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<B><FONT size=5 face="serif">UNITED STATES</FONT></B></P>
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<B><FONT size=5 face="serif">SECURITIES AND EXCHANGE COMMISSION</FONT></B></P>
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<FONT size=4 face="serif">WASHINGTON, D.C. 20549</FONT></P>
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<B><FONT size=5 face="serif">FORM 8-K</FONT></B><BR>
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<B><FONT size=2 face="serif">CURRENT REPORT</FONT></B></P>
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<B><FONT size=2 face="serif">PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></B></P>
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<FONT size=2 face="serif">Date of Report (Date of earliest event reported): January 7, 2008 (December 31, 2007)</FONT></P>
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<B><FONT size=5 face="serif">NATCO GROUP INC.</FONT></B>&nbsp;
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<FONT size=2 face="serif">(Exact name of registrant as specified in its charter)</FONT>&nbsp;
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<I><FONT size=2 face="serif">Commission File Number 001-15603</FONT></I>&nbsp;
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<FONT size=2 face="serif">Delaware</FONT>&nbsp;
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<FONT size=2 face="serif">001-15603</FONT>&nbsp;
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<FONT size=2 face="serif">22-2906892</FONT>&nbsp;
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<FONT size=2 face="serif">(State of Incorporation)</FONT>&nbsp;
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<FONT size=2 face="serif">(Commission File Number)</FONT>&nbsp;
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<FONT size=2 face="serif">(IRS Employer</FONT>&nbsp;
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<FONT size=2 face="serif">Identification No.)</FONT>&nbsp;
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<FONT size=2 face="serif">11210 Equity Drive</FONT>&nbsp;
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<FONT size=2 face="serif">Houston, Texas</FONT>&nbsp;
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<FONT size=2 face="serif">77041</FONT>&nbsp;
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<FONT size=2 face="serif">(Address of Principal Executive Offices)</FONT>&nbsp;
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<FONT size=2 face="serif">(Zip Code)</FONT>&nbsp;
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<FONT size=2 face="serif">Registrant&#146;s Telephone Number, Including Area Code: (713) 849-7500</FONT></P>
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<FONT size=2 face="serif">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:</FONT></P>
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<FONT size=2 face="serif">[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</FONT></P>
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<FONT size=2 face="serif">[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</FONT></P>
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<FONT size=2 face="serif">[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</FONT></P>
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<FONT size=2 face="serif">[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</FONT></P>

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<B><FONT size=2 face="serif">ITEM 5.02. DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.</FONT></B></P>
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<B><I><FONT size=2 face="serif">Employment Contracts for Certain Named Executive Officers.</FONT></I></B></P>
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<FONT size=2 face="serif">Effective January 1, 2008, the Company entered into new employment agreements with John U. Clarke, Chairman of the Board of Directors and Chief Executive Officer, and Patrick M. McCarthy, President and Chief Operating
Officer (collectively, Mr. Clarke and Mr. McCarthy are referred to in this report as the &#147;Executives&#148; and individually as an &#147;Executive&#148;). The following is a summary of the agreements, which is qualified in its entirety by the
actual terms and conditions of the respective agreements.</FONT></P>
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<FONT size=2 face="serif">Each employment agreement is for a term expiring December 31, 2010, unless sooner terminated in accordance with its terms. Under their respective agreements, Mr. Clarke is entitled to receive an annual salary of at least
&#36;500,000, and Mr. McCarthy is entitled to receive an annual salary of at least &#36;400,000. Mr. Clarke is eligible to receive an annual bonus with a target award of 100% of his base salary, and Mr. McCarthy is eligible to receive an annual
bonus with a target award of 70% of his base salary, based on the Company&#146;s financial performance and other criteria to be determined annually by the Company&#146;s Board of Directors.</FONT></P>
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<FONT size=2 face="serif">Under the employment agreements, the Executives are eligible to participate in the Company&#146;s long-term incentive plans and annual incentive bonus plan. Under his agreement, Mr. McCarthy also shall receive reimbursement
for monthly expenses associated with an automobile.</FONT></P>
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<FONT size=2 face="serif">Upon any involuntary termination of employment by the Company or an Executive prior to expiration of the term, such Executive 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, such Executive or his estate may be entitled to additional compensation and/or benefits, as described below:</FONT></P>
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<FONT size=2 face="serif">Upon an involuntary termination by the Company for any reason or by an Executive by reason of a material</FONT>&nbsp;
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<FONT size=2 face="serif">breach of the agreement by the Company or for certain other specified reasons, and after execution of a release</FONT>&nbsp;
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<FONT size=2 face="serif">and in consideration of his continuing obligations under the agreement (including his non-competition</FONT>&nbsp;
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<FONT size=2 face="serif">obligations), such Executive shall be entitled to (1) one year&#146;s annual base salary; (2) a pro rata share of the</FONT>&nbsp;
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<FONT size=2 face="serif">target bonus compensation earned by him under any applicable bonus plan then in effect through the date of</FONT>&nbsp;
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<FONT size=2 face="serif">termination; (3) for Mr. Clarke, the continuation of health insurance and dental insurance benefits for Mr.</FONT>&nbsp;
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<FONT size=2 face="serif">Clarke and eligible dependents for up to one year following the termination date; for Mr. McCarthy,</FONT>&nbsp;
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<FONT size=2 face="serif">reimbursement for all COBRA expenses related to health insurance and dental insurance for a period of 18</FONT>&nbsp;
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<FONT size=2 face="serif">months following the termination date; (4) continuation of life insurance benefits for such Executive, for up to</FONT>&nbsp;
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<FONT size=2 face="serif">one year following the termination date; and (5) any deferred compensation previously earned under any of the</FONT>&nbsp;
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<FONT size=2 face="serif">Company&#146;s plans. Additionally, Mr. McCarthy shall be entitled to a one-time payment in the amount of</FONT>&nbsp;
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<FONT size=2 face="serif">&#36;210,000, and he may exercise any of his stock options that are outstanding and then vested, at any time on or</FONT>&nbsp;
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<FONT size=2 face="serif">before 90 days from the involuntary termination date.</FONT>&nbsp;
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<FONT size=2 face="serif">If a Change in Control (as defined in the employment agreements) occurs within 24 months following such an</FONT>&nbsp;
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<FONT size=2 face="serif">involuntary termination, the Executive shall be entitled to (1) an amount equal to 2.99 times his annual base</FONT>&nbsp;
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<FONT size=2 face="serif">salary; (2) an amount equal to 2.99 times the target bonus compensation at the greater of his target bonus in</FONT>&nbsp;
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<FONT size=2 face="serif">effect (A) at the time notice of termination is given or (B) immediately preceding the Change of Control date,</FONT>&nbsp;
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<FONT size=2 face="serif">offset by any payment he previously received under the foregoing provision; (3) continuation of health and</FONT>&nbsp;
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<FONT size=2 face="serif">dental insurance benefits for such Executive and eligible dependents for 18 months following the termination</FONT>&nbsp;
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<FONT size=2 face="serif">date; (4) continuation of life insurance benefits for such Executive for up to 18 months following the</FONT>&nbsp;
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<FONT size=2 face="serif">termination date; (5) the cash-equivalent of the value of an additional 18 months of health, dental, and life</FONT>&nbsp;
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<FONT size=2 face="serif">insurance benefits; and (6) any deferred compensation previously earned under any of the Company&#146;s plans to</FONT>&nbsp;
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<FONT size=2 face="serif">the extent not previously paid. In addition, all outstanding unvested stock options held by such Executive shall</FONT>&nbsp;
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<FONT size=2 face="serif">fully vest as of the Change in Control Date and become immediately exercisable, all restrictions on any</FONT>&nbsp;
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<FONT size=2 face="serif">restricted stock held by such Executive shall lapse as of the Change in Control Date, and all vesting and/or</FONT>&nbsp;
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<FONT size=2 face="serif">performance requirements on any forms of awards granted to such Executive under any incentive plans shall</FONT>&nbsp;
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<FONT size=2 face="serif">automatically accelerate and/or deemed to have been met at target levels, unless such treatment will cause the</FONT>&nbsp;
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<FONT size=2 face="serif">2</FONT></P>

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<FONT size=2 face="serif">award to become subject to Section 409A of the Internal Revenue Code of 1986, as amended (the &#147;Code&#148;). In</FONT>&nbsp;
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<FONT size=2 face="serif">addition, any such stock options shall be exercisable for 12 months after the date of termination, unless the term</FONT>&nbsp;
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<FONT size=2 face="serif">of the stock options expires before the end of such exercise period, in which case the stock options shall be</FONT>&nbsp;
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<FONT size=2 face="serif">exercisable until the expiration of their term. Additionally, Mr. McCarthy shall receive cash in the amount of</FONT>&nbsp;
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<FONT size=2 face="serif">any bonus to which he would have become entitled to for any completed fiscal year prior to the fiscal year in</FONT>&nbsp;
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<FONT size=2 face="serif">which the termination date occurs, to the extent such bonus had not been previously paid.</FONT>&nbsp;
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<FONT size=2 face="serif">&middot; </FONT>&nbsp;
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<FONT size=2 face="serif">If a Change in Control occurs within 6 months following an involuntary termination, the Executive shall be</FONT>&nbsp;
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<FONT size=2 face="serif">entitled to the same benefits enumerated in (1) &#150; (6) above with regard to termination following a Change in</FONT>&nbsp;
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<FONT size=2 face="serif">Control. In addition, such Executive shall receive a cash payment in an amount equal to the sum of (a) with</FONT>&nbsp;
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<FONT size=2 face="serif">respect to any stock option that was forfeited as of the date of his termination of employment, equal to the</FONT>&nbsp;
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<FONT size=2 face="serif">difference between the closing price of the Company&#146;s common stock on the Change of Control date and such</FONT>&nbsp;
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<FONT size=2 face="serif">option&#146;s exercise price (or, if the term of such option would have expired before the Change of Control date, the</FONT>&nbsp;
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<FONT size=2 face="serif">difference between the closing price of the Company&#146;s common stock as of the date of such option&#146;s expiration</FONT>&nbsp;
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<FONT size=2 face="serif">date and such option&#146;s exercise price), (b) with respect to any restricted stock that is forfeited as of the date of</FONT>&nbsp;
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<FONT size=2 face="serif">his termination of employment, equal to the aggregate closing price of such stock as of the Change of Control</FONT>&nbsp;
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<FONT size=2 face="serif">date, and (c) with respect to any other form of incentive compensation award under the Company&#146;s long-term</FONT>&nbsp;
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<FONT size=2 face="serif">incentive compensation plans, the amount of such award as of the Change in Control Date, with such payment</FONT>&nbsp;
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<FONT size=2 face="serif">to be made within 30 days of the Change of Control date. Additionally, Mr. McCarthy shall receive cash in the</FONT>&nbsp;
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&nbsp;	</TD>
	<TD width=95% nowrap align=left>
<FONT size=2 face="serif">amount of any bonus to which he would have become entitled to for any completed fiscal year prior to the fiscal</FONT>&nbsp;
	</TD>
</TR>
<TR valign="bottom">
	<TD width=2% nowrap align=left>
&nbsp;
	</TD>
	<TD width=2%>
&nbsp;	</TD>
	<TD width=95% nowrap align=left>
<FONT size=2 face="serif">year in which the termination date occurs, to the extent such bonus had not been previously paid.</FONT>&nbsp;
	</TD>
</TR>
<TR>
	<TD colspan=3>
&nbsp;
	</TD>
</TR>
<TR valign="bottom">
	<TD width=2% nowrap align=left>
<FONT size=2 face="serif">&middot; </FONT>&nbsp;
	</TD>
	<TD width=2%>
&nbsp;	</TD>
	<TD width=95% nowrap align=left>
<FONT size=2 face="serif">Upon an involuntary termination by reason of an Executive&#146;s death or disability, such Executive or his</FONT>&nbsp;
	</TD>
</TR>
<TR valign="bottom">
	<TD width=2% nowrap align=left>
&nbsp;
	</TD>
	<TD width=2%>
&nbsp;	</TD>
	<TD width=95% nowrap align=left>
<FONT size=2 face="serif">beneficiaries shall be entitled to (1) a pro rata share of the amount of the target bonus compensation earned by</FONT>&nbsp;
	</TD>
</TR>
<TR valign="bottom">
	<TD width=2% nowrap align=left>
&nbsp;
	</TD>
	<TD width=2%>
&nbsp;	</TD>
	<TD width=95% nowrap align=left>
<FONT size=2 face="serif">him under any applicable bonus plan then in effect through the date of termination; (2) any deferred</FONT>&nbsp;
	</TD>
</TR>
<TR valign="bottom">
	<TD width=2% nowrap align=left>
&nbsp;
	</TD>
	<TD width=2%>
&nbsp;	</TD>
	<TD width=95% nowrap align=left>
<FONT size=2 face="serif">compensation previously earned under any of the Company&#146;s plans; and (3) continuation of health insurance</FONT>&nbsp;
	</TD>
</TR>
<TR valign="bottom">
	<TD width=2% nowrap align=left>
&nbsp;
	</TD>
	<TD width=2%>
&nbsp;	</TD>
	<TD width=95% nowrap align=left>
<FONT size=2 face="serif">and dental insurance benefits for 18 months following the termination date.</FONT>&nbsp;
	</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">If it is determined that any benefit, payment or distribution by the Company to or for the benefit of an Executive (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 Code, then the payment shall be reduced to the extent necessary to avoid the imposition of the excise tax.</FONT></P>
<P align="left">
<FONT size=2 face="serif">Upon his termination of employment, the Executive will be subject to a one-year non-competition and non-solicitation provision under the employment agreements.</FONT></P>
<P align="left">
<FONT size=2 face="serif">The Governance, Nominating &amp; Compensation, or GNC, Committee of the Board of Directors approved changes to certain employment agreement, severance pay policies, and 2006 performance unit award agreements in order to
comply with Section 409A of the Code. The Company intends to enter into amended and restated employment agreements with Bradley P. Farnsworth, Senior Vice President and Chief Financial Officer, and Knut Eriksen, Senior Vice President &#150; Global
Execution, to address these Section 409A changes. The other terms and conditions of said amended and restated employment agreements shall remain the same. </FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">Deferred Compensation; Restricted Stock Awards; Changes in Salary.</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">On December 31, 2007, the GNC Committee approved the payment of &#36;388,470 in deferred compensation payable to Mr. McCarthy under the terms of his then current employment agreement, to be paid on January 31, 2008.
</FONT></P>
<P align="left">
<FONT size=2 face="serif">On January 1, 2008, effective January 2, 2008, the GNC Committee approved restricted stock awards to Mr. Clarke and Mr. McCarthy of 45,000 and 30,000 restricted shares, respectively, under the Company&#146;s 2006 Long-Term
Incentive Compensation Plan (the &#147;2006 Compensation Plan&#148;). The restricted stock awards provide for restrictions to lapse on March 1, 2011, subject to (i) the Company achieving an earnings per share averaging at least &#36;1.50 per year
for the three years ending December 31, 2008, 2009 and 2010, and (ii) the recipient&#146;s continuous employment with the Company or a subsidiary from the date of the grant to the date restrictions lapse. Restrictions may lapse earlier as provided
in the 2006 Long-Term Incentive Compensation Plan or as a result of a Change in Control.</FONT></P>
<P align="left">
<FONT size=2 face="serif">3</FONT></P>

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<P align="left">
<FONT size=2 face="serif">On January 2, 2008, the Board of Directors of the Company approved an increase in base salary for Robert A. Curcio, who was promoted to Executive Vice President &#150; Integrated Engineered Solutions, to &#36;315,000, such
increase to be effective as of January 1, 2008. The increases in Mr. Clarke's and Mr. McCarthy's salaries discussed above were made effective as of October 1, 2007.</FONT></P>
<P align="left">
<TABLE><TR><TD nowrap>
<B><FONT size=2 face="serif">ITEM 8.01. OTHER EVENTS.</FONT></B><BR>
</TD></TR></TABLE>
</P>
<P align="left">
<FONT size=2 face="serif">On January 3, 2008, the Company announced certain changes to its senior management organization and its financial segment reporting for 2008, as more fully described in the press release attached as Exhibit 99.1
hereto.</FONT></P>
<P align="left">
<FONT size=2 face="serif">On January 4, 2008, a subsidiary of the Company entered into a Stock Purchase Agreement to purchase 100% of the issued and outstanding shares of capital stock of Linco-Electromatic, Inc., a Texas corporation. The aggregate
purchase price for the Linco shares is US&#36;23 million in cash. The parties to the Stock Purchase Agreement have made customary representations, warranties, and covenants. The Stock Purchase Agreement also contains post-closing indemnification
obligations for, among other matters, breaches of representations and warranties. The transaction is expected to close during the first quarter 2008, subject to customary closing conditions.</FONT></P>
<P align="left">
<FONT size=2 face="serif">A press release announcing NATCO entered into the Stock Purchase Agreement is attached to this report as Exhibit 99.2 and incorporated into this report by reference.</FONT></P>
<P align="left">
<B><FONT size=2 face="serif">ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.</FONT></B></P>
<TABLE border=0 cellspacing=1 cellpadding=0>
<TR valign="bottom">
	<TD width=19% nowrap align=left>
<B><FONT size=2 face="serif">Exhibits.</FONT></B>&nbsp;
	</TD>
	<TD width=2%>
&nbsp;	</TD>
	<TD width=78% nowrap align=left>
&nbsp;
	</TD>
</TR>
<TR>
	<TD colspan=3>
&nbsp;
	</TD>
</TR>
<TR valign="bottom">
	<TD width=19% nowrap align=left>
<FONT size=2 face="serif">Exhibit 99.1</FONT>&nbsp;
	</TD>
	<TD width=2%>
&nbsp;	</TD>
	<TD width=78% nowrap align=left>
<FONT size=2 face="serif">Press Release issued January 3, 2008 (Organizational Matters)</FONT>&nbsp;
	</TD>
</TR>
<TR valign="bottom">
	<TD width=19% nowrap align=left>
<FONT size=2 face="serif">Exhibit 99.2</FONT>&nbsp;
	</TD>
	<TD width=2%>
&nbsp;	</TD>
	<TD width=78% nowrap align=left>
<FONT size=2 face="serif">Press Release issued January 7, 2008 (Linco Acquisition)</FONT>&nbsp;
	</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">4</FONT></P>

<HR noshade align="center" width="100%" size=2>



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<A name="page_5"></A>

<P align="center">
<TABLE><TR><TD align="center" nowrap>
<FONT size=2 face="serif">SIGNATURE</FONT><BR>
</TD></TR></TABLE>
</P>
<P align="left">
<FONT size=2 face="serif">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.</FONT></P>
<P align="left">
<TABLE><TR><TD nowrap>
<FONT size=2 face="serif">Dated: January 7, 2008</FONT><BR>
</TD></TR></TABLE>
</P>
<P align="center">
<TABLE><TR><TD align="center" nowrap>
<FONT size=2 face="serif">NATCO Group Inc.</FONT><BR>
</TD></TR></TABLE>
</P>
<P align="center">
<TABLE><TR><TD align="center" nowrap>
<FONT size=2 face="serif">By: /s/ Patrick M. McCarthy</FONT><BR>
<FONT size=2 face="serif">Patrick M. McCarthy</FONT><BR>
<FONT size=2 face="serif">President and Chief Operating Officer</FONT><BR>
</TD></TR></TABLE>
</P>
<P align="center">
<TABLE><TR><TD align="center" nowrap>
<FONT size=2 face="serif">Exhibit Index</FONT><BR>
</TD></TR></TABLE>
</P>
<P align="left">
<TABLE><TR><TD nowrap>
<U><FONT size=2 face="serif">Exhibit No.</FONT></U><BR>
</TD></TR></TABLE>
</P>
<P align="left">
<TABLE><TR><TD nowrap>
<U><FONT size=2 face="serif">Description</FONT></U><BR>
</TD></TR></TABLE>
</P>
<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">99.1</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">Press Release issued January 3, 2008 (Organizational Matters)</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">99.2</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">Press Release issued January 7, 2008 (Linco Acquisition)</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR></TABLE>
<P align="left">
<FONT size=2 face="serif">5</FONT></P>

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DC3355.pdf -- Converted by SEC Publisher 4.2, created by BCL Technologies Inc., for SEC Filing
UNITED STATES
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): January 7, 2008 (December 31, 2007)
NATCO GROUP INC.
(Exact name of registrant as specified in its charter)
Commission File Number 001-15603
Delaware
001-15603
22-2906892
(State of Incorporation)
(Commission File Number)
(IRS Employer
Identification No.)
11210 Equity Drive
Houston, Texas
77041
(Address of Principal Executive Offices)
(Zip Code)
Registrant's Telephone Number, Including Area Code: (713) 849-7500
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 5.02. DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.
Employment Contracts for Certain Named Executive Officers.
Effective January 1, 2008, the Company entered into new employment agreements with John U. Clarke, Chairman of the Board of Directors and Chief Executive Officer, and Patrick M. McCarthy, President and Chief Operating
Officer (collectively, Mr. Clarke and Mr. McCarthy are referred to in this report as the "Executives" and individually as an "Executive"). The following is a summary of the agreements, which is qualified in its entirety by the
actual terms and conditions of the respective agreements.
Each employment agreement is for a term expiring December 31, 2010, unless sooner terminated in accordance with its terms. Under their respective agreements, Mr. Clarke is entitled to receive an annual salary of at least
$500,000, and Mr. McCarthy is entitled to receive an annual salary of at least $400,000. Mr. Clarke is eligible to receive an annual bonus with a target award of 100% of his base salary, and Mr. McCarthy is eligible to receive an annual
bonus with a target award of 70% of his base salary, based on the Company's financial performance and other criteria to be determined annually by the Company's Board of Directors.
Under the employment agreements, the Executives are eligible to participate in the Company's long-term incentive plans and annual incentive bonus plan. Under his agreement, Mr. McCarthy also shall receive reimbursement
for monthly expenses associated with an automobile.
Upon any involuntary termination of employment by the Company or an Executive prior to expiration of the term, such Executive 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, such Executive or his estate may be entitled to additional compensation and/or benefits, as described below:
·
Upon an involuntary termination by the Company for any reason or by an Executive by reason of a material
breach of the agreement by the Company or for certain other specified reasons, and after execution of a release
and in consideration of his continuing obligations under the agreement (including his non-competition
obligations), such Executive shall be entitled to (1) one year's annual base salary; (2) a pro rata share of the
target bonus compensation earned by him under any applicable bonus plan then in effect through the date of
termination; (3) for Mr. Clarke, the continuation of health insurance and dental insurance benefits for Mr.
Clarke and eligible dependents for up to one year following the termination date; for Mr. McCarthy,
reimbursement for all COBRA expenses related to health insurance and dental insurance for a period of 18
months following the termination date; (4) continuation of life insurance benefits for such Executive, for up to
one year following the termination date; and (5) any deferred compensation previously earned under any of the
Company's plans. Additionally, Mr. McCarthy shall be entitled to a one-time payment in the amount of
$210,000, and he may exercise any of his stock options that are outstanding and then vested, at any time on or
before 90 days from the involuntary termination date.
·
If a Change in Control (as defined in the employment agreements) occurs within 24 months following such an
involuntary termination, the Executive shall be entitled to (1) an amount equal to 2.99 times his annual base
salary; (2) an amount equal to 2.99 times the target bonus compensation at the greater of his target bonus in
effect (A) at the time notice of termination is given or (B) immediately preceding the Change of Control date,
offset by any payment he previously received under the foregoing provision; (3) continuation of health and
dental insurance benefits for such Executive and eligible dependents for 18 months following the termination
date; (4) continuation of life insurance benefits for such Executive for up to 18 months following the
termination date; (5) the cash-equivalent of the value of an additional 18 months of health, dental, and life
insurance benefits; and (6) any deferred compensation previously earned under any of the Company's plans to
the extent not previously paid. In addition, all outstanding unvested stock options held by such Executive shall
fully vest as of the Change in Control Date and become immediately exercisable, all restrictions on any
restricted stock held by such Executive shall lapse as of the Change in Control Date, and all vesting and/or
performance requirements on any forms of awards granted to such Executive under any incentive plans shall
automatically accelerate and/or deemed to have been met at target levels, unless such treatment will cause the
2
award to become subject to Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"). In
addition, 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 exercise period, in which case the stock options shall be
exercisable until the expiration of their term. Additionally, Mr. McCarthy shall receive cash in the amount of
any bonus to which he would have become entitled to for any completed fiscal year prior to the fiscal year in
which the termination date occurs, to the extent such bonus had not been previously paid.
·
If a Change in Control occurs within 6 months following an involuntary termination, the Executive shall be
entitled to the same benefits enumerated in (1) – (6) above with regard to termination following a Change in
Control. In addition, such Executive shall receive a cash payment in an amount equal to the sum of (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 the Company's common stock on 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's common stock as of the date of such option's expiration
date and such option's exercise price), (b) with respect to any restricted stock that is forfeited as of the date of
his termination of employment, equal to the aggregate closing price of such stock as of the Change of Control
date, and (c) with respect to any other form of incentive compensation award under the Company's long-term
incentive compensation plans, the amount of such award as of the Change in Control Date, with such payment
to be made within 30 days of the Change of Control date. Additionally, Mr. McCarthy shall receive cash in the
amount of any bonus to which he would have become entitled to for any completed fiscal year prior to the fiscal
year in which the termination date occurs, to the extent such bonus had not been previously paid.
·
Upon an involuntary termination by reason of an Executive's death or disability, such Executive 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; (2) any deferred
compensation previously earned under any of the Company's plans; and (3) continuation of health insurance
and dental insurance benefits for 18 months following the termination date.
If it is determined that any benefit, payment or distribution by the Company to or for the benefit of an Executive (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 Code, then the payment shall be reduced to the extent necessary to avoid the imposition of the excise tax.
Upon his termination of employment, the Executive will be subject to a one-year non-competition and non-solicitation provision under the employment agreements.
The Governance, Nominating & Compensation, or GNC, Committee of the Board of Directors approved changes to certain employment agreement, severance pay policies, and 2006 performance unit award agreements in order to
comply with Section 409A of the Code. The Company intends to enter into amended and restated employment agreements with Bradley P. Farnsworth, Senior Vice President and Chief Financial Officer, and Knut Eriksen, Senior Vice President – Global
Execution, to address these Section 409A changes. The other terms and conditions of said amended and restated employment agreements shall remain the same.
Deferred Compensation; Restricted Stock Awards; Changes in Salary.
On December 31, 2007, the GNC Committee approved the payment of $388,470 in deferred compensation payable to Mr. McCarthy under the terms of his then current employment agreement, to be paid on January 31, 2008.
On January 1, 2008, effective January 2, 2008, the GNC Committee approved restricted stock awards to Mr. Clarke and Mr. McCarthy of 45,000 and 30,000 restricted shares, respectively, under the Company's 2006 Long-Term
Incentive Compensation Plan (the "2006 Compensation Plan"). The restricted stock awards provide for restrictions to lapse on March 1, 2011, subject to (i) the Company achieving an earnings per share averaging at least $1.50 per year
for the three years ending December 31, 2008, 2009 and 2010, and (ii) the recipient's continuous employment with the Company or a subsidiary from the date of the grant to the date restrictions lapse. Restrictions may lapse earlier as provided
in the 2006 Long-Term Incentive Compensation Plan or as a result of a Change in Control.
3
On January 2, 2008, the Board of Directors of the Company approved an increase in base salary for Robert A. Curcio, who was promoted to Executive Vice President – Integrated Engineered Solutions, to $315,000, such
increase to be effective as of January 1, 2008. The increases in Mr. Clarke's and Mr. McCarthy's salaries discussed above were made effective as of October 1, 2007.
ITEM 8.01. OTHER EVENTS.
On January 3, 2008, the Company announced certain changes to its senior management organization and its financial segment reporting for 2008, as more fully described in the press release attached as Exhibit 99.1
hereto.
On January 4, 2008, a subsidiary of the Company entered into a Stock Purchase Agreement to purchase 100% of the issued and outstanding shares of capital stock of Linco-Electromatic, Inc., a Texas corporation. The aggregate
purchase price for the Linco shares is US$23 million in cash. The parties to the Stock Purchase Agreement have made customary representations, warranties, and covenants. The Stock Purchase Agreement also contains post-closing indemnification
obligations for, among other matters, breaches of representations and warranties. The transaction is expected to close during the first quarter 2008, subject to customary closing conditions.
A press release announcing NATCO entered into the Stock Purchase Agreement is attached to this report as Exhibit 99.2 and incorporated into this report by reference.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibits.
Exhibit 99.1
Press Release issued January 3, 2008 (Organizational Matters)
Exhibit 99.2
Press Release issued January 7, 2008 (Linco Acquisition)
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: January 7, 2008
NATCO Group Inc.
By: /s/ Patrick M. McCarthy
Patrick M. McCarthy
President and Chief Operating Officer
Exhibit Index
Exhibit No.
Description
99.1
Press Release issued January 3, 2008 (Organizational Matters)
99.2
Press Release issued January 7, 2008 (Linco Acquisition)
5