NATCO GROUP INC.

2006 LONG-TERM INCENTIVE COMPENSATION PLAN

Performance Unit Award Agreement

 

Grantee:

Date of Grant: June 6, 2007

PU Grant No.: 2007 - PU___

1. Notice of Grant. You are hereby granted the following Performance Unit Award
under the NATCO Group Inc. 2006 Long-Term Incentive Compensation Plan (the
"Plan"), subject to the terms and conditions of the Plan and this Agreement.
Capitalized terms used but not defined in this Agreement shall have the meanings
ascribed to such terms in the Plan.

2. Number of Performance Units. The number of performance units ("Performance
Units") granted to you under this Performance Unit Award is . Each Performance
Unit shall have a target value of $1.00. The actual value, if any, of a
Performance Unit at the end of the Performance Period specified in Attachment A
will be determined based on the level of achievement during the Performance
Period of the performance measures set forth in Attachment A hereto, which is
made a part of this Agreement for all purposes.

3. Events Occurring Prior to the End of the Performance Period.

Death or Disability

. If, prior to the end of the Performance Period, you incur a termination of
service as a result of your death or disability (as determined by the committee
responsible for administering the plan), the Performance Units will become 100%
vested as of the date of such termination and shall be paid at target.

Other Terminations

. If your employment with the Company or any of its subsidiaries is terminated
prior to the end of the Performance Period for any reason other than provided in
3(a), all unvested Performance Units held by you shall be forfeited immediately
without payment upon such termination.

Change of Control

. Notwithstanding any other provision of this Agreement, the Performance Units
shall become fully vested upon the occurrence of a Corporate Change during the
Performance Period and shall be paid at target.

4. Payment of Vested Units. Except as indicated below, payouts will be made as
soon as administratively practicable after the end of the Performance Period,
but in no event later than March 15, 2010. In the event of death or disability
as specified above, payment will be made no later than March 15 of the year
following the year in which the event occurs. In the event of a Corporate
Change, payment will be made on the effective date of the Corporate Change.
Notwithstanding the foregoing, however, (a) payment may not be made prior to the
first day such payment would not be subject to the additional tax imposed by
Section 409A of the Code, (b) in no event may the amount paid to you by the
Company in any year with respect to Performance Units earned hereunder exceed
$5,000,000 if you are a "covered employee" for purposes of Section 162 (m) of
the Code and (c) you shall not be entitled to receive payment until you have
completed one year of service with the Company or its Affiliates from the date
of grant of this Award, unless such requirement is waived by the Committee in
the case of death, disability, retirement, involuntary separation without cause
or a Corporate Change.

5. Nontransferability of Award. This Performance Unit Award may not be
transferred in any manner other than by will or by the laws of descent or
distribution. The terms of the Plan and this Agreement shall be binding upon
your executors, administrators, heirs, successors and assigns.

6. Entire Agreement. This Agreement constitutes the entire agreement of the
parties with regard to the subject matter hereof, and contains all the
covenants, promises, representations, warranties and agreements between the
parties with respect to the Award granted hereby. Without limiting the scope of
the preceding sentence, all prior understandings and agreements, if any, among
the parties hereto relating to the subject matter hereof are hereby null and
void and of no further force and effect.

7. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflicts
of laws principles thereof.

8. Withholding of Tax. To the extent that the grant or vesting of a Performance
Unit results in compensation income or wages by you with respect to which the
Company has a withholding obligation pursuant to applicable federal, state or
local tax purposes, unless other arrangements have been made by you that are
acceptable to the Company, you may elect to have the Company withhold, or shall
deliver to the Company, such amount of money as the Company may require to meet
its minimum withholding obligations under such applicable tax laws or
regulations. No payment shall be made under this Agreement until you have paid
or made arrangements approved by the Company to satisfy all applicable minimum
tax withholding requirements of the Company.

9. Amendment. Except as provided below, this Agreement may not be adversely
modified in any respect by any verbal statement, representation or agreement or
by any employee, officer or representative of the Company or by any written
agreement, unless signed by you and by an officer of the Company (or member of
the Committee) who is expressly authorized by the Company to execute such
document. Notwithstanding anything in the Plan or this Agreement to the
contrary, if the Committee determines that the terms of this grant do not, in
whole or in part, satisfy the requirements of Section 409A of the Code, the
Committee, in its sole discretion, may unilaterally modify this Agreement in
such manner as it deems appropriate to comply with such section and any
regulations or guidance issued thereunder.

10. General. You agree that this Performance Unit Award is granted under and
governed by the terms and conditions of the Plan and this Agreement. In the
event of any conflict, the terms of the Plan shall control. Unless otherwise
defined in this Agreement, the terms defined in the Plan shall have the same
defined meanings in this Agreement.

11. Administration of the Plan. As provided in the Plan, the administration of
the Plan (including this Performance Unit Award Agreement) is the responsibility
of the Governance, Nominating & Compensation Committee of the Board of Directors
of the Company or any successor committee as specified under the Plan (the
"Committee").

IN WITNESS WHEREOF

, the Company has caused this Agreement to be duly executed by an officer or
Committee member thereunto duly authorized, effective as of the day and year
first above written.

NATCO GROUP INC.

By:

Name:

Title:

Grantee

 

[Name]

 

 

The provisions of this Attachment A shall determine the extent, if any, that the
awarded Performance Units become "earned" and payable.

1. Performance Period. The Performance Period shall be the period beginning
January 1, 2007 and ending December 31, 2009. In the event of a Corporate
Change, the Performance Period shall be the period beginning on January 1, 2007
and ending on the date of the Corporate Change.

2. Performance Measure/Payout Percentage. The performance measure to be met is a
three-year cumulative earnings per share, as adjusted, to be achieved as of the
end of the Performance Period in an amount and to vest as indicated below. The
Payout Percentage following achievement of the Threshold Performance Level shall
be pro-rated using a straight-line interpolation for performance between for
performance between the threshold and target performance levels and the target
and maximum performance levels. The maximum amount of compensation that may be
paid under all performance awards paid in cash to any one individual may not
exceed $5 million.

Performance Level

Perfomance Measure

Payout Percentage (Percent Vested)

Below Threshold

< $___ cumulative EPS

0%

Threshold

$___ cumulative EPS

50%

Target

$___ cumulative EPS

100%

Maximum

$___ cumulative EPS

150%

     

3. Adjustments. For purposes of this Agreement, earnings per share shall be
adjusted to eliminate the effects of mergers, acquisitions, divestitures and
other extraordinary non-recurring events occurring during the Performance
Period; provided, however, that any such event which is valued at $1,000,000 or
less shall not result in any adjustment under this provision. In this regard, if
a merger or acquisition occurs during the Performance Period, for purposes of
this award, the results of operations from any entities or business units merged
with or otherwise acquired by the Company or its affiliates shall be eliminated
from all earnings per share calculations relating to all quarters during the
Performance Period from and after the time of such merger or acquisition. If the
Company or any of its affiliates divests of a business unit, subsidiary or other
affiliate or in excess of 60% of any their assets, the results of operations
from such business unit, subsidiary, other affiliate or business conducted in
connection with such assets, as applicable, shall be eliminated from all
earnings per share calculations relating to all quarters during the Performance
Period from and after the time of such divestiture. Such adjustments, if any,
shall be made in accordance with US generally accepted accounting principles and
determined by the Committee administering the Plan.