Exhibit 10.15


    

      Exhibit
        10.15

      


      LUFKIN
        INDUSTRIES, INC.

      SUPPLEMENTAL
        RETIREMENT PLAN

      


      LUFKIN
        INDUSTRIES, INC. (the “Company”) hereby establishes the Lufkin Industries, Inc.
        Supplemental Retirement Plan (the “Plan”) effective as of January 1, 1995. The
        terms, provisions and conditions of the Plan are as follows:

      


      SECTION
        I

      Purpose
        of Plan

      


      Section
        1.1 Purpose
        - The
        purpose of the Plan is to enhance the Company’s ability to attract and to retain
        those key executives who are essential to the Company’s success by providing
        them with nonqualified retirement benefits that are in addition to the
        retirement benefits provided by the Company’s qualified defined benefit pension
        plan (the “Qualified Plan”).

      


      SECTION
        II

      Eligibility
        and Participation

      


      Section
        2.1 Eligibility
        - Only
        those key executives of the Company who are (i) “highly compensated employees”
or “members of a select group of management”, within the meaning of those terms
        as set forth in Section 201(2) of the Employee Retirement Income Security
        Act of
        1974, as amended, and (ii) formally designated as participants by the
        Compensation Committee of the Board of Directors of the Company (the
“Compensation Committee”) shall be participants in this Plan.

      


      SECTION
        III

      Benefits

      


      Section
        3.1 Benefits
        -
        Subject to farther provisions of this Plan, a participant (or, in the event
        of
        his death, his Beneficiary) shall be entitled to receive from the Company
        a
        supplemental monthly retirement benefit hereunder that is equal to the excess
        of:

      


      
        	 	
                (a)

              	
                the
                  monthly retirement benefit that would be payable to such participant
                  (or
                  Beneficiary) under the Qualified Plan if (i) the participant were
                  credited
                  with an additional .5 year of credited service thereunder for each
                  year of
                  credited service actually credited to the participant under the
                  Qualified
                  Plan, (ii) the participant’s compensation were determined as provided
                  under the Qualified Plan but without limitation pursuant to Section
                  401(a)(17) of the Internal Revenue Code, and (iii) the participant’s
                  benefits thereunder were not limited by Section 415 of the Internal
                  Revenue Code,

              
	 	
                (b)

              	
                the
                  monthly retirement benefit that is actually paid to the participant
                  (or
                  Beneficiary) under the Qualified
                  Plan.

              


      

      


      Section
        3.2 Automatic Form of Benefit Payments
        -
        Subject to the further provisions of this Plan, the monthly retirement benefit
        payable to a participant (or Beneficiary) under this Plan shall commence
        at the
        same time, shall be paid in the same form, and shall be subject to the same
        restrictions and actuarial adjustments and other terms, as the benefit actually
        paid to such person under the Qualified Plan;
        provided, however,
        the
        Compensation Committee, in its sole discretion, may direct at any time on
        or
        after the participant’s retirement or death that the Actuarial Equivalent
        present value of such benefit (or remaining benefit if already in pay status)
        be
        paid to such person in a lump sum (by check).

      


      Section
        3.3 Vesting of Benefits
        -
        Subject to the further provisions of the Plan, each participant shall possess
        a
        vested interest in (a nonforfeitable right to) his accrued supplemental
        retirement benefit hereunder to the same extent that such participant is
        vested
        in his accrued retirement benefit under the Qualified Plan;
        provided, however,
        if (1)
        the participant voluntarily terminates his employment with the Company prior
        to
        attaining the age of 62 years or (2) the Company terminates the participant’s
        employment for Cause, no benefits shall be payable to or on behalf of such
        participant under the Plan;
        provided further, however,
        a
        participant who is an employee of the Company on the date of a Change in
        Control
        shall always be 100% vested under the Plan on and after that date.

      


      Section
        3.4 Automatic Lump Sum Benefit
        -
        Notwithstanding anything in Section 3.1, 3.2 or 3.3 to the contrary, if a
        participant’s employment with the Company is terminated for any reason other
        than death on or following a Change in Control or a participant’s employment is
        terminated by the Company at any time other than for Cause, the Actuarial
        Equivalent of such participant’s accrued supplemental retirement benefit shall
        be paid to him in a single lump sum as soon as is reasonably practicable
        following the date of his termination of employment.

      


      Section
        3.5 Definitions

      


      
        	 	
                (a)

              	
                A
                  “Change in Control” shall occur on the date of the earliest of the
                  following events:

              
	 	 	
                (i)

              	
                any
                  “person,” as such term is used in Section 13(d) and 14(d) of the
                  Securities Exchange Act of 1934 (the “Exchange Act”) (other than the
                  Company, any trustee or other fiduciary holding securities under
                  an
                  executive benefit plan of the Company, or any company owned, directly
                  or
                  indirectly, by the shareholders of the Company in substantially
                  the same
                  proportions as their ownership of stock of the Company) together
                  with its
                  “Affiliates” and “Associates”, as such term is defined in Rule 12b-2 of
                  the Exchange Act, is or becomes the “beneficial owner” (as defined in Rule
                  13d-3 under the Exchange Act), directly or indirectly, of securities
                  of
                  the Company representing 25% or more of the Company’s common stock or of
                  the combined voting power of the Company’s then outstanding securities
                  entitled to vote generally in the election of
                  directors;

              
	 	 	
                (ii)

              	
                during
                  any period of two consecutive years, individuals who at the beginning
                  of
                  such period constitute the Board of Directors of the Company (the
                  “Board”), and any new director (other than a director designated by a
                  person who has entered into an agreement with the Company to effect
                  a
                  transaction described in clause (i), (iii) or (iv) of this definition)
                  whose election by the Board or nomination for election by the Company’s
                  shareholders was approved by a vote of at least two-thirds of the
                  directors then still in office who either were directors at the
                  beginning
                  of the period or whose election or nomination for election was
                  previously
                  so approved, cease for any reason to constitute at least a majority
                  thereof

              
	 	 	
                (iii)

              	
                the
                  shareholders of the Company approve a merger or consolidation of
                  the
                  Company with any other company other than (A) a merger or consolidation
                  which would result in the voting securities of the Company outstanding
                  immediately prior thereto continuing to represent (either by remaining
                  outstanding or by being converted into voting securities of the
                  surviving
                  entity) more than 80% of the combined voting power of the voting
                  securities of the Company (or such surviving entity) outstanding
                  immediately after such merger or consolidation, or (B) a merger
                  or
                  consolidation effected to implement a recapitalization of the Company
                  (or
                  similar transaction) in which no “person” (as hereinabove defined)
                  acquires more than 25% of the combined voting power of the Company’s then
                  outstanding securities; or

              
	 	 	
                (iv)

              	
                the
                  shareholders of the Company adopt a plan of complete liquidation
                  of the
                  Company or approve an agreement for the sale, exchange or disposition
                  by
                  the Company of “all or a significant portion of the Company’s assets,”
                  which for this purpose shall mean a sale or other disposition transaction
                  or series of related transactions involving assets of the Company
                  or any
                  subsidiary (including the stock of any subsidiary) in which the
                  value of
                  the assets or stock being sold or otherwise disposed of (as measured
                  by
                  the purchase price being paid therefor or by such other method
                  as the
                  Board determines is appropriate in a case where there is no readily
                  ascertainable purchase price) constitutes more than 25% of the
                  fair market
                  value of the Company (as hereinafter defined). For purposes of
                  the
                  preceding sentence, the “fair market value of the Company” shall be the
                  aggregate market value of the outstanding shares of common stock
                  of the
                  Company (on a fully diluted basis) plus the aggregate market value
                  of the
                  Company’s other outstanding equity securities. The aggregate market value
                  of the shares of common stock of the Company shall be determined
                  by
                  multiplying the number of shares of the Company’s common stock (on a fully
                  diluted basis) outstanding on the date of the execution and delivery
                  of a
                  definitive agreement with respect to the transaction or series
                  of related
                  transactions (the “Transaction Date”) by the market value per share
                  immediately preceding the Transaction Date or by such other method
                  as the
                  Board shall reasonably determine is appropriate. The aggregate
                  market
                  value of any other equity securities of the Company shall be determined
                  in
                  a manner similar to that prescribed in the immediately preceding
                  sentence
                  for determining the aggregate market value of the shares of common
                  stock
                  of the Company or by such other method as the Board shall reasonably
                  determine is appropriate

              
	 	
                (b)

              	
                The
                  term “Cause” shall mean:

              
	 	 	
                (i)

              	
                an
                  act or acts of personal dishonesty taken by the participant and
                  intended
                  to result in substantial personal enrichment of the participant
                  at the
                  expense of the Company;

              
	 	 	
                (ii)

              	
                repeated
                  violations by the participant of his duties which are demonstrably
                  willful
                  and deliberate on the participant’s part and which are not remedied in a
                  reasonable period of time after receipt of written notice from
                  the
                  Company; or

              
	 	 	
                (iii)

              	
                the
                  conviction of the participant of, or plea of nolo contendere by
                  the
                  participant to, a felony.

              
	 	 	
                A
                  participant must be notified in writing of any termination of his
                  employment for Cause, which writing shall set forth in reasonable
                  detail
                  the facts and circumstances relied upon therefor. A participant
                  will then
                  have the right, within ten days of receipt of such notice, to file
                  a
                  written request for review. In such case, the participant will
                  be given
                  the opportunity to be heard, personally or by counsel, by the members
                  of
                  the Board who are not then executives of the Company (the “Independent
                  Directors”) and a majority of the Independent Directors must thereafter
                  confirm that such termination is for Cause. If the Independent
                  Directors
                  do not provide such confirmation, the termination shall be treated
                  as a
                  termination by the Company without Cause.

              
	 	
                (c)

              	
                The
                  term “Actuarial Equivalent” shall have the same meaning as such term in
                  the Qualified Plan.

              
	 	
                (d)

              	
                The
                  term “Beneficiary” shall mean the participant’s surviving spouse entitled
                  to any survivor benefits under the Qualified Plan or, if the participant
                  is either not married or his surviving spouse is not his beneficiary
                  under
                  the Qualified Plan, the person(s) including, if applicable, estate,
                  that
                  is the participant’s beneficiary receiving the comparable survivor’s
                  benefit under the Qualified Plan.

              


      

      


      


      SECTION
        IV

      Administration

      


      Section
        4.1 Administrator
        - The
        Compensation Committee shall be the Administrator of the Plan and shall have
        the
        complete discretion and authority to interpret and construe the Plan, to
        determine a person’s eligibility for and the amount of his benefit under the
        Plan and to decide all questions or disputes arising under the Plan. All
        decisions and actions by the Compensation Committee with respect to the Plan
        shall be final and binding on all persons. Section 4.2 Appeal of Decisions
        - A
        person who initially has been denied a benefit hereunder either in whole
        or in
        part may appeal that decision to the Compensation Committee. The appeals
        procedures under the Plan shall be the same as the appeals procedures under
        the
        Qualified Plan, except that the appeal shall be to the Compensation
        Committee.

      


      SECTION
        V

      Amendment
        and Termination

      


      Section
        5.1 Amendment and Termination
        - The
        Board may amend, “freeze” and/or terminate the Plan at any time for whatever
        reasons it may deem appropriate. However, no such action shall reduce or
        void
        any participant’s right to the benefit he has accrued under the Plan as of the
        date of such action. If the Plan is terminated, the Company shall pay each
        participant (and beneficiary then in pay status) the Actuarial Equivalent
        of his
        then accrued supplemental benefit (or, if in pay status, his remaining benefit)
        in a lump sum as soon as is reasonably practicable following such termination
        of
        the Plan.

      


      Section
        5.2 Successor
        - The
        Company shall require any successor, whether direct or indirect, by purchase,
        merger, consolidation or otherwise, to all or substantially all of the business
        or assets of the Company, expressly to assume and agree to pay the benefits
        accrued under this Plan as of the date of such succession in the same manner
        and
        to the same extent as the Company would have been required if no such succession
        had taken place. If a successor fails to assume such obligations, such failure
        shall be deemed a termination of the Plan as of the date of such
        succession.

      


      SECTION
        VI

      Miscellaneous

      


      Section
        6.1 No Employment Rights
        -
        Nothing contained in the Plan shall be construed as a contract of employment
        between the Company and any employee, or as creating a right in any employee
        to
        continue in the employment of the Company, or as a limitation of the right
        of
        the Company to discharge any employee, with or without Cause.

      


      Section
        6.2 Assignment
        - The
        benefits payable under the Plan may not be assigned, alienated, pledged,
        transferred, attached, garnished or hypothecated in any manner (whether
        voluntary or involuntary) by a participant (or beneficiary).

      


      Section
        6.3 Taxes
        - The
        Company shall withhold (or cause to be withheld) from all payments made under
        the Plan, all taxes required by law to be withheld from such
        payments.

      


      Section
        6.4 Benefits Unfunded
        - The
        benefits to be paid pursuant to the Plan are unfunded obligations of the
        Company
        and, until actual payment, shall constitute general obligations of the Company.
        The Company is not required to segregate any monies from its general funds,
        or
        to create any grantor trusts, or to make any special deposits or other funding
        arrangements with respect to these obligations, although it may do so in
        its
        sole discretion. Title to and the beneficial ownership of any investments,
        including grantor trust investments, which the Company may make with respect
        to
        its obligations hereunder shall at all times remain solely in the Company.
        Any
        investments and the creation or maintenance of any trust or other funding
        accounts by the Company shall not create or constitute a trust or a fiduciary
        relationship between the Company and a participant, or otherwise create any
        vested or beneficial interest in any participant or his creditors in any
        assets
        of the Company or in any such trust whatsoever. The participants shall be
        only
        general unsecured creditors of the Company with respect to the payment of
        any
        benefits due under the Plan.

      


      Section
        6.5 Applicable law
        - This
        Plan shall be governed by the laws of the State of Texas, except to the extent
        preempted by applicable Federal law.

      


      IN
        WITNESS WHEREOF,
        the
        Company has caused its duly authorized officer to affix its name hereto this
        October 6, 1995, effective for all purposes as provided above.

      


      LUFKIN
        INDUSTRIES, INC.

      


      
        	
                By:

              	
                /s/
                  C J Haley, Jr.

              
	
                Title:

              	
                Secretary
                  - Treasurer

              


      

      


      



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      AMENDMENT
        ONE TO

      


      LUFKIN
        INDUSTRIES, INC.

      


      SUPPLEMENTAL
        RETIREMENT PLAN

      


      WHEREAS,
        effective as of January 1, 1995, Lufkin Industries, Inc. (the “Company”)
        established the Lufkin Industries, Inc. Supplemental Retirement Plan (the
        “Plan”) for the benefit of certain of its key employees;

      


      WHEREAS,
        by the
        terms of Section 5.1 of the Plan, the Plan may be amended by the Board of
        Directors of the Company;

      


      WHEREAS,
        the
        Company has determined that the Plan shall be amended to correct a drafting
        error which omitted a reduction in the benefits under the Plan for benefits
        paid
        from the Company’s retirement plan restoration plan, and to reduce the age for
        vesting in Plan benefits from age 62 to age 60; and

      


      WHEREAS,
        the
        Board of Directors of the Company has approved and adopted such amendments
        as
        set forth herein;

      


      NOW,
        THEREFORE,
        the Plan
        is hereby amended, effective as of January 1, 1998, as follows:

      


      1. Section
        1.1 of the Plan is amended to read in its entirety as follows:

      


      “Section
        1.1 Purpose -
        The
        purpose of the Plan is to enhance the Company’s ability to attract and to retain
        those key executives who are essential to the Company’s success by providing
        them with nonqualified retirement benefits that are in addition to the
        retirement benefits provided by the Company’s qualified defined benefit pension
        plan (the “Qualified Plan”) and the Company’s nonqualified retirement plan
        restoration plan (the “Restoration Plan”).”

      


      2. Section
        3. l(b) of the Plan is amended to read in its entirety as follows:

      


      
        	 	
                (b)

              	
                the
                  sum of the monthly retirement benefits that are actually paid to
                  the
                  participant (or Beneficiary) under the Qualified Plan and the Restoration
                  Plan.”

              


      

      


      3. Section
        3.3 of the Plan is amended to read in its entirety as follows:

      


      “Section
        3.3 Vesting of Benefits
        -
        Subject to the further provisions of the Plan, each participant shall possess
        a
        vested interest in (a nonforfeitable right to) his accrued supplemental
        retirement benefit hereunder to the same extent that such participant is
        vested
        in his accrued retirement benefit under the Qualified Plan; provided, however,
        if(l) the participant voluntarily terminates his employment with the Company
        prior to attaining the age of 60 years or (2) the Company terminates the
        participant’s employment for Cause, no benefits shall be payable to or on behalf
        of such participant under the Plan; provided further, a participant who is
        an
        employee of the Company on the date of a Change in Control shall always be
        100%
        vested under the Plan on and after that date.”

      


      IN
        WITNESS WHEREOF,
        LUFKIN
        INDUSTRIES, INC. has caused this instrument to be executed by its duly
        authorized officers on this 4th day of August, 1998, to be effective as stated
        above.

      


      


      
        	
                ATTEST:

              	
                COMPANY

              
	 	
                LUFKIN
                  INDUSTRIES, INC.

              
	
                /s/
                  R E Myers.

              	
                By:

              	
                /s/
                  C J Haley, Jr.

              
	
                Assistant
                  Secretary

              	
                Title:

              	
                Secretary
                  - Treasurer

              


      

      


      



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


      AMENDMENT
        TWO

      


      LUFKIN
        INDUSTRIES, INC.

      


      SUPPLEMENTAL
        RETIREMENT PLAN

      


      WHEREAS,
        effective as of January 1, 1995, Lufkin Industries, Inc. (the “Company”)
        established the Lufkin Industries, Inc. Supplemental Retirement Plan (the
        “Plan”) for the benefit of certain of its key employees;

      


      WHEREAS,
        by the
        terms of Section 5.1 of the Plan, the Plan may be amended by the Board of
        Directors of the Company;

      


      WHEREAS,
        the
        Company has determined that the Plan shall be amended to comply with the
        requirements of section 409A of the Internal Revenue Code as amended and
        to
        clarify the intent of the Plan;

      


      NOW,
        THEREFORE,
        the
        Plan is hereby amended, effective as of January 1, 2005 as follows:

      


      1. Section
        3.1 of the Plan shall be amended to read as follows:

      


      
        	 	
                “(a)

              	
                the
                  monthly retirement benefit that would be payable to such participant
                  (or
                  Beneficiary) under the Qualified Plan if (i) the participant were
                  credited
                  with an additional .5 year of credited service thereunder for each
                  year of
                  credited service actually credited to the participant under the
                  qualified
                  Plan, (ii) the participant’s compensation were determined as provided
                  under the Qualified Plan but without limitations pursuant to Section
                  401(A)(17) of the Internal Revenue Code of 1986 as amended (the
“Code”)
                  and as if the participant’s compensation under the Basic Plan had not been
                  reduced by any deferrals of his compensation which he elected to
                  make
                  under a deferred compensation agreement with an employer pursuant
                  to a
                  nonqualified defined contribution plan restoration plan maintained
                  by the
                  employer; and (iii) the participant’s benefits thereunder were not limited
                  by Section 415 of the Code,

              
	 	
                (b)

              	
                the
                  sum of the monthly retirement benefits that are actually paid to
                  the
                  participant (or Beneficiary) under the Qualified Plan and the Restoration
                  Plan.”

              


      

      


      2. Section
        3.2 of the Plan shall be amended to read as follows:

      


      “Section
        3.2 Automatic Form of Benefit Payments -
        Subject
        to the further provision of this Plan, the benefit payable to a participant
        (or
        Beneficiary) under this Plan shall be paid or commence as soon as
        administratively feasible following the participant’s Benefit Distribution Date
        (as defined below). The Participant shall be entitled to make the following
        elections as to the form and timing of the payment:

      


      
        	 	
                (a)

              	
                At
                  any time prior to the date the Participant first becomes eligible
                  to
                  participate in the Plan and subject to such requirements as may
                  be imposed
                  by the Committee, Participant may elect to receive the Actuarial
                  Equivalent of his benefits under the Plan in a lump sum or in any
                  form of
                  benefit offered under the Qualified Plan commencing on his or her
                  Benefit
                  Distribution Date;

              
	 	
                (b)

              	
                At
                  any time prior to January 1, 2006, subject to such requirements
                  as may be
                  imposed by the Committee, a Participant may elect to receive benefits
                  under the Plan in a lump sum or in any form of benefit offered
                  under the
                  Qualified Plan commencing on his or her Benefit Distribution
                  Date;

              
	 	
                (c)

              	
                At
                  any time prior to Participant’s Benefit Distribution Date, Participant may
                  elect to change his form of benefit to a lump sum or any of the
                  forms of
                  distribution permitted under the Qualified Plan, provided that
                  such change
                  complies with each of the following requirements:

                Such
                  payment change must be submitted to and accepted by the Committee
                  in its
                  sole discretion at least twelve (12) months prior to the Participant’s
                  previously designated scheduled Benefit Distribution Date;
                  and

                The
                  new scheduled Benefit Distribution Date selected by the Participant
                  must
                  be at least five years after the previously designated Benefit
                  Distribution Date; and

              
	 	 	
                (i)

              	
                payment
                  change must be submitted to and accepted by the Committee in its
                  sole
                  discretion at least twelve (12) months prior to the Participant’s
                  previously designated scheduled Benefit Distribution Date;
                  and

              
	 	 	
                (ii)

              	
                The
                  new scheduled Benefit Distribution Date selected by the Participant
                  must
                  be at least five years after the previously designated Benefit
                  Distribution Date; and

              
	 	 	
                (iii)

              	
                The
                  election of the new scheduled Benefit Distribution Date shall have
                  no
                  effect until at least twelve (12) months after the date on which
                  the
                  election is made.”

              


      

      


      3. Section
        3.4 of the Plan shall be amended to read as follows:

      


      “Section
        3.4 Automatic Lump Sum Benefit
        -
        Notwithstanding anything in Section 3.1, 3.2 or 3.3 to the contrary, if a
        participant’s employment with the Company is terminated for any reason other
        than death on or following a Change in Control or a participant’s employment is
        terminated by the Company at any time other than for Cause, the Actuarial
        Equivalent of such participant’s accrued supplemental retirement benefit shall
        be paid to him in a single lump sum as soon as reasonably practicable following
        his Benefit Distribution Date.”

      


      4. Section
        3.5 of the Plan shall be amended to add subsection 3.5 (e) to read as
        follows:

      


      
        	 	
                (e)

              	
                “Benefit
                  Distribution Date” shall mean the date that is as soon as administratively
                  feasible following a participant’s separation from service (within the
                  meaning of section 409A of the Code) with the Company and each
                  member of
                  its controlled group; provided, however, that in the event that
                  a
                  participant is determined by the Committee to be a “key employee” (as
                  defined in section 416(i) of the Code without regard to paragraph
                  (5)
                  thereof) as of the last day of the calendar year prior to the
                  Participant’s separation from service, such participant’s Benefit
                  Distribution Date shall be the date that is the earlier of (i)
                  participant’s date of death or (ii) six (6) months following such
                  separation from service. If a participant would have received payments
                  during such six-month period but for the fact that participant
                  is a “key
                  employee”, participant’s installment payments shall be accumulated during
                  such six-month period and paid as soon as administratively feasible
                  after
                  such six-month period.”

              


      

      


      4. Except
        as
        hereinabove amended, the provision of the Plan as previously amended shall
        remain in full force and effect.

      


      IN
        WITNESS WHEREOF,
        the
        Company has caused this instrument to be executed by its duly authorized
        officer
        on this 2nd day of November, 2005.

      


      Absent
        an
        election by the Participant in accordance with (i), (ii) or (iii) above,
        all
        Post-2004 accruals shall be paid in one lump sum as soon as administratively
        feasible following the Participant’s Benefit Distribution Date.

      


      


      
        	
                ATTEST:

              	
                COMPANY

              
	 	
                LUFKIN
                  INDUSTRIES, INC.

              
	
                /s/
                  P G Perez

              	
                By:

              	
                /s/
                  R D Leslie

              
	
                Secretary

              	
                Title:

              	
                Vice
                  President/Treasurer/Chief Financial
                  Officer

              


      

      



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      AMENDMENT
        THREE

      


      LUFKIN
        INDUSTRIES, INC.

      


      SUPPLEMENTAL
        RETIREMENT PLAN

      


      WHEREAS,
        effective as of January 1, 1995, Lufkin Industries, Inc. (the “Company”)
        established the Lufkin Industries, Inc. Supplemental Retirement Plan (the
        “Plan”) for the benefit of certain of its key employees;

      


      WHEREAS,
        by the
        terms of Section 5.1 of the Plan, the Plan may be amended by the Board of
        Directors of the Company;

      


      WHEREAS,
        effective as of January 1, 2005, the Company amended the Plan (Amendment
        Two) to
        comply with the requirements of section 409A of the Internal Revenue Code
        as
        amended and to clarify intent;

      


      WHEREAS,
        the
        Company wishes to clarify its intention to “grandfather” the benefits of Plan
        that were accrued and vested as of December 31, 2004;

      


      NOW,
        THEREFORE,
        the Plan
        is hereby amended as follows:

      


      1. Effective
        as of January 1, 2005, Section 3.2 of the Plan shall be amended to read as
        follows:

      


      “Section
        3.2 Automatic Form of Benefit Payments

      


      
        	 	
                (a)

              	
                Pre-2005
                  Accruals. The present value as of December 31, 2004 of the monthly
                  retirement benefit that would be payable to a participant (or Beneficiary)
                  if the participant voluntarily terminated service without cause
                  on
                  December 31, 2004 and received a payment of the benefits with the
                  maximum
                  value available from the Plan on the earliest possible date allowed
                  under
                  the Plan to receive a payment of benefits following the termination
                  of
                  services within the meaning of applicable guidance relating to
                  the
                  provisions of Section 409A of the Internal Revenue Code shall herein
                  be
                  referred to as the “Pre-2005 Accruals”. Increases in the present value of
                  the future payments to which the participant or Beneficiary are
                  entitled
                  as of December 31, 2004, due solely to the passage of time determined
                  using the same interest rate used to determine the amounts under
                  the Plan
                  before January 1, 2005 resulting from the shortening of the discount
                  period before the future payments are made, plus, if applicable
                  an
                  increase in the present value resulting from the Participant’s
                  survivorship during the year shall also be included in the “Pre-2005
                  Accruals”, however, an increase in the potential benefits under the
                  Restoration Plan due to an application of an increase in compensation
                  after December 31, 2004 to prior years or service or subsequent
                  eligibility for an early retirement subsidy shall not constitute
“Pre-2005
                  Accruals”. The Pre-2005 Accruals shall commence at the same time, shall
                  be
                  subject to the same restrictions and actuarial adjustments and
                  other terms
                  as the benefit actually paid to such person under the Qualified
                  Plan;
                  provided,
                  however, the
                  Compensation Committee, in its sole discretion, may direct at any
                  time on
                  or after the participant’s retirement or death that the Actuarial
                  Equivalent present value of such benefit (or remaining benefit
                  if already
                  in pay status) be paid to such person in a lump sum (by
                  check).

              
	 	
                (b)

              	
                Post-2004
                  Accruals. The monthly retirement benefit payable to a participant
                  (or
                  Beneficiary) which is accrued under the Plan in excess of the Pre-2005
                  Accruals shall be referred to herein as the “Post-2004 Accruals”. With
                  respect to the Post 2004 Accruals, the benefit payable to a participant
                  (or Beneficiary) under this Plan shall be paid or commence as soon
                  as
                  administratively feasible following the participant’s Benefit Distribution
                  Date (as defined below) and the Participant shall be entitled to
                  make the
                  following elections as to the form and timing of the
                  payment:

              
	 	 	
                (i)

              	
                At
                  any time prior to the date the Participant first becomes eligible
                  to
                  participate in the Plan and subject to such requirements as may
                  be imposed
                  by the Committee, Participant may elect to receive the Actuarial
                  Equivalent of his benefits under the Plan in a lump sum or in any
                  form of
                  benefit offered under the Qualified Plan commencing on his or her
                  Benefit
                  Distribution Date;

              
	 	 	
                (ii)

              	
                At
                  any time prior to January 1, 2006, subject to such requirements
                  as may be
                  imposed by the Committee, a Participant may elect to receive benefits
                  under the Plan in a lump sum or in any form of benefit offered
                  under the
                  Qualified Plan commencing on his or her Benefit Distribution
                  Date;

              
	 	 	
                (iii)

              	
                At
                  any time prior to Participant’s Benefit Distribution Date, Participant may
                  elect to change his form of benefit to a lump sum or any of the
                  forms of
                  distribution permitted under the Qualified Plan, provided that
                  such change
                  complies with each of the following requirements:

              
	 	 	 	
                (A)

              	
                Such
                  payment change must be submitted to and accepted by the Committee
                  in its
                  sole discretion at least twelve (12) months prior to the Participant’s
                  previously designated scheduled Benefit Distribution Date;
                  and

              
	 	 	 	
                (B)

              	
                The
                  new scheduled Benefit Distribution Date selected by the Participant
                  must
                  be at least five years after the previously designated Benefit
                  Distribution Date; and

              
	 	 	 	
                (C)

              	
                The
                  election of the new scheduled Benefit Distribution Date shall have
                  no
                  effect until at least twelve (12) months after the date on which
                  the
                  election is made.”

              
	 	 	
                (iv)

              	
                Absent
                  an election by the Participant in accordance with (i), (ii) or
                  (iii)
                  above, all Post-2004 accruals shall be paid in one lump sum as
                  soon as
                  administratively feasible following the Participant’s Benefit Distribution
                  Date.

              


      

      


      2. Section
        3.4 of the Plan shall be amended to read as follows:

      


      “Section
        3.4 Automatic Lump Sum Benefit
        -
        Notwithstanding anything in Section 3.1, 3.2 or 3.3 to the contrary, if a
        participant’s employment with the Company is terminated for any reason other
        than death on or following a Change in Control or a participant’s employment is
        terminated by the Company at any time other than for Cause, the Actuarial
        Equivalent of such participant’s accrued supplemental retirement benefit that is
        a Pre-2005 Accruals shall be paid to him in a single lump sum as soon as
        reasonably practicable following the date of his termination of employment.
        The
        Actuarial Equivalent of Post-2004 Accruals shall be paid to him in a single
        lump
        sum as soon as reasonably practicable following his Benefit Distribution
        Date.”

      


      3. Section
        3.5 of the Plan shall be amended to add subsection 3.5 (e) to read as
        follows:

      


      
        	 	
                “(e)

              	
                “Benefit
                  Distribution Date” shall mean the date that is as soon as administratively
                  feasible following a participant’s separation from service (within the
                  meaning of section 409A of the Code) with the Company and each
                  member of
                  its controlled group; provided, however, that in the event that
                  a
                  participant is determined by the Committee to be a “key employee” (as
                  defined in section 416(i) of the Code without regard to paragraph
                  (5)
                  thereof) as of the last day of the calendar year prior to the
                  Participant’s separation from service, such participant’s Benefit
                  Distribution Date shall be the date that is the earlier of (i)
                  participant’s date of death or (ii) six (6) months following such
                  separation from service. If a participant would have received payments
                  during such six-month period but for the fact that participant
                  is a “key
                  employee”, participant’s installment payments shall be accumulated during
                  such six-month period and paid as soon as administratively feasible
                  after
                  such six-month period.” 

              


      

      


      4. To
        the extent that any provision of any amendments herein or in any previous
        or
        subsequent amendment shall be construed as a “material modification” (within the
        meaning of the grandfathering provisions of section 409A of the Code and
        applicable guidance) of the Plan provisions as in effect prior to January
        1,
        2005 with respect to the Pre-2005 Accounts, such provisions shall be void
        ab
        initio and of no effect.
        Except as hereinabove amended, the provisions of the Plan as previously amended
        shall remain in full force and effect.  

      


      IN
        WITNESS WHEREOF, the Company has caused this instrument to be executed by
        its
        duly authorized officer on this 1st day of November,
        2006.

      


       

      

        	
                ATTEST:

              	
                COMPANY

              
	 	
                LUFKIN
                  INDUSTRIES, INC.

              
	
                /s/
                  P G Perez

              	
                By:

              	
                /s/
                  R D Leslie

              
	
                Secretary

              	
                Title:

              	
                Vice
                  President/Treasurer/Chief Financial
                  Officer