EMPLOYMENT AGREEMENT

EXHIBIT 10.13

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”), dated this 5^th day of January, 2004 (the “Effective Date”), is entered into by and between Dresser, Inc., a Delaware corporation (the “Employer”) and Patrick M. Murray (“Employee”).

W I T N E S S E T H:

WHEREAS, Employer and Employee desire to amend and replace with this Agreement the existing Executive Employment Agreement between Employer or its affiliates and Employee, dated January 29, 2001 (the “Original Agreement”);

WHEREAS, 85% of the outstanding voting securities (on a fully diluted basis) of Dresser, Ltd., a Bermuda corporation, are owned by DEG Acquisitions, L.L.C. (“DEG”);

WHEREAS, Dresser Holding, Ltd. (“DHL”) is a wholly owned subsidiary of Dresser, Ltd.;

WHEREAS, Dresser Holding, Inc. (“DHI”) is a wholly owned subsidiary of DHL;

WHEREAS, Employer is a wholly owned subsidiary of DHI;

WHEREAS, Dresser, Ltd. and Employer are referred to collectively as the “Principal DEG Entities”;

NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, Employer and Employee agree as follows:

ARTICLE 1: EMPLOYMENT AND DUTIES:

1.1 Employer agrees to employ Employee, and Employee agrees to be employed by Employer, beginning as of the Effective Date and continuing until April 30, 2004 (such period being referred to as the “Term”), subject to any termination of such employment as set forth in Article 3, and subject to other rights and obligations set forth in the terms and conditions of this Agreement. Employer acknowledges and agrees that Employee is accepting employment hereunder in reliance upon the facts set forth in the Whereas clauses set forth above, which Employer represents and warrants to be true and correct in all respects.

1.2 Beginning as of the Effective Date, Employee shall be employed as the Chief Executive Officer of Employer and will serve as a member of the Board of Directors of Employer (the “Board”). As Chief Executive Officer, Employee will report directly to the Board, and Employee’s duties will include such functions and operations consistent with Employee’s title and assigned him from time to time by the Board. Employee agrees to perform such functions and operations diligently and to the best of Employee’s abilities as well as such additional or different duties and services appropriate to such positions which Employee from time to time may be reasonably directed to perform by the Board.

1.3 Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time, including, without limitation, Employer’s Code of Business Conduct (the “Code of Business Conduct”), which at any time during the period of his employment by Employer have been furnished in writing to Employee.

1.4 Employee shall, during the period of Employee’s employment by Employer, devote Employee’s full business time, energy, and best efforts to the business and affairs of Employer. Employee may not engage, directly or indirectly, in any other business, investment, or activity that materially interferes with Employee’s performance of Employee’s duties hereunder, is contrary to the interest of Employer or any of Dresser, Ltd.’s current or future affiliated subsidiaries (each a “Dresser Entity”, or collectively, the “Dresser Entities”), or requires any significant portion of Employee’s business time. The foregoing notwithstanding, the parties recognize and agree that Employee may engage in passive personal investments and other business activities which do not conflict with the business and affairs of the Dresser Entities or materially interfere with Employee’s performance of his duties hereunder. In addition, Employee may serve on not more than two (2) corporate, civic, or charitable boards of directors, provided that he first obtain approval to serve on any for-profit corporate boards in accordance with Employer’s policies and procedures regarding such service to the extent previously furnished in writing to Employee. Employee shall be permitted to retain any compensation received for approved service on any unaffiliated corporation’s board of directors.

1.5 Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times in the best interests of Employer and the other Dresser Entities and to do no act which would, directly or indirectly, injure any such entity’s business, interests, or reputation. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect Employer, or any other Dresser Entity, involves a possible conflict of interest. In keeping with Employee’s fiduciary duties to Employer, Employee agrees that Employee shall not knowingly become involved in a conflict of interest with Employer or any Dresser Entity, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee shall not engage in any activity that is reasonably likely to involve a possible conflict of interest without first obtaining approval in accordance with Employer’s policies and procedures.

1.6 Nothing contained herein shall be construed to preclude the transfer of Employee’s employment or this Agreement to another Dresser Entity or Entities (“Subsequent Employer”) as of, or at any time after, the Effective Date and no such transfer shall be deemed to be a termination of employment for purposes of Article 3 hereof; provided, however, that (1) effective with such transfer, all of Employer’s obligations hereunder shall be assumed by and be binding upon, and all of Employer’s rights hereunder shall be assigned to, such Subsequent Employer, jointly and severally with Employer in all respects, and the defined term “Employer” as used herein shall thereafter be deemed amended to include such Subsequent Employer, (2) Employee shall be Chief Executive Officer and member of the board of directors of each of the one or more companies that in the aggregate hold and/or are the successor or successors to all or substantially all of the business of Employer (“Employer Successors”), (3) Employer shall remain jointly and severally liable and bound by this Agreement, and (4) nothing in this Section 1.6 shall alter the

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definition of, or Employee’s rights associated with, Employee Cause (as defined in Section 3.4(i) below), or a Change of Control (as defined in Section 7.2 below). Except as otherwise provided above, all of the terms and conditions of this Agreement, including without limitation, Employee’s rights and obligations, shall remain in full force and effect following such transfer of employment. An example of such an assignment may be the division of Employer into two separate corporate entities which each assume a portion of Employer’s business and which each then shall become Employers, or the assignment of Employee’s contract to a Dresser Entity which purchases all or substantially all of the assets of Employer, which purchaser will then become an Employer.

ARTICLE 2: COMPENSATION AND BENEFITS:

2.1 From the Effective Date to the “Termination Date” (as defined in Article 3), Employee’s base salary shall be not less than $650,000 per annum, which base salary shall be paid by Employer in accordance with its standard payroll practice for its executives. Employee’s base salary may be increased from time to time. Such increased base salary shall become the minimum base salary for such office under this Agreement and may not be decreased thereafter without the written consent of Employee.

2.2 From the Effective Date to the end of the Term, Employee will be eligible for an Annual Bonus to be awarded, if at all, based on achievement of performance goals established annually by the Board, in consultation with Employee, within the first ninety days of Employer’s fiscal year. The Board will reasonably determine whether these performance goals have been met and the amount of any Annual Bonus in its sole discretion, subject to the following guidelines: (1) the Target Annual Bonus will be equal to 50% of Employee’s base salary and the Maximum Annual Bonus will be equal to 100% of Employee’s base salary; (2) the Board may increase the Target Annual Bonus or the Maximum Annual Bonus at any time, but may not decrease them without Employee’s express written consent; and (3) the Annual Bonus to be paid under the severance provisions of Sections 3.3 or 3.5, should they become applicable, will be the Target Annual Bonus.

2.3 So long as a Termination Date has not occurred prior to the end of the Term (other than as a result of Employee’s Retirement on, but not before, the last day of the Term), then on the last day of the Term, Employee shall receive an “End of Term” bonus equal to $1,217,670.

2.4 From the Effective Date to the Termination Date, Employee will receive a perquisite allowance as the Board may establish from time to time for senior executive employees. In addition, Employer shall pay or reimburse Employee for all actual, reasonable and customary expenses incurred by Employee in the course of his employment; provided that such expenses are incurred and accounted for in accordance with Employer’s applicable policies and procedures.

2.5 From the Effective Date to the Termination Date, Employee shall be allowed to participate, on the same basis as other senior executive employees of Employer, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the Effective Date or thereafter are made available by Employer to Employer’s similarly

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situated executive employees, excluding, however, those plans established by predecessors of Employer which as of the Effective Date are not generally open to new participants and in which Employee is not already a participant. Such benefits, plans, and programs may include, without limitation, medical, health, and dental care, life insurance, disability protection, and qualified and non-qualified retirement plans. Except as specifically provided herein, nothing in this Agreement is to be construed or interpreted to increase or alter in any way the rights, participation, coverage, or benefits under such benefit plans or programs than provided to similarly situated executive employees pursuant to the terms and conditions of such benefit plans and programs.

2.6 Notwithstanding anything to the contrary in this Agreement, with the exception of equity based incentives and option plans pursuant to which Employee has received, or is contractually entitled to receive, any awards, it is specifically understood and agreed that Employer shall not be obligated to institute, maintain, or refrain from changing, amending, or discontinuing any incentive, compensation, or employee benefit program or plan, so long as such actions are similarly applicable to covered employees generally.

2.7 Employer may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

ARTICLE 3: TERMINATION AND EFFECTS OF TERMINATION:

3.1 Employee’s employment with Employer shall be terminated (i) upon the death of Employee, (ii) upon Employee’s Retirement (as defined below), (iii) upon Employee’s Permanent Disability (as defined below), (iv) at any time by Employer upon notice to Employee, or (v) by Employee upon thirty (30) days’ notice to Employer, for any or no reason. The first date that any of the events described in clauses (i) through (v) above becomes effective is the “Termination Date.”

3.2 If Employee’s employment is terminated by reason of any of the following circumstances (i), (ii), or (iii), Employee shall be entitled to receive the benefits set forth only in Section 3.3 below:

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of guilty or nolo contendere to a felony or Employee engaging in fraudulent or criminal activity relating to the scope of Employee’s employment (whether or not prosecuted), (c) a material violation of the Code of Business Conduct, provided that it has been provided to Employee in writing prior to such alleged violation; (d) Employee’s material breach of any material provision of this Agreement, provided that Employee has received written notice from Employer and been afforded a reasonable opportunity (not to exceed 30 days) to cure such breach, or (e) any continuing or repeated failure to perform the duties as requested in writing by the Board after Employee has been afforded a reasonable opportunity (not to exceed 30 days) to cure such breach. Determination as to whether or not Employer Cause exists for termination of Employee’s employment will be made by not less than 75% of the members of the Board at a meeting in which Employee shall have the right (a) to have received not less than 10 days prior to the meeting written notice of the date, time and place of the meeting and the charges (in reasonable detail) to be considered, (b) to appear at the meeting with counsel, and (c) to answer any charges made concerning the existence of Employer Cause. Any determination by the Board of Employer Cause at such meeting shall not be entitled to any deferential or evidentiary weight or presumption of correctness, and at the election of Employee, shall be determined pursuant to Section 7.7 in a de novo review, with Employer having the obligation to prove Employer Cause by clear and convincing evidence. During the foregoing process, Employer may, without Employer creating any default under this Agreement or incurring any additional liability of any kind and at Employer’s sole discretion, place Employee on paid administrative leave and relieve Employee of all or any part of his responsibilities. Notwithstanding the foregoing, and regardless of whether the process results in a finding that Employer Cause existed for the termination, the year in which such termination shall be deemed to have occurred, for purposes of determining Employee’s entitlement to payments of unpaid Annual Bonus, shall be the year in which Employer first informs Employee that he is terminated for Employer Cause. “Employer Cause” shall not mean any of the following: (a) Employee’s bad judgment; (b) Employee’s negligence; (c) any act or omission that Employee believed in good faith was in or was not opposed to the interests of Employer; or (d) any act or omission of which any non-employee member of the Board who is not a party to such act or omission had actual knowledge for at least six (6) months.

3.3 If Employee’s employment is terminated by reason of Section 3.2 (i), (ii), or (iii), Employee shall be entitled to each of the following:

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Bonus payable for years prior to the year of Employee’s termination of employment, but, except as set forth in Section 3.3(iii), shall not be entitled to any Annual Bonus for the year in which he terminates employment, or any other payments or benefits by or on behalf of Employer except for those which may be payable pursuant to the terms of Employer’s employee benefit plans (as defined in Section 3.7), stock options or other equity interests or the applicable agreements underlying such plans, or, Section 3.3(ii) of this Agreement in the event that Employer makes the applicable election thereunder. Employee shall not be entitled to the End of Term Bonus unless Employee’s employment is terminated by reason of Section 3.2(i) on the last day of the Term.

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disability protection, or qualified and non-qualified retirement plans. For so long as Employee has not willfully and materially violated any of the covenants set forth in Article 4 or Article 5 hereof, Employer shall provide Employee with benefits (or cash value, as provided below) under the Severance Benefit Plans at the level provided to Employee as of the end of the Term until December 31, 2007. Except as specifically provided herein, nothing in this Agreement is to be construed or interpreted to increase or alter in any way the rights, participation, coverage, or benefits under such benefit plans or programs than provided to similarly situated executive employees pursuant to the terms and conditions of such benefit plans and programs; provided, however, at the option of Employer, Employer may upon sixty (60) days advance written notice effective at any time more than eighteen months after such termination elect to provide Employee with the cash value of providing such benefits (which cash value shall not exceed 125% of Employer’s cost of providing such benefits at the time Employee’s employment was terminated). In addition, if Employer’s employment is terminated under Section 3.2(i) on the last day of the Term, then Employee shall also be entitled to receive a pro rata amount of the Annual Bonus for the year ended December 31, 2004, pro rated through such date of termination upon payment of such Annual Bonus to other employees of Employer. Also, the Board has made a determination pursuant to Section 5.3 of the Dresser, Inc. Senior Executives’ Deferred Compensation Plan that, if Employer’s employment is terminated under Section 3.2(i) on the last day of the Term, all “unforfeited Benefits” under such plan will be paid in the form of shares of common stock (or successor shares in Dresser, Ltd.), valued in accordance with such plan.

3.4 If Employee’s employment is terminated by reason of (i), (ii), (iii), or (iv) below, Employee shall be entitled to receive the benefits set forth in Section 3.5 or Section 3.6, as applicable.

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by Employee to the Board of such material inconsistency; (f) the failure of an Employer to assign this Agreement, as permitted pursuant to Section 1.6, to any one or more Employer Successor; or (g) material interference by any officer, employee, director, board of directors, member, partner, manager or other agent of any Dresser Entity (other than Employer) in Employee’s performance of his duties hereunder or exercise of his authority as Chief Executive Officer, which, to the extent it is capable of correction, remains uncorrected for thirty (30) days following written notice of such breach by Employee to Employer. Determination as to whether or not Employee Cause exists for termination of Employee’s employment will be made by the Board at a meeting in which Employee shall have the right to present his case for the existence of Employee Cause with, at his election, the assistance of counsel. Any determination by the Board of Employee Cause at such meeting shall not be entitled to any deferential or evidentiary weight or presumption of correctness and at the election of Employee shall be determined pursuant to Section 7.7 in a de novo review, with the Employee having the obligation to prove Employee Cause by clear and convincing evidence. During the foregoing process, Employer may, without Employer creating any default under this Agreement or incurring any additional liability of any kind and at Employer’s sole discretion, place Employee on paid administrative leave and relieve Employee of all or any part of his responsibilities. Notwithstanding the foregoing, and regardless of whether the process results in a finding that Employee Cause existed for the termination, the year in which such termination shall be deemed to have occurred, for purposes of determining Employee’s entitlement to payments of unpaid Annual Bonus, shall be the year in which Employee first informs Employer that he is terminating his employment for Employee Cause.

3.5 If Employee’s employment is terminated by Employee under Section 3.4 (i) or by Employer under Section 3.4 (ii), Employee shall be entitled to each of the following:

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through the date of termination as if it accrued throughout the year on a daily basis. Such amounts shall be paid to Employee in a single lump sum cash payment no later than thirty (30) days following Employee’s termination of employment. No payment of the End of Term Bonus shall be made.

3.6 If Employee’s employment is terminated by reason of Section 3.4 (iii) or (iv), Employee’s estate, in the case of death, or Employee or his legal guardian, in the case of Permanent Disability, shall be entitled to payment of Employee’s (1) unpaid base salary; (2) earned but unpaid Annual Bonus payable for years prior to the year of Employee’s termination of employment; (3) earned but unpaid Annual Bonus for the year of termination, pro rated through

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the date of termination as if it accrued throughout the year on a daily basis, of the Target Amount, and (4) the End of Term Bonus. Such amounts shall be paid in a single lump sum cash payment no later than thirty (30) days following Employee’s termination of employment.

3.7 The severance benefit paid to Employee pursuant to Section 3.3 or Section 3.5 above shall be in consideration of Employee’s continuing obligations hereunder after such termination, including, without limitation, Employee’s obligations under Article 4 and Article 5. Further, as a condition to the receipt of such severance benefit, Employer, in its sole discretion, may require Employee to first execute a release, in the form established by Employer, releasing Employer and all other Dresser Entities, and their officers, directors, employees, and agents, from any and all claims and from any and all causes of action of any kind or character, including, but not limited to, all claims and causes of action arising out of Employee’s employment with or status as a director of Employer or any other Dresser Entities or the termination of such employment or status; provided that Employee shall not be expected to waive any rights accruing under this Agreement, including but not limited to rights to indemnification and coverage under directors’ and officers’ liability insurance, rights to benefits under the terms of applicable benefit plans of Employer including health benefits, rights to option and/or equity incentive plan participation and rights with respect to any stock or other rights acquired thereunder (“Retained Rights”). The performance of Employer’s obligations under Section 3.3 or Section 3.5 and the receipt of the severance benefit provided thereunder by Employee and provision of the Retained Rights shall constitute full settlement of all such claims and causes of action. Employee shall not be under any duty or obligation to seek or accept other employment following a termination of employment pursuant to which a severance benefit payment under Section 3.3 or Section 3.5 is owing and the amounts due Employee pursuant to Section 3.3 or Section 3.5 shall not be reduced or suspended if Employee accepts subsequent employment or earns any amounts as a self-employed individual. Employee’s rights under Section 3.3 or Section 3.5 and the Retained Rights are Employee’s sole and exclusive rights against Employer, or any affiliate of Employer, and Employer’s sole and exclusive liability to Employee under this Agreement, whether such claim is based in contract, tort or otherwise, for the termination of his employment or director relationship with Employer. Employee agrees that all disputes relating to Employee’s employment or termination of employment or status shall be resolved as provided in Section 7.7 hereof; provided, however, that decisions as to whether and as of what date Employee has become permanently disabled shall be limited to whether such decision was reached by a mutually acceptable medical expert. Nothing contained in this Article 3 shall be construed to be a waiver by Employee of any benefits accrued for or due Employee under any employee benefit plan (as such term is defined in the Employees’ Retirement Income Security Act of 1974, as amended) maintained by Employer except that Employee shall not be entitled to any severance benefits pursuant to any severance plan or program of Employer.

3.8 Termination of the employment relationship or status as a director does not terminate those obligations imposed by this Agreement, which are continuing obligations, including, without limitation, Employee’s obligations under Article 4 and Article 5.

3.9 The payment of any monies to Employee under this Agreement after the date of termination of employment or status does not constitute an offer or a continuation of employment

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of Employee. In no event shall Employee represent or hold himself out to be an employee of Employer after the Termination Date. Except as provided in Article 6, Employee shall be responsible for any and all federal, state, or local taxes that arise out of any payments to Employee hereunder (subject to the obligation of Employer under law to submit to the applicable taxing authorities any amounts withheld from Employer’s compensation on account of any such taxes).

3.10 During any period during which any monies are being paid to Employee under this Agreement after the date of termination, Employee shall provide to Employer reasonable levels of assistance to Employer in answering questions concerning the business of Employer, transition of responsibility, or litigation, provided that all out of pocket expenses of Employee reasonably incurred in connection with such assistance is fully and promptly reimbursed and that any such assistance after the Non-Compete Period (as defined below) shall not interfere or conflict with the obligations which Employee may owe to any other employer.

3.12 In the event of termination of Employee’s status as a director, whether under Section 3.2 or Section 3.4, Employee shall deliver his written resignation as a director of Employer simultaneously with such termination. Such written resignation as a director shall not change or have any effect upon the characterization of such termination under this Article.

ARTICLE 4: OWNERSHIP AND PROTECTION OF INTELLECTUAL PROPERTY AND CONFIDENTIAL INFORMATION:

4.1 All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee’s employment by or directorship with Employer or any of the other Dresser Entities (whether during business hours or otherwise and whether on Employer’s premises or otherwise) which relate to the business, products or services of Employer or the other Dresser Entities (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer’s organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks), and all writings or materials of any type embodying any of such items, shall be the sole and exclusive property of Employer or another Dresser Entity, as the case may be, and shall be treated as “work for hire”.

4.2 Employee acknowledges that the businesses of Employer and the other Dresser Entities are highly competitive and that their strategies, methods, books, records, and documents, their technical information concerning their products, equipment, services, and processes, procurement procedures and pricing techniques, the names of and other information (such as credit and financial data) concerning their customers and business affiliates, all comprise confidential business information and trade secrets which are valuable, special, and unique assets which Employer or the other Dresser Entities use in their business to obtain a competitive advantage over their competitors. Employee further acknowledges that protection of such

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confidential business information and trade secrets against unauthorized disclosure and use is of critical importance to Employer and the other Dresser Entities in maintaining their competitive position. Employee hereby agrees that Employee will not, at any time during or after his employment by Employer, make any unauthorized disclosure of any confidential business information or trade secrets of Employer or the other Dresser Entities, or make any use thereof, except in the carrying out of his employment responsibilities hereunder. Confidential business information shall not include information in the public domain (but only if the same becomes part of the public domain through a means other than a disclosure prohibited hereunder). The above notwithstanding, a disclosure shall not be unauthorized if (i) it is required by law or by a court of competent jurisdiction or (ii) it is in connection with any judicial, arbitration, dispute resolution or other legal proceeding in which Employee’s legal rights and obligations as an employee or under this Agreement are at issue; provided, however, that Employee shall, to the extent practicable and lawful in any such events, give prior notice to Employer of his intent to disclose any such confidential business information in such context so as to allow Employer or any other Dresser Entity an opportunity (which Employee will not oppose) to obtain such protective orders or similar relief with respect thereto as may be deemed appropriate.

4.3 All written materials, records, and other documents made by, or coming into the possession of, Employee during the period of Employee’s employment by Employer or term as a director of Employer which contain or disclose confidential business information or trade secrets of Employer or the other Dresser Entities shall be and remain the property of Employer, or the other Dresser Entities, as the case may be. Upon termination of Employee’s employment or status by Employer, for any reason, Employee promptly shall deliver the same, and all copies thereof, to Employer.

ARTICLE 5: COVENANT NOT TO COMPETE:

5.1 From the Effective Date to the Termination Date, and (a) if termination of employment is under Section 3.4 above, for the period that payments are made under Section 3.5(ii), (b) if termination of employment is under Section 3.2 above (other than under Section 3.2(i) on the last day of the Term), for the period that payments are made under Section 3.3(ii) or (c) if termination of employment is under Section 3.2(i) on the last day of the Term, until December 31, 2006, (the “Non-Compete Period”), he will not, in association with or as an officer, principal, member, advisor, agent, partner, director, material stockholder, employee or consultant of any corporation (or sub-unit, in the case of a diversified business) or other enterprise, entity or association, work on the acquisition or development of, or engage in any line of business, property or project in which Employee (i) is involved in or responsible for on the date of such termination, or (ii) has worked with or evaluated in the last year and which were still being pursued or evaluated by a Dresser Entity within one month of the time of such termination. Such restriction shall cover Employee’s activities anywhere in the world.

5.2 From the Effective Date to the Termination Date and during the Non-Compete Period, Employee will not solicit or induce any person who is or was employed by any of the Dresser Entities at any time during such term or period, excluding employees who may have left their

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employment by such Dresser Entity more than 60 days prior to being hired or solicited for employment by Employee, (A) to interfere with the activities or businesses of any Dresser Entity or (B) to discontinue his or her employment with any of the Dresser Entities, or employ any such person in a business or enterprise which competes with any of the Dresser Entities.

5.3 From the Effective Date to the Termination Date or during the Non-Compete Period, Employee will not, directly or indirectly, influence or attempt to influence any customers, distributors or suppliers of any of the Dresser Entities to divert their business to any competitor of the Dresser Entities or their affiliates.

5.4 Employee understands that the provisions of Article 5 hereof may limit his ability to earn a livelihood in a business similar to the business in which he is involved, but as an executive officer of Employer he nevertheless agrees and hereby acknowledges that (i) such provisions do not impose a greater restraint than is necessary to protect the goodwill or other business interests of Employer and any of the other Dresser Entities; (ii) such provisions contain reasonable limitations as to time, scope of activity, and geographical area to be restrained; and (iii) the consideration provided hereunder, including without limitation, any amounts or benefits provided under Article 3 hereof, is sufficient to compensate Employee for the restrictions contained in Article 5 hereof. In consideration of the foregoing and in light of Employee’s education, skills and abilities, Employee agrees that he will not assert that, and it should not be considered that, any provisions of Article 5 otherwise are void, voidable or unenforceable or should be voided or held unenforceable.

5.5 Employee acknowledges and agrees that his duties with Employer are of an executive nature and that he is a member of Employer’s management group. Employee agrees that the remedy at law for any breach by him of any of the covenants and agreements set forth in this Article 5 will be inadequate and that in the event of any such breach, Employer may, in addition to the other remedies which may be available to it at law, and pursuant to Section 5.7 of this Agreement obtain injunctive relief prohibiting Employee (together with all those persons associated with him) from the breach of such covenants and agreements.

5.6 Each of the covenants of this Article 5 are given by Employee as part of the consideration for this Agreement and as an inducement to Employer to enter into this Agreement and accept the obligations hereunder.

5.7 In the event of a willful and material breach of any of the covenants of this Article 5, the parties agree that the damages to Employer could be significant and will be extremely difficult or impracticable to ascertain. Based upon the facts as known by the parties at the time of this Agreement, the parties agree that any payments Employee has received pursuant to Article 3 as of the date of any willful breach constitutes reasonable liquidated damages due Employer.

ARTICLE 6: EXCISE TAX GROSS-UP PROVISIONS:

6.1 Anything in this Agreement to the contrary notwithstanding, and except as set forth below, in the event it shall be determined that any Payment would be subject to the Excise Tax,

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then Employee shall be entitled to receive an additional payment (the “Gross-Up Payment”) in an amount such that, after payment by Employee of all Taxes, including any income taxes and Excise Tax imposed upon the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 6.1, if it shall be determined that Employee is entitled to the Gross-Up Payment, but that the Parachute Value of all Payments does not exceed one hundred and ten percent (110%) of the Safe Harbor Amount, then except as provided below, no Gross-Up Payment shall be made to Employee and the amounts payable under this Agreement or under any other agreement between Employee and Employer or its affiliates, other than amounts or benefits provided pursuant to any option or equity grants to Employee (the “Subject Payments”), shall be reduced (but not below zero) so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing any payments under Section 3.3(ii) or Section 3.5(ii) of this Agreement, and in any event shall be made in such a manner as to maximize the Value of all Payments actually made to Employee. For purposes of reducing the Parachute Value of all Payments to the Safe Harbor Amount, only the Subject Payments shall be reduced. If the reduction of the Subject Payments would not result in a reduction of the Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable under the Agreement shall be reduced pursuant to this Section 6.1, and the Gross-Up Payment shall be made to Employee. Employer’s obligation to make Gross-Up Payments under this Section 6.1 shall not be conditioned upon Employee’s Termination of Employment.

6.2 Subject to the provisions of Section 6.3, all determinations required to be made under this Article 6, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by PricewaterhouseCoopers, or if such firm is unwilling to act in such capacity, such other nationally recognized certified public accounting firm as may be mutually agreed upon by Employee and Employer (the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations both to Employer and Employee within fifteen (15) business days of the receipt of notice from Employee that there has been a Payment or such earlier time as is requested by Employer. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the change of control, at Employee’s request Employee and Employer shall mutually agree upon another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by Employer. Any Gross-Up Payment, as determined pursuant to this Article 6, shall be paid by Employer to or on behalf of Employee within five (5) business days of the receipt of the Accounting Firm’s determination, provided that no such payment shall be due under this Article 6 before five (5) days prior to the date the related payments of Taxes are required to be paid by Employee to the applicable taxing authority. Any determination by the Accounting Firm shall be binding upon Employer and Employee, absent manifest error. As a result of the uncertainty in the application of Sections 280G and 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by Employer should have been made (the “Underpayment”), consistent with the calculations required to be made hereunder. In the event Employer exhausts its remedies pursuant to Section 6.3

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and Employee thereafter is required to make a payment of any additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by Employer to or for the benefit of Employee.

6.3 Employee shall notify Employer in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Employer of the Gross-Up Payment. Such notification shall be given as soon as practicable, but no later than ten (10) business days after Employee is informed of such claim. Employee shall apprise Employer of the nature of such claim and, if applicable, the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the thirty (30) calendar day period following the date on which Employee gives such notice to Employer (or such shorter period ending on the date that any payment of Taxes with respect to such claim is due). If Employer notifies Employee in writing prior to the expiration of such period that Employer desires to contest such claim (or if Employee pays the related Taxes within such shorter period and Employer requests, within such thirty (30)-day period, that Employee claim a refund of some or all of such Taxes), then Employee shall:

provided, however, that Employer shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest or refund claim (including, but only to the extent reasonably incurred, costs and expenses incurred by Employee), and shall indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 6.3, Employer shall control all proceedings taken in connection with such contest, and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole discretion, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Employer shall determine; provided, however, that, if Employer directs Employee to pay such claim and sue for a refund, Employer shall advance the amount of such payment to Employee, on an interest-free basis, and shall indemnify and hold Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties) imposed with respect to such

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advance or with respect to any imputed income in connection with such advance; and provided, further, that any extension of the statute of limitations relating to payment of Taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due (other than any such extension arising by operation of law) is limited solely to such contested amount. Furthermore, Employer’s control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

6.4 If, after the receipt by Employee of a Gross-Up Payment or an amount advanced by Employer pursuant to Section 6.3, Employee becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, Employee shall (subject to Employer complying in all material respects with the requirements of Section 6.3, if applicable) promptly pay to Employer the amount of such refund (together with any interest paid or credited thereon after Taxes applicable thereto), less any Taxes required to be paid by Employee with respect to the receipt thereof. If, after the receipt by Employee of an amount advanced by Employer pursuant to Section 6.3, a determination is made that Employee shall not be entitled to any refund with respect to such claim and Employer does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) calendar days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall be offset, to the extent thereof, against the amount of Gross-Up Payment required to be paid. Employer may request that Employee pursue a refund of any Gross-Up Payment paid under this Article 6, and in such case the provisions of Section 6.3 and this Section 6.4 shall govern the pursuit of such refund.

6.5 Notwithstanding any other provision of this Article 6, Employer may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of Employee, all or any portion of any Gross-Up Payment, and Employee hereby consents to such withholding.

6.6 For purposes of this Article 6, the following definitions will apply:

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ARTICLE 7: MISCELLANEOUS:

7.1 For purposes of this Agreement, the terms “affiliate” or “affiliated” mean an entity or entities in which a Principal DEG Entity has a 20% or more direct or indirect equity interest or entity or entities that have a 20% or more direct or indirect equity interest in a Principal DEG Entity.

7.2 For purposes of this Agreement, the term “Change of Control” means any one or more of the following events: (i) any person (as such term is used in Rule 13d-5 under the Securities Exchange Act of 1934 (the “Exchange Act”)) or group (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act), other than DEG or its affiliates, or a subsidiary or employee benefit plan (or any related trust) of Employer, becomes, directly or indirectly, the beneficial owner of (A) 50% or more of the common stock of a Principal DEG Entity or (B) securities of a Principal DEG Entity entitled to vote generally in the election of directors of such Principal DEG Entity (“Voting Securities”) representing 50% or more of the combined voting power of all Voting Securities of such Principal DEG Entity; (ii) if the persons who were shareholders of Dresser, Ltd. as of the Effective Date (“Existing Shareholders”) directly or indirectly own less than 33% of the Voting Securities of a Principal DEG Entity and there is another beneficial owner of a greater percentage of the Voting Securities of such Principal DEG Entity than the Existing Shareholders as a group; (iii) if Dresser, Ltd. (or any successor to all or substantially all of its assets) owns, directly or indirectly, less than 66-2/3% of the Voting Securities of Employer (or any successor to all or substantially all of its assets) and each other current or future company then in the chain of ownership between Dresser, Ltd. and Employer (including, without limitation,

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DHL and DHI from the Effective Date until they cease to be in such chain of ownership), other than as a result of a merger or consolidation of Employer, DHL, or DHI (or their successors) with and into Dresser, Ltd., DHL, or DHI (or their successors) or the downstream merger or liquidation of Dresser, Ltd. as a result of tax restructuring as a result of which (in the case of each of a merger, consolidation, downstream merger or liquidation) the holding company structure is eliminated, and in each case which do not otherwise constitute a Change of Control; (iv) individuals who, as of the Effective Date, constitute the Board of a Principal DEG Entity (the “Incumbent Directors”) cease for any reason to constitute at least 75% of the members of the Board; provided that any individual who becomes a director after the Effective Date whose election or nomination for election by Employer’s shareholders was approved by at least 75% of the members of the Incumbent Directors or who was elected by the shareholders at a time when the First Reserve Funds and Odyssey Investment Partners directly or indirectly own more than 75% of the Voting Securities of a Principal DEG Entity (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened “election contest” relating to the election of the directors of a Principal DEG Entity (as such terms are used in Rule 14a-11 under the Exchange Act), “tender offer” (as such term is used in Section 14(d) of the Exchange Act) or a proposed Merger (as defined below)) shall be deemed to be a member of the Incumbent Board; (v) approval by the stockholders of a Principal DEG Entity of either of the following: (A) a merger, reorganization, consolidation or similar transaction (any of the foregoing, a “Merger”) as a result of which the individuals and entities who were the respective beneficial owners of the outstanding common stock and Voting Securities of a Principal DEG Entity immediately before such Merger are not expected to beneficially own, immediately after such Merger, directly or indirectly, more than 60% of, respectively, the common stock and the combined voting power of the Voting Securities of the corporation resulting from such Merger in substantially the same proportions as immediately before such Merger, or (B) a plan of liquidation of a Principal DEG Entity or a plan or agreement for the sale or other disposition of all or substantially all of the assets of Employer other than any such sale or other disposition to a Subsequent Employer; or (vi) any other transaction, event, or circumstance, regardless of form (collectively “Transaction”), which results in control over the strategic and operational decisions of a Principal DEG Entity by a board of directors, committee, or group other than the Board or some subcomponent thereof (collectively, the “New Board”); provided however, that such Transaction referenced in (vi) and not also referenced in (i), (ii), (iii), (iv) or (v) shall not be deemed to result in a Change of Control if Employee reports to and is a member of the New Board, and remains Chief Executive Officer or becomes Chairman of the New Board (in which case the Board shall have been deemed to make the election set forth in Section 1.1(a)). Notwithstanding the foregoing, Employer may request and Employee may in his sole discretion accept that any transaction or series of transaction not be considered to be a Change of Control hereunder.

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7.3 For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when received by or tendered to Employee or Employer, as applicable, by pre-paid courier or by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

7.4 This Agreement shall be governed by and construed and enforced, in all respects in accordance with the law of the State of Delaware, without regard to principles of conflicts of law, unless preempted by federal law, in which case federal law shall govern; provided, however, that either Employer’s Dispute Resolution Plan, or the rules of the American Arbitration Association, as elected by Employee, shall govern in all respects with regard to the resolution of disputes hereunder as provided in Section 7.7.

7.5 No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

7.6 It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association, or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect.

7.7 It is the mutual intention of the parties to have any dispute concerning this Agreement resolved out of court. Accordingly, the parties agree that any such dispute shall, as the sole and exclusive remedy, be submitted for resolution either through Employer’s Dispute Resolution Plan or pursuant to binding arbitration to be held in Dallas, Texas, under the rules of the American Arbitration Association concerning Commercial Arbitration, as elected by Employee; provided, however, that Employer, on its own behalf and on behalf of any of the other Dresser Entities, shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any breach or the continuation of any breach of the provisions of Article 4 and Employee hereby consents that such restraining order or injunction may be granted without the necessity of Employer posting any bond. The parties agree that the resolution of any dispute concerning this Agreement through any of the means set forth in this Section 7.7 shall be final and binding.

7.8 This Agreement shall be binding upon and inure to the benefit of Employer, its successors in interest, or any other person, association, or entity which may hereafter acquire or succeed to all or substantially all of the business assets of Employer by any means, whether

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indirectly or directly, and whether by purchase, merger, consolidation, or otherwise. Employee’s rights and obligations under this Agreement are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, without the prior written consent of Employer, other than in the case of death or permanent disability of Employee.

7.9 This Agreement replaces and merges any previous agreements and discussions pertaining to the subject matter covered herein, including without limitation the Original Agreement. This Agreement constitutes the entire agreement of the parties with regard to the terms of Employee’s employment, termination of employment and severance benefits, and contains all of the covenants, promises, representations, warranties, and agreements between the parties with respect to such matters. Each party to this Agreement acknowledges that option plan participation is handled in separate agreements and that no representation, inducement, promise, or agreement, oral or written, has been made by either party with respect to the foregoing matters which is not embodied herein, and that no agreement, statement, or promise relating to the employment of Employee by Employer that is not contained in this Agreement shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing and signed by each party whose rights hereunder are affected thereby.

7.10 Employer will maintain directors’ and officers’ liability insurance for Employee while employed or serving as a director of Employer, and for a five (5) year period following termination of employment or director status at a level equivalent to the most favorable and protective coverage for any active officer or director of Employer.

7.11 Employer agrees to indemnify Employee for any job-related liability to the fullest extent permitted under Employer’s by-laws and other applicable indemnification agreements.

7.12 Employer will pay Employee’s legal fees and legal expenses in connection with the negotiation, drafting, implementation, interpretation, and enforcement of this Agreement.

7.13 Employee is currently a party to the Amended and Restated Investor Rights Agreement, as amended, between the Employer and certain of its stockholders (the “IRA”). In the event of a termination of employment or status of Employee under Sections 3.2 or 3.4, Employee shall have the right to cause Employer to purchase all or part of the shares of common stock of Employer held by Employee pursuant to Section 4.1 of the IRA. The rights described in this Section 7 shall be deemed to be the “terms set forth in the “Executive Employment Agreement” entered into between each Employee Stockholder and the Company,” as contemplated by Section 4.1 of the IRA. Section 4 of the IRA shall govern the respective rights of the Employer and Employee with respect to the repurchase of any stock or stock rights of Employee, except that the following provisions shall apply:

(a) notwithstanding language in Section 4.1 of the IRA, the term “Put Shares” shall include vested Stock Rights (as defined in Section 3.5 of the IRA);

(b) Employer shall deliver the “Notice of Repurchase” described in Section 4.3 of the IRA, if at all, prior to the date which is 358 days following the Termination Date;

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(c) following (i) delivery of any Put Notice, or (ii) delivery of any Notice of Repurchase, provided Employee has delivered the number of Repurchase Shares specified in the Put Notice or Repurchase Notice, as the case may be, Employer shall pay the “Repurchase Price” for such “Repurchase Shares” in cash in immediately available funds prior to the date which is the later of (x) 90 days following the Put Notice or Notice of Repurchase, as the case may be, or (y) the first date that Employer may make such payment without violating any legal restrictions or contractual restrictions imposed on Employer pursuant to its financing arrangements.

Notwithstanding the foregoing, in the event of a termination of Employee’s status as an employee under Section 3.2(i) on the last day of the Term, Employee and Employer contemplate that, by separate and independent action by the Board, Employee will be elected Chairman of the Board. In such event Employee and Employer agree that (A) the “Notice of Repurchase” may not be delivered until Employee resigns or is removed as Chairman of the Board, and may then be delivered at any time, if at all, prior to the date which is 358 days following such resignation or removal, and (C) the Repurchase Price shall be determined without regard to any discount attributable to minority ownership.

In addition, notwithstanding anything in any agreement between Employer and Employee to the contrary, until replaced by the options described in Exhibit A, (a) any unvested options held by Employee will terminate without value upon termination of Employee’s employment for Employer Cause or resignation by Employee without Employee Cause; (b) all unvested options will immediately vest upon any termination other than for Employer Cause; and (c) vested options will expire if unexercised on the first anniversary of termination.

In the event of any conflict between Section 4 of the IRA and this Section 7.13, this Section 7.13 shall govern.

7.14 Employee acknowledges that Dresser Ltd. is currently contemplating an exchange regarding its outstanding employee stock options or other transaction pursuant to which the outstanding stock options held by Employee and other employees will be amended or replaced. Employee agrees that such amendment or replacement of options shall apply to his stock options. In addition, in the event Employee is entitled to payment of the End of Term Bonus, Employee agrees that all stock options held by him will be amended in the manner described on Exhibit A hereto.

IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement in multiple originals to be effective on the Effective Date.

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EXHIBIT A

Terms of Post-Employment Options

Employee’s current options to purchase 45,000 shares of Dresser, Ltd. stock will be amended to contain the following terms:

1. All options will become fully invested at retirement.

2. Employee will be entitled to exercise all options, in whole or in part, at any time until the date which is one year following Employee’s resignation or removal as Chairman of the Board of Directors of Employer, subject to applicable law.