Document:

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                                                                    Exhibit 10.7

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
                           OF DRESSER INDUSTRIES, INC.

                      RESTATEMENT EFFECTIVE JANUARY 1, 1998

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                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
                           OF DRESSER INDUSTRIES, INC.

         Dresser Industries, Inc. hereby amends by restatement the Supplemental
Executive Retirement Plan of Dresser Industries, Inc., effective January 1,
1998, upon the following terms and conditions:

                                    ARTICLE I
                                   Definitions

         The words and phrases defined hereinafter shall have the following
meaning:

         Section 1.1. Actuarial Equivalent. An amount of equal value determined
on the basis of the 1983 Group Mortality Table (blended - 50% male and 50%
female) and using whichever of the following sets of interest rate factors (as
more completely set forth in the Pension Plan) yields the greatest lump sum
amount: 1) "Old" PBGC immediate rate, or 2) "New" PBGC graded rate.

         Section 1.2. Benefits Committee. The Employee Benefits Committee of
Dresser Industries, Inc.

         Section 1.3. Board. The Board of Directors of Dresser Industries, Inc.

         Section 1.4. For Cause. Means gross, willful or intentional misconduct
which causes harm to the Company.

         Section 1.5. Change of Control. Means:

                  (1) The sale of all or a majority of Dresser's assets;

                  (2) Dresser's liquidation or dissolution;

                  (3) The purchase by any persons or entities of beneficial
ownership of at least 30% of Dresser's common stock (or 30% of the combined
voting power of Dresser's then outstanding voting securities entitled to vote
generally in the election of directors); or

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                  (4) The approval by Dresser's stockholders of a
reorganization, merger, or consolidation, the result of which is that the
persons or entities which were stockholders immediately before the transaction
do not own more than 50% of the combined voting power of the surviving entity's
then outstanding voting securities entitled to vote generally in the election of
directors.

         Section 1.6. Company. Dresser Industries, Inc., or an entity partially
or wholly owned by Dresser Industries, Inc. if so designated by the Compensation
Committee.

         Section 1.7. Compensation Committee. The Executive Compensation
Committee of the Board of Dresser Industries, Inc.

         Section 1.8. DB Plans. The Pension Plan as defined in Section 1.13 and
the Related Plans as defined in Section 1.15, and corresponding non-qualified DB
plan accruals in the Dresser Industries, Inc. ERISA Excess and Excess
Compensation Plans.

         Section 1.9. DC Plan. The Dresser Industries, Inc. Retirement Savings
Plan-A and corresponding non-qualified DC plan balances in the Dresser
Industries, Inc. ERISA Excess and Excess Compensation Plans.

         Section 1.10. Earned Bonus. The amount of bonus awarded to an Executive
pursuant to the Company's annual bonus program/s regardless of whether that
bonus is paid, "carried over" or deferred.

         Section 1.11. Executive. An individual designated by the Benefits
Committee who is employed by the Company and has attained the position of
Corporate Vice President or any higher position, Division President, or
equivalent title as approved by the Benefits Committee. The term "Executive"
also shall include any individual found by the Compensation Committee to have
been employed by the Company or an entity partially or wholly owned by the
Company in an equivalent position and declared eligible for this Plan.

         Section 1.12. ERISA. The Employee Retirement Income Security Act of
1974, as amended.

         Section 1.13. Final Average Salary. The average of the highest total
compensation (annualized base pay and Earned Bonus) of an Executive for any five
(5) consecutive complete

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calendar years of employment with the Company out of the last ten (10)
consecutive complete calendar years of active employment. For any Executive with
less than five consecutive complete calendar years of employment with the
Company, the total compensation shall be the average of the most recent years of
employment, not to exceed five (5) years.

         Section 1.14. Pension Plan. The Dresser Industries, Inc. Consolidated
Salaried Retirement Plan, as frozen May 31, 1995.

         Section 1.15. Plan. The "Supplemental Executive Retirement Plan of
Dresser Industries, Inc.", as set forth herein.

         Section 1.16. Related Plan. Any Company sponsored qualified or
non-qualified defined benefit or defined contribution pension plan (which may or
may not be terminated) for nonunion salaried employees, other than the Pension
Plan or the DC Plan.

         Section 1.17. Years of Service. For the purposes of this Plan, Years of
Service shall begin on the date of first employment by Dresser Industries, Inc.
and shall end upon severance from service, or such other dates as determined by
the Benefits Committee.

                                   ARTICLE II
                                 Purpose of Plan

         Section 2.1. Purpose. The purpose of the Plan is to provide a
consistent benefit structure for eligible Executives which assures that eligible
Executives do not suffer a diminution of retirement benefits as a consequence of
having diverse and divergent participation in related Company, joint venture or
predecessor employer retirement plans. This is an unfunded plan described in
sections 201(2), 301(a)(3), and 401(a)(1) of ERISA.

                                 ARTICLE III
                                 Eligibility

         Section 3.1. General Eligibility. An Executive shall be covered by this
Plan if he/she is an Executive and meets the requirements of Section 3.2 below.

         Section 3.2. Eligibility For Benefit. An Executive or former Executive
(or his spouse or beneficiary) shall be eligible for a benefit determined under
Section 4.1, under the following circumstances:

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         (a) The Executive dies while employed, or becomes disabled under
circumstances that would entitle him to Disability Benefits under the qualified
Pension Plan (or similar disability provisions of a qualified Related Plan or
the qualified DC Plan that are applicable to him/her); or

         (b) The Executive or former Executive voluntarily terminates and the
Executive has earned five (5) years of service as an Executive during the ten
(10) year period ending on his/her termination date, and terminates after Age
Fifty Five (55) with ten (10) years of service; or

         (c) The Executive or former Executive is involuntarily terminated and
has earned five (5) years of service as an Executive during the ten (10) year
period ending on his/her termination date; or

         (d) If the Executive's eligibility has been established and approved by
the Compensation Committee.

         Section 3.3. Spouses and Beneficiaries. The extent of a surviving
spouse's or beneficiary's eligibility to receive benefits after an Executive's
death is determined by the eligibility of the Executive for Plan coverage under
Section 3.1 and Section 3.2(a). Where eligibility is established, the surviving
spouse or beneficiary shall be entitled to the Executive's entire benefit
consistent with the terms of this Plan. Priority, as between a spounse or named
beneficiary, shall be as established under the qualified DC Plan.

                                   ARTICLE IV
                                    Benefits

         Section 4.1. Amount of Benefits. Determined as of the Executive's
termination date, the amount of the benefit payable under this Section 4.1, if
any, shall be determined as follows:

         Step (1) Determination of target retirement income amount.
                  At age 65, an Executive shall be entitled to receive 2% of
                  his/her Final Average Salary, multiplied by the Executive's
                  Years of Service (up to a maximum of Thirty (30) Years of
                  Service).

                  If termination occurs prior to age 65, a reduction of .2% from
                  the above formula will be assumed for each month necessary
                  after termination that is necessary to attain age 65.

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         Step (2) Determination of retirement income amount. Determined as of
the Executive's termination date, with respect to the Executive, determine the
sum of:
         (a) the Executive's monthly pension computed under the Pension Plan,
any Related Plan, and/or any predecessor DB plan, or joint venture employer DB
plans,
         (b) the Actuarial Equivalent of the Executive's employer contribution
accounts under the DC Plan, any similar DC plan, and/or any predecessor DC plan,
or joint venture employer DC plans, (except that, should an executive not
contribute at a rate which yields the maximum employer contribution, a minimum
employee contribution rate which yields the maximum employer contribution will
be assumed and hypothetically calculated),

         (c) the Actuarial Equivalent of the Executive's "pension equivalent
annuity credits" (for both DB and DC Plan components, as determined and recorded
under the Dresser Industries, Inc. Deferred Compensation Plan); and

         Step (3) Determination of the Benefit (if any) payable under this
Section 4.1. If the amount determined in Step (1) exceeds the amount determined
in Step (2), the annual difference will be paid under this Plan. The Actuarial
Equivalent of such annual benefit shall be converted to, and paid in, a lump sum
in accordance with 4.3 below. If the amount determined in Step (1) does not
exceed the amount determined in Step (2), no benefit is payable under this Plan.

Notwithstanding the provisions of this Section, for Executives participating in
the Plan on December 31, 1997, it is explicitly understood that, if the
Executive's projected benefit due under the Plan prior to this Restatement
provides a target retirement income under its Step (1) of Section 4.1 which
exceeds the maximum benefit provided in Step (1) of Section 4.1 of this
Restatement, then the greater of the two actual target retirement incomes will
be paid to the Executive.

         Section 4.2. Funding of Benefits Upon Change of Control. Upon a Change
of Control, the Company shall, as soon as possible, but in no event longer than
ninety (90) days following such Change of Control, make an irrevocable
contribution of additional cash to the Trust in an amount sufficient to pay each
Executive's and Executive's beneficiary 120% of the value of accrued benefits
which may become payable thereafter pursuant to the terms of the Plan as in
effect on the date of the Change of Control. All funded amounts will be
immediately vested irrespective of the terms of Section 5.1 below.

         Section 4.3. Form of Benefit. Benefits under this Plan shall be payable
in a lump sum to the Executive, or to the Executive's DC Plan Beneficiary in the
event of the Executive's death as soon as practicable following the Executive's
termination. With the approval of the Benefits

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Committee, the Executive may elect that Plan benefits be paid in a different
form authorized under the DC Plan.

         Section 4.4. Time of Benefit Payments. Benefits due under this Plan
shall be determined by the Benefits Committee at the time of the Executive's
termination of employment. Except in the case of a lump-sum payment, such
benefits shall be paid by the Company monthly in advance. In the case of a
lump-sum payment, such payment shall be made as closely as practicable to the
time such payment would be made if it were paid from the Pension Plan. Such
payments shall be made by the Company out of its general assets and shall not be
funded in any manner, expect as provided in Section 4.2 above.

                                    ARTICLE V
                             Vesting and Forfeiture

         Section 5.1. Vesting. An Executive shall vest in benefits under this
Plan at the time such person terminates and is eligible under Section 3.2. No
Executive (nor the beneficiary of such person) whose employment is terminated
For Cause, as determined by the Compensation Committee, shall vest in any
benefits under this Plan, even if such termination is deemed a retirement under
provisions of the Pension Plan, a Related Plan or the DC Plan.

         Section 5.2. Forfeiture. The Compensation Committee may declare
forfeited any or all future benefits of an Executive (and/or his/her
beneficiary) if the Compensation Committee in its sole discretion determines
that such person has taken or allowed any action that is a violation of the
Dresser Code of Conduct, has engaged in serious and willful misconduct in
connection with his/her employment, or competes with or assists others to
compete with the Company, without written consent of the Company.

                                   ARTICLE VI
                                 Administration

         Section 6.1. Duties of Benefits Committee. This Plan shall be
administered by the Benefits Committee in accordance with its terms and
purposes. The Benefits Committee shall have the sole discretionary duty and
authority to interpret the provisions of this Plan (and any private letter
agreement affecting an Executive's benefits under the Plan) and determine the
amount and manner of payments of the benefits due to or on behalf of each
Executive from this Plan and shall cause them to be paid accordingly.

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         Section 6.2. Finality of Decisions. The decisions made and the actions
taken by the Benefits Committee in the administration of this Plan shall be
final and conclusive on all persons, and the members of the Benefits Committee
shall not be subject to individual liability with respect to this Plan.

                                   ARTICLE VII
                          Claims and Appeal Procedures

         Section 7.1. Purpose. The purpose of the claims and appeal provisions
set forth in Sections 7.1 through 7.11 is to secure the speedy, inexpensive
resolution of all disputes over Plan benefits and rights granted by the Plan.
These provisions shall be liberally construed so as to avoid litigation and its
attendant expenses.

         Section 7.2. Claims Procedure. Each Executive who claims entitlement to
any right or benefit under the Plan ("claimant") may submit a claim with respect
to that benefit or right under the procedure set forth in the Dresser
Industries, Inc. Retirement Savings Plan-A.

         Section 7.3 Appeal Procedure. When a claim has been or is deemed
denied, the claimant (hereinafter referred to as appellant) shall have the right
within 60 days after receipt of written notice thereof or the date the claim is
deemed denied to file an appeal with the Benefits Committee and to go through
the appeal procedure herein set forth. All appeals shall be in writing, and
shall set forth the reasons why the appellant believes the decision denying
his/her claim is erroneous. The Benefits Committee shall render a decision on
the appeal in writing not later than 60 days after receipt of the written
appeal.

         The decision of the Benefits Committee shall be final and shall be
binding upon the appellant, his/her beneficiaries, heirs, and assigns and all
other persons claiming by, through or under him.

         A failure to file a claim and an appeal in the manner and within the
time limits set forth herein shall be deemed a failure by the aggrieved party to
exhaust his/her administrative remedies and shall constitute a waiver of the
rights or benefits sought to be established under the Plan.

         Section 7.4. Exhaustion of Administrative Remedies. No legal action to
recover Plan benefits or to enforce or to clarify rights under the Plan shall be
commenced under section 502(a)(1)(B) of ERISA, or under any other provisions of
law, whether or not statutory, unless and until the claimant first shall have
exhausted the claims and appeal procedures available to him hereunder in
Sections 7.1-7.3. A claimant must raise all issues and present all theories
relating to the

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Executive's claim to the Benefits Committee at one time. Otherwise, the claimant
shall be deemed to have abandoned forever all issues and theories not raised and
presented to the Benefits Committee.

         Section 7.5. Limitation on Actions. Any suit brought to contest a
decision of the Benefits Committee shall be filed in a court of competent
jurisdiction within 1 year from receipt of written notice of the Benefits
Committee's final decision or from the date the appeal is deemed denied, and any
suit not filed within this 1-year limitation period shall be dismissed by the
court. Service of legal process shall be made upon the Plan by service upon the
Benefits Committee.

         Section 7.6. Federal Preemption. All state law causes of action that
arise out of or relate to this Plan or to entitlement to rights or benefits
under the Plan shall be deemed to have been preempted by section 514 of ERISA.

         Section 7.7. No Right to Jury Trial; Evidence. In any suit contesting a
decision of the Benefits Committee, all issues of fact shall be tried by the
court and not by a jury. No evidence may be introduced in court which was not
previously presented to the Benefits Committee and no evidence may be introduced
to modify or contradict the terms of the Plan document.

         Section 7.8. Scope of Review. The Benefits Committee shall have full
discretionary authority to interpret and apply the terms of this Plan document
and other relevant documents and relevant provisions of law, and deference shall
be afforded the Benefits Committee's decisions. This grant of authority shall be
broadly construed and shall include the authority to find facts, to reach
conclusions of law, to interpret and apply ambiguous terms, and to supply
missing terms reasonably necessary to resolution of claims and appeals. No
finding of fact by the Benefits Committee shall be set aside by a court unless
the party contesting the finding shall prove by clear and convincing evidence
that the finding is arbitrary and capricious. No conclusion of law reached by
the Benefits Committee shall be reversed by a court unless the party contesting
the conclusion shall demonstrate that the Benefits Committee is guilty of
manifest disregard of law.

         Section 7.9. Limitation on Damages. In any suit over Plan benefits or
rights, recovery shall be limited to the amount of benefits found due, without
interest, or to specific enforcement of rights established under the Plan, and
shall not include any other damages whether denominated incidental, special,
consequential, collateral, compensatory, exemplary, punitive or whatever.

         Section 7.10. Participant Plan Data. The Benefits Committee may issue,
or cause to be issued, from time to time statements to Executives, retirees or
beneficiaries indicating eligibility, service or other data regarding their Plan
benefits. If any such person wishes to challenge the

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accuracy of such data, the person shall do so in the manner and within the time
limits set forth above in Sections 7.1-7.9.

         Section 7.11. Final Determination of Rights and Benefits. After
termination of the Plan, the Benefits Committee may direct a final determination
of the rights and benefits of some or all Executives having an interest in the
Plan. The determination with respect to any person may be mailed to that person
at the Executive's last known address and that person may be given 90 days
within which to challenge the determination through the claims and appeal
procedures set forth in Sections 7.1-7.10. The mailing of a copy of a
determination to a person at his/her last known address shall be deemed
constructive receipt by that person of a copy of the determination. Any
determination not challenged through the claims and appeals procedures shall
govern an Executive's rights under the Plan, and the rights of any person
claiming by, through or under him.

                                  ARTICLE VIII
                            Amendment and Termination

         Section 8.1. Amendment and Termination. The Company intends to maintain
this Plan as long as it is appropriate. However, the Company reserves the right
to amend and/or terminate it at any time without the consent of any Executive,
(a) by the Board of Directors of the Company, or (b) in the case of amendments
which do not materially modify the provisions hereof, the Benefits Committee;
provided, however, that no such amendment or termination shall reduce any
benefits accrued under the terms of this Program prior to the date of
termination or amendment.

                                   ARTICLE IX
                                  Miscellaneous

         Section 9.1. No Employment Rights. Nothing contained in this Plan shall
be construed as a contract of employment between the Company or any subsidiary
or joint venture company and any employee, or as a right of any employee to be
continued in the employment of the Company, or as a limitation of the right of
the Company to discharge any of its employees with or without cause.

         Section 9.2. Entire Agreement; Successors. This Plan, including any
subsequently adopted amendments, shall constitute the entire agreement or
contract between the Company and any Executive regarding this Program. There are
no covenants, promises, agreements, conditions or understandings, either oral or
written, between an Executive and the Company relating to the subject

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matter hereof, other than those set forth herein. This Plan and any amendments
hereof shall be binding on the Company and the Executives and their respective
heirs, administrators, trustees, successors and assigns, including but not
limited to, any successors of the Company by merger, consolidation or otherwise
by operation of law, and on all designated beneficiaries of the Executive.

         Section 9.3. Governing Law. The laws of the State of Texas shall govern
this Plan.

         Section 9.4. Nonassignability. To the extent permitted by law, the
right of any Executive or any beneficiary in any benefit hereunder shall not be
subject to attachment or any other legal process for the debts of such Executive
or beneficiary; nor shall any such benefit be subject to anticipation,
alienation, sale, transfer, assignment or encumbrance.

Dated:                                , 1997
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DRESSER INDUSTRIES, INC.

By:
   -----------------------------------

Title:
      --------------------------------

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                                                                    Exhibit 10.8

                      SHORT TERM DEFERRED COMPENSATION PLAN

                                  INTRODUCTION

Dresser, Inc., has two programs which enable its employees to defer compensation
as an extension of the bonus incentive system.

1.       The regular Deferred Compensation Plan is for employees who earn $7,500
         or more incentive compensation in a fiscal year. This plan provides a
         method for the employee to defer payment of income tax on his deferred
         bonus until it is received after retirement or termination of
         employment with the company.
2.       The short Term Deferred Compensation Plan is designed to offer more
         flexibility in income panning to participants. Open to employees
         earning $5,000 or more incentive compensation in a fiscal year, the
         Plan is a 5-year program with three pay-out dates.

The purpose of this booklet is to describe briefly the major provisions of the
Short Term Deferred Compensation Plan and to answer questions most likely to be
asked by participants.

In the back of the booklet is a copy of the legal document under which the Plan
is administered. The document controls all actual payments under the Plan and
may be changed when appropriate for tax or other reasons by the Board of
Directors.

If, after reading this booklet, you have additional questions about the Plan,
please contact your Industrial Relations Manager or the Corporate Industrial
Relations Department.

                               INTENT OF THE PLAN

The Short Term Deferred Compensation Plan is designed to enable eligible
employees to defer incentive compensation under a 5-year program.

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The basic features of the Plan are these:

o     An individual's deferred compensation is converted into "unit stock" at a
      10 percent discount.
o     Cash benefits on the "unit stock" that are equivalent to dividends on
      Dresser Common Stock are paid annually.
o     The cash value of the "unit stock" is paid out on a three-payment schedule
      over the five year period.
o     The full market price of Dresser Common Stock is used to determine the
      value of the "unit stock" for pay-out purposes.

                                 WHO IS ELIGIBLE

All employees of the Company and its wholly-owned subsidiaries who receive
$5,000 or more in bonuses or incentive compensation in a fiscal year are
eligible to participate in the Short Term Deferred Compensation Plan. However,
an employee cannot participate in both the Short Term Plan and regular Deferred
Compensation Plan in the same fiscal year.

                              HOW THE PLAN OPERATES

$5,000 MINIMUM

An employee must defer at least $5,000 of incentive. A written request for the
amount to be deferred must be filed with the Industrial Relations Department by
October 15. A copy of the form which will be provided for this purpose is shown
on pages 8-9.

CONVERSION TO "UNIT STOCK"

On each Crediting Date, January 15, the dollar amount of the deferred
compensation is converted into full shares of "unit stock" and credited to the
individual's account. The price of the "unit stock" is 90 percent of the average
daily closing price of Dresser Common Stock during December, flowing the end of
the fiscal year. New York Stock Exchange prices are used.

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In converting the deferred compensation into "unit stock," any cash balance
remaining because it was less than the price of a full share will be paid back
to the employee on the next date on which a payment is made.

ANNUAL DIVIDEND EQUIVAQLENTS

Participants will receive an annual cash benefit on the shares of "unit stock"
in their account during the prior year that is equivalent to the dividends paid
on regular Dresser Common Stock. Payments will be made as soon as possible after
January 15.

                     DETERMINING BENEFITS AND PAY-OUT DATES

The value of the "unit stock" in the individual's account for pay-out purposes
is determined by the price of regular Dresser Common Stock. The average daily
closing price of stock in the December preceding the Benefit Pay-Out Date
(January 15) is multiplied by the number of shares of "unit stock" in the
individual's account to determine the value of his account. Cash benefit
pay-outs are subject to the normal with-holding taxes.

THREE BENEFIT PAY-OUT DATES

There are three Benefit Pay-Out Dates in the Short Term Plan: The third, fourth,
and fifth anniversaries of the original crediting date of the deferred
compensation. The pay-out schedule is as follows.

      o     First Benefit Pay-Out Date (third year)--Participant receives one
            third of the value of his outstanding account.
      o     Second Benefit Pay-Out Date (fourth year)--He receives one half of
            the remaining value of his outstanding account.
      o     Third Benefit Pay-Out Date (fifth year)--All of the remaining value
            of his account is paid to the participant.

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                               QUESTIONS & ANSWERS

Who Administers The Plan?

The Short Term Deferred Compensation Plan is administered by the same Committee
that is appointed by the Board of Directors to administer the regular Deferred
Compensation Plan.

If An Individual's Annual Incentive Compensation Is $7,500 Or More, Can He
Participate In Both The Short Term and Regular Deferred Compensation Plans?

Yes, but not in the same fiscal year. If an employee earns incentive
compensation totaling $7,500 or more in a fiscal year, he may elect to
participate in only one Plan in that given year. However, he may switch from one
plan to the other in subsequent years. The request form for selecting specific
options (page 8-9) will be provided annually to eligible participants in time to
meet the October 15 filing deadline.

Is There Any Risk Involved For The Individuals?

Because your deferred compensation is converted to "unit stock", you have no
guarantee that you will get back all of the bonus that is deferred. However, in
recognition of this risk, the "unit stock" is credited to your account at a 10
percent "discount" while the benefit pay-outs are made at "market value."
Additionally, of course, you receive cash benefits annually that are equivalent
to regular dividends paid on Dresser Common Stock.

What About Stock Splits And Stock Dividends?

If the company at any time declares a stock dividend, stock split, consolidation
of shares, or similar action affecting its Common Stock, the outstanding shares
of "unit stock" in an individual's account will be increased or decreased
correspondingly, just as though they were regular shares of Dresser Common
Stock.

What If The Employee Leaves Dresser?

If the individual's employment with the company is terminated for reasons other
than death, disability, or retirement, the pay-out will be made according to the
normal schedule-the third, fourth, and fifth anniversaries of the original
crediting date.

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However, the cash benefit payable after termination will be based upon the
dollar amount of the deferred bonus instead of the "unit stock." Dividend
equivalent payments also stop.

What If A Participant Dies, Retires, Or Is Disabled?

Benefits will be paid to the individual or his beneficiary according to the
regular schedule. At the discretion of the Committee and proof of financial
necessity by the individual to whom the benefit is payable, the entire balance
of the outstanding account may be paid on the first available benefit payment
date.

Can An Individual's Benefits Be Forfeited?

Yes. If a participant takes or permits some action or omission which results in
damage to the Company--unless it was done in good faith and without reasonable
cause to believe it was improper--the Committee may terminate all subsequent
benefits.

                      SHORT-TERM DEFERRED COMPENSATION PLAN

SECTION I. DEFINITIONS.

The following words and phrases when used herin shall, unless the context
clearly indicates otherwise, have the following meanings:

      1.01  "Benefit means the net, unforfeited amounts to be paid a
            Participant, his estate or his beneficiary.

      1.02  "Benefit Payment Date" means each of the dates for payment of
            Benefits accrued with respect to a Fiscal Year crediting of Unit
            Stock as a Contingent Allotment, as set forth in Section 5.02.

      1.03  "Board" means the Board of Directors of Dresser, Inc.

      1.04  "Committee" means the Committee designated by the Board pursuant to
            Section III hereof to administer the Plan

      1.05  "Company" means Dresser, Inc., and all its wholly-owned
            subsidiaries.

      1.06  "Crediting Date" for any contingent credit or Dividend Equivalent
            payment under the Plan shall be the January 15 next

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            following the end of the Fiscal Year for which the contingent credit
            is awarded or the Dividend Equivalent is computed.

      1.07  "Deferred Bonus" means that portion of an Employee's Incentive
            Compensation as shall be deferred under the terms and conditions of
            the Plan.

      1.08  "Disability" means such an absence of physical or mental powers in a
            Participant so as to render him incapable of competently performing
            his duties.

      1.09  "Dividend Equivalent" means the amount computed and paid each year
            that Incentive Compensation is deferred under this Plan, as limited
            and described in Section 5.01.

      1.10  "Employee" means any person employed by the Company, including an
            officer of the Company.

      1.11  "Fiscal Year" shall mean the fiscal year of the Company.

      1.12  "Incentive Compensation" means compensation awarded to an Employee
            at the end of a Fiscal Year, based upon profits, sales, or other
            performance throughout such year, which except for this Plan or the
            Dresser, Inc. Deferred Compensation Plan, would become payable in a
            lump sum in the following Fiscal Year or in annual installments
            beginning in the following Fiscal Year.

      1.13  "Participant" means an Employee who is contingently entitled to
            Benefits under the Plan.

      1.14  "Plan" means this Dresser, Inc., Short-Term Deferred Compensation
            Plan adopted by the Board on January 21, 1971, as amended from time
            to time.

      1.15  "Retirement" shall mean a severance of an Employee from the
            employment of the Company on or after his attaining age 65 or a
            severance whereby the Employee is granted Early Retirement under the
            terms of a retirement plan provided by the Company for the benefit
            of salaried employees.

      1.16  "Unit Price" means the price determined under Section 4.02(c).

      1.17  "Unit Stock" means shares of common stock of Dresser, Inc.

SECTION II. ADMINISTRATION.

      2.01  Appointment and Removal of Committee. The Plan shall be administered
            by a committee, which shall be the same

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            Committee (appointed by the Board) as administers the Dresser, Inc.
            Deferred Compensation Plan.

      2.02  Powers and Duties of Committee. The Committee shall have such powers
            and duties as are conferred on it by the Plan or the Board. The
            Committee shall adopt such rules and procedures for the conduct of
            its business and for the administration of the Plan as it deems
            advisable and shall have authority to take any and all action
            necessary to implement such rules and procedures. The Committee
            shall act at meetings by affirmative vote of a majority of the
            members of the Committee. Any action permitted to be taken at a
            meeting may be taken without a meeting if, prior to such action, a
            written consent to the action is signed by all members of the
            Committee and such written consent is filed with the minutes of
            proceedings of the committee. The construction and interpretation of
            the terms and provisions of the Plan by the Committee and
            determinations made by the Committee or the Board shall be final and
            conclusive.

      2.03  Expenses. All expenses of the administration of the Plan shall be
            borne by the Company.

SECTION III. PARTICIPATION.

      3.01  Eligibility. An Employee may elect to participate in this Plan with
            respect to any Fiscal Year for which his Inventive Compensation
            equals or exceeds $5,000 (or such other amount as may be determined
            by the Board from time to time, such determination to be effective,
            however, only with respect to Fiscal Years ending after such
            determination).

      3.02  Election. An eligible Employee shall become a Participant in the
            Plan with respect to a Fiscal Year by filing with the Committee on
            or before the 15th day of the last calendar month in such Fiscal
            Year a written election on a form prescribed by the Committee, which
            election shall specify the amount of Incentive Compensation to be
            deferred under this Plan and, if the Employee is also eligible to
            participate in the Company's Deferred Compensation Plan for such
            Fiscal Year, his election not to defer any Incentive Compensation
            under such Deferred Compensation Plan for the Fiscal Year involved.
            No deferral may be made under this Plan with respect to any Fiscal

                                       7
<PAGE>

            Year in an amount less than $5,000 (or such other amount as may be
            determined by the Board from time to time, such determination to be
            effective, however, only with respect to Fiscal Years ending after
            such determination).

SECTION IV. CONTINGENT ALLOTMENTS

4.01  Contingent Allotment. The Contingent Allotment for a Participant with
      respect to any particular Fiscal Year will consist of the total credits in
      such Allotment from time to time, consisting of:

      (a)   Unit Stock shares contingently credited on the initial Crediting
            Date, under Section 4.02(a).

      (b)   Any unpaid cash balance remaining after conversions of Unit Stock,
            under Section 4.02(b), reduced by amounts paid under Section 5.02 or
            5.03 or forfeited under Section 6.03.

4.02  Computation of Contingent Unit Stock Allotments.

      (a)   Deferred Bonus. On each Crediting Date, the total number of full
            shares of Unit Stock the dollar amount of each Participant's
            Deferred Bonus in respect of the prior Fiscal Year would purchase at
            the Participant's Unit Price shall be credited to the Contingent
            Allotment of the Participant for such Fiscal Year.

      (b)   Less Than Full Shares. Any balance of a Participants Deferred Bonus
            not credited to his Contingent Allotment because it was less than
            the Unit Price of a full share of Unit Stock shall be paid to the
            Participant on the first subsequent Crediting Date or Benefit
            Payment Date as to which any other payment is due to the
            Participant.

      (c)   Unit Price. The Unit Price for a Participant on each Crediting Date
            shall be 90% of the average of the daily closing prices of the Unit
            Stock on the New York Stock Exchange for the calendar month
            immediately prior to such Crediting Date.

4.03  Corporate Changes. If the company at any time increases or decreases
      proportionately to all holders of shares of its common stock then
      outstanding, whether by stock dividend, stock split, consolidation of
      shares, or in any other manner the number of all of its outstanding shares
      of such common stock held by such holders, then each Contingent Allotment
      and each Unit Stock Benefit as determined in Section IV theretofore
      credited and unforfeited or unpaid shall be correspondingly increased or
      decreased with respect to the number of shares of such common stock
      represented thereby, In the event of the

                                       8
<PAGE>

      merger or consolidation of the Company with or into another corporation or
      the sale of substantially all of the assets of the Company, the Board
      shall make an appropriate equitable adjustment to each Contingent
      Allotment.

SECTION V. BENEFITS.

5.01  Dividend Equivalents. As of each Crediting Date there shall be ascertained
      the total number of unpaid and unforteited shares of Unit Stock credited
      prior to such Crediting Date to each Participant in all of his Contingent
      Allotments. Then the total amount of cash dividends which would have been
      payable during the preceding calendar year on the shares of Unit Stock in
      all of his Contingent Allotments if the shares had been outstanding during
      the preceding calendar year shall be calculated. The amount so calculated
      shall be the Dividend Equivalent for each Participant for that Crediting
      Date and shall be paid to him in cash as soon as practicable after the
      Crediting Date if and only if the Participant was employed by the Company
      on that Crediting Date or such employment ceased on account of his Death,
      Disability, or Retirement. No Dividend Equivalents shall be paid as to
      Crediting Dates after a Participant terminates employment with the Company
      for any other reason.

5.02  Benefit Payment Dates. With respect to Unit Stock shares contingently
      credited on any particular Crediting Date there will be three Benefit
      Payment Dates, which will be the third, fourth and fifth anniversaries of
      the original Crediting Date. The value of a Contingent Allotment of Unit
      Stock for benefit payment purposes will be determined by reference to the
      average of the daily closing prices of Unit Stock on the New York Stock
      Exchange for the calendar month immediately prior to the applicable
      Benefit Payment Date. A Participant still employed by the Company on a
      Benefit Payment Date will receive a cash benefit (less required
      withholding taxes) equal to the following portion of the value of each
      Contingent Allotment unpaid and unforfeited as of that date:

         First Benefit Payment Date- One-third
         Second Benefit Payment Date- One-half
         Final Benefit Payment Date- All

                                       9
<PAGE>

5.03  Terminations.

      (a)   If a participant's employment with the Company ceases prior to a
            Benefit Payment Date on account of his Death, Disability or
            Retirement, the Participant (or the person designated pursuant to
            Section 6.02, if he is deceased or incompetent) will receive
            benefits as thought he were then still employed by the Company.

      (b)   If and when employment with the Company ceases for any other reason,
            the cash benefit payable on each subsequent Benefit Payment Date
            with respect to any particular Contingent Allotment will be
            one-third of the net Deferred Bonus (said Bonus less any payment
            under Section 4.02(b)) that created that total Contingent Allotment,
            instead of an amount determined by the value of that Allotment.

SECTION VI. MISCELLANEOUS.

6.01  Death or Disability. In the event of the death or disability of a
      Participant while employed by the Company, the Committee may, in its sole
      discretion and upon proof of the financial necessity of the person or
      persons to whom Benefits are payable, pay the entire balance of all
      Contingent Allotments standing to the credit of such Participant at the
      first available Benefit Payment Date for such Allotment.

6.02  To Whom Payments are to be Made. Payments shall be made to the Participant
      if living. Unless otherwise requested in writing by the Participant, in
      the event of a Participant's death, payment will be made to the
      beneficiary designated by the Participant for the purpose of receiving
      life insurance benefits under the Company's group life insurance plan. In
      the event no beneficiary is designated by the Participant either in
      writing or for the purpose of receiving such life insurance benefits, or
      if the designated beneficiary does not survive the Participant, Benefits
      will be paid to his personal representatives or to the person appointed by
      Will to receive said Benefits. This provision does not affect the number
      of payments or the amount of each such payment, but only affects to whom
      payments are to be made.

6.03  Forfeiture. In the event a Participant has taken or allowed some action or
      omission resulting in damage or competitive injury to the Company then,
      unless such action or omission shall have been taken or allowed in good
      faith and without reasonable cause to believe that it was

                                       10
<PAGE>

      improper or illegal, the Committee may terminate all subsequent payments
      of Dividend Equivalents to the Participant, and in addition, the Committee
      may terminate and forfeit all or any part of the Participant's Contingent
      Allotment hereunder a sit may deem appropriate.

6.04  Reserves. The Company shall be under no obligation to reserve, segregate
      or earmark and cash, stock or other property for the payment of any
      Benefits under this Plan. No Participant shall have any right whatsoever
      in any cash, stock or other property which may be set aside under the
      Plan.

6.05  Withholding. There shall be deducted from each payment of Benefits under
      the Plan (including Dividend Equivalents) any taxes required to be
      withheld by the Company in respect of such payment.

6.06  Plan not to Constitute Contract of Employment. Neither the adoption of
      this Plan nor its operation shall in any way affect the right of the
      Company to dismiss or discharge a Participant at any time, not give an
      employee a right to participate in the Company's Incentive Compensation
      Plan.

6.07  Nontransferability and Nonassignability. No rights under this Plan shall
      be assignable or transferable, or subject to encumbrances, pledge, or
      charge of any nature, except that a Participant may designate a
      beneficiary to receive Benefits upon his death as otherwise provided
      herein.

6.08  Amendment, Suspension or Termination. The Board may amend, suspend or
      terminate the Plan in whole or in part, except that no amendment,
      suspension or termination shall reduce any Benefits credited to the
      Participant prior to the date of such amendment, suspension, or
      termination or Benefits to be credited in the future based on amounts
      previously credited to the Participant.

6.09  Reliance Upon Information. The Board and the Committee may rely upon any
      information supplied to them by any officer of the Company, the Company's
      legal counsel or by the Company's independent public accountants in
      connection with the administration of the Plan, and shall not be liable
      for any decision or action in reliance theron. No Participant, or any
      person claiming through him shall have any right or interest in the Plan
      or any Benefits hereunder unless and until all the terms, conditions, and
      provisions of the Plan that affect such Participant or such other person
      shall have been complied with as specified herein. The Participant shall
      complete such forms and furnish such information as the Committee may
      require in the administration of the Plan.

                                       11
<PAGE>

6.10  Joint Ventures. Notwithstanding anything else in this Plan to the
      contrary, any Participant whose employment with the Company is terminated
      by virtue of his transfer to employment by a joint venture or partnership
      in which the Company holds an ownership or profit interest of at least 25%
      shall not be eligible to defer under this Plan any bonus earned after such
      transfer of employment but he shall not be deemed to have terminated his
      employment with the Company until he ceases to be employed by such joint
      venture or partnership, provided, however, that no such Participant shall
      receive from the Plan less total benefit than if he were treated as having
      terminated his employment under Section 5.03(b) of this Plan as of
      February 20,1987.

                                       12

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