THIS EMPLOYMENT AGREEMENT ("Employment Agreement"), made as of this 26^th day of June, 2006, by and between NATCO Group Inc., a corporation organized and existing under the laws of the State of Delaware (hereinafter referred to as "NATCO"), and Patrick M. McCarthy (hereinafter referred to as "the Executive").

WITNESSETH

WHEREAS, NATCO and the Executive have previously entered into that certain Employment Agreement dated December 11, 2002, amended as of September 30, 2004, and amended further as of September 17, 2005 (collectively, the "Original Employment Agreement");

WHEREAS, NATCO's Board of Directors (the "Board") has determined that it is in the best interests of NATCO and its stockholders for the Executive to continue in his current role as President of the Company and to assume the role of Chief Operating Officer of the Company;

WHEREAS, NATCO desires to provide the Executive an increase in his annual base compensation and to update certain provisions of the Employment Agreement to address issues arising under Section 409A of the Internal Revenue Code of 1986, as amended (the "Code");

WHEREAS, the Executive agrees to accept such continuation of his employment on the terms and conditions hereinafter set forth; and

WHEREAS, NATCO and the Executive mutually desire to amend and restate the terms of the Original Employment Agreement as set forth below.

NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, it is hereby agreed by and between NATCO and the Executive as follows:

1. Capacity and Services.

   1. NATCO hereby agrees to continue to employ the Executive and the Executive hereby agrees to accept such employment by NATCO as President and Chief Operating Officer of NATCO on the terms and conditions set forth herein. The employment of the Executive pursuant to this Employment Agreement shall commence on July 1, 2006 and continue through the Period of Active Employment, as defined in Paragraph 1(e) of this Employment Agreement. In his capacity as President and Chief Operating Officer of NATCO, the Executive shall assume such responsibilities, perform such duties, and have such authority, as may from time to time be assigned or delegated by the Board of Directors of NATCO (the "Board") or the Chief Executive Officer of NATCO (the "CEO"), consistent with the Executive's position. The Executive agrees to perform such duties in accordance with the Bylaws of NATCO, the instructions of the CEO and the Board, and NATCO's policies.

   2. The Executive shall devote his full business time to his duties hereunder, provided, however, that the foregoing shall not prevent the Executive from serving as a member of the board of directors of a corporation if the Board, or the appropriate Committee thereof, determines in its sole discretion that such membership is not adverse to the interests of NATCO. Subject to the foregoing, the Executive shall not engage in any business activities that are directly or indirectly competitive with any business then conducted by NATCO or any of its affiliated companies.

   3. The Executive may be an investor, shareholder, joint venturer, or partner (hereinafter referred to as an "Investor") in any enterprise, association, corporation, joint venture or partnership (hereinafter referred to as an "Investment"), provided, however, that any such Investment does not (i) violate NATCO's conflict of interest policy as in effect from time to time, (ii) require the Executive's involvement in the management (except service on boards of directors to the extent permitted by Paragraph 1(b) of this Employment Agreement) or operation of such Investment (recognizing that the Executive shall be permitted to monitor and oversee the Investment, as would any prudent Investor) or (iii) interfere with the performance of the Executive's duties and obligations hereunder.

   4. The Executive shall fully and faithfully discharge his duties under the direction of the Board.

   5. "Period of Active Employment", as used herein, shall mean the period beginning on July 1, 2006 and terminating on the date on which the first of the following events occurs:

      1. The death of the Executive;

      2. The Disability of the Executive, as provided in Paragraph 7 of this Employment Agreement;

      3. The termination of the Executive's employment, as provided in Paragraph 13 of this Employment Agreement; or

      4. Expiration of the Term of this Employment Agreement, as provided in Paragraph 2 hereof (or as such expiration may be extended pursuant to Paragraph 3 hereof).
         
          

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