptance of a permanent position with Company, Employee shall receive a one-time bonus payment of $100,000 on January 10, 2005. Long Term Incentives: o 57,000 shares of non-performance based restricted stock, with restrictions lapsing after 3 years of service, subject to earlier lapse on Change of Control, death or disability, grant date January 5, 2005 o 22,000 shares of performance based restricted stock, with restrictions lapsing upon achievement of $1.00 EPS as provided in, and having terms similar to, 9/9/04 grants to other senior officers, grant date December 7, 2004 o Nonqualified Stock Options to acquire up to 39,500 shares having terms similar to 9/9/04 grants to other senior officers, grant date December 7, 2004 43,000 shares of performance based o restricted stock, with restrictions lapsing after the Company's stock has traded @ $12.00/share or more for 30 consecutive trading days, expiring after 5 years if restrictions do not lapse prior to such time, grant date January 5, 2005 o Employee is eligible to participate in any long-term incentive plans as recommended and approved by the Board of Directors of NATCO Group Inc. In the event of a Change of Control as defined in Article 3, Section 3.6(e), accelerated vesting shall occur on the Change of Control date for all unvested options under any award grants that have not otherwise expired. Vacation Benefits: Employee shall receive four weeks of vacation per year accrued on a bi-weekly basis. Permitted Activities: Authorized to continue to participate on Board of Director assignments with Houston Exploration Company, Harvest Natural Resources, Inc. and FuelQuest, provided that there are no conflicts of interest as determined by the NATCO Group Inc. Audit Committee. EX-99.1 3 h20871exv99w1.txt PRESS RELEASE - ANNOUNCING ELECTION OF OFFICER EXHIBIT 99.1 PRESS RELEASE 2950 North Loop West, Suite 700 Houston, TX 77092 PHONE: (713) 685-8062 FAX: (713) 683-7841 =============================================================================== NATCO Group Names New CEO Houston,December 8, 2004 - ------------------------------------------------------------------------------- The Board of Directors of NATCO Group Inc. (NYSE: NTG) today announced the election of John U. Clarke as Chief Executive Officer of the Company on December 7, 2004. He will remain as Chairman of the Board of Directors. Mr. Clarke said, "I am excited about the prospect of leading NATCO. Over the past several months I have had the opportunity to work with the Board and key members of NATCO's management team to fashion strategies and a business model to increase the Company's profitability and to earn improved returns for our shareholders. These plans are near completion and will be finalized in the weeks ahead." Mr. Clarke, 52, has served on the NATCO board of directors since February 2000 and has been Interim Chief Executive Officer since early September 2004. Since May 2001, Mr. Clarke has been president of Concept Capital Group, Inc., a financial and strategic advisory firm. Prior to such time, he served in various executive management positions with three significant energy companies, including Dynegy, Cabot Oil and Gas and Transco Energy Company. Mr. Clarke is also a director of The Houston Exploration Company and Harvest Natural Resources. NATCO Group Inc. is a leading provider of wellhead process equipment, systems and services used in the production of oil and gas. NATCO has designed, manufactured and marketed production equipment and services for more than 75 years. NATCO production equipment is used onshore and offshore in most major oil and gas producing regions of the world. Statements made in this press release that are forward-looking in nature are intended to be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 and may involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to documents filed by NATCO Group Inc. with the Securities and Exchange Commission, including its Annual Report on Form 10-K, which identifies significant risk factors which could cause actual results to differ from those contained in the forward-looking statements. # # # EX-99.2 4 h20871exv99w2.txt PRESS RELEASE - ANNOUNCING ELECTION OF DIRECTOR EXHIBIT 99.2 PRESS RELEASE 2950 North Loop West, Suite 700 Houston, TX 77092 PHONE: (713) 685-8062 FAX: (713) 683-7841 =============================================================================== NATCO Group Elects New Director Houston, December 9, 2004 - ------------------------------------------------------------------------------- NATCO Group Inc. (NYSE: NTG) announced today that Julie H. Edwards, executive vice president-finance and administration and chief financial officer for Frontier Oil Corp., has been elected as a director and member of NATCO's audit committee. Ms. Edwards, 45, joined Frontier in March 1991 as vice president, secretary and treasurer. She was named senior vice president and chief financial officer in August 1994 and, in April 2000, was named to her current position. From mid-1985 until 1991, she worked at Smith Barney, Harris Upham & Co., Inc., in New York and Houston, as an associate in corporate finance, then as vice president-corporate finance. Prior to that, she was an exploration geologist at Amerada Hess Corp. in Tulsa, Okla. Ms. Edwards is a member of the board of directors of ONEOK, Inc., a diversified energy company involved primarily in oil and gas production, natural gas processing, gathering, storage and transmission in the US mid-continent area. She earned a master's degree in business administration with concentration in finance in 1985 from the Wharton Graduate School and a bachelor's of science degree in geology and geophysics in 1980 from Yale College, Yale University. "NATCO is delighted to be including a director of Ms. Edwards' caliber. Her energy industry background and expertise in corporate finance and accounting matters make her an ideal fit for our board," said John Clarke, NATCO Group chairman and chief executive officer. NATCO Group Inc. is a leading provider of wellhead process equipment, systems and services used in the production of oil and gas. NATCO has designed, manufactured and marketed production equipment and services for more than 75 years. NATCO production equipment is used onshore and offshore in most major oil and gas producing regions of the world. Statements made in this press release that are forward-looking in nature are intended to be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 and may involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to documents filed by NATCO Group Inc. with the Securities and Exchange Commission, including its Annual Report on Form 10-K, which identifies significant risk factors which could cause actual results to differ from those contained in the forward-looking statements. # # # -----END PRIVACY-ENHANCED MESSAGE-----